Ranger Oil (NasdaqGS:ROCC) - Share price, News & Analysis

Q: What is the Fair Price of ROCC when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

ROCC ($38.39) is trading above our estimate of [[fair value]] ($30.58)

ROCC fundamental analysis
Snowflake Score
Valuation	4/6
Future Growth	3/6
Past Performance	4/6
Financial Health	2/6
Dividends	0/6

ROCC Stock Overview

Ranger Oil Corporation, an independent oil and gas company, engages in the onshore exploration, development, and production of crude oil, natural gas liquids, and natural gas in the United States.

Rewards

Price-To-Earnings ratio (6.8x) is below the US market (15.8x)

Earnings are forecast to grow 15.38% per year

Became profitable this year

Risk Analysis

Shareholders have been substantially diluted in the past year

Has a high level of debt

Ranger Oil Competitors

Talos Energy

NYSE:TALO

US$1.7b

Dorchester Minerals

NasdaqGS:DMLP

US$1.1b

Brigham Minerals

NYSE:MNRL

US$1.8b

Centennial Resource Development

NasdaqCM:CDEV

US$2.2b

Price History & Performance

Summary of all time highs, changes and price drops for Ranger Oil
Historical stock prices
Current Share Price	US$38.39
52 Week High	US$53.59
52 Week Low	US$15.00
Beta	2.8
1 Month Change	12.98%
3 Month Change	11.66%
1 Year Change	143.59%
3 Year Change	21.95%
5 Year Change	-1.51%
Change since IPO	-5.50%

Recent News & Updates

Jul 29

Ranger Oil: Racing Towards New Highs

The market often does not see the cyclical appreciation potential until a cyclical recovery is well underway. The key to making money with cyclical stocks is to sell after the recovery but before the market top (or at least near it). There is always a risk of a recovery aborting. Oil and gas has cleaned the house in both 2016 and again in 2020. Therefore, any coming correction is unlikely to affect the industry as much as other industries that are over-priced. Ranger Oil management is building a more valuable company to take full advantage of the latest industry upswing. (Note: This article appeared in the newsletter on May 28, 2022 and has been updated as needed.) One of the concepts that is hard to get across for any cyclical stock like Ranger Oil (ROCC) is that management will most likely exceed earlier highs in the latest cycle. So many times, investors look at market bottoms and only see years of decline. A 20% or 30% profit on the way back up is often greeted with loud cheers of success. But most cycles do not abort the way the last one did (though there is always the risk in any recovery). In fact, the recent stock price pullback has largely ignited fears that "the party is over". But the essential ingredient of over production is lacking. Similarly, a much-feared recession is unlikely to last long. Rather this is likely to prove to be a case of the market spotting "eleven of the last seven" recessions (yet again!). Worry and fear sells. It also makes contrarian investing very hard. Economic Background Now, there is some fears of a recession that is brought about by rising interest rates. That certainly could happen. But from an economic viewpoint, this is not 2008 where the whole situation was allowed to continue for two presidential terms before things literally got out of control. This time around, the Federal Reserve is taking action a few years sooner. There are clearly some overpriced stocks that will get hit very hard by the decreasing liquidity (through the open market operations of the Federal Reserve) combined with the fact that many of those managements have now realized that competition arrived. Those stocks are very likely to make the headlines to the point that the correction now underway will seem much worse than it was. But the oil and gas part of the investment world was housecleaned twice (once in 2016 and again rather recently). There really is not enough left to clean out. Furthermore, the start of this rally saw the typical consolidation of the stronger competitors shopping for bargains that financially weaker members of the industry were willing to unload. That also included some who thought they could make a killing in the industry only to endure fiscal year 2020. Therefore, whatever lies ahead for the stock market is very unlikely to do to oil and gas what has already happened yet again. Oil and gas stocks are certainly volatile and a pullback at some point due to a recession is a possibility. The end of the current war would be another point that could cause a commodity price retreat. But the fact is that demand is in excess of supply. We have gone through these periods before with the result that the marketplace takes time to sort the situation out. So, no one should expect surpluses "tomorrow" or in the near future unless something unexpectedly significant is going to happen. Ranger Oil Fits Right In Ranger Oil is doing what many in the industry are doing. A lot of small producers have suffered tremendously over the last five years or so. They now want out and want out at very flexible prices. Ranger Oil management has got the company in a position to offer prices that get those sellers out while providing shareholders with a reasonably accretive deal. Ranger Oil Map Of Bolt-On Eagle Ford Acquisitions (Ranger Oil May 2022, Corporate Presentation) The company just acquired more acreage in a prime Eagle Ford location. Keep in mind that the company production is largely oil. The recent acquisitions appear to maintain that focus. Management announced a few more small transactions at the end of June to complement the transactions shown above. But the best part of the deal is that the acreage cost is well below the going rate for similar acreage in the Permian. Yet the wells often are every bit as profitable, and the Eagle Ford rarely suffers from insufficient takeaway capacity like the Permian did in the last upcycle. On an execution basis, the Eagle Ford often exceeds the Permian in profitability when the location costs of wells is included because the Permian takeaway issues lead to pricing discounts while the Eagle Ford often sells production at a premium to the related benchmark. There is no guarantees of course that it will again happen this time around. But, as the saying goes, I like the chances of another takeaway shortage developing in the Permian. The Permian is still the "hot basin" in the industry and attracts far more interest. That alone, should be a warning sign of what may happen as activity steadily increases. Furthermore, the midstream industry is waiting for customers to demand more takeaway capacity. Once that happens, it is typically two years until that capacity is actually in service. Oftentimes, the midstream industry is increasing capacity well into a cyclical downturn as transportation needs catch up with the last cycle peak. This is and will be a serious issue for the "hot spots" of the industry. It frequently leads to unexpected outperformance of basins thought to have inferior profitability prospects. The result is that some top operators just avoid the basin completely to produce their above average results. Ranger Oil picked up oil weighted inventory for less than $5K an acre at a time when some are paying $50K an acre and higher. Later announced acquisitions were similarly discounted even if not quite as good a price at times. This happens because the lease holdings purchased were small. Management is creating value by taking those "too-small" holdings and combining them into the larger contiguous holdings shown above. That creates value for shareholders before they even drill the first well. The real payback comes when management drills on this acreage. Very few managements discuss the cost of acreage as part of the well breakeven. In this case, the acre cost of roughly 5K an acre on 100 acre spacing would add about $500,000 to the breakeven calculation. That is easy to cover in this environment. But the company paying $50K an acre on that same spacing adds $5 million to the breakeven calculation. That much money is much harder for management to justify (especially given the steep first year production declines of these wells) in any pricing environment. The result is that Ranger Oil will show shareholders a far greater return on capital with the lower priced acreage. Conclusion This management is "going the extra mile" for shareholders by piecing together small parcels that are likely to be uneconomic by themselves into contiguous acreage that is more marketable and more profitable to drill. This is one of many signs that the company should outperform the next upcycle in the industry. Of course, investors have a lot more work to do than just one particular item to evaluate overall management.

