FORT WORTH, Texas, Oct. 23, 2019 (GLOBE NEWSWIRE) -- RANGE RESOURCES CORPORATION (RRC) today announced its third quarter 2019 financial results.
- Sold 2.5% overriding royalty in southwest Appalachia leases for gross proceeds of $750 million
- Total asset sales of approximately $1.1 billion in the last 12 months
- Increased credit facility commitment from $2.0 billion to $2.4 billion in October
- Expected 2019 capital spending reduced to $736 million, $20 million below budget
- Board of Directors approved a $100 million share repurchase program, effective October 2019
- Third quarter production averaged 2,244 Mmcfe per day
- Third quarter cash unit costs of $2.02 per mcfe, an improvement of 7% since year-end 2018
- Third quarter NGL differential of $0.29 below Mont Belvieu equivalent, best in recent Company history
Commenting on the quarter, Jeff Ventura, the Company’s CEO and President said, “In third quarter 2019, Range delivered on several initiatives: improving our cost structure, enhancing balance sheet strength and delivering on our operational plans for less capital than originally budgeted. Our financial position has materially improved over the last year with over $1 billion in asset sales being put toward debt reduction. Maintaining financial strength and flexibility is a core principle of Range’s strategy and the recent increase in bank commitments not only enhances liquidity but demonstrates the durability of Range’s assets and business. While Range has made progress so far this year, we remain committed to positioning the Company for success through the commodity cycles.”
Except for generally accepted accounting principles (GAAP) reported amounts, specific expense categories exclude non-cash impairments, unrealized mark-to-market adjustment on derivatives, non-cash stock compensation and other items shown separately on the attached tables. “Unit costs” as used in this release are composed of direct operating, transportation, gathering, processing and compression, production and ad valorem taxes, general and administrative, interest and depletion, depreciation and amortization costs divided by production. See “Non-GAAP Financial Measures” for a definition of each of the non-GAAP financial measures and the tables that reconcile each of the non-GAAP measures to their most directly comparable GAAP financial measure.
Third Quarter 2019 Results
GAAP revenues for third quarter 2019 totaled $622 million, GAAP net cash provided from operating activities (including changes in working capital) was $104 million, and GAAP net income was a loss of $28 million ($0.11 per diluted share). Third quarter earnings results include a $75 million derivative gain due to decreases in commodity prices and a $36 million loss related to asset sales.
Non-GAAP revenues for third quarter 2019 totaled $628 million, and cash flow from operations before changes in working capital, a non-GAAP measure, was $128 million. Adjusted net income comparable to analysts’ estimates, a non-GAAP measure, was a loss of $18 million ($0.07 per diluted share) in third quarter 2019.
Third quarter 2019 drilling and completion expenditures were $148 million. In addition, during the quarter, $9 million was spent on acreage purchases and $1 million on gathering facilities. Total capital expenditures year to date in 2019 were $576 million. Range is reducing its expected 2019 capital spending by $20 million to $736 million as a result of continued efficiency gains, water savings, and service cost improvements.
Asset Sales and Bank Credit Facility
During the quarter, Range sold 2.5% proportionately reduced overriding royalty interests in 350,000 net surface acres in southwest Appalachia for gross proceeds totaling $750 million. The royalty sales were effective as of March 1, 2019, and apply to existing and future Marcellus, Utica and Upper Devonian development on the subject leases. Sale processes to monetize additional non-core assets remain underway.
Separately during the third quarter, Range divested of certain legacy dry gas assets in Appalachia that were producing approximately 3 Mmcfe per day. The divestiture is modestly accretive to cash flow. Range maintains the rights to develop deeper horizons including Marcellus, Utica and Upper Devonian.
In October, the Company increased its credit facility commitment from $2.0 billion to $2.4 billion.
Range repurchased and retired approximately $94 million in principal amount of its senior notes during the quarter for a total cash spend of approximately $90 million.
Range’s Board of Directors approved the initiation of a $100 million equity repurchase program, beginning October 2019. The share repurchase program will be executed at times deemed appropriate by the Company.
