JPMorgan Maintains Underweight on RRC and Cuts Dec-26 Target Price to $43

Overview

This report is JPMorgan's 2Q26 earnings preview for Range Resources. The core view is that the company's field operations and production performance will be relatively normal and solid, but weaker realized natural gas prices following a revaluation based on bid-week pricing are expected to put 2Q26 EBITDAX approximately 3% below market expectations. The report also cuts its 2026/2027 EPS and CFPS forecasts and lowers the Dec-26 target price from $47 to $43 due to recent strip pricing adjustments, while maintaining an Underweight rating.

Core views

JPMorgan believes RRC has a strong balance sheet, an excellent management team, strong field execution, and substantial FCF, but these advantages are insufficient to offset pressure from relatively high valuation and potentially weakening NGL competitive advantages. Production growth in the second half of 2026 is expected to be more concentrated in the latter half as processing and gathering infrastructure comes online; 2027 production is expected to rise further to 2.60 Bcfe/d. However, the NGL premium versus Mont Belvieu could decline as Gulf Coast terminal capacity expands, weakening the relative advantage provided by RRC's Marcus Hook position.

Analysis framework

The report primarily presents a quarterly earnings preview, incorporating production, capital expenditures, realized natural gas and NGL prices, EPS, CFPS, EBITDAX, FCF, and updated strip pricing into its earnings forecasts. Valuation uses an NAV framework based on a DCF of PDP reserves, supplemented by valuations of undeveloped resources using operating cost assumptions, commodity price assumptions, balance sheet items, and future development plans, with the Dec-26 target price ultimately set at 90% of NAV.

Methodology notes

• Valuation methodsNAV

  Oil & gas E&P valuation based on net asset value

  The target price is based on an NAV methodology using NYMEX strip pricing: PDP reserves are first valued through a DCF, followed by adjustments for operating costs, commodity price assumptions, and balance sheet items; undeveloped assets are valued based on future development plans, with 90% of NAV used to reflect differences in inventory quality and depth.

• Earnings forecastQuarterly operating and financial forecasts

  Linkage among production, realized prices, capital expenditures, and EBITDAX

  The report derives quarterly revenue, EBITDAX, EPS, CFPS, and FCF from assumptions for natural gas, NGL, and condensate production, as well as realized price differentials relative to Henry Hub and Mont Belvieu.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• RRC.N

  Covered asset

  Strengths

  Management, field execution, and the business model receive positive assessments; the company is expected to generate substantial FCF in 2026/2027; the strong balance sheet should support future cash returns.

  Weaknesses

  Relatively high valuation versus peers; 2Q26 EBITDAX is expected below market expectations; the potential decline in the NGL premium versus Mont Belvieu could weaken its competitive advantage.

  Comparison

  The report believes RRC previously gained an NGL pricing advantage versus peers from its Marcus Hook position, but Gulf Coast terminal capacity expansion could weaken this advantage; relative to the covered E&P group, the target price incorporates inventory quality and depth differences at only 90% of NAV.

  Risks

  Natural gas and oil price volatility, narrowing NGL price premiums, infrastructure constraints, oilfield services cost inflation or deflation, well performance, and uncertainty in reserve assumptions.

• Natural gas

  Core commodity price driver

  Strengths

  2026/2027 strip pricing still supports substantial FCF generation by RRC; growth in local utility and data center gas-fired power demand could affect FT portfolio optimization opportunities.

  Weaknesses

  2Q26 realized natural gas prices are expected at $2.30/Mcf, approximately $0.60/Mcf below the HH benchmark, a key reason for EBITDAX being below expectations.

  Comparison

  The report uses an HH benchmark price of $2.89/Mcf as the 2Q26 reference and updates the model using 2026/2027 natural gas prices of $3.65/$3.43 per Mcf.

  Risks

  Natural gas price volatility could materially alter cash flow, buyback capacity, and stock performance.

• NGL

  Margin and competitive advantage driver

  Strengths

  2Q26 realized NGL prices are expected at $29.06/bbl, still assuming a premium of approximately $3.00/bbl versus Mont Belvieu.

