In reaction to Range Resources Corp.’s (RRC) 2Q14 results, which exceeded expectations, Canaccord Genuity analyst Karl Chalabala reiterated a Buy rating with a $107 price target.
Chalabala wrote, “Both wet and dry Marcellus gas wells improved, with Range taking up EUR assumptions per 1000 lateral ft. in the Southwest PA Dry and Northeast PA Dry assets, and importantly, the company’s lateral lengths and frac stages are increasing for all developments areas in H2/14”. The analyst continued, “Despite significant problems this quarter at the Markwest Houston complex and downtime on Sunoco’s Mariner west, the company did not miss production estimates and beat on EBITDA”.
The analyst added, “Our Buy rating and $107 price target represents 12x our 2015 EV/EBITDA estimate, and a 12% discount to our $122 NAV estimate. This is a premium to the Appalachian peer group, which we believe is warranted given Range’s strategic plan, large scalable asset once midstream tightness eases, and growth profile”.