Independent oil and gas producer Range Resources Corp. (RRC) on Wednesday reported a net loss for the third quarter compared to a profit in the year-ago period, hurt by hedging losses and a 67% drop in revenues. Adjusted earnings per share for the quarter dropped 51% from the year-ago period. The company noted that production volumes increased 13% over last year, primarily due to successful drilling results in the Barnett and Marcellus Shale plays.
For fiscal year 2009, the company announced a 6% increase in its capital budget and raised its production growth target by 30%.
Third-Quarter Results
The Fort Worth, Texas-based company reported a net loss for the third quarter of $29.82 million, or $0.19 per share, compared to net income of $284.95 million, or $1.81 per share, in the prior-year quarter.
The results for the latest quarter include a non-cash mark-to-market hedging loss of $54 million, impairment of unproved properties of $24 million, expense recorded for the mark-to-market in the deferred compensation plan of $16 million, and costs related to the closure of the company's Houston office of $0.84 million.
Excluding the special items, non-GAAP net income for the quarter declined to $40.96 million, or $0.26 per share, from $82.85 million, or $0.53 per share, in the year-ago period. On average, 29 analysts polled by Thomson Reuters expected the company to earn $0.22 per share for the quarter. Analysts' estimate typically excludes special items.
Revenues for the quarter dropped 67% to $203.64 million from $622.67 million in the same period last year, and missed analysts' consensus estimate of $260.87 million.
Commenting on the results, John Pinkerton, Chairman and CEO of Range Resources, said, "While our financial results suffered from lower commodity prices, our operating results were the best in our Company's history. Despite losing 15 Mmcfe per day at the close of the second quarter due to asset sales, we were able to more than overcome the loss and post our 27th consecutive quarter of sequential production growth in the third quarter."
Peer Performance
Pittsburgh, Pennsylvania-based EQT Corp. (EQT) is yet to announce its financial results for the third quarter. Analysts expect the company to report earnings of $0.18 per share on revenues of $170.92 million for the quarter.
Other Metrics
Range Resource's total oil and gas sales for the third quarter declined to $202.12 million from $347.72 million in the previous-year quarter. Oil and gas sales including cash-settled derivatives, a non-GAAP measure, were $255.35 million, down 21% from $321.72 million in the prior-year quarter.
Average daily production grew 13% to 437.09 million cubic feet of oil equivalent or Mmcfe, from 387.87 Mmcfe in the year-ago quarter, and was achieved despite losing 15 Mmcfe per day of production due to asset sales, which closed in June 2009.
Production for the quarter comprised of 367 Mmcf per day of gas and 5,809 barrels per day of oil and natural gas liquids. Range Resources said it has now posted 27 consecutive quarters of sequential production growth.
Last week, the company had said that "excellent" drilling results, notably in the Barnett and Marcellus Shale plays, resulted in production exceeding the quarterly guidance. Range Resources, which owns 15 operational rigs, expended $145 million in the third quarter towards the drilling of 128 wells and achieved a 100% success rate.
Average realized prices, or wellhead prices, including cash-settled hedges and derivatives, dropped 30% to $6.35 per thousand cubic feet of gas equivalent or mcfe, from $9.02 per mcfe in the prior-year quarter. Average gas price dropped 30% to $6.05 per mcf, and average oil price decreased 5% from last year to $63.88 per barrel.
The company's direct operating expenses for the quarter were $0.75 per mcfe, down 25% from $1.00 per mcfe in the prior-year quarter. The company noted that the impact of selling higher cost properties, combined with lower service costs and increasing production in core areas with low operating costs helped drive down operating costs.
General and administrative expenses for the quarter were $0.57 per mcfe, up $0.03 per mcfe from last year, primarily due to one-time charges associated with closing the company's
Houston office and an allowance for bad debt.
Total operating expenses for the third quarter surged 51% to $248.72 million from $165.14 million in the year-ago quarter. Cash flow from operations before changes in working capital, a non-GAAP measure, declined to $171.08 million from $226.82 million in the same period last year.
For the fourth quarter, Range Resources has approximately two-thirds of its gas production hedged at an average floor price of $7.79 and an average cap price of $8.53. For the first half of 2010, the company has hedged 53% of its gas production at a $5.50 floor and a $7.45 cap, and 42% of its second half 2010 gas production at a $5.59 floor and a $7.50 cap.
Year-To-Date Results
For the nine months, Range Resources reported net loss of $37.09 million, or $0.24 per share, compared to net income of $257.44 million, or $1.65 per share, in the year-ago quarter.
Excluding special items, non-GAAP net income for the period dropped to $113.08 million or $0.71 per share from $257.32 million or $1.65 per share in the prior-year period.
Revenues for the nine-month period dropped 33% to $660.51 million from $979.81 million in the same period last year.
Outlook
For fiscal year 2009, Range Resources said that its board of directors has increased the capital budget by 6% to $740 million from the prior $700 million. The company noted that the increase will provide funds to buy additional leases in areas where the company has met with drilling success in the year.
The company also raised its production growth outlook for the year to 13% from the prior 10%, representing an increase of 30%.
Stock Quotes
RRC closed Wednesday's regular trading session at $58.44, down $0.30 or 0.51% on a volume of 3.35 million shares. The stock has been trading in a range of $28.05-$60.13 in the past 52 weeks.
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