Range Resources Corporation

Welcome to the Range Resources fourth quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. The 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. Lace Sandoe, Vice President, Investor Relations at Range Resources. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining Ranges' year-end 2023 earnings call. The speakers on today's call are Dennis Degner, Chief Executive Officer, and Mark Skutky, 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 slides on the call this morning. You'll also find our 10-K on Ranges' 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. We've also posted supplemental tables on our website that include realized pricing details by product, along with calculations of EBITDAX, cash margins, and other non-GAAP measures. With that, let me turn the call over to Dennis.

Thanks, Lath. And thanks to all of you for joining the call today. Range's 2023 plan was successfully executed with a consistent theme throughout the year, operating safely while driving continued operational improvements, generating free cash flow with a peer-leading capital efficiency, and prudent allocation of that free cash flow, balancing returns of capital to shareholders with further debt reduction and the long-term development of our world-class asset base. I believe our fourth quarter results are a great example of continued advancement against those key objectives and showcase the resilience of Range's business in the low point of a cycle. Likewise, our year in reserves update and 16th consecutive year of positive performance revisions points to the repeatable nature of our Marcellus inventory. As we look towards the year ahead, you will hear those themes repeated. And I believe the resilience that our business has in a lower price environment will be a key differentiator for range. Maintaining a flexible hedge program to cover fixed costs and capital commitments is clearly beneficial in periods of price weakness like we find ourselves in today. However, the real value proposition over the long run is underpinned by range's low sustaining capital requirements. Our low capital intensity is the result of Range's class-leading drilling and completion costs, shallow base decline, large blocky core inventory, and talented team. Altogether, these result in a required reinvestment rate that is lower than any of our peers, which provides Range a solid foundation for consistently generating significant free cash flow and returns to shareholders. Further bolstering Ranges' durability is our liquids contribution, which is approximately 30% of our total production volume. Our liquids revenue is expected to provide an uplift in natural gas prices, and using today's strip pricing, it's very meaningful. For context, Ranges' NGL barrel is currently priced around $24 per barrel using strip prices for 2024. That is equivalent to $1.60 per MCF premium to recent Henry Hub pricing. When we roll all of that together, our liquids revenue uplift, our low maintenance capital, and a thoughtful hedging program, you get the lowest break-even among natural gas producers and the most resilient organic free cash flow, as evidenced by our 2023 results and 2024 projections. Importantly, with our vast inventory of de-risked, high-quality Marcellus wells, we have the ability to compound our per-share growth in free cash flow for decades to come. Turning to our near-term plans, for 2024, Range expects to generate healthy free cash flow at strip pricing, with all-in capital spending between $620 and $670 million. This capital plan consists of approximately $575 million to support our base-level maintenance production plan, similar to the past few years, along with additional investments in three categories. First is additional acreage spending above maintenance levels, which not only allows for longer laterals, but actually offsets most of our lateral footage being turned to sales, keeping our 28 million feet of core Marcellus inventory relatively unchanged. Second is an investment in expanding our water infrastructure, which provides a very quick payback and supports a low DNC and LOE cost in the future. And lastly is flexible drilling and completion capital, like we had in 2023, which increases our year-end inventory of drilled and or completed lateral footage, providing us optionality and flexibility as we evaluate the optimum setup for following years. The overall number of drilling rigs and frac crews will be the same as last year, with the additional inventory generated as a result of simply retaining the equipment, which maintains operational efficiencies and provides flexibility for 2025 and beyond. Given the MACRO backdrop, Range is planning a maintenance production profile that is similar to recent years, at 2.12 to 2.16 BCF equivalent per day. Approximately three-quarters of the lateral footage that will turn to sales this year will be located across our wet and super-rich acreage positions, providing the added benefit of our NGL uplift to overall cash flow and price realizations, with the remainder of our program focused in our dry gas footprint. Our operational cadence for 2024 will consist of two horizontal drilling rigs operating throughout the year. resulting in a total combined footage of approximately 750,000 lateral feet being drilled, or about 100,000 feet more than what we will turn to sales. 