Range Resources Corporation

Welcome to the Arranged Resources Third 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. Le Sandow, Vice President, Investor Relations at Range Resources. Please go ahead, sir.

Thank you, Operator. Good morning, everyone, and thank you for joining Range's third quarter earnings call. The speakers on today's call are Jeff Ventura, Chief Executive Officer, Dennis Degner, Chief Operating Officer, and Mark Skuki, Chief Financial Officer. Hopefully, you've had a chance to review the press release and updated investor presentation that we've posted on our websites. We also filed our 10-Q with the SEC. 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, Leif, and thanks everyone for joining us on this morning's call. As our company and our industry have matured, we are positioning range to provide more consistent returns for shareholders by improving our cost structure, strengthening our balance sheet, operating safely and efficiently, lowering the capital intensity of our business with the peer-leading maintenance capital, and ultimately, positioning the company to return capital to shareholders. The third quarter saw continued progress towards this, streamlining our business with the sale of North Louisiana, extending maturities, reducing debt, and lowering our full-year capital budget as a result of efficient operations and disciplined spending. In addition to providing more consistent returns, We believe the market is also looking for companies to take a more holistic view of what sustainability means. For our industry, we believe that requires environmental leadership. On the environmental front, the natural gas industry has an advantage position today and for the foreseeable future as the world moves towards cleaner, more efficient fuels. Within the natural gas industry, Appalachia is an advantage globally. as an abundant, low-cost resource with leading environmental standards. And we believe range is best positioned within Appalachia, as discussed in our most recent sustainability report. There are several highlights in the report, including our pioneering efforts on water recycling and our class-leading emissions intensity of 0.35 metric tons per million cubic feet equivalent produced, which is best in class amongst all E&P companies, according to third-party research. In addition, our target of net zero emissions by 2025 further separates Range from other independents with respect to environmental targets and objectives. As we strive to achieve this goal, it all starts with efficient operations that reduces our environmental footprint and, importantly, generates higher returns. I believe Range's peer-leading capital efficiency and maintenance capital is a key differentiator amongst peers. There are several ways that maintenance capital, sustaining capex, or capital intensity can be measured. As an investor, you could look at enterprise value and range as one of the very few companies that spends less than 10% of enterprise value to maintain production. With maintenance capital in the low $400 million range, including facilities and land, that equates to only 8% of our enterprise value. Another metric that we've discussed in the past is capital spending per unit of production, where range is, again, best in class amongst Appalachian peers. This low capital intensity that is unmatched amongst small and mid-cap E&P companies provides us a solid foundation for generating a top-tier free cash flow yield. Total third-quarter spending of $63 million and the reduction of full-year capital while achieving our operational objectives reflects exactly that. 2020 will be the third consecutive year that range is able to complete its operational plans for less than budgeted, which reflects the organization-wide focus on efficiencies in our commitment to capital discipline. Being able to sustainably hold production flat for such a low level of capital is driven by our peer-leading well cost, our sub-20% base decline, and the repeatable well results from our sizable core Marcellus inventory. Layered on top of this operational advantage, we have a competitive and improving cost structure. The last two quarters have seen cash costs average in the low $1.80s per MCFE, a substantial improvement from where we were this time last year, a result of laser focus on efficiencies. Mark will elaborate on the costs in a few minutes, but I can say that we'll continue to look for efficiencies across the board as every penny per MCFE of cost savings generates a durable improvement of $8 million per year in cash flow. We also have the benefit of a large blocky acreage position that allows for maximizing midstream infrastructure, and we will continue to see improvements to our GP&T expense for many years as a result. This is a line item that is already improved by 11 cents per MCFE thus far in 2020 versus last year's average in 18 cents per MCFE since the end of 2018. When we pair the unit cost improvements made this year with our low sustaining capital requirements and consider the backdrop of improved natural gas and NGL pricing, we see range generating significant free cash flow in 2021 and beyond. Given that range has reduced debt by more than $1.1 billion since late 2018, this free cash flow, along with potential asset sales, will put range at our near-term leverage targets in the not-too-distant future, as 2021 is expected to be the fourth consecutive year that range reduces absolute debt. 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. Before I turn things over to Dennis, I want to reiterate Range's strategy for 2021 and beyond. Range remains committed to sustainable free cash flow, generating corporate-level returns. While 2021 and even 2022 prices have improved considerably for natural gas and NGLs, we believe the forward curve remains below a sustainable long-term price. This is not a market that's incentivizing any growth. Instead, Range will seek to maintain production around current levels and optimize cash flow, similar to our capital program this year, and use excess cash flow to reduce debt and ultimately return this free cash flow to shareholders. Over time, we believe Range will stand out among peers as a result of our low-sustaining capital requirements competitive cost structure, marketing strategies, and importantly, our multi-decade core inventory life, which will be a critical competitive advantage in the years to come as other operators exhaust their core inventories. I'll now turn it over to Dennis to discuss operations.