Range Resources Corporation

Welcome to the Range Resources first quarter 2021 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 now like to turn the call over to Mr. Leight Sando, Vice President, Investor Relations at Range Resources. Please go ahead, sir.

Thank you, Operator. Good morning, everyone, and thank you for joining Range's first 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 website. You'll find our 10Q 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.

Thank you, Leif, and thanks, everyone, for joining us on this morning's call. The first quarter of 2021 saw Range make continued progress towards our key strategic objectives, improving margins through cost controls and thoughtful marketing, generating free cash flow, enhancing liquidity and extending our maturity profile, operating safely and efficiently, and ultimately positioning the company to return capital to shareholders as the most efficient natural gas and NGL producer in Appalachia. I'll touch briefly on each of these before turning it over to Dennis and Mark to cover in more detail. I'll start with unit costs and margin improvements. Ranges unit costs for the quarter were right on track and ahead of our expectations with G&A, LOE, expiration expense, and production taxes coming in at the low end of our guidance and expectations. Additionally, we reported a significant gain in our marketing activities for the quarter. As expected, GP&T increased versus the prior quarter, but was more than offset by the significant improvements we saw in NGL and natural gas realizations. resulting in vast improvements to Range's margins. In fact, Range's unhedged realized price for the quarter was approximately $3.20 per MCFE, which was 51 cents above the NYMEX Henry Hub equivalent price of $2.69. This premium to Henry Hub is a result of our diversified marketing portfolio and liquids production. This liquids uplift improves margins and reduces Range's break-even costs, when compared to producing only dry gas. In fact, range's pre-hedge margin improved by over $1 per MCFE in the first quarter when compared to the 2020 average. Given the improved fundamental backdrop for natural gas liquids, with approximately 65% of our activity in the liquids-rich window this year, range is very well positioned to continue to benefit from this dynamic. During the quarter, Range was also able to benefit from improved daily prices in the natural gas market, realizing a natural gas differential that was $0.08 better than the midpoint of guidance, only partially offset by higher transportation fuel costs, again, benefiting margins in cash flow. On the back of this improved pricing, Range generated $193 million in cash flow from operation before changes in working capital, and with capital spending coming in at just $105 million for the quarter, range generated solid free cash flow. As shown on slide 14, we expect this to continue with significant growth in EBITDAX this year versus last. When combined with absolute debt reduction, this organic free cash flow generation puts us well on our way towards our longer-term balance sheet targets. Touching on the all-in capital investment of $105 million on the quarter, It's clear that the team's operational execution was superb, and we continue to find ways to lower costs, once again leveraging our large, contiguous acreage position to find ways to complete the operational plan with peer-leading capital efficiency. After delivering on operational plans below budget for the last three years, Range remains on track to do the same for the fourth executive year in 2021. The operational team safely delivered this capital-efficient plan with an eye towards our long-term environmental goals. Range closed out 2020 with class-leading emissions intensity, reducing greenhouse gas emissions intensity, and putting us right on track towards our 2025 goal of net zero. As we strive for this goal, it all starts with efficient operations that minimize our operating footprint and, importantly, generates competitive returns. We believe RANGE's peer-leading capital efficiency and maintenance capital are key differentiators amongst peers. As we've discussed in the past, RANGE's large, blocky acreage position affords us operational and financial efficiencies on multiple fronts, including water recycling, infrastructure, rig mobilization, and equally optimization, just to name a few. Dennis will cover a good example of how this combination of these benefits benefit range from both an ongoing development and corporate return standpoint, in addition to strengthening our environmental efforts. When combining our low wealth costs, strong recoveries, and shallow base decline of under 20%, range is operating at a high level of capital efficiency that provides a solid foundation for generating sustainable free cash flow. What further differentiates range is our ability to deliver this level of efficiency for an extended period of time, giving our multi-decade core inventory. For some added context on our inventory, range is turning to sales approximately 60 wells this year, but we have approximately 2,000 Marcellus locations with EURs that are greater than 2 BCF per thousand foot of lateral. The average recovery of these wells is very similar to the wells range has turned to sales for the last several years, providing range and unmatched runaway of high quality wells that's measured in decades. This is not the case for many of our peers, which we believe positions Range as well as any upstream company to benefit from improving commodity price environment over the medium and long term. Before turning it over to Dennis and Mark, I'll just reiterate that Range remains committed to sustainable free cash flow. Over time, we believe Range will stand out amongst peers as a result of our low sustaining capital competitive cost structure, marketing strategies, and importantly, our multi-decade core inventory life, which will be an increasing competitive advantage in the years to come as other operators exhaust their core inventories. We will continue to focus on safe, efficient, and environmentally sound operations, prudent capital allocation, and generating sustainable returns to shareholders. Importantly, These are all reflected in our updated compensation metrics that can be found in our most recent proxy statement. They've also been summarized in our company presentation, demonstrating the alignment of our incentive programs with shareholders as we seek to continue our steady progress towards key initiatives. Over to you, Dennis.