Third Quarter Unit Costs and Realized Pricing
The following table details Range’s unit cost trend since year-end 2018 (a):
|Expenses||3Q 2019 |
|2Q 2019 |
|1Q 2019 |
|4Q 2018 |
|Transportation, gathering, processing and compression||1.43||1.45||1.49||1.51|
|Production and ad valorem taxes||0.04||0.05||0.06||0.08|
|General and administrative(a)||0.16||0.18||0.18||0.16|
|Total cash unit costs(b)||2.02||2.08||2.13||2.18|
|Depletion, depreciation and amortization (DD&A)||0.67||0.68||0.68||0.75|
|Total cash unit costs plus DD&A(b)||$||2.68||$||2.76||$||2.82||$||2.93|
|(a) Excludes stock-based compensation, legal settlements, rig release penalties, termination costs and amortization of deferred financing costs.|
|(b) May not add due to rounding.|
Third quarter 2019 cash unit costs totaled $2.02 per mcfe, an improvement of $0.16 per mcfe compared to fourth quarter 2018. This improvement was primarily driven by lower transportation, gathering, processing and compression (GP&T), interest and production tax expenses per mcfe. Range expects an additional 2% reduction in cash unit costs during fourth quarter 2019, primarily driven by additional improvements in GP&T and interest expense per mcfe. Range anticipates further unit cost improvement in 2020 and beyond to be driven by lower GP&T, interest, and cash G&A per mcfe.
The following table details Range’s average production and realized pricing for third quarter 2019:
|Natural Gas |
|Oil (Bbl/d)||NGLs |
|Natural Gas |
|Realized Pricing (a)|
|Natural Gas |
|Natural Gas |
|Average NYMEX price||$2.23||$56.42|
|Differential, including basis hedging||(0.26)||(6.84)|
|Realized prices before NYMEX hedges||1.97||49.58||$15.06||$2.30|
|Settled NYMEX hedges||0.51||0.15||0.74||0.38|
|Average realized prices after hedges||$2.48||$49.73||$15.80||$2.69|
|(a) May not add due to rounding|
Third quarter 2019 natural gas, NGLs and oil price realizations (including the impact of derivative settlements which correspond to analysts’ estimates) averaged $2.68 per mcfe. Additional detail on commodity price realizations can be found in the Supplemental Tables provided on the Company’s website.
- The average natural gas price, including the impact of basis hedging, was $1.97 per mcf, or $0.26 per mcf below NYMEX. Based on recent pricing, Range expects a fourth quarter 2019 differential of approximately $0.30 below NYMEX.
- Pre-hedge NGL realizations were $15.06 per barrel, or $0.29 per barrel below to a Mont Belvieu weighted barrel, as shown on Supplemental Table 9 on the Company’s website. The third quarter NGL differential to Mont Belvieu was the best in recent Company history. Range expects to maintain a strong differential during fourth quarter 2019 as a result of access to international markets and its diversified portfolio of ethane contracts.
- Crude oil and condensate price realizations, before realized hedges, averaged $49.58 per barrel, or $6.84 below West Texas Intermediate (WTI). Range expects a fourth quarter 2019 oil and condensate pricing differential of approximately $7 below WTI.
During September and October, Sunoco performed optimization work at the Marcus Hook export terminal which is expected to result in more efficient transportation to end markets. The upgrade required the Mariner East pipeline to experience downtime, and as a result of the outage, Range sold ethane volumes in its residue natural gas stream that would typically be transported via the Mariner East system.
The value of exported barrels from the East Coast increased during the quarter, particularly in September after a Middle East oil disruption. Range capitalized on the opportunity during the third quarter by utilizing both pipeline and rail access to export terminals. Propane export values at the dock remain elevated and are currently estimated at $0.10 per gallon above the Mont Belvieu index. The combination of ethane rejection and access to international markets for propane and butane led to the best quarterly NGL differential to Mont Belvieu that Range has realized in recent history. Range resumed use of Mariner East ethane capacity in mid-October and expects another strong differential to Mont Belvieu in the fourth quarter of 2019.
Production for third quarter 2019 averaged approximately 2,042 net Mmcfe per day from the Appalachia division, a 3% increase over the prior-year third quarter. Despite the third-party optimization work mentioned above, which impacted ethane recovery, the southwest area of the division averaged 1,945 net Mmcfe per day during third quarter 2019. The northeast Marcellus properties averaged 97 net Mmcf per day inclusive of approximately 15 net Mmcf per day of legacy acreage production during third quarter 2019.
