Range Resources (RRC, Financial) is making remarkable progress in an unimpressive natural gas price environment. Its core fundamentals such as level of production, reserves, revenue, net income and cash flow have increased considerably in 2014 over the last year. Its production grew 24%, while reserve, revenue, net income and cash flow expanded 26%, 14%, 9% and 10% respectively over 2013.
Trying to overcome headwinds
Looking ahead for the fiscal 2015, Range Resources is taking various precautions to combat this lower natural gas prices surrounding. It has pulled down its capital expenditure dramatically to $870 million, a decrease of approximately $700 million from its level in 2014.
It has sound capital efficiency model in place that will contribute significantly to its growth in 2015 and 2016. The company is targeting a growth of more than 20% in fiscal 2015 with this capital efficiency. It plans to achieve this growth sequentially throughout the year that will set a great platform for the company in 2016.
In addition, the company has solid hedge position for fiscal 2015 that should help the company to counterbalance the declining natural gas prices. It has placed nearly 65% of its total natural gas production on hedge with an average floor price of $4.00. Also, it has hedged approximately 77% of its oil at a floor price of $90.00 per barrel. This is outstanding hedge position that should lead to better top line growth this fiscal year.
Apart from these positive and promising returns, the company has a solid balance sheet. It has cash and cash equivalent of $1.2 billion under the commitment amount and $2.2 billion under the borrowing base. Also, it has no debt maturity until 2019 to 2020 on banks as well as on notes. The company remains pretty strong on debt metrics. It has reduced its debt to capital ratio to 47% in 2014 from 57% in 2013. Also, the debt to EBITDA has been reduced to 2.6x at the end of 2014 from 2.8x in 2013. This clearly highlights its potential of generating profits.
Conclusion
Range Resources is a good bet looking at its performance and prospects in the long-run. The analysts expect its earnings to grow at CAGR of 5.57% for the next five years. It carries profit and operating profit margins of 31.06% and 46.37% for the last twelve months. Moreover, it has operating cash flow of $954.1 million. These fundamentals signify healthier returns for Range Resources in the coming years.
