Yahoo Finance Range Resources’ Enterprise Multiple: How Does It Look?
Could Range Resources Finally Reverse Its Downtrend in 2016?
Range Resources’ enterprise multiple
As of 4Q15, Range Resources’ (RRC) adjusted EV-t0-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) ratio comes in at around ~7.6x, which is lower than its five-year historical average EV-to-EBITDA ratio of ~15.8x.
As seen in the above chart, RRC’s EV-to-EBITDA ratio has fallen since 3Q14, mainly due to a much steeper fall in its enterprise value than EBITDA. Upstream S&P 500 (SPY) peers Noble Energy (NBL), Pioneer Natural Resources (PXD), Devon Energy (DVN), and Murphy Oil (MUR) have enterprise multiples of ~12.4x, ~10x, 5.1x, and ~3.2x, respectively.
RRC’s forward EV-to-EBITDA multiple is ~15x, which is lower than its own historical average of ~15.8x. For 2016, Wall Street analysts estimate RRC’s EBITDA to be ~40% lower YoY (year-over-year), coming in at ~$511 million.
The enterprise multiple
The EV-to-EBITDA ratio, also referred to as the enterprise multiple, is preferred over the PE ( price-to-earnings) ratio as a measure of upstream companies because it takes into account the debt of a company. In the enterprise multiple, the enterprise value is the summation of the market capitalization and market value of debt, minus total cash and cash equivalents.
RRC’s proven reserves
As of December 31, 2015, Range Resources’ proven reserves totaled ~9.9 trillions of cubic feet equivalent, a decrease of ~4% from December 31, 2014. As of December 31, 2015, ~64% of RRC’s proven reserves consisted of natural gas, ~33% consisted of natural gas liquids, and only ~3% consisted of crude oil. All of RRC’s proven reserves are located in the United States. Of the total proven reserves, ~86% is in the Marcellus shale formation. According to RRC’s 2015 annual report, the discounted value of its reserve base at the end of 2015 was ~$6.8 billion.
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