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On Thursday, Piper Sandler adjusted its stance on Range Resources Corp (NYSE:NYSE:RRC) stock, moving from an Overweight to a Neutral rating. The firm also revised the price target to $31.00, a decrease from the previous $43.00.
This change was largely attributed to a lowered long-term natural gas price forecast, now set at $3.25 per million British thermal units (MMBtu), down from $4.00.
Range Resources recently reported a second-quarter beat for fiscal year 2024, citing stronger gas volumes, improved gas realizations, and reduced cash operating expenses as key factors.
The company has maintained its capital expenditure and production guidance for the fiscal year, with production expected at the higher end of the forecast.
Additionally, Range Resources has increased its natural gas liquids (NGL) realization guidance by $0.625 per barrel and decreased cash operating expenses by $0.05 at the midpoint.
The company has been active in capital management, repurchasing $20 million of its stock at an average price of $33.42 per share and buying back $48 million of notes due in 2025 at a discount.
Approximately 53% of the fiscal year's capital budget has been used in the first half, resulting in 53% of the planned total wells being brought into production, with 26 of the 49 planned turn-in-lines (TILs) completed.
Despite the current weak gas price environment, Range Resources has discussed the possibility of counter-cyclical investments, which might lead to capital-efficient growth in fiscal year 2025. However, Piper Sandler projects a maintenance budget for the company at $525 million for that year.
The firm forecasts about $560 million in free cash flow (FCF), which translates to a 7.5% FCF to enterprise value (EV) yield, potentially increasing to $670 million at strip pricing ($3.37/MMBtu), yielding an 8.5% FCF/EV.
The analyst highlighted Range Resources' solid financial position, noting that the company maintains one of the strongest balance sheets among its gas-focused peers. The projected leverage for fiscal year 2025 is estimated at 1.0x with a $3/MMBtu gas price.
In other recent news, Range Resources Corp. reported strong Q2 results, with significant free cash flow and a production rate of 2.15 billion cubic feet equivalent per day (Bcf/d).
The company's cash margin stood at $1.22 per unit of production, and a cash flow of approximately $237 million was strategically distributed across capital investments, debt repurchases, dividends, and share repurchases.
Looking ahead, Range Resources anticipates maintaining its production momentum, projecting a rate of around 2.2 Bcf/d for the latter part of the year.
These developments underscore Range Resources' financial resilience and strategic focus on operational efficiency and cost management. The company remains optimistic about the future of natural gas and natural gas liquids (NGLs), supported by a robust balance sheet and a hedging program that ensures operational stability.
In terms of analyst notes, no specific upgrades or downgrades were mentioned. However, the company's direct access to international markets for NGL sales and its proactive hedging strategy were highlighted, providing stability to future production.
Range Resources is also prepared to adjust its 2025 production profile based on market conditions, further demonstrating its adaptability and strategic foresight.
These recent developments highlight Range Resources' ability to leverage its strategic initiatives and market position to deliver value to its shareholders.
The company's focus on cost management and efficiency, alongside its proactive hedging strategy, positions it to capitalize on the anticipated growth in international demand for LPG and to adjust to market conditions as necessary.
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