Jul 29

Estimating The Intrinsic Value Of Ranger Oil Corporation (NASDAQ:ROCC)

Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Ranger Oil Corporation...

Shareholder Returns

	ROCC	US Oil and Gas	US Market
7D	2.1%	2.3%	1.4%
1Y	143.6%	73.4%	-8.4%

Return vs Industry: ROCC exceeded the US Oil and Gas industry which returned 64.7% over the past year.

Return vs Market: ROCC exceeded the US Market which returned -9% over the past year.

Price Volatility

Is ROCC's price volatile compared to industry and market?
ROCC volatility
ROCC Average Weekly Movement	11.8%
Oil and Gas Industry Average Movement	8.9%
Market Average Movement	7.6%
10% most volatile stocks in US Market	17.1%
10% least volatile stocks in US Market	3.1%

Stable Share Price: ROCC is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 12% a week.

Volatility Over Time: ROCC's weekly volatility (12%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1882	136	Darrin Henke	https://www.rangeroil.com

Ranger Oil Corporation, an independent oil and gas company, engages in the onshore exploration, development, and production of crude oil, natural gas liquids, and natural gas in the United States. It engages in drilling unconventional horizontal development wells; and operates producing wells in the Eagle Ford Shale field in South Texas. As of December 31, 2021, it had total proved reserves of approximately 241 million barrels of oil equivalent; and 860 gross productive wells, as well as leased approximately 172,000 gross acres of leasehold and royalty interests.

Ranger Oil Fundamentals Summary

How do Ranger Oil's earnings and revenue compare to its market cap?
ROCC fundamental statistics
Market Cap	US$1.57b
Earnings (TTM)	US$111.96m
Revenue (TTM)	US$890.47m

6.8x

P/E Ratio

0.9x

P/S Ratio

Is ROCC overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
ROCC income statement (TTM)
Revenue	US$890.47m
Cost of Revenue	US$67.14m
Gross Profit	US$823.33m
Other Expenses	US$711.38m
Earnings	US$111.96m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	5.65
Gross Margin	92.46%
Net Profit Margin	12.57%
Debt/Equity Ratio	73.3%

How did ROCC perform over the long term?

See historical performance and comparison

We’ve recently updated our valuation analysis.

Valuation

Is ROCC undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

4/6

Valuation Score 4/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for ROCC?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for ROCC. This is calculated by dividing ROCC's market cap by their current preferred multiple.
What is ROCC's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$1.57b

ROCC key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	1.9x
Enterprise Value/EBITDA	3.5x
PEG Ratio	0.4x

Price to Earnings Ratio vs Peers

How does ROCC's PE Ratio compare to its peers?

