Range Resources Withstands Commodity Slump to Q4 Beat

Independent oil and gas company Range Resources Corp. (RRC) overcame sharply lower commodity prices to report strong fourth quarter 2014 results. Significantly higher production, primarily in the Marcellus shale region, led to the improvement.

The company’s adjusted earnings per share (excluding one-time items and stock-based compensation) came in at 47 cents, which was way ahead of the Zacks Consensus Estimate of 22 cents and the year-ago adjusted profit of 24 cents.

Fourth quarter total revenue of $872.2 million comfortably beat the Zacks Consensus Estimate of $503 million and grew 104% year over year.

Operational Performance

Range Resources’ fourth quarter production averaged almost 1,277.2 million cubic feet equivalent per day (MMcfe/d), comprising 69% natural gas, while natural gas liquids (NGLs) and oil contributed 31%. Total production volume experienced a 26% improvement from the year-ago quarter, mainly on the back of higher upstream operations in the Marcellus shale region.

Oil production increased 3%, NGL jumped 71%, while natural gas output grew 17% from the fourth quarter of 2013.

The company’s total price realization (including the effect of hedges and derivative settlements) averaged $3.54 per Mcfe, down 26% year over year. The overall price comprised NGL at $17.96 per barrel (down 50% year over year), crude oil at $59.65 a barrel (down 30%) and natural gas at $3.24 per Mcf (down 12%).

Full year 2014 total production of 1,162.4 MMcfe/d improved 24% from the 2013 level of 939.8 MMcfe/d.

Financials

At the end of the quarter, long-term debt was $3,073 million, representing a debt-to-capitalization ratio of 47.1%.

Guidance

For 2015, the company targets production growth of 20% year over year, while first quarter output is anticipated at 1.30 Bcfe per day. Importantly, Range Resources has decided to slash its capital budget by 46% (to $870 million), as it focuses on controlling costs amid plummeting crude realizations

Zacks Rank

Range Resources currently carries a Zacks Rank #3 (Hold).

Stocks that Warrant a Look

Better-ranked players in the energy space like VTTI Energy Partners L.P. (VTTI), Western Gas Equity Partners L.P. (WGP) and Valero Energy Partners L.P. (VLP) are worth consideration. All these stocks sport a Zacks Rank #1 (Strong Buy).

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