Nomura Securities Starts Range Resources (RRC) at Buy

Nomura Securities initiates coverage on Range Resources (NYSE: RRC) with a Buy rating and a price target of $71.00.

Analyst Lloyd Byrne highlighted:

• RRC is our favorite avenue to play rising long-term natural gas pricing. Natural gas producers are currently out of favor with many investors.
• RRC has been a peer leader in organic shale gas production, with a consistent strategy of 20-25% production growth at a low-cost structure for multiple years. We expect RRC’s capital efficiency to improve, both absolute and relative to peers (see chart on next slide).
• RRC’s main advantage is its low-cost, long-duration wet and dry gas acreage inventory in Appalachia, in which it holds 925,000 net acres across SW and NE Pennsylvania, prospective for stacked pay potential in the Marcellus, Utica, and Upper Devonian.
• We value our coverage using detailed corporate modelling and relative valuation to growth multiples (i.e., EV /DACF relative to DACFPS). We then fold in DCFs and/or NAV work and backtest these valuations against more traditional price to forward cash flow multiples to arrive at our relative ratings and target prices. In the case of RRC our $71 target price corresponds to 8.0x our normalized CFPS estimate of $8.92/share. This is below our NAV analysis at $81/share, providing incremental upside, if/when gas price visibility improves.

For an analyst ratings summary and ratings history on Range Resources click here. For more ratings news on Range Resources click here.

Shares of Range Resources closed at $59.79 yesterday.

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