Range Resources Corporation

Welcome to the Range Resources fourth quarter 2022 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 risks 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. Leite Sando, Vice President, Investor Relations at Range Resources. Please go ahead.

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 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 may reference certain of those slides on the call this morning. You'll 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 epitax, 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. While front-month natural gas prices have, no doubt, wavered over the past couple of months, Range's operations have remained consistent. We've made steady progress on key objectives, and our business is more resilient today than than at any point in the company's history. In 2022, Range successfully managed a great opportunity the natural gas markets presented us with. We delivered our operational plans safely and with peer-leading efficiencies. We generated record free cash flow, materially strengthened our financial position, and returned significant capital to shareholders. At the end of the year, we had reduced debt by over a billion dollars, marking our fifth consecutive year of debt reduction, repurchased 400 million in shares, and established an annualized dividend of 32 cents per share. We captured much of the upside presented to us in 2022 with a deliberate fit-for-purpose hedging program. Ultimately, every natural gas E&P company would have preferred to have been unhedged last year as the natural gas market moved higher. But when looking back at our results, Range's hedge program retained more of the upside on a per-MCF basis than any of our natural gas peers. Looking forward into 2023 and 2024, the natural gas market is in a different place, but our hedge program is, once again, positioned for success. Our hedging activity is not aimed at picking tops and bottoms. but our program is aimed at supporting durable free cash flow through the cycles while retaining exposure to improving longer-term natural gas and NGL fundamentals. Looking at our 2022 results and projections for the next two years, I believe we've struck that balance quite well. Our business generates free cash flow down to very low prices, and for 2023, we believe Range has among the best annual break evens in the industry, well below $2 per MCF. The resilience that our business has in a lower price environment, like we find ourselves in today, is a positive differentiator for Range. Having hedges in place to cover our fixed costs and capital commitments is part of it, but the business model over the long run is really underpinned by Range's sustaining capital requirements. Our relatively low capital requirements are the result of Range's class-leading drilling and completion costs, coupled with our shallow base decline and large blocky core inventory. Altogether, these result in a peer-leading all-in maintenance that is approximately 76 cents per MCFE. This provides Range a solid foundation for consistently generating significant free cash flow and returns to shareholders. Further bolstering Range's durability is our liquids production. NGLs and condensate are approximately 30% of Ranges production. Through the cycles, our liquid revenue has provided an uplift to natural gas prices, and using today's strip pricing for 2023, that uplift is meaningful. For context, Ranges NGL pricing would currently be priced around $26 per barrel using strip prices for 2023. That is the equivalent to a 40% or $1.30 per MCF premium to current Henry Hub strip pricing for 2023. When we roll all of that together, our low maintenance capital, our leading hedge program, and our liquids optionality, you get the lowest break even amongst natural gas producers and the most durable free cash flow in 2023. As we show in our slides, Range is still generating several hundred million dollars in free cash flow at $2.50 natural gas prices. Importantly, our leading efficiencies and low break-evens are sustainable because of Range's large blocky acreage position that provides us decades of core inventory. A portion of the value of this massive inventory can be found in our year-end reserves. The after-tax PV10 of our reserves using $4 NYMEX which is approximately where the 10-year strip is, equates to over $40 per share net of debt, over 50% higher than range's current share price. For added context, our reserve report includes our approved developed wells in only 367 undeveloped locations out of approximately 3,000 undrilled core locations we have in the Marcellus. Simply put, we do not believe this significant resource value is currently reflected in today's market. presenting range the opportunity to create meaningful long-term per share value for equity holders through our buyback program, which has $1.1 billion of availability remaining. As a reminder, we set a target in the spring of 2021 to reduce debt by more than $2 billion by the end of 2023. Today, we are 90% of the way towards that target. It's been a successful repositioning of our balance sheet within a short period of time, and clears the path for meaningful returns of capital to shareholders in the years ahead. Before turning it over to Mark and Dennis, I'll reiterate what I've said on the last many calls. 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 power our everyday lives while also helping billions of others improve their standard of living. We believe Appalachian natural gas and natural gas liquids are positioned to meet that future demand. And within Appalachia, Range will be among those leading the way on capital efficiency, emissions intensity, and transparency, which are all core to generating sustainable long-term value for shareholders. Range 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. With the resilient business plan for 2023 and 24 and favorable long-term fundamentals for natural gas and natural gas liquids, Range is well positioned to generate healthy returns on and returns of capital to shareholders. I'll now turn it over to Dennis to cover operations.