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Range Resources First Quarter 2021 Results

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   |    Monday,April 26,2021

Range Resources Corp. announced its first quarter 2021 financial results.

Highlights:

• Realizations before index hedges of $3.20 per mcfe, or approximately $0.51 above NYMEX natural gas
• Pre-hedge NGL realization of $26.35 per barrel, highest since late 2018
• NGL differential of $1.52 per barrel above Mont Belvieu, best in Company history
• Natural gas differentials, including basis hedging, averaged $0.14 per mcf below NYMEX
• Production averaged 2,081 Mmcfe per day, approximately 70% natural gas
• All-in first quarter capital spending was $105 million, approximately 25% of the annual budget
• Approximately 45% of pre-hedge revenue from liquids sales
• In March, Range's $3.0 billion borrowing base and $2.4 billion elected commitment were reaffirmed
• In April, Range redeemed approximately $63.3 million of senior notes and senior subordinated notes due between 2021 and 2023

Commenting on the quarter, Jeff Ventura, the Company's CEO said, "Range continues to make progress on key near-term objectives: improving margins with a focus on cost structure, generating free cash flow, enhancing liquidity, and operating safely while maintaining peer-leading capital efficiency. There were sizable improvements in pricing quarter-over-quarter leading to Range's $193 million in cash flow from operations before changes in working capital. The corresponding capital spending of $105 million generated solid free cash flow for the quarter.

Range remains committed to disciplined capital spending and generating sustainable free cash flow. Over time, we believe Range will be differentiated as a result of our low sustaining capital, competitive cost structure, marketing strategies, environmental leadership and importantly, our multi-decade core inventory life, which will be an increasing competitive advantage in the years to come."

Financial Discussion

First Quarter 2021

GAAP revenues for first quarter 2021 totaled $626 million, GAAP net cash provided from operating activities (including changes in working capital) was $109 million, and GAAP net income was $27 million ($0.11 per diluted share). First quarter earnings results include a $58 million derivative fair value loss due to increases in commodity prices.

Non-GAAP revenues for first quarter 2021 totaled $645 million, and cash flow from operations before changes in working capital, a non-GAAP measure, was $193 million. Adjusted net income comparable to analysts' estimates, a non-GAAP measure, was $73 million ($0.30 per diluted share) in first quarter 2021.

Total production for first quarter 2021 averaged approximately 2,081 net Mmcfe per day. By area, southwest Marcellus production averaged 2.0 Bcfe per day while the northeast Marcellus assets averaged 77 net Mmcf per day during the quarter.

First quarter 2021 natural gas, NGLs and oil price realizations (including the impact of cash-settled hedges and derivative settlements which correspond to analysts' estimates) averaged $3.01 per mcfe.

• The average natural gas price, including the impact of basis hedging, was $2.55 per mcf, or a ($0.14) per mcf differential to NYMEX. The first quarter natural gas differential includes the benefit of improved regional basis and positive impact of higher daily prices in February. The Company's average 2021 natural gas differential to NYMEX remains within an expected range of ($0.30) to ($0.40) per mcf.
  
  
• Pre-hedge NGL realizations were $26.35 per barrel, an improvement of $8.33 per barrel versus the fourth quarter of 2020 driven by an improving market for propane and heavier products. At a $1.52 premium over Mont Belvieu equivalent, the first quarter premium was the best in Company history. Range continues to see strong NGL export premiums at Marcus Hook because of the Company's access to international markets and diversified portfolio of sales agreements. As a result of these improvements, the Company expects to average a pre-hedge premium differential to Mont Belvieu equivalent of $0.50 - $2.00 per barrel for 2021.
  
  
• Crude oil and condensate price realizations, before realized hedges, averaged $49.00 per barrel, or $9.06 below WTI (West Texas Intermediate). Range expects an improving condensate differential to WTI during 2021, between $7-$9 below NYMEX, as regional production continues to decline and demand for transportation fuels recovers.

Capital Expenditures

First quarter 2021 drilling and completion expenditures were $97.1 million. In addition, during the quarter, $6.4 million was invested on acreage leasehold and $1.9 million on gathering systems and other. First quarter investments represent approximately 25% of Range's total capital budget of $425 million in 2021.

