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Why Is Range Resources (RRC) Down 13% Since Last Earnings Report?

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  • RRC

A month has gone by since the last earnings report for Range Resources (RRC). Shares have lost about 13% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Range Resources due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Range Resources Q3 Earnings Match Estimates, Revenues Lag

Range Resources reported third-quarter 2021 adjusted earnings of 52 cents per share, in line with the Zacks Consensus Estimate. The bottom line turned around from a loss of 5 cents per share in the prior-year quarter.

Total revenues for the reported quarter were $302.6 million, missing the Zacks Consensus Estimate of $733 million. The top line, however, improved from the prior-year $299.3 million.

The quarterly earnings were aided by higher gas equivalent prices and decreased exploration costs. This was offset partially by lower production volumes.

Operational Performance

For third-quarter 2021, the company’s production averaged 2,135.5 million cubic feet equivalent per day, down 3% from the prior-year period. Natural gas contributed 70.1% to total production, while NGLs and oil accounted for the remaining.

Oil production increased 8% for the quarter from the year-ago period, while NGL and natural gas output decreased 1% and 4%, respectively.

Its total price realization (excluding derivative settlements and before third-party transportation costs) averaged $4.32 per thousand cubic feet equivalent (Mcfe), up 129% year over year. Natural gas prices rose 143% on a year-over-year basis to $3.59 per Mcf. NGL and oil prices increased 109% and 102%, respectively.

Costs & Expenses

Total costs and expenses declined to $682.6 million from $1,084.6 million in the year-ago quarter. Total transportation, gathering, processing and compression costs, direct operating expenses as well as general and administrative expenses increased in the quarter. Lower exploration costs offset the rise in costs.

On a per-unit basis, direct operating costs was flat at 10 cents per Mcfe compared to the September quarter of 2020. Transportation, gathering, processing and compression expenses were recorded at $1.51 per Mcfe, higher than $1.33 in the prior-year quarter.

Capital Expenditure & Balance Sheet

The company’s drilling and completion expenditure totaled $91.8 million for third-quarter 2021. An amount of $4.6 million was used in acreage leasehold, gathering and others.

At third quarter-end, it had total debt of $2,730.5 million. It had a debt to capitalization of 69.8%. The company reported around $750 million in senior notes, expected to mature through 2023. At third quarter-end, it had more than $2 billion borrowing capacity.

Outlook

For 2021, Range Resources issued its production guidance at a range of 2.12 to 2.13 Bcfe per day, with almost 30% allocated to liquids production. The company’s overall capital budget is expected to be $415 million, revised downward from the prior estimate of $425 million.

The company reiterated its estimate for exploration expenses for 2021 within $20-$25 million. On a per-unit basis, direct operating expenses for the year are expected within 9-11 cents per Mcfe. Transport, gathering, processing and compression expenses are now estimated in the range of $1.48-$1.52 per Mcfe, higher than previous range of $1.43-$1.47 per Mcfe.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 19.69% due to these changes.

VGM Scores

At this time, Range Resources has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Range Resources has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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