Production for third quarter 2019 averaged approximately 202 net Mmcfe per day. The division brought on line two wells during the quarter and expects to bring on line an additional well during the fourth quarter.
The table below summarizes estimated activity for 2019 regarding the number of wells to sales for each area.
|Wells TIL |
|Wells TIL |
|Calendar 2019 |
|SW PA Super-Rich||8||11||19||0|
|SW PA Wet||8||8||36||20|
|SW PA Dry||6||20||33||7|
|Total N. LA.||2||5||8||1|
Guidance – 2019
Production per day Guidance
Production for fourth quarter 2019 is expected to be ~2.33 to 2.35 Bcfe per day, which includes an approximately 25 Mmcfe per day impact from recent asset sales and ethane recovery. Full year 2019 production is expected to average ~2.28 Bcfe per day, which is in line with prior guidance, after incorporating asset sales and reduced ethane recovery in September and October.
4Q 2019 Expense Guidance
|Direct operating expense:||$0.16 − $0.17 per mcfe|
|Transportation, gathering, processing and compression expense:||$1.40 − $1.42 per mcfe|
|Production tax expense:||$0.04 − $0.05 per mcfe|
|Exploration expense:||$7.0 − $9.0 million|
|Unproved property impairment expense:||$15.0 − $18.0 million|
|G&A expense:||$0.15 − $0.17 per mcfe|
|Interest expense:||$0.19 − $0.21 per mcfe|
|DD&A expense:||$0.67 − $0.70 per mcfe|
|Net brokered gas marketing expense:||~$6.0 million|
Based on current market indications, Range expects to average the following pre-hedge differentials for fourth quarter 2019 production.
|4Q 2019 Pricing Guidance|
|Natural Gas: (1)||NYMEX minus $0.30|
|Natural Gas Liquids: (2)||Mont Belvieu minus $0.60 to $0.80 per barrel|
|Oil/Condensate:||WTI minus $6.00 to $8.00|
(1) Including basis hedging
(2) Weighting based on 53% ethane, 27% propane, 7% normal butane, 4% iso-butane and 9% natural gasoline.
Range hedges portions of its expected future production volumes to increase the predictability of cash flow and to help maintain a more flexible financial position. Range currently has over 80% of its expected fourth quarter 2019 natural gas production hedged at a weighted average floor price of $2.81 per Mmbtu. Similarly, Range has hedged over 80% of its fourth quarter 2019 projected crude oil production at an average floor price of $56.78. Please see Range’s detailed hedging schedule posted at the end of the financial tables below and on its website at www.rangeresources.com.
Range has also hedged Marcellus and other basis differentials to limit volatility between NYMEX and regional prices. The fair value of the basis hedges was a gain of $4.6 million as of September 30, 2019. The Company also has propane basis swap contracts which lock in the differential between Mont Belvieu and international propane indices. The fair value of these contracts was a loss of $3.3 million on September 30, 2019.
Conference Call Information
A conference call to review the financial results is scheduled on Thursday, October 24 at 9:00 a.m. ET. To participate in the call, please dial 866-900-7525 and provide conference code 9092535 about 10 minutes prior to the scheduled start time.
A simultaneous webcast of the call may be accessed at www.rangeresources.com. The webcast will be archived for replay on the Company's website until November 24, 2019.
Non-GAAP Financial Measures
Adjusted net income comparable to analysts’ estimates as set forth in this release represents income or loss from operations before income taxes adjusted for certain non-cash items (detailed in the accompanying table) less income taxes. We believe adjusted net income comparable to analysts’ estimates is calculated on the same basis as analysts’ estimates and that many investors use this published research in making investment decisions and evaluating operational trends of the Company and its performance relative to other oil and gas producing companies. Diluted earnings per share (adjusted) as set forth in this release represents adjusted net income comparable to analysts’ estimates on a diluted per share basis. A table is included which reconciles income or loss from operations to adjusted net income comparable to analysts’ estimates and diluted earnings per share (adjusted). The Company provides additional comparative information on prior periods along with non-GAAP revenue disclosures on its website.
