uploads///RRC Cash Flows

Analyzing Range Resources’ Free Cash Flow Trends

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Mar. 2 2016, Updated 3:06 a.m. ET

RRC’s revenues and operating cash flows

For 3Q15, Range Resources’ (RRC) total operating revenue was ~$252 million, which was ~42% lower when compared with 3Q14. The much lower operating revenue in 3Q15 was the direct result of lower realized prices for natural gas production.

In 3Q15, RRC reported an OCF (operating cash flow) of ~$145 million, which was ~32% lower than its OCF of ~$213 million in 3Q14. The drop was primarily due to the lower revenues reported in the same period.

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Range Resources’ free cash flow trend

As seen in the above chart, Range Resources (RRC) has been reporting negative free cash flows since 1Q13. In 3Q15, RRC reported a free cash flow (or FCF) of about -$86 million. Due to the steep downward trend in energy prices, free cash flows of almost all S&P 500 (SPY) energy companies have declined in 3Q15.

Large players Pioneer Natural Resources (PXD), Occidental Petroleum (OXY), and Noble Energy (NBL) reported -$194 million, -$64 million, and -$23 million, respectively, in free cash flows in 3Q15.

FCF helps a company to enhance shareholder value, and it can be used to pay dividends, buyback stock, or repay debt. FCF is calculated by subtracting capital expenditure (or capex) from OCF.

RRC’s capex

In 3Q15 Range Resources (RRC) spent ~$231 million in capex, which is ~29% lower when compared with 3Q14.

For 2015, Range Resources expects a total capex of ~$870 million, which is ~42% lower when compared with 2014. RRC plans to direct its capital budget for more dry gas drilling to maximize its expected rate of return.

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