ROCC PE Ratio vs Peers

The above table shows the PE ratio for ROCC vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	9.9x
TALO Talos Energy	8.6x	23.3%	US$1.7b
DMLP Dorchester Minerals	10.2x	n/a	US$1.1b
MNRL Brigham Minerals	15.4x	-4.6%	US$1.8b
CDEV Centennial Resource Development	5.3x	17.3%	US$2.2b
ROCC Ranger Oil	6.8x	15.4%	US$1.6b

Price-To-Earnings vs Peers: ROCC is good value based on its Price-To-Earnings Ratio (6.8x) compared to the peer average (9.9x).

Price to Earnings Ratio vs Industry

How does ROCC's PE Ratio compare vs other companies in the US Oil and Gas Industry?

Price-To-Earnings vs Industry: ROCC is good value based on its Price-To-Earnings Ratio (6.8x) compared to the US Oil and Gas industry average (9.8x)

Price to Earnings Ratio vs Fair Ratio

What is ROCC's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

ROCC PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	6.8x
Fair PE Ratio	17.7x

Price-To-Earnings vs Fair Ratio: ROCC is good value based on its Price-To-Earnings Ratio (6.8x) compared to the estimated Fair Price-To-Earnings Ratio (17.7x).

Share Price vs Fair Value

What is the Fair Price of ROCC when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: ROCC ($38.39) is trading above our estimate of fair value ($30.58)

Significantly Below Fair Value: ROCC is trading above our estimate of fair value.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is more than 20% higher than the current share price and analysts are within a statistically confident range of agreement.

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Future Growth

How is Ranger Oil forecast to perform in the next 1 to 3 years based on estimates from 3 analysts?

Future Growth Score

3/6

Future Growth Score 3/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

15.4%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: ROCC's forecast earnings growth (15.4% per year) is above the savings rate (1.9%).

Earnings vs Market: ROCC's earnings (15.4% per year) are forecast to grow faster than the US market (14.4% per year).

High Growth Earnings: ROCC's earnings are forecast to grow, but not significantly.

Revenue vs Market: ROCC's revenue (8.1% per year) is forecast to grow faster than the US market (7.8% per year).

High Growth Revenue: ROCC's revenue (8.1% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: Insufficient data to determine if ROCC's Return on Equity is forecast to be high in 3 years time

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Past Performance

How has Ranger Oil performed over the past 5 years?

Past Performance Score

4/6

Past Performance Score 4/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

-50.0%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: ROCC has high quality earnings.

Growing Profit Margin: ROCC became profitable in the past.

Past Earnings Growth Analysis

Earnings Trend: ROCC has become profitable over the past 5 years, growing earnings by -50% per year.

Accelerating Growth: ROCC has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: ROCC has become profitable in the last year, making it difficult to compare its past year earnings growth to the Oil and Gas industry (184.6%).

Return on Equity

High ROE: ROCC's Return on Equity (30.8%) is considered high.

Discover strong past performing companies

Financial Health

How is Ranger Oil's financial position?

Financial Health Score

2/6

Financial Health Score 2/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: ROCC's short term assets ($275.7M) do not cover its short term liabilities ($445.7M).

Long Term Liabilities: ROCC's short term assets ($275.7M) do not cover its long term liabilities ($606.7M).

Debt to Equity History and Analysis

Debt Level: ROCC's net debt to equity ratio (68.8%) is considered high.

Reducing Debt: ROCC's debt to equity ratio has increased from 16.6% to 73.3% over the past 5 years.

Debt Coverage: ROCC's debt is well covered by operating cash flow (81.9%).

Interest Coverage: ROCC's interest payments on its debt are well covered by EBIT (7x coverage).

Balance Sheet

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Dividend

What is Ranger Oil current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

Dividend Yield vs Market

Notable Dividend: Unable to evaluate ROCC's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate ROCC's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.

Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if ROCC's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if ROCC's dividend payments have been increasing.

Earnings Payout to Shareholders

Earnings Coverage: ROCC is not paying a notable dividend for the US market.

Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as ROCC has not reported any payouts.

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Management

How experienced are the management team and are they aligned to shareholders interests?

2.4yrs

Average management tenure

CEO

Darrin Henke (55 yo)

2yrs

Tenure

US$1,554,807

Compensation

Mr. Darrin J. Henke serves as the President, Chief Executive Officer and Director at Ranger Oil Corporation (formerly known as Penn Virginia Corporation) since August 17, 2020. Prior to joining Penn Virgin...

CEO Compensation Analysis

Compensation vs Market: Darrin's total compensation ($USD1.55M) is below average for companies of similar size in the US market ($USD5.41M).

Compensation vs Earnings: Darrin's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: ROCC's management team is considered experienced (2.4 years average tenure).

Board Members

Experienced Board: ROCC's board of directors are not considered experienced ( 1.6 years average tenure), which suggests a new board.

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Ownership Breakdown

Dilution of Shares: Shareholders have been substantially diluted in the past year, with total shares outstanding growing by 176.6%.

Data	Last Updated (UTC time)
Company Analysis	2022/08/18 00:00
End of Day Share Price	2022/08/18 00:00
Earnings	2022/06/30
Annual Earnings	2021/12/31