Range Resources Reaffirms Credit Facility Amid Market Turmoil

Range Resources Corporation RRC recently announced that its borrowing base of $3 billion under its credit facility has been reaffirmed. Total bank commitment under the facility is $2.4 billion, which is crucial, given the company’s current cash flow and balance sheet.

Its free cash flow remained in the negative zone over the last few years, reflecting operational weakness. Moreover, the current weak commodity pricing scenario is not expected to improve anytime soon. This can lead to cash crunch for the company, in turn affecting future productions.

As such, Range Resources will have to rely on balance sheet strength. However, as of Dec 31, 2019, the company had long-term debt of $3,172.9 million. The company had a debt-to-capitalization ratio of 57.5%, significantly higher than the industry average of 41.7%, reflecting high exposure to debt. Hence, the borrowing base will likely provide Range Resources with the required breathing space amid the current market uncertainty. It has received $1.1 billion from asset sales, which has strengthened its financial position.

On an encouraging note, the company’s future plans are promising. For 2020, it expects production volumes of 2.3 billion cubic feet equivalent per day, indicating almost no change from the 2019 figure. It expects to achieve the same with capital expenditure of $520 million, which suggests a decrease from $728 million in 2019, reflecting efficiency gains. Notably, 94% of the total capital budget will be allocated for drilling and recompletions. Available liquidity of $1.7 billion at 2019-end will likely provide an impetus to the company.

Range Resources is one of the top 10 natural gas producers in the United States. The company’s total proved reserves at the end of 2019 was recorded at 18.2 trillion cubic feet equivalent, which increased marginally from the Dec 31, 2018 level. Given the growth in proved reserves, its natural gas production is expected to improve considerably. The Zacks Rank #3 (Hold) company’s core operating regions in the Appalachian Basin comprise a huge inventory of low-risk drilling inventories that will likely fetch the firm with incremental production volumes. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

This stock has lost 55.2% year to date compared with 64.4% decline of the industry it belongs to.

Stocks to Consider

Some better-ranked stocks in the energy sector include Antero Resources Corporation AR, Earthstone Energy, Inc. ESTE and FTS International, Inc. FTSI, each carrying a Zacks Rank #2 (Buy).

Antero Resources’ bottom line for 2020 is expected to rise 22.2% year over year.

Earthstone Energy’s revenues for first-quarter 2020 are expected to rise 33.3% year over year.

FTS International has witnessed three positive estimate revisions in the past 60 days, while no revision in the opposite direction.

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