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Investing.com -- Moody’s Ratings has upgraded the Corporate Family Rating (CFR) of Range Resources Corporation (NYSE:RRC) (Range) to Ba1 from Ba2. The Probability of Default Rating (PDR) has also been upgraded to Ba1-PD from Ba2-PD, and the senior unsecured ratings have risen to Ba2 from Ba3. The Speculative Grade Liquidity rating remains unchanged at SGL-1, while the rating outlook has been revised from positive to stable.
The upgrade comes on the back of Range’s solid operational performance, its ability to generate free cash flow even in a low gas price environment as demonstrated in 2023-24, improved leverage, and a commitment to conservative financial policies. Moody’s Ratings Vice President, Sajjad Alam, highlighted Range’s low cost structure, significant liquids production, firm-transportation contracts, disciplined hedging strategy, and reduced debt level as factors contributing to the company’s financial flexibility through 2026, even if gas prices average between $2.75 and $3.00/MMBtu.
The Ba1 CFR reflects Range’s large natural gas resource base in Appalachia, significant proportion of Natural Gas Liquids (NGLs) in the production mix, lower base decline rate, and efficient operations. It also reflects the expectation that management will wisely allocate capital to achieve growth, debt reduction, and shareholder return objectives while maintaining Range’s strong balance sheet.
Range’s ratings are constrained by its high correlation to volatile natural gas and NGL prices, with natural gas representing about 68% of production, high geographic concentration, and exposure to Appalachian basin negative price differentials.
Range has improved capital efficiency in recent years, leading to more consistent free cash flow generation. Capital expenditures have been significantly reduced from pre-pandemic years and are projected to range between $650 million to $700 million per year over the next three years. Range plans to operate two drilling rigs and one frac crew in 2025, with liquids accounting for over 30% of total production.
The company plans to reduce total debt near the lower end of its $1.0-$1.5 billion net debt target and intends to use a combination of cash and revolver borrowings to repay the $609 million 4.875% notes maturing on May 15, 2025. Range’s reduced debt level and low cost structure enhances its resilience to withstand negative credit impacts from carbon transition risks.
As of December 31, 2024, Range had $304 million in cash and no borrowings under its $1.5 billion committed revolving credit facility (expiring April 14, 2027). The facility has a $3 billion borrowing base and had $1.335 billion available after accounting for $165 million in letters of credit at year-end 2024.
The senior unsecured notes are rated Ba2, one notch below Range’s Ba1 CFR, due to their subordinated position in the capital structure behind the company’s sizable senior secured revolving credit facility.
The stable outlook reflects the expectation that Range will maintain conservative financial policies and very good liquidity. Potential factors for an upgrade or downgrade of the ratings include significant growth in production scale, greater geographic diversification, consistent free cash flow, and changes in the retained cash flow-to-debt ratio.
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