2024 completions will be executed utilizing a single new electric fracturing fleet operating through the year as well. Consistent with a maintenance production program, approximately 640,000 lateral feet from 50 new wells is expected to go into production in 2024. with more than half of the new wells being drilled, developed on pads with existing production. Returning to pads with existing production has been a repeatable part of the range story for many years and supports both our capital and operational efficiency. Similar to prior years, our activity and capital will be weighted towards the front half of the year, while our quarterly production profile is expected to be back half weighted as the new turn in lines materialize in the back half of 2024. First quarter production is expected to be around 2.1 BCF equivalent per day before building into the second half of the year. Our operational review for the past year showcased a continued theme of execution excellence that starts with our drilling highlights. 2023 saw several new efficiency records set for the program, while drilling a total combined lateral footage of nearly 700,000 feet. The team managed to drill eight of the top 15 longest laterals in RANGE's program history, with 40% exceeding 15,000 feet laterally. Four of the wells had lateral lengths greater than 20,000 feet, with the longest two laterals extending four miles. Our large contiguous acreage position affords us the ability to drill these type of long laterals, increasing efficiencies and allowing us to access more reserves from a single location. all while reducing our overall footprint and consolidating infrastructure requirements. In addition to the new horizontal length records set by the team, we also set new benchmark rates for daily drill footage. The average daily lateral footage drilled in 2023 was more than 4,600 feet per day, a step change increase of 38% over the previous year. with the fastest drilling day exceeding 7,450 feet drilled in a 24-hour period. The efficiency gains we see from longer laterals and faster daily drilling rates are key to the program's success, but equally important was that the team managed to simultaneously improve its pinpoint accuracy when in zone. Over the years, our drilling and geoscience teams have set an extremely precise standard for our horizontal targeting. typically with a tolerance of less than 20 feet. In 2023, with all the long lateral and high drilling rate success the team had, they did it while staying within their high-graded targets for more than 93% of the lateral footage drilled in the year, a noteworthy achievement by the team. This type of laser focus plays a role in the positive performance revisions and consistent reserve reporting that investors have come to expect from RANCH. Moving to completions, several new completion efficiency records were established during the year to include the following. Increasing overall efficiencies to nine stages per day, a 10% improvement over the prior mark, which was just set in 2022. Achieving our highest pad average of 13.4 stages per day, a mark set during the fourth quarter. Successfully completing ranges longest well to date with a total measure depth of 29,500 feet, and setting a new record of 17 stages completed in a 24-hour period. These incremental gains in operational efficiency could not have been accomplished without reliable logistics supporting each stage, and the Ragewater operations and logistics team played a critical role in supporting these efforts. But these operational results are incomplete if we can't execute safely. In addition to the highlights shared today, the team also delivered on one of our best safety and environmental performances in the company's history. We look forward to sharing more on these results in our upcoming corporate sustainability report in the months ahead. Turning quickly to marketing, during the quarter, Rage's weighted average NGL price was $24.91 per barrel. This is a $2.42 per barrel premium to the Mont Bellevue index and the highest quarterly premium in company history. This performance was driven by range's flexible LPG export program and strong seasonal butane values during the quarter. Full year 2023 saw $1.24 per barrel NGO premium and was also a company best on an annual basis. We expect range to maintain a differential to the Bellevue index of $1 minus to $1 premium for 2024 by leveraging our export capacity and flexible transportation options. To the extent that export dynamics remain tight in the Gulf Coast, as they were in the second half of 2023, we would expect our access to the East Coast to be advantaged, pushing us toward the premium side of our guidance. And as I mentioned at the beginning of these remarks, Range's NGL barrel is currently priced well above natural gas prices, supporting our durable free cash flow profile. Turning to natural gas, near-term prices are obviously incredibly challenging for the industry, and we expect these historically low price levels should help keep a lid on natural gas production across the U.S. We're encouraged by reduced industry activity in the Haynesville and Tier 2 basins, along with maintenance programs being planned in the Marcellus. This moderated industry activity, along with LNG project startups expected in the second half of 2024, and continued strength in gas power generation, provides the potential for the domestic market to rebalance later this year. While beyond this year, continued growth in global demand for U.S. natural gas, combined with domestic power and industrial demand, and Tier 1 well inventory exhaustion all set up a strong outlook for long-term U.S. gas fundamentals. Before handing over to Mark, I'll reiterate a message we've shared previously. We believe the future of natural gas and NGLs is strong, and the range team remains focused on generating free cash flow while advancing our overall efficiencies and delivering repeatable well performance across our large, contiguous inventories. I believe the positive results we generated in 2023 and plan to build upon in 2024 are a reflection of that focus and show the resilience of Range's business. I'll now turn it over to Mark to discuss the financials.