Cash flow from operations before changes in working capital (sometimes referred to as “adjusted cash flow”) as defined in this release represents net cash provided by operations before changes in working capital and exploration expense adjusted for certain non-cash compensation items. Cash flow from operations before changes in working capital is widely accepted by the investment community as a financial indicator of an oil and gas company’s ability to generate cash to internally fund exploration and development activities and to service debt. Cash flow from operations before changes in working capital is also useful because it is widely used by professional research analysts in valuing, comparing, rating and providing investment recommendations of companies in the oil and gas exploration and production industry. In turn, many investors use this published research in making investment decisions. Cash flow from operations before changes in working capital is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operations, investing, or financing activities as an indicator of cash flows, or as a measure of liquidity. A table is included which reconciles net cash provided by operations to cash flow from operations before changes in working capital as used in this release. On its website, the Company provides additional comparative information on prior periods for cash flow, cash margins and non-GAAP earnings as used in this release.
The cash prices realized for oil and natural gas production, including the amounts realized on cash-settled derivatives and net of transportation, gathering, processing and compression expense, is a critical component in the Company’s performance tracked by investors and professional research analysts in valuing, comparing, rating and providing investment recommendations and forecasts of companies in the oil and gas exploration and production industry. In turn, many investors use this published research in making investment decisions. Due to the GAAP disclosures of various derivative transactions and third-party transportation, gathering, processing and compression expense, such information is now reported in various lines of the income statement. The Company believes that it is important to furnish a table reflecting the details of the various components of each line in the statement of operations to better inform the reader of the details of each amount and provide a summary of the realized cash-settled amounts and third-party transportation, gathering, processing and compression expense which were historically reported as natural gas, NGLs and oil sales. This information is intended to bridge the gap between various readers’ understanding and fully disclose the information needed.
The Company discloses in this release the detailed components of many of the single line items shown in the GAAP financial statements included in the Company’s quarterly report on Form 10-Q. The Company believes that it is important to furnish this detail of the various components comprising each line of the Statements of Operations to better inform the reader of the details of each amount, the changes between periods and the effect on its financial results.
RANGE RESOURCES CORPORATION (RRC) is a leading U.S. independent oil and natural gas producer with operations focused in stacked-pay projects in the Appalachian Basin and North Louisiana. The Company pursues an organic development strategy targeting high return, low-cost projects within its large inventory of low risk development drilling opportunities. The Company is headquartered in Fort Worth, Texas. More information about Range can be found at www.rangeresources.com.
Included within this news release are certain “forward-looking statements” within the meaning of the federal securities laws, including the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that are not limited to historical facts, but reflect Range’s current beliefs, expectations or intentions regarding future events. Words such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “outlook,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” and similar expressions are intended to identify such forward-looking statements.
All statements, except for statements of historical fact, made in this release regarding activities, events or developments the Company expects, believes or anticipates will or may occur in the future, such as those regarding future well costs, expected asset sales, well productivity, future liquidity and financial resilience, anticipated exports and related financial impact, NGL market supply and demand, improving commodity fundamentals and pricing, future capital efficiencies, future shareholder value, emerging plays, capital spending, anticipated drilling and completion activity, acreage prospectivity, expected pipeline utilization and future guidance information are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on assumptions and estimates that management believes are reasonable based on currently available information; however, management's assumptions and Range's future performance are subject to a wide range of business risks and uncertainties and there is no assurance that these goals and projections can or will be met. Any number of factors could cause actual results to differ materially from those in the forward-looking statements. Further information on risks and uncertainties is available in Range's filings with the Securities and Exchange Commission (SEC), including its most recent Annual Report on Form 10-K. Unless required by law, Range undertakes no obligation to publicly update or revise any forward-looking statements to reflect circumstances or events after the date they are made.
