Range Resources Corporation

Welcome to Range Resources first quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. Statements made during the conference call that are not historical are forward-looking statements. Such statements are subject to risk and uncertainty, 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 session. At this time, I would like to turn the call over to Mr. Lace 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. We may reference certain of those slides on the call this morning. You'll 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.

Thanks, Leith, and thanks, everyone, for joining us on this morning's call. Before discussing the successful first quarter range had, I wanted to spend a few minutes on the global energy challenges that we're all witnessing and working through. Since our year-end call in February, Commodity prices across the board have moved significantly higher as supply has struggled to meet demand for varying reasons, ranging from longer-term capital underinvestment to supply chain issues and infrastructure challenges, some of which are driven by policy decisions in the United States and abroad. The Russian invasion of Ukraine has resulted in the tragic loss of life and massive destruction of cities and infrastructure, and it has also exposed some of the flaws in energy policy that has miscalculated or ignored the physical realities of energy market fundamentals while trying to achieve ambitious longer-term environmental goals. Range pioneered the development of the Marcellus shale over 15 years ago, and it's been an exciting and humbling experience to watch Appalachian shale production from the Marcellus and Utica Point Pleasant grow from nothing to now producing over one-third of the nation's natural gas supplies, becoming the largest producing natural gas field in the world in making the US the largest natural gas producer in the world. The result is natural gas prices in the US are significantly lower than natural gas prices in Europe and Asia. Currently, US pricing is about 75% lower than prices abroad, creating a significant number of quality jobs, making US manufacturing more competitive, helping to keep the US utility bills lower than other countries, positively contributing to the US trade balance, generating tax revenues for governments, and providing energy security for our country. In addition, the U.S. has led the world in lowering CO2 emissions, primarily from the substitution of natural gas for coal and power generation, as natural gas has a 60% lower carbon footprint than coal. Despite this meaningful improvement in emissions by moving from coal to natural gas, we believe that much more can and should be done in the years ahead, both in our country and globally. As we look forward, we see a world that desperately needs access to ethical, safe, secure, reliable, and abundant fuel sources, while at the same time being mindful of and continuing to prioritize the global move towards a lower carbon future. There's no shortage of independent third-party experts that believe Appalachian natural gas and NGLs should be a growing part of that global solution. We believe that Appalachia will see increased in-basin demand in incremental takeaway projects in the years ahead. However, a more meaningful increase in natural gas supply will require the support from federal, state, and local governments to provide critical infrastructure in the form of pipelines, compression, and LNG terminals to get Appalachian natural gas to the end markets that need it. We believe that the Marcellus and Utica Point Pleasant shales have the ability to increase production meaningfully and to be part of the global call on added LNG supplies from the United States. But the industry is currently hindered by a lack of additional infrastructure due to permitting delays, policy decisions, and rhetoric that discourages long-term capital investment in natural gas and natural gas infrastructure. So where does that leave range today? We believe we have positioned the company for success in whatever commodity price and infrastructure scenario we find ourselves in this year, next year and for the foreseeable future. As the most capital-efficient operator in the largest natural gas field in the world, we believe we sit at the low end of the global cost curve for natural gas. Importantly, Range and other Appalachian producers also have an advantaged emissions intensity profile, given the prolific nature of the Marcellus, robust drilling standards, and a focus on operational efficiencies being applied on a daily basis. Longer term, We see ranges being differentiated amongst producers given our operational expertise, robust multi-decade core inventory, and access to markets outside of Appalachia. I believe the financial and operational results of the most recent quarter reflect those advantages as we've made steady progress on our key objectives for 2022. Enhancing margins through thoughtful marketing, hedging, and a focus on cost completing our drilling program safely within budget and with peer-leading capital efficiency, bolstering our balance sheet with absolute debt reduction, and returning capital to shareholders. Operationally, range successfully delivered on our