Range Resources Corporation

Welcome to the Range Resources fourth 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. Leith 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 year-end 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 website. You will also find our 10-K on RANGE's 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. Looking back at 2020, Range made steady progress on key objectives. We enhanced margins through cost improvements and thoughtful marketing, strengthened our balance sheet by reducing debt for the third consecutive year, completed our 2020 drilling program safely and efficiently, and lowered the capital intensity of our business with the peer-leading maintenance capital program. Range also continued to advance on key environmental fronts, becoming the first North American producer to set a goal of net zero direct emissions. We believe each of these accomplishments show continued progress towards positioning the company to return capital to shareholders. Looking first at margins, we can discuss unit costs. Range reduced cash unit costs by about 10 percent last year compared to average 2019 costs. Mark will touch on the improvements in more detail, but it's important to point out that these unit cost reductions drive lasting enhancements to margins and cash flow that don't require change in commodity price. While we made improvements in 2020 on gathering and transportation expenses, LOE and G&A, we remain focused on becoming even more efficient in the years ahead. On the pricing side of the margin equation, I believe our mix of production and delivery of NGLs into the international markets provides range in unappreciated advantage in terms of pricing. For context, if we look at pricing for 2021 NGLs, we expect an unhedged realized price comfortably above $20 per NGL barrel for range, approaching $4 per MCF equivalent based on today's STRIP. Our ability to sell Purity NGL products into the international markets paired with improved NGL fundamentals helps support Range's strong free cash flow at strip pricing. Turning to the balance sheet, Range made significant progress bolstering our financial position over the last couple of years. Not only have we improved our cost structure and streamlined our operations, we have reduced debt by over $1 billion strengthened our maturity profile, and improved liquidity while reducing share count. This reflects our commitment to thoughtful, disciplined capital allocation. Looking forward, we expect free cash flow at strip pricing to further strengthen our position and move us towards our longer-term financial targets. Operationally, the team continues to innovate and reduce normalized well cost. As a result of efficient operations, coordinated planning and a laser focus on capital discipline, the team was able to deliver the 2020 operational plan for $19 million less than budgeted in March of last year. This is the third consecutive year Range has achieved these types of savings, spending less than budgeted, which is a reflection of our cost leadership and disciplined capital spending. Range has been a leader in well cost per foot amongst Appalachian producers since discovering the Marcellus. As Dennis will discuss, the operational plan that we've laid out for 2021 shows a continuation of efficient operations with average well costs below $600 per lateral foot, which is the best amongst peers. Ranges class-leading D and C costs, coupled with our shallow base decline and our substantial core inventory, all come together to support a very low and sustainable maintenance capital. Range's base decline entering 2021 is approximately 19%, allowing for maintenance capital in the low $400 million range. This low capital intensity that is unmatched among small and mid-cap E&P companies provides us a solid foundation for generating significant free cash flow. Importantly, this maintenance capital figure is sustainable for a couple of important reasons. First, the lateral footage in Range's drilling completing and turning in line for this year is all very similar to what we've accomplished in 2020, leaving us well-positioned to continue in the 2022 and beyond with equal or better capital efficiencies. This is unlike what we've seen from the industry, more broadly, which has relied on duct drawdowns or massive outspends to provide a short-lived boost to efficiencies. That is not the case for range. And second, range has a core inventory of wells measured in decades. which provides us a long runway of consistent, repeatable results in efficient capital deployment. These positive differentiators on sustaining capital bear out in the reported results. Taking a simple look at relative efficiency using actual DNC capital per unit of production range-led all Appalachian producers in 2020, and we expect similar results going forward. As others exhaust their core inventories in the years ahead, Range will remain well-positioned with multiple decades of inventory. A portion of the value of our inventory can be found in our year-end reserve report. At 275 natural gas and $50 oil, the PV10 of Range's approved reserves was $8.6 billion. For context, after backing out our year-end debt balances, this equates to over $22 per share. But as many of you know, the SEC definition of approved reserves only allows for five years of development. And beyond this five-year window, range has thousands of additional core Marcellus wells not included. Before turning it over to Mark and Dennis, I'll reiterate that I think range has made great progress in 2020 in the face of a difficult commodity environment. Looking forward, as prices are set to improve in 2021 and 2022 on improving fundamentals, we see range generating significant free cash flow, putting us on the path towards reaching our long-term leverage targets in the not-too-distant future, as debt reduction and strip pricing is the expectation. Our focus will remain on safe, efficient, and environmentally sound operations, prudent capital development, and generating sustainable returns to shareholders. Importantly, these are all reflected in our updated compensation metrics. Our latest slide deck shows a summary of the short-term and long-term incentives that will be reflected in our next proxy report, aligning our incentive programs with shareholders as we seek to continue our steady progress against key initiatives. Over to you, Dennis.