Barclays Downgrades Range Resources To Underweight

On Thursday, Barclays issued a company note on Range Resources Corp. (NYSE: RRC) amid the global turmoil in the oil and gas industry. Analysts at Barclays downgraded Range Resources from Equal Weight to Underweight and lowered the price target to $24.

Thomas Driscoll, an analyst at Barclays, wrote, "While the company has a deep inventory of attractive drilling locations, it faces cost structure challenges and it has a levered balance sheet [...]We are lowering 2016 cash flow and EBITDA roughly 11 percent and 8 percent."

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Justification

Analysts at Barclays gave one key reason why they downgraded Range Resources and lowered their price target: low growth and challenging cash flow.

Barclays noted that cash flow before hedges is negative at current strip prices, which puts a large amount of pressure on Range Resources' business operations. Furthermore, the company may have a challenging time growing with depressed oil prices as drilling locations have become a less lucrative investment. Going forward, while analysts believe Range Resources deserves a 40–45 percent premium to their peers in this difficult macroeconomic environment, the company will face many headwinds that can detract value from shareholders.

Range Resources last traded at $31.17.