Range Resources Corporation

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

Thank you, operator. Good morning, everyone. Thank you for joining Range's third quarter earnings call. Speakers on today's call are Jeff Ventura, Chief Executive Officer, Dennis Degner, Chief Operating Officer, and Mark Skouki, 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. We'll be referencing certain slides on the call this morning. You will also 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, Leith, and thanks, everyone, for joining us on this morning's call. Range continued to make steady progress in the third quarter of 2021 towards our key objectives, improving margins through cost controls and competitive marketing strategies, generating free cash flow and organically reducing debt and leverage, operating safely and efficiently, and ultimately positioning the company to return capital to shareholders in the near future as the most efficient natural gas and NGL producer in Appalachia. I'll touch briefly on these before turning it over to Dennis and Mark to cover in more detail. Starting with margins, margins improved by nearly $1 versus the prior year quarter, driven by higher pricing and unit costs that were in line with expectations. Strong liquids pricing in an improved natural gas differential drove range's pre-hedged realized price for the quarter to $4.37 per MCFE, which was 36 cents above the NYMEX Henry Hub price of $4.01. This premium to Henry Hub is a major differentiator for Range, and it is a result of our liquids optionality and diversified marketing portfolio. Through consistent and efficient operations, coupled with strong prices, Range generated healthy free cash flow in the third quarter, and this is expected to expand materially over the coming quarters at current strip pricing. In the third quarter, range produced $277 million in cash flow, and with capital spending coming in at just $96 million, range generated strong free cash flow that again reduced debt outstanding. Mark will provide more detail shortly, but the expansion of range's free cash flow over the coming quarters and years is significant. At strip pricing, free cash flow in 2022 is in excess of $1 billion, and with recent improvements to pricing in 2023 and beyond, we see a high degree of repeatability in a large free cash flow profile despite heavy backwardation in natural gas and NGL's futures curve. As a result, Rains expects to rapidly approach the leverage targets that we have set in recent years. including a balance sheet that is below one times levered at the end of 2022. After many years of supply exceeding demand, supply for natural gas and NGLs has stabilized over the last 18 months, while demand continues to grow both domestically and internationally. This has driven storage levels for most commodities from near all-time highs just one year ago to near multi-year seasonal lows today. continued discipline from producers is prudent, and to that end, range remains committed to a maintenance-level program. Our key strategic objectives continue to emphasize free cash flow generation and balance sheet strength and ultimately returning capital to shareholders, all of those currently taking priority over growth. While the market could require some incremental production from top-tier Appalachian operators at some point in the future, This would only occur at range after we've achieved higher priority objectives. But looking at supply-demand fundamentals and at the shape of the futures curves for natural gas and NGLs, we do not believe the market is incentivizing Appalachian producers to grow in the near term. Looking longer term, what too often gets overlooked by the market is the repeatability of drilling programs over longer time horizons. As we have discussed at length in recent years, the cores of major U.S. shale plays are known and limited, and the core inventory is not evenly distributed across operators. Given that range was the first mover in Appalachia, we were able to secure a large, contiguous acreage position, approximately 1.5 million acres in the core of the Appalachian Basin. This provides range with an unmatched core inventory life that's measured in decades. As other operators exhaust core inventories over the coming years, range stands to benefit. And as pure capital efficiencies start to roll over, the average break-even price should begin to rise, while range would still be executing the same consistent development program. This is all to say we're excited about where range is today and equally excited about what the future holds. I believe that the development of U.S. shale is one of the most substantial innovations of the last century. It has created millions of direct and indirect jobs across multiple parts of our country, and provided reliable, clean, and very affordable energy. The increased use of natural gas has substantially improved U.S. emissions over the past decade and saved consumers money in the process. In addition, natural gas and natural gas liquids provide a critical feedstock for many products helping to supply the U.S. manufacturing industry. With continued investment in pipeline infrastructure and export facilities, the US has the opportunity to make a positive impact on the world's future energy needs through increased LNG and LPG exports. LPG is not only used as a feedstock for manufacturing internationally, but also supplying LPG to developing nations provides them with cleaner fuels, which helps to improve their quality of life, lower emissions, and reduce deforestation, as roughly half the world's population is living in energy poverty and cooking with wood, coal, and biomass. Natural gas and natural gas liquids will continue to play a critical role as the world moves towards cleaner, more efficient fuels. We believe that producers who can most efficiently deliver these products to end markets from a cost and emissions perspective will be the most successful. And we believe range is well positioned within that framework. we remain committed to achieving our absolute emission reduction targets in our 2025 goal of net zero. And our emissions profile is near best in class amongst producers globally. So Range has both class leading inventory and one of the best environmental track records in the upstream industry, which positions us well for success in the coming years and decades. Before turning it over to Dennis and Mark, I'll just reiterate that Range remains committed to disciplined capital spending. Over time, we believe Range will stand out amongst peers as a result of our low sustaining capital, competitive cost structure, liquids optionality, and importantly, our multi-decade core inventory life, which is an increasingly competitive advantage as other operators exhaust their inventories. We will continue to focus on safe, efficient, and environmentally sound operations prudent capital allocation, and generating sustainable returns to shareholders. Over to you, Dennis.