Ranger Oil Corp., Houston, has raised its 2022 capital spending forecast to about $400 million from $245 million in 2021 as its leaders look to reap the rewards of greater efficiencies in the company’s operations.
Ranger last year acquired Lonestar Resources US Inc. to grow its acreage in the Eagle Ford to more than 140,000 and President and Chief Executive Officer Darrin Henke said the integration of those operations has gone better than expected, allowing Ranger to bump its synergies forecast to $25 million annually over the next 5 years from $20 million. On top of that, newly turned wells handily outperformed expectations and Ranger’s field teams stepped up their performance, among other things growing their average feet drilled per day to 2,035 from 1,716 in 2020.
“We are clearly seeing the cost synergies afforded by our consolidation efforts,” Henke said on a Mar. 8 conference call. “We continue to prudently invest in proven technologies to drive further cost efficiencies, such as jet pump installations, annular gas lift, ongoing field compression upgrades, and other production management initiatives designed to bend the curve and decrease the natural decline rate of our wells.”
Those improvements helped Ranger book a 2021 margin per equivalent barrel of about $35.65, a number that should grow well north of $40 at today’s prices. That has given Henke and his team confidence to increase their capital spending targets for the year to $375-425 million for drilling and completion and $5-10 million for land and facilities. Henke said Ranger is looking to occasionally add a third rig to its development plans this year and focus it on acreage in LaSalle County, south of San Antonio, acquired in the Lonestar deal.
“Rather than move a rig all the way down there, what makes sense to us is to pick up a spot rig,” Henke told analysts on the conference call. “It's not the easiest thing today to pick up a drilling rig but we do think we'll be able to execute on that and drill some wells [that are] going to be very high quality, in the top decile of our inventory from a return standpoint.”
Ranger booked a net profit of $68.3 million on total revenues of $225 million in the fourth quarter. Those figures were up from $43.1 million and $141 million, respectively, in the third quarter and a loss of $135 million and sales of $67 million during the last 3 months of 2020. Average oil sales volume for the fourth quarter came in at 27,516 b/d, topping the target the Ranger team had forecast on the heels of reporting its third-quarter results (OGJ Online, Nov. 5, 2021).
Free cash flow for the quarter was $44 million and $109 million for all of 2021. Lifted by higher prices, it is expected to surge to $250 million this year, setting the stage for the Ranger team to further trim the company’s debt load and plan to begin buying back up to $100 million of the company’s stock and launch a quarterly dividend of 6.25 cents/share.
At the same time, Henke said he’s keeping an eye out for more acquisition opportunities, saying there are “definitely deals in marketplace and we’re active. And I really can’t say much more.”
Shares of Ranger (Ticker: ROCC) rose strongly on the heels of the earnings report. In the last hour of regular trading Mar. 8, they were up 9% to about $40.40. They had changed hands at nearly $41 earlier in the session and have now doubled over the past six months. In a note to clients, Seaport Research Partners analyst Nick Pope said he has raised his price target to $43 from $40 and that Ranger will then still trade at a discount to its peer group and be a compelling investment.
