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Range Resources: Broker repeats ‘buy’ recommendation with 200% upside

“Like most E&P companies, Range is trading at a material discount; and has not seen a significant uplift in price following the rally in crude prices”
oil and gas operations
Cantor has a 0.7p price target

A newly ‘unbound’ Range Resources Ltd (LON:RRL) offers investors upside in the order of 200%, that’s according to Cantor Fitzgerald analyst Ashley Kelty.

“Range capped a busy week of news with the announcement of an aggressive 2018 work programme at Perlak in Indonesia,” the analyst said in a note.

“This followed on from the landmark RRDSL contract win with Shell and interim results.”

In the financial results, Range acquired a 23% indirect interest in an established oilfield in Northern Sumatra, Indonesia and took 100% control of Range Resources Drilling Services Limited.

Revenues over the half-year rose by 39% to US$5.4mln (US$3.9mln) due largely to the higher production, while the interim pre-tax loss was US$8.5mln (US$37.8mln).  Average oil prices received also rose by 13.7% to US$48.1 per barrel. No impairment charges were recognised for the first time since 2013, while Range ended the half year with cash of US$10.9mln.

In the Cantor note, Kelty highlighted that the group’s extended waterflooding in Trinidad and its ongoing programme will support production growth, while better crude prices (and thus better net backs per barrel) further boost to the group’s economics.

Cantor rates Range as a ‘buy’ with a price target of 0.7p, which compares to a market price of 0.18p.

“Like most E&P companies, Range is trading at a material discount; and has not seen a significant uplift in price following the rally in crude prices,” Kelty said.

“The Trinidad asset base generates positive NPVs and our forecasts suggest the company will benefit from a materially higher free cash flow position in 2018 as production grows.”

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