Range Resources Corporation

Welcome to the Range Resources second quarter 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. Statements made during this conference call that are not historical facts are forward-looking statements. Such statements are subject to risk and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. After the speaker's remarks, there will be a question and answer period. At this time, I would like to turn the call over to Mr. Laith Sando. Vice President, Investor Relations, and Range Resources. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining Range's second quarter earnings call. The speakers on today's call are Jeff Ventura, Chief Executive Officer, Mark Scucchi, Chief Financial Officer, and Dennis Degner, Chief Operating Officer. Hopefully, you've had a chance to review the press release and updated investor presentation that we've posted on our website. We also filed our 10Q with the SEC yesterday. It's available on our website under the Investors tab, or you can access it using the SEC's EDGAR system. Please note, we'll be referencing certain non-GAAP measures on today's call. Our press release provides reconciliations of these to the most comparable GAAP figures. For additional information, we've posted supplemental tables on our website to assist in the calculation of EBITDAX, cash margins, and other non-GAAP measures. With that, let me turn the call over to Jeff.

Thanks, Laith, and thanks, everyone, for joining us on this morning's call. We are very pleased with the progress the team made this past quarter, moving the ball forward on multiple fronts and further strengthening range as a leader amongst natural gas producers. As we'll detail in our upcoming sustainability report, we believe the natural gas industry has an advantage position today and for the foreseeable future, as the world moves towards cleaner, more efficient fuels. And within the natural gas industry, we believe that Appalachia is advantaged globally as an abundant, low-cost resource with leading environmental standards. Most importantly, we believe that range, having discovered the Marcellus, is best positioned within Appalachia for several reasons. I'll walk through each of them briefly. The first differentiator is Range's peer-leading capital efficiency and maintenance capital. Since discovering the Marcellus in 2004, the team has been on the leading edge of well cost and performance per lateral foot, and this year is no exception. As evidenced by our capital spending thus far in 2020, the team is doing a superb job meeting and beating this year's average well cost targets with recent well costs trending below $600 per foot. These outstanding cost controls paired with RANGE's well productivity and peer-leading base decline provides us a true maintenance capital requirement that we believe is unmatched in Appalachia. Secondly, Pennsylvania has some of the best environmental standards in the world when it comes to natural gas production. Importantly, RANGE has been and we'll continue to be a leader and innovator when it comes to environmental efforts, whether that's our 100% water recycling, our transparent disclosures or the industry leading methane emission targets that we're setting, making range the sustainable choice for current and future natural gas supply. As the world seeks to reduce emissions, we believe that range in the US natural gas industry will play a critical role in reaching global emissions targets. Lastly, Range has a core inventory that is class-leading. Our year-end 2019 Prove reserves were 18.1 TCFE, were 21 times current annual production, and included just 442 undeveloped wells for about five years' worth of development. In addition to those reserves, we have thousands of additional locations in the Marcellus that will move into Prove reserves as they become a part of our five-year outlook. In addition to that Marcellus resource, we are holding significant future optionality in thousands of low-risk Utica and Upper Devonian wells that are being held by our Marcellus development. We believe that as other producers exhaust their core Marcellus inventories and begin developing these other horizons, which are adjacent to our acreage, this value will become more apparent. Our core area in southwest Pennsylvania is the only area in the basin where you can stack the core of all three horizons. Understandably, this multi-decade, multi-horizon inventory does not get much attention today as the market is much more focused on the near term. However, as core exhaustion becomes a growing reality in U.S. shale plays over time, Range will ultimately stand out amongst peers as a result of our industry-leading inventory of core natural gas and liquids wells. In the meantime, Range continues to focus on furthering our leadership position on well costs, improving unit costs to enhance margins, funding our capital program organically, and reducing absolute debt. I'll quickly highlight our recent progress against a few of these key initiatives. First, yesterday we announced the sale of our North Louisiana assets for $245 million with the potential for $90 million in additional proceeds depending on commodity prices. Having sold over $1.3 billion in assets since 2018, these divestitures show our commitment to a strong balance sheet while streamlining our activity and enhancing Range's capital efficiency as we focus our capital towards our highest return assets. To that end, additional asset sale processes remain underway. Second, our $430 million capital budget for 2020, which was reduced by $90 million in March, approximately aligns with cash flow and spending this year despite a highly challenged commodity environment. When including proceeds from the North Louisiana sale, range expects to reduce absolute debt again in 2020. marking the third consecutive year of absolute debt reduction, a rare feat in the E&P sector. And third, we continue to see considerable improvements in our unit costs, with cash unit costs in the second quarter declining to $1.79 per MCFE. When compared to the end of 2018, our cash unit costs have improved by a remarkable 39 cents per MCFE, or 18% in just a year and a half. This is primarily the result of efficiently utilizing our infrastructure and streamlining operations. Looking ahead, we expect our cost structure to see continued improvement over time. Most impactful will be the continuing improvements we see in our GP&T expense. GP&T has become a tailwind as we're now benefiting from the significant infrastructure build-out that occurred over the last 15 years. Before I turn things over to Mark, I want to reiterate Range's strategy for 2021 and beyond. As we've discussed in the past, Range is committed to sustainable free cash flow, generating corporate level returns. To that end, we do not have any external pressures that would cause us to grow for growth sake. Looking into 2021, we see considerable improvements for the natural gas and NGO macro as a result of activity driven supply declines particularly in shale oil basins and strengthening global demand for natural gas and NGLs. For this reason, many reputable analysts are now predicting $3 natural gas or higher in 2021. However, while 2021 natural gas futures have improved since their lows in March, forward curves beyond 2021 remain depressed. This is not a market that's incentivizing any growth. and a range has no plans to grow and add supply to the market. Instead, Range will seek to maintain current production levels and optimize cash flow similar to our capital program this year and use excess cash flow from higher near-term prices to reduce debt. Over time, as we approach our long-term balance sheet targets, Range intends to return this free cash flow to shareholders. In summary, in the near term, Range is focused on what is within our control continuing to drive down costs and debt. However, the incredible store of value embedded in our reserves and resource should not be overlooked. Through disciplined capital allocation, efficient drilling and completions, and innovative marketing, we look forward to translating that resource into competitive, sustainable returns for our shareholders. I'll now turn it over to Mark to discuss the financials. Thanks, Jeff.