GaryB; Range Resources/RRC
I am not an accountant - but here's my quick study version. Write downs from the recent Earnings release are not included; these figures are prior. Writedowns were ''Oil'' driven and with in expectations and RRC moved up on good volume post release. RRC is also highly leveraged to Oil & Gas price increases which we have had a 40% increase in since Q4.... With most E&P's selling for 4-9 times cash flow; RRC increases cash flow by .06 cents (.24 to .35cents of share value - 10% of current stockprice !!!) with every $1.00 rise in Crude prices and for each .10 cent increase in Gas prices RRC increases cash flow by .12 cents per share (.48 to $1.08) in shareprice appreciation potential...
***This is the double edged sword - companies this leveraged get hammered, as in the enviroment we just came out of ! - but guess which direction they go in the present enviroment...!
RRC was created by LOMAK merging with DOMAIN; LOMAK had acquired over $800 M in assets in the 1990's including $540 M in the last 2 years. Company has presence in Appalachia, Permian Basin, Mid Continent & Gulf Coast - one of the most diversified asset bases in its Nat Gas peer group with near sector leading 13 year avg resv life.
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RE: insider selling; these are the players - there are many ''planned'' sales by exec's from the acquired company - there has been an exec shakeout from restructuring. The ''players'' below are NOT selling to my knowledge... company bought back stock.
Officers: Thomas Edelman, Chmn.
C. Rand Michaels, Vice Chmn.
John Pinkerton, Pres./CEO
Thomas W. Stoelk, Sr. VP- Fin. & Admin./CFO
Geoffrey Doke, CAO/Contr.
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ie: Capital Requirements
In 1998, $81.5 million of capital was expended on development and exploration activities. In an effort to reduce outstanding debt the Company has significantly reduced its 1999 exploration and development capital budget to between $35 million to $40 million. The development and exploration expenditures are currently expected to be funded entirely by internally generated cash flow. The remaining cash flow will be available for debt repayment.
...the Key is that current cash flow is more than adequate to fund 1999 cap ex budget and excess cashflow will be used to pay down debt.
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13 year avg reserve life (industry avg. is 9.5 years) - over 90% of RRC's reserves will still remain to be produced when year 2000 begins.
Trading at a near Industry low of .48% of net asset value
Trading at 1.2 x 1999 cash flow - again, near sector low
Trading @ .25 of bookvalue & .42 x sales
73% nat gas production / excellent low cost of development properties
RRC plans to sell approx $100M in non - core properties - will de-leverage the balance sheet and/or make acquisitions - increase investment in (cash cow) IPF business.
Long Term Debt to Capital was 63%
Cash flow per share wil increase from $2.16 in 1999 to $3.06 in 2000
The IPF business is a great asset/income producer for RRC - 19% rate of return,doubled in each of last few years; few understand this part of the business; RRC lends $ to small independant gas producers for a predetermined rate of return. RRC is collateralized by the producing properties of its customers - has never experienced a net loss on a property and has $7 million in reserve for loan losses.... The IPF has a separate credit facility that is non recourse to RRC !
RRC due to its premium priced asset base, long lived reserve base and IPF cash flow/return rate can carry a higher degree of leverage than most E&P's.
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as of Feb. 1999 - in millions:
Proved reserves - 771
undeveloped acreage - 12
gas processing facilities - 43
IPF operations - 108
misc assets - 11
working ca[ital - 3
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total assets - $ 948 Million
long term debt - 548
non recourse ipf debt - 54
Trust Pre conv sec - 120
conv pref - 29
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= net asset value of $197 Million
$5.52 per share NAV
*** note non recourse debt to IPF must be carried on balance sheet of RRC, but it is collateralized only by IPF portfolio which is non recourse to RRC.
*** RRC's conv pref debt trust is among the sectors best; after tax carrying cost is 4% - payable in 28 years ! - convertible at $23.50 per share...
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***BT Alex Brown has a Strong Buy and $7 short term price target; there are some great analyst reports on RRC.
here is an old release: ie share buyback & insider buys:
NEWS STORY FOR RRC 7
11:15 Range Resources Says 1.2M Shrs Bought By Co., Insiders
FORT WORTH, Texas (Dow Jones)--Range Resources Corp. said (RRC) about 1.2million of its common shares were purchased by the company and insiders.In a press release Wednesday, the company said it has acquired since June 5 acombination of Range and Domain Energy Corp. shares equivalent to 1.03 millionRange shares, at an average cost of $8.89 a share, while its directors,officers and employees acquired 188,269 shares.
Range Resources said a total of $15.9 million remains available for
repurchases under a June authorization from its board for the repuchase of up to $25 million of common stock.
As reported, Lomak Petroleum Inc. and Domain Energy Corp. merged in August,and named the combined company Range Resources.
Range Resources, which develops, acquires and explores for oil and gas, had about 21.3 million shares outstanding as of Aug. 12.
(END) DOW JONES NEWS 09-30-98 11:15 AM-
Here is an excellent press release from CEO on stockprice:
businesswire.com
<< FORT WORTH, Texas--(BUSINESS WIRE)--Oct. 16, 1998--Range Resources Corporation (NYSE:RRC) today stated that the Company knows of no justification for the recent sharp decline in its stock price.
John H. Pinkerton, the Company's President and Chief Executive Officer said, "Despite the current weakness in the market for the securities of small and medium sized companies and independent oil and gas companies in particular, Range is currently trading at less than two times estimated 1998 cash flow, and at an even lower multiple of 1999 cash flow. These multiples compare with an average multiple of more than five times over the past five years. While investors may be concerned about the Company's leverage, our EBITDA presently covers interest expense by a better than 3 to 1 ratio, even with current depressed energy prices."
The Company also announced several positive developments since the completion of the merger of Lomak and Domain in August. The Company has drilled 37 wells since the merger, resulting in increasing production and reserves. The Independent Producer Finance unit continues to grow rapidly and is generating attractive returns. Finally, the integration of the two companies' properties, personnel and systems is proceeding smoothly. >>
....Whewww - that's the last time I do this ... |
