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Range Resources Second Quarter 2021 Results

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   |    Wednesday,July 28,2021

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


  • Realizations before index hedges of $3.25 per mcfe, or approximately $0.41 above NYMEX natural gas
  • Pre-hedge NGL realization of $27.92 per barrel, highest since 2014
  • NGL differential of $2.24 per barrel above Mont Belvieu
  • Natural gas differentials, including basis hedging, averaged $0.39 per mcf below NYMEX
  • All-in second quarter capital spending was $120 million, approximately 28% of the annual budget
  • Production averaged 2.10 Bcfe per day, approximately 31% liquids
  • Redeemed $63.3 million of senior notes and senior subordinated notes due between 2021 and 2023
  • Reduced total debt outstanding by approximately $66 million
  • Range committed to a pilot project with Project Canary to certify the production of responsibly sourced natural gas (RSG)

Commenting on the quarter, Jeff Ventura, the Company's CEO said, "Range continues to make progress on key objectives: improving margins with a focus on cost structure, generating free cash flow, and operating safely while maintaining peer-leading capital efficiency. Range generated solid free cash flow for the quarter, investing $120 million in second quarter with corresponding cash flow from operations before changes in working capital of $177 million. Range remains committed to disciplined capital spending and generating sustainable free cash flow and at current strip pricing, we expect Range to rapidly approach our long-term balance sheet targets. We believe Range is 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 is an increasingly important competitive advantage."


Second Quarter 2021

GAAP revenues for second quarter 2021 totaled $435 million, GAAP net cash provided from operating activities (including changes in working capital) was $174 million, and GAAP net earnings was a loss of $156 million ($0.65 per diluted share). Second quarter earnings results include a $250 million derivative fair value loss due to increases in commodity prices.

Non-GAAP revenues for second quarter 2021 totaled $644 million, and cash flow from operations before changes in working capital, a non-GAAP measure, was $177 million. Adjusted net income comparable to analysts' estimates, a non-GAAP measure, was $59 million ($0.24 per diluted share) in second quarter 2021.

The following table details Range's average production and realized pricing for second quarter 2021(a):

  2Q21 Production & Realized Pricing  
  Natural Gas
  Natural Gas
Net Production per day 1,449,307   8,539   100,587   2,104,064  
Average index price(b) $2.84   $65.96   $25.68      
Differential (0.40)   (8.36)   2.24      
Basis hedging 0.01   -   -      
Realized prices before index hedges $2.45   $57.60   $27.92   $3.25  
Settled index hedges (0.07)   (15.39)   (2.28)   (0.21)  
Average realized prices after hedges $2.38   $42.21   $ 25.64   $ 3.04  

(a) May not add due to rounding
(b) Indexes include NYMEX-Henry Hub, NYMEX-WTI and OPIS-Mont Belvieu for natural gas, oil and NGLs, respectively

Total production for second quarter 2021 averaged approximately 2.10 net Bcfe 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.

Second quarter 2021 natural gas, natural gas liquids (NGL) and oil price realizations (including the impact of cash-settled hedges and derivative settlements which correspond to analysts' estimates) averaged $3.04 per mcfe.

  • The average natural gas price, including the impact of basis hedging, was $2.45 per mcf, or a ($0.39) per mcf differential to NYMEX. 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 $27.92 per barrel, an improvement of $1.56 per barrel versus the first quarter of 2021 and a $2.24 premium to the Mont Belvieu equivalent barrel. The Company's average 2021 premium differential to the Mont Belvieu equivalent barrel remains within an expected range of $0.50 - $2.00 per barrel for 2021.

  • Crude oil and condensate price realizations, before realized hedges, averaged $57.60 per barrel, or $8.36 below WTI (West Texas Intermediate). Range's estimated condensate differential to WTI during 2021 remains within an expected range of $7-$9 below NYMEX.

The following table details Range's unit costs per mcfe(a):

Expenses   2Q 2021
    2Q 2020
Direct operating(a) $ 0.10   $ 0.11     (9%)    
Transportation, gathering, processing and compression   1.48     1.30     14%    
Production and ad valorem taxes   0.04     0.03     33%    
General and administrative(a)   0.16     0.13     23%    
Interest expense(a)   0.29     0.22     32%    
Total cash unit costs(b)   2.07     1.79     15%    
Depletion, depreciation and amortization (DD&A)   0.47     0.49     (4%)    
Total unit costs plus DD&A(b) $ 2.54   $ 2.28     11%    

(a) Excludes stock-based compensation, legal settlements and amortization of deferred financing costs.
(b) May not add due to rounding.

