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Range Touts Record 43.4 Mmcfe/d Marcellus Well, Utica Volumes in 1Q

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   |    Tuesday,April 28,2015

Range Resources Corp. has announced its first quarter results.

Highlights:

• Production volumes reached a record high, averaging 1,328 Mmcfe per day, a 26% increase over the prior-year quarter.
• Unit costs declined $0.53 per mcfe, or 15% compared to the prior-year.
• Washington County Marcellus well brought on line in late April with a 24-hour production rate of 43.4 Mmcfe per day. This is a new record and the highest rate ever for any Marcellus well.
• Record Utica well has cumulative production to date of 1.2 Bcf under constrained conditions.
• New well in dry gas area of Washington County, Pennsylvania brought on line in first quarter at a 24-hour production rate of 31.3 Mmcf per day.
• An additional long-term LNG sales agreement signed, bringing total LNG sales agreements to 200,000 Mmbtu per day.

Commenting, Jeff Ventura, Range's Chairman, President and CEO, said, "First quarter operational results continue to be excellent, as we exceeded our first quarter production guidance and we continue to see great drilling results with lower cost and improved capital efficiency in the Marcellus. The oversupply of natural gas and NGLs in Appalachia have created a challenging price environment, but we see signs of improvement coming, and until then, our hedges help to improve financial results. Later this year, the Mariner East project is expected to commence, providing Range another premium outlet for ethane sales, plus substantial savings on propane transportation costs.

"With our current plan to spend approximately $700 million less in 2015 than 2014 and still target 20% growth, we believe that we will be one of the most capital efficient companies in our industry. This continuing capital efficiency, coupled with our large footprint in the core of the Marcellus, Utica and Upper Devonian, with optionality of drilling dry, wet and super-rich acreage, gives Range flexibility to maximize returns. Combined with the shape of our 20% growth profile in 2015, which is back-end loaded, we are well positioned for the remainder of 2015, 2016 and beyond."

Operational Discussion

Southern Marcellus Shale Division

Production for the first quarter averaged 887 net Mmcfe per day for the division, a 32% increase over the prior year. The division's first quarter net production included 490 Mmcf per day of gas, 55,786 barrels per day of NGLs and 10,382 barrels per day of condensate. During the first quarter, the division brought on line 35 wells in southwest Pennsylvania, with 17 wells in the super-rich area, 14 wells in the wet gas area, three Marcellus dry gas wells and one Utica dry gas well. For Marcellus wells brought on line in the first quarter, the average working interest was 98%, and the average net revenue interest was 82%.

During the first quarter, the division brought on line the Claysville's Sportsman's Club Unit #11H, the division's first Washington County Utica well that tested at an initial 24-hour rate of 59 Mmcf per day in late December. The well was brought on line in late January, at a constrained rate of 20 Mmcf per day on an interruptible basis. To date, production results are encouraging, as the well has cumulative production of 1.2 Bcf of gas. Production results and formation analysis continue to reinforce the Company's belief that the well is located in the core of the Utica with the highest gas in place. Range has an 87.5% working interest and a net revenue interest of 71.1% in this well. The division plans two additional Utica wells in 2015, with the first well spud recently and the other well planned to spud in the second half of this year. Range holds approximately 400,000 net acres, considered prospective for Utica dry gas.

Late in the quarter, the division brought on line a well in the dry gas area of Washington County that produced under constrained conditions at a 24-hour production rate of 31.3 Mmcf per day. The well was drilled with a lateral length of 7,906 feet and 41 stages. Two additional wells are planned for this pad in the second quarter.

Also, in late April, a well brought on line in the wet gas area of Washington County set a record for any Marcellus well drilled to date, with an initial 24-hour production rate to sales of 43.4 Mmcfe per day. The well was drilled with a lateral length of 8,668 feet containing 45 stages, and is producing under constrained conditions.

Northern Marcellus Shale Division

In northeast Pennsylvania, production for the first quarter averaged 253 net Mmcf per day for the division, a 30% increase over the prior year. In the first quarter, the division turned three wells to sales, with an average working interest of 100% and average net revenue interest of 84%. One well brought on line had an initial 24-hour rate to sales of 26.1 Mmcf per day, with a 30-day average rate of 21 Mmcf per day and a 60-day rate of 19 Mmcf per day. Range anticipates 2015 rig activity to fluctuate between one and two rigs in order to satisfy the drilling obligations on larger leases, and turning 11 wells to sales for the remainder of 2015.

Southern Appalachia Division

Production for the first quarter averaged 107 net Mmcf per day for the division, a 53% increase over the prior year, primarily due to the increased volumes resulting from the Nora/Conger exchange with EQT, completed in June 2014. Production was negatively impacted by the cold weather during the first quarter. The division continues to test new completion techniques and well designs, which have so far produced impressive results. Because of these improvements, coalbed methane (CBM) wells completed in 2014 and first quarter 2015 are the best group of CBM wells in over 20 years at Nora. Importantly, the Virginia assets receive a premium gas price due to their strategic location near the growing southeast markets along the Atlantic Coast.