  Weaknesses

  The company cautions that the premium versus Mont Belvieu could decline next year as Gulf Coast terminal capacity expands.

  Comparison

  RRC's position at Marcus Hook previously created an advantage versus peers, but this advantage could weaken as Gulf Coast export capacity increases.

  Risks

  Weaker NGL fundamentals or a narrowing premium would affect the company's margins and relative valuation.

Key data

• RatingUnderweightThe report maintains its Underweight rating, primarily due to caution regarding relative valuation and NGL fundamentals.
• Target price$43.00The Dec-26 target price is cut from $47.00 to $43.00.
• Current price$36.73RRC US price as of 2026-07-09.
• 2Q26 total production forecast2.28 Bcfe/dBelow STe of 2.30 Bcfe/d; shown in the table as 2,282 MMcfe/d.
• 2Q26 capital expenditure forecast$186 MMIn line with STe and approximately 34% higher sequentially, as a second completion crew was added in 2Q26 to work through the DUC inventory.
• 2Q26 EBITDAX forecast$312 MMBelow STe/consensus of $324 MM, primarily due to weaker realized natural gas prices.
• 2Q26 EPS/CFPS forecast$0.59 / $1.23Below STe of $0.71 / $1.31.
• 2Q26 realized natural gas price$2.30/McfApproximately $0.60/Mcf below the HH benchmark price of $2.89/Mcf.
• 2Q26 realized NGL price$29.06/bblAssumes a premium of approximately $3.00/bbl versus Mont Belvieu.
• 2026/2027 FCF forecast$830 MM / $684 MMEstimated free cash flow before changes in working capital, based on recent 2026/2027 strip pricing.
• 2026/2027 EPS forecast revisions$3.55 / $3.11Prior figures were $3.73 / $3.70.
• 2026/2027 CFPS forecast revisions$6.40 / $5.90Prior figures were $6.64 / $6.62.

Impact & implications

The report's implications for RRC stock are cautious: near-term results may combine solid operations with financial performance below expectations, limiting room for valuation re-rating; while production growth, FCF, and cash returns provide medium-term support, declining NGL premiums and relatively high valuation make the risk/reward profile less compelling. For the oil & gas E&P sector, RRC remains highly sensitive to changes in natural gas prices, NGL prices, infrastructure constraints, and service costs.

Risks

• Commodity price volatility could alter the economics of oil and gas projects and the company's cash flow, causing share price performance to exceed or fall short of expectations.
• Infrastructure constraints could affect production ramp-up, realized prices, and transportation costs.
• Inflation or deflation in oilfield services costs could affect capital expenditure efficiency and margins.
• Geological conditions, type curves, and proved reserves/resource potential rely on numerous assumptions, and outcomes could change materially.
• If future well performance exceeds type curves, production could outperform expectations and drive a stock re-rating, representing an upside risk to the Underweight rating.
• A decline in the NGL premium versus Mont Belvieu could weaken RRC's competitive advantage relative to peers.

What to watch

• Whether actual 2Q26 EBITDAX is near $312 MM and the difference versus consensus of $324 MM.
• Whether 2Q26 realized natural gas prices and the differential versus Henry Hub are consistent with the $2.30/Mcf assumption and approximately $0.60/Mcf discount.
• Changes in the NGL premium versus Mont Belvieu, particularly the impact of Gulf Coast terminal capacity expansion.
• The pace of DUC inventory drawdown and second-half production ramp-up following the addition of a second completion crew in 2Q26.
• The progress of new processing and gathering infrastructure coming online in 2H26 and whether production increases from 2.28 to 2.55 Bcfe/d from 2Q to 4Q26 as expected.
• Further management commentary on optimizing the natural gas and liquids FT portfolio, including whether specific cost-reduction or margin-improvement targets are provided.
• Whether the company's buyback strategy shifts more clearly toward countercyclical repurchases and increases buybacks when prices are below mid-cycle levels.