Capital Expenditures

Second quarter 2021 drilling and completion expenditures were $115.7 million. In addition, during the quarter, $4.5 million was invested on acreage leasehold, gathering systems and other. Total capital expenditures year to date were $226 million at the end of the second quarter. Range remains on track to spend at or below the total capital budget of $425 million in 2021.

Financial Position

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.

As of June 30, 2021, Range had total debt outstanding of $3.1 billion, consisting of $121 million in bank debt and $2.95 billion in senior notes. The Company has approximately $750 million in senior notes that mature through 2023, which are expected to be retired with projected free cash flow at current strip pricing. Range had over $1.9 billion of borrowing capacity under the bank credit facility commitment amount at the end of the second quarter.

Operational Activity

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

      Wells TIL
2Q 2021
  Calendar 2021
Planned TIL
SW PA Super-Rich     3   17   8  
SW PA Wet     12   18   3  
SW PA Dry     10   24   7  
Total Wells     25   59   18  

NGL Marketing and Transportation

In second quarter, Range began utilizing an additional 5,000 barrels per day of Mariner East capacity to transport NGLs to export markets. Range's second quarter NGL differential benefitted from a diversified marketing strategy with flexibility in product placement and sales timing. Range's unhedged realized NGL price for the second quarter was $27.92 per barrel, a $2.24 premium to Mont Belvieu. This represents the highest premium to Mont Belvieu in Company history and, in absolute terms, the highest quarterly NGL price since 2014. As a result of export timing, the second quarter NGL barrel included a higher percentage of propane and heavier products, thereby improving the quarterly differential. During second half 2021 the Company expects strong fundamentals to result in higher absolute prices for domestic propane and butane, compressing arbitrage premiums of U.S. exports. Coupled with a lighter barrel from export timing and seasonality in domestic NGL sales, Range expects lower premiums to Mont Belvieu but improving overall NGL price realizations in a globally competitive price environment. Range's 2021 premium NGL differential is expected to be within a $0.50 to $2.00 per barrel range for the full year, showing the benefit of a diversified NGL portfolio and access to international markets.

For reference, Range's forecasted 2021 pre-hedge NGL realization has increased by approximately $7 per barrel since February, resulting in an increase of approximately $250 million in forecasted revenue. As a result of higher NGL prices and the effect of Range's price-linked processing contracts, Range is increasing guidance for 2021 GP&T expense to $1.43 to $1.47 per mcfe. Net of projected processing costs, Range's forecasted pre-hedge cash flow from NGL sales in 2021 has increased by approximately $200 million since February. As previously disclosed, Range expects GP&T expense to decline annually in 2022 and beyond based on existing gathering contracts. The reduction in annual gathering expenses relative to 2021 totals approximately $70 million by 2025 and greater than $100 million by 2030.

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

Direct operating expense: $0.09 - $0.11 per mcfe  
Transportation, gathering, processing and compression expense: $1.43 - $1.47 per mcfe  
Production tax expense: $0.02 - $0.04 per mcfe  
Exploration expense: $20.0 - $25.0 million  
G&A expense: $0.15 - $0.16 per mcfe  
Interest expense: $0.26 - $0.28 per mcfe  
DD&A expense: $0.47 - $0.50 per mcfe  
Net brokered gas marketing net expense: $2.0 - $10.0 million  

Full Year 2021 Price Guidance

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

Natural Gas:(1) NYMEX minus $0.30 to $0.40  
Natural Gas Liquids (including ethane):(2) Mont Belvieu plus $0.50 to $2.00 per barrel  
Oil/Condensate: WTI minus $7.00 to $9.00  

(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 July 16, 2021, Range had more than 75% of its expected second half 2021 natural gas and condensate production hedged. Range also had over 35% of its projected second half 2021 net NGL revenue hedged as of July 16th. For details, please see the detailed hedging schedule posted on the Range website under Investor Relations - Financial Information.

Range has also hedged basis for natural gas and NGL volumes to limit volatility between published pricing benchmarks and regional sales prices. The combined fair value of the natural gas basis, NGL freight and spread hedges as of June 30, 2021 was a net gain of $26 million.

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