Marcellus Shale Marketing, Transportation and Processing Update

As part of the commissioning process on the Sunoco Mariner East pipeline, Range began flowing propane in late 2014, in advance of the announced in-service date for the Marcus Hook harbor facilities in third quarter of 2015. When the project is fully operational, Range expects savings of approximately $0.20 per gallon on the 20,000 barrels per day of propane contracted on the Mariner East pipeline, and expects to initiate sales of 20,000 barrels per day of ethane under its long-term export agreement with INEOS. Range is expecting $90 million of additional annualized cash flow from its NGL transportation and sales arrangements when Mariner East is fully operational.

In addition, Range recently signed a long-term LNG sales agreement with an international purchaser for 50,000 Mmbtu per day, resulting in total signed LNG sales agreements of 200,000 Mmbtu per day. Range will be utilizing its existing firm capacity agreements to supply gas under all of these LNG sales agreements.

Financial Discussion

GAAP revenues for the first quarter of 2015 totaled $463 million (a 1% increase as compared to first quarter 2014), GAAP net cash provided from operating activities including changes in working capital reached $211 million and GAAP earnings were $27.7 million ($0.16 per diluted share) versus earnings of $32.5 million ($0.20 per diluted share) in the prior-year quarter. First quarter 2015 results included $123 million in derivative gains due to decreased commodity prices, compared to a $147 million loss in the first quarter of 2014. First quarter 2015 results also included a $5.6 million gain in the deferred compensation plan due to decreases in the Company's stock price compared to a gain of $2.0 million in first quarter 2014.

Non-GAAP revenues for first quarter 2015 totaled $437 million (a 13% decrease compared to first quarter 2014) and cash flow from operations before changes in working capital, a non-GAAP measure, was $207 million. Adjusted net income comparable to analysts' estimates, a non-GAAP measure, was $30.9 million ($0.19 per diluted share for the first quarter 2015), compared to $74.1 million ($0.46 per diluted share) in the prior year. The Company's total unit cash costs of $1.77 per mcfe in first quarter 2015 decreased by $0.41 per mcfe or 19% compared to the prior-year quarter. The Company's total unit costs in first quarter 2015 decreased by $0.53 per mcfe or 15% compared to the prior-year quarter.

First quarter 2015 natural gas, NGLs and oil price realizations (including the impact of cash-settled hedges and derivative settlements which correspond to analysts' estimates) averaged $3.54 per mcfe, a 28% decrease from the prior-year quarter. Additional detail on commodity price realizations can be found in the Supplemental Tables provided on the Company's website.

• Production and realized prices for each commodity for the first quarter of 2015 were: natural gas - 894 Mmcf per day ($3.54 per mcf), NGLs - 59,548 barrels per day ($12.20 per barrel) and crude oil and condensate - 12,655 barrels per day ($64.06 per barrel). 
  
  
• The first quarter average natural gas price decreased to $3.54 per mcf (including the impact of cash-settled hedges), as compared to the prior-year quarter of $4.20 per mcf. Financial hedges based upon NYMEX increased realizations $0.79 per mcf while financial basis hedges decreased realizations $0.10 per mcf during the quarter. The average Company natural gas differential including the settled financial basis hedges but before NYMEX hedging for the first quarter was ($0.24) per mcf, equal to the prior year differential. 
  
  
• NGL pricing, before hedges, but net of processing and transportation costs, was 23% of the West Texas Intermediate index ("WTI") for the first quarter compared to 31% of WTI in the prior-year quarter, and 25% of WTI in the fourth quarter of 2014. 
  
  
• Crude oil and condensate price realizations, before hedges, for the first quarter averaged $16.19 below WTI compared to $13.48 below WTI in the prior-year quarter. Crude oil and condensate realizations, before hedges, for fourth quarter 2014 were $15.08 below WTI.

Capital Expenditures

First quarter drilling expenditures of $262 million funded the drilling and recompletion of 35 (31 net) wells. A 100% drilling success rate was achieved. In addition, during the first quarter, $13.4 million was expended on acreage, $2.2 million on gas gathering systems and $7.2 million for exploration expense. The Company is on track with its 2015 capital expenditure budget of $870 million, as first quarter expenditures did not fully reflect the impact of service cost declines announced in late February. We expect to see those decreases reflected fully in the second quarter and beyond.

Financial Position and Liquidity

As previously announced on March 31, Range's existing $3 billion borrowing base and $2 billion commitment amount under its $4 billion bank credit facility were unanimously reaffirmed by its 29 bank lending group. Under the terms of the credit agreement, the borrowing base will be renewed annually, with the current borrowing base in effect through May 1, 2016. The facility has a maximum amount of $4 billion and matures in October 2019. The debt to EBITDAX covenant of 4.25x, was replaced with an EBITDAX to interest expense covenant of 2.5x. The ratio of the present value of proved reserves to total debt covenant of 1.5x will apply until Range has two investment grade ratings.

Guidance - Second Quarter 2015

Production Guidance:

Production growth for 2015 is targeted at 20% year-over-year. Average daily production for the second quarter of 2015 is expected to be 1.345 Bcfe per day, with 30% liquids.

Expense per mcfe Guidance:

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