Range Resources (NYSE:RRC) reported record free cash flow in the first quarter, paying down $350m of debt while beating earnings estimates. Range shares are up ~65% year to date, with underlying cash flows are likely to accelerate as hedges roll off in the 2nd half:
- Earnings – the company generated $1.21 per share in adjusted earnings during the quarter, versus consensus expectations for $1.18.
- Cash flow – Range (RRC) generated $489m in adjusted cash flow from operations, and spent $117m on capex; the ~$372m of Q1 free cash flow equates to ~1.5% of Range’s market capitalization.
- Capital allocation – the company spent 25% of its annual capex budget in the quarter, reduced debt by $350m and repurchased 600k shares (<1% of shares outstanding).
Natural gas (NG1:COM) has been trading around a 13yr high, as constrained pipeline capacity limits production growth. Gas stocks have performed well, alongside earnings revisions, as natural gas prices have risen. However, Range (RRC) analysts remain largely remain on the sidelines given elevated commodity prices and a relative lack of shareholder returns.