If you want gas exposure without swinging for the fences, start a position on dips near the mid-$30s, then add on confirmation from pricing and guidance. Details below.
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Strategic Positioning
Range Resources (NYSE: RRC) is a pure-play Appalachia gas producer with a few things going for it that most investors gloss over: a giant, decades-long inventory, low well costs per lateral foot, and a habit of squeezing more out of each pad through steady efficiency gains.
When gas cycles turn, the low-cost guys tend to win first. That’s Range.
Management has leaned into the balance sheet cleanup, taking net debt down to about $1.2B and keeping leverage under 1x EBITDAX by many estimates.
That gives them room to be patient on volumes and opportunistic on buybacks.
They also keep reminding the Street that Range’s emissions intensity sits at the low end for U.S. E&Ps, which matters for marketing and for securing premium offtake.
Action: Nibble between $33 and $35 if you want exposure to a gas upcycle with a disciplined operator. Use $31 as your “I’m wrong” line in the sand. |
Recent Momentum
Q2 was solid. Range posted adjusted EPS of $0.66 vs. $0.61 expected and revenue around $733M, with operating cash flow of roughly $336M.
That cash supported about $74M returned via buybacks and dividends, while debt kept moving in the right direction.
Operationally, wells performed consistently, and the company flagged more efficiency gains that should help keep per-unit costs in check if gas gets choppy.
On the sell-side, the tone is mixed, which is exactly what creates opportunity.
UBS trimmed its target to $40 and stayed Neutral, citing ongoing headwinds, while Roth/MKM upgraded to Buy with a $42 target.
Morgan Stanley moved up to Equal-weight and a $49 target earlier this year. Translation: no euphoric consensus, but a clear path for sentiment to improve if macros cooperate.
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The Gas Setup You’re Actually Betting On
If you buy Range here, you’re really underwriting the gas tape in 2025–2026.
Macro price deck: The EIA’s latest outlook has 2025 Henry Hub around $4.19 per MMBtu versus last year’s $2-handle. That is a different world for free cash flow.
Structural demand: LNG export capacity is still climbing, U.S. power burn keeps surprising to the upside, and data centers are steadily pulling more baseload. You do not need wild price spikes for that mix to work. You need stability north of $3.50 to unlock better capital returns.
Inventory quality: Range has 30+ years of high-quality locations. In a tight basin like Appalachia, longevity plus cost leadership is a real edge.
Capital discipline: With leverage low and debt trending down, Range can keep buying back stock and bumping the base dividend as long as strip holds up. The quarterly dividend just went to $0.09, which is not going to knock anyone over, but it signals confidence.
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Valuation Check
At about $35, Range is roughly 17–18x trailing earnings, but the better lens is through cash generation versus strip.
On mid-$3s gas with modest liquids uplift, Range screens at a high single-digit free cash flow yield.
If Henry Hub hangs around $4, that FCF yield pushes into the low double digits. That is where multiple expansion and buyback math start to matter.
Peers like Antero and EQT will trade on their own catalysts, but Range’s setup is simpler: low cost, long runway, and leverage already tamed.
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Catalysts to Watch
Pricing and basis: Henry Hub near or above $3.75, Appalachia basis differentials staying contained.
LNG cadence: Any updates on U.S. LNG start-ups and contracting that tighten the 2026+ picture.
Operational beats: Another steady EPS beat with cash costs trending lower and well results holding serve.
Capital returns: Continuation of buybacks and a path to inch the base dividend higher.
Balance sheet: Net debt sliding below $1.1B would be a nice signal that FCF is doing its job.
Risks
Let’s be real about what can go sideways.
Commodity volatility: If a warm winter and storage gluts push Henry Hub back toward $3 or below, the whole E&P group derates and capital return pacing slows.
Basis blowouts: Appalachia can suffer from takeaway congestion. If basis widens, realized prices lag strip and margins compress.
Policy and ESG: Permitting, methane rules, and pipeline litigation can delay projects or raise costs. Range’s low emissions footprint helps, but policy risk is not zero.
Hedge book: Hedges can dampen the upside in a sudden price spike. That is fine for balance-sheet safety, but it caps torque.
Execution: Efficiency narratives need to keep showing up in well results and cash costs. Any stumble there, and the market will notice.
Sentiment swings: Gas equities are retail-heavy and headline-sensitive. You can get 10% down days on weather models. If you cannot stomach that, size accordingly.
Action Plan
Here is a clean, practical way to trade or build a position.
Starter buy: $33–$35 to begin a core. You are buying a low-cost, low-leverage gas producer at a reasonable FCF yield with upside to strip.
Add on strength: Add above $36 on confirmation if Henry Hub trends toward $3.80–$4.00 and management reiterates capital return plans.
Near-term target: $40 on stable pricing and one more clean quarter.
Stretch target: $45 if strip holds near $4 into winter and basis stays friendly.
Risk control: Stop or mental stop near $31 to cap downside if weather breaks bearish or basis widens.
What to monitor weekly: Gas strip, Appalachia basis, LNG headlines, storage reports, and Range’s buyback pace.
Final Take
This is not a meme stock or a moonshot. It is a sensible way to get paid if gas normalizes above last year’s distressed levels.
Range has the inventory, the cost position, and the balance sheet to convert a better tape into durable free cash flow.
Analyst opinions are split, which I like, because it means the rerate is not already priced in.
If you want leverage to LNG, power burn, and the broader electrification theme without chasing the hottest tickers, Range fits the bill.
Build it on weakness, add on proof, and let the cycle do some heavy lifting.
That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.
Best Regards,
— Adam Garcia
Elite Trade Club
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