Morningstar | Range Resources Continues Focus on Marcellus, While Looking to Improve the Balance Sheet
We're leaving our fair value estimate for Range Resources unchanged at $19 per share following the release of fourth-quarter and full-year results. Our no-moat rating is also intact. Volumes declined 5% sequentially to 2.15 billion cubic feet per day, dented by an operational issue at the MarkWest Houston and Harmon Creek processing complexes. The processing facilities returned to service in early January.Range's expected 2019 capital budget of about $750 million would mark a decline from $910 million in 2018, driven partly by management planning for an average of three rigs in the Marcellus, a slight step down from last year. Still management's midpoint for production guidance points to growth of 6%. Our production estimate is below the guidance midpoint in 2019.
Once again, the drilling program will be focused on the Marcellus, where the company plans to turn about 90 wells to sales compared with fewer than 10 in north Louisiana. The Louisiana assets, acquired in the merger with Memorial Resource Development, have underperformed and Range took a $1.6 billion goodwill impairment in the fourth quarter related to the deal. As we've previously mentioned, we think the Louisiana assets are up for sale with any proceeds targeted for debt reduction.
At about $10 per share, Range trades considerably below our fair value estimate of $19 per share. However, we'd urge caution. Range still has high financial leverage, leading to a wide discrepancy between our bull- and bear-case fair value scenarios of $34 and $6 per share, respectively. The resulting extreme uncertainty rating means we'd label shares as fairly valued despite the yawning gap between our fair value estimate and the current trading price.
Range Resources is a holding company. Through its subsidiaries, the company is an independent natural gas, natural gas liquids and oil company, engaged in the exploration, development and acquisition of natural gas and oil properties, located in the Appalachian and North Louisiana regions of the United States, primarily in the Marcellus Shale in Pennsylvania and the Lower Cotton Valley formation in Louisiana.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.