first quarter development plans with production coming in slightly better than expected and capital spending of $117 million, or approximately 25% of the full-year budget, putting us on track with our full-year guidance of $460 to $480 million. Dennis will provide some additional details on the quarter in a minute, but we're off to a great start. Looking at margins, starting with price, Rains delivered a premium natural gas differential in the first quarter as we weathered daily price volatility with thoughtful marketing and balanced deliveries to multiple end markets. Range's natural gas liquids production also received a premium to Mont Bellevue equivalent price coming in at over $40 per barrel or greater than $6 per MCFE. Overall, Range received $5.63 per MCFE in the first quarter for its aggregate production. This represents a premium of over $0.74 over Henry Hub natural gas prices, something that's unique when compared to pure dry gas producers in Appalachia the Haynesville, and other natural gas plays. As a result, we realized the highest quarterly cash flow per share and free cash flow in company history, a trend we expect to continue throughout this year. This record free cash flow is being directed towards absolute debt reduction and capital returns we announced in February, including a base dividend to begin later this year and a $500 million share repurchase program. We were comfortable making an announcement in February when commodity prices were much lower because of our competitive cost structure and peer-leading maintenance capital requirements that provide us a solid foundation for generating truly sustainable free cash flow through the cycles. The meaningful improvement in commodity prices over the last two months has simply allowed us to accelerate our absolute debt reduction while simultaneously repurchasing shares of what we believe is a fraction of the underlying value of the business. particularly with long-term commodity prices re-rating higher as the call for U.S. natural gas becomes more evident globally. We have discussed our long-term balance sheet target of $1 to $1.5 billion in absolute debt. It now appears that we can achieve this financial objective by early next year at current strip pricing while simultaneously funding the base dividend and share repurchases. While Range's stock prices moved materially higher over the last two years, we believe the buyback program continues to represent a compelling investment of our capital as we still traded a substantial discount to the underlying value of our reserves and resource base under what we believe are conservative mid-cycle pricing assumptions and development plans. While we run various NAV scenarios in addressing company valuation, we can point to Range's approved reserve valuations at year-end 2021 as a proxy for the value of a portion of our inventory. At year-end 2021 strip pricing, the PV10 of Range's approved reserves was $12.7 billion. For context, after backing out year-end net debt balances, this PV10 equated to approximately $40 per share. Based on more recent strip pricing, that valuation is well north of $60 per share, And, as many of you are aware, 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. Simply put, we don't believe this significant resource value is currently reflected in range's share price, presenting range the opportunity to create meaningful long-term per share value for our equity holders through our buyback program. Before turning it over to Mark and Dennis, I'll reiterate something I mentioned on our last call, which is that I truly believe range is in the best position in the company's history. As the world continues to move towards cleaner, more efficient fuels, natural gas and NGLs will be the affordable, reliable, and abundant supply that help to power our everyday lives, while also helping billions of others improve their standard of living and reducing their reliance on coal and other more carbon-intensive fuels. We believe Appalachian natural gas and natural gas liquids are well positioned to meet that current and future demand. And within Appalachia, Rains will be among those leading the charge on emissions intensity, capital efficiency, and transparency, which are all core to generating sustainable long-term value for shareholders. Rains has de-risked a massive inventory of high-quality wells in the Marcellus, measured in decades, and translated that into a business capable of generating free cash flow through the cycles. Underpinning this business is the low sustaining capital requirements that Range enjoys, reflected in our peer-leading, drill-and-complete spending per MCFE, which allows us to weather potential service cost inflation better than most and generate healthy margins. At the same time, Range's balance sheet is in the best shape in company history, with rapid improvements continuing in the coming months. With significantly lower absolute debt, range will be even more resilient when we see the next cycle. That said, with favorable fundamentals for natural gas and natural gas liquids today and for the foreseeable future, range is well positioned to generate healthy returns on and returns of capital to shareholders. I'll now ask Dennis to cover operations.