The SEC permits oil and gas companies, in filings made with the SEC, to disclose proved reserves, which are estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions as well as the option to disclose probable and possible reserves. Range has elected not to disclose its probable and possible reserves in its filings with the SEC. Range uses certain broader terms such as "resource potential,” “unrisked resource potential,” "unproved resource potential" or "upside" or other descriptions of volumes of resources potentially recoverable through additional drilling or recovery techniques that may include probable and possible reserves as defined by the SEC's guidelines. Range has not attempted to distinguish probable and possible reserves from these broader classifications. The SEC’s rules prohibit us from including in filings with the SEC these broader classifications of reserves. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of actually being realized. Unproved resource potential refers to Range's internal estimates of hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques and have not been reviewed by independent engineers. Unproved resource potential does not constitute reserves within the meaning of the Society of Petroleum Engineer's Petroleum Resource Management System and does not include proved reserves. Area wide unproven resource potential has not been fully risked by Range's management. “EUR”, or estimated ultimate recovery, refers to our management’s estimates of hydrocarbon quantities that may be recovered from a well completed as a producer in the area. These quantities may not necessarily constitute or represent reserves within the meaning of the Society of Petroleum Engineer’s Petroleum Resource Management System or the SEC’s oil and natural gas disclosure rules. Actual quantities that may be recovered from Range's interests could differ substantially. Factors affecting ultimate recovery include the scope of Range's drilling program, which will be directly affected by the availability of capital, drilling and production costs, commodity prices, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals, field spacing rules, recoveries of gas in place, length of horizontal laterals, actual drilling results, including geological and mechanical factors affecting recovery rates and other factors. Estimates of resource potential may change significantly as development of our resource plays provides additional data.
In addition, our production forecasts and expectations for future periods are dependent upon many assumptions, including estimates of production decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected by significant commodity price declines or drilling cost increases. Investors are urged to consider closely the disclosure in our most recent Annual Report on Form 10-K, available from our website at www.rangeresources.com or by written request to 100 Throckmorton Street, Suite 1200, Fort Worth, Texas 76102. You can also obtain this Form 10-K on the SEC’s website at www.sec.gov or by calling the SEC at 1-800-SEC-0330.
Laith Sando, Vice President – Investor Relations
Mark Windle, Manager of Corporate Communications
RANGE RESOURCES CORPORATION
|STATEMENTS OF OPERATIONS|
|Based on GAAP reported earnings with additional|
|details of items included in each line in Form 10-Q|
|(Unaudited, in thousands, except per share data)|
|Three Months Ended September 30,||Nine Months Ended September 30,|
|Revenues and other income:|
|Natural gas, NGLs and oil sales (a)||$||474,754||$||736,431||$||1,709,987||$||2,094,450|
|Derivative fair value income/(loss)||74,676||(34,591||)||208,190||(151,890||)|
|Brokered natural gas, marketing and other (b)||72,765||109,111||302,848||266,774|
|ARO settlement (loss) gain (b)||(11||)||—||(11||)||(12||)|
|Total revenues and other income||622,445||811,225||-23||%||2,222,011||2,210,008||1||%|
|Costs and expenses:|
|Direct operating – non-cash stock-based compensation (c)||319||537||1,459||1,667|
|Transportation, gathering, processing and compression||295,912||304,562||899,786||819,100|
|Production and ad valorem taxes||7,805||9,427||29,004||29,493|
|Brokered natural gas and marketing||79,416||115,677||311,837||273,420|
|Brokered natural gas and marketing – non-cash stock-based compensation (c)||522||403||1,523||1,001|
|Exploration – non-cash stock-based compensation (c)||496||405||1,372||1,527|
|Abandonment and impairment of unproved properties||16,202||6,549||41,631||73,244|
|General and administrative||32,626||37,812||107,425||121,255|
|General and administrative – non-cash stock-based compensation (c)||8,423||5,607||27,561||38,332|
|General and administrative – lawsuit settlements||139||53||2,035||1,385|
|General and administrative – rig release penalty||—||—||1,436||—|
|General and administrative – bad debt expense||(141||)||250||(141||)||(1,250||)|
|Termination costs – non-cash stock-based compensation (c)||(1||)||—||25||—|
|Deferred compensation plan (d)||(8,871||)||223||(16,432||)||(559||)|
|Interest expense – amortization of deferred financing costs (e)||1,795||1,738||5,388||5,315|
|Gain on early extinguishment of debt||(2,985||)||—||(2,985||)||—|
|Depletion, depreciation and amortization||137,751||164,266||417,974||487,558|
|Impairment of proved property||—||—||—||22,614|
|Loss/(gain) on sale of assets||36,341||30||30,663||(149||)|
|Total costs and expenses||697,245||738,549||-6||%||2,134,420||2,153,772||-1||%|
|(Loss) income before income taxes||(74,800||)||72,676||-203||%||87,591||56,236||56||%|
|Income tax (benefit) expense:|
|Net (loss) income||$||(27,581||)||$||48,539||-157||%||$||89,023||$||17,941||396||%|
|Net (Loss) Income Per Common Share:|