Financial Position

In January 2021, Range issued $600.0 million aggregate principal amount of 8.25% senior notes due 2029 and used net proceeds to repay borrowings under its bank credit facility. In April 2021, Range redeemed outstanding principal amounts of senior notes due in 2021 and 2022 totaling approximately $26.0 million and senior subordinated notes due in 2021, 2022 and 2023 totaling approximately $37.3 million. Proforma the April redemptions, Range has approximately $218 million in notes that mature through 2022, which are expected to be redeemed via free cash flow at current strip pricing.

Range's $3.0 billion borrowing base and $2.4 billion commitment amount were reaffirmed during first quarter 2021 with no changes to financial covenants. The credit facility matures on April 13, 2023 and is subject to semi-annual redeterminations. As of March 31, 2021, Range had total debt outstanding of $3.1 billion, consisting of $124 million in bank debt, $3.0 billion in senior notes and $37 million in senior subordinated notes. The Company had over $1.9 billion of borrowing capacity under the current commitment amount at the end of the first quarter.

Operational Activity

The table below summarizes estimated activity for 2021 regarding the number of wells to sales for each area.

NGL Marketing and Transportation

Range's liquids marketing continued to expand premiums relative to Mont Belvieu pricing, with first quarter NGL realizations averaging a $1.52 premium per barrel, a best in Company history. The portfolio of domestic and international ethane contracts performed very well during the quarter and generated a significant uplift relative to Mont Belvieu while propane and butane markets benefited from an increase in Marcus Hook export premiums and a supportive macro environment.

Starting April 2021, Range will have an additional 5,000 barrels per day of Mariner East capacity, which is expected to be fully utilized with existing production. In addition, Range has secured new and diverse LPG export-related contracts. These contracts add flexibility, reduce costs, and further enhance realized propane and butane prices, and continue the momentum of achieving strong export premiums. Range expects near-term and long-term benefits of NGL exports out of the Northeast as international demand for NGL products continues to grow. NGL exports out of Marcus Hook provide Range a unique supply option for that demand. In 2021, Range expects to export over 80% of its propane and butane, the highest percentage of propane and butane exported by any U.S. independent, leading to strong year-over-year improvements in NGL pricing and margins. Higher realized NGL prices for Range in 2021 will lead to a slight increase in processing costs as Range's processing costs are based on the NGL revenue received, providing a partial hedge against NGL price fluctuations.

Including the impact of basis hedging, Range had a natural gas differential of ($0.14) per mcf during the first quarter. The Company's transportation portfolio provides access to natural gas markets in the Gulf Coast, Midwest, and Northeast, with each region benefiting from strong daily sales prices in February. This revenue uplift was partially offset by higher natural gas fuel cost during the quarter which is reflected in transportation, gathering, processing and compression expense. Range remains on track with its natural gas differential to NYMEX guidance of ($0.30) - ($0.40) for the year.

Guidance 2021

Capital & Production Guidance

Range's 2021 all-in capital budget is $425 million. Production for full-year 2021 is expected to average approximately 2.15 Bcfe per day, with ~30% attributed to liquids production.

Full Year 2021 Expense Guidance

Full Year 2021 Price Guidance

Based on current market indications, Range expects to average the following price differentials for its production in 2021.

⁽¹⁾ Including basis hedging
⁽²⁾ Weighting based on 53% ethane, 27% propane, 7% normal butane, 4% iso-butane and 9% natural gasoline.

Hedging Status

Range hedges portions of its expected future production volumes to increase the predictability of cash flow and to help maintain a strong, flexible financial position. As of April 16, 2021, Range had approximately 70% of its remaining expected 2021 natural gas production hedged at an average ceiling price of $2.79 per Mmbtu and an average floor price of $2.60 per Mmbtu. Similarly, Range hedged approximately 70% of its remaining estimated 2021 crude oil production at an average floor price of $52.00 per barrel and approximately 20% of its remaining expected 2021 NGL revenue. Please see the detailed hedging schedule posted on the Range website under Investor Relations - Financial Information.

Range has also hedged Marcellus and other basis for natural gas and NGL exports to limit volatility between benchmarks and regional prices. The combined fair value of the natural gas basis, NGL freight and spread hedges as of March 31, 2021 was a net gain of $10 million.

2024 Development Plan

Category	2023	2024 Est. Initial	Updated 2024 Guidance	%Difference (2023 vs 2024)
Total Capital Expenditure($mm)

Frac / Completion Crew (s)

Production Daily Equivalent(mmcfe/d)

 Click here for More Planned 2024 Activity