Range Resources Q3 2024 Earning Call Summary

Management Comments Summary

1. Production Levels:

   • The company reported Q3 2024 production at 2.2 Bcf equivalent per day, with expectations to maintain similar levels in Q4, leading to an annual forecast of approximately 2.17 Bcfe per day. This projection is about 30 million cubic feet per day above prior guidance due to strong well performance and optimization of gathering and compression infrastructure.

   • Range can sustain current production levels with one electric frac crew, demonstrating operational efficiency and a low base decline rate of 19%, which contributes to stable output over time.

2. Forecast and Capital Expenditures:

   • The company has not finalized 2025 capital plans, but the strategy is expected to continue with a "maintenance plus" approach. This involves investing slightly above maintenance levels to enhance efficiency, such as land and water infrastructure projects.

   • 2024 capital expenditures amounted to $156 million in Q3, with full-year capital guidance on track. The investments support incremental well inventory and infrastructure improvements.

3. Hedging and Financial Strategy:

   • The hedging program remains a crucial part of the strategy, aimed at covering fixed costs and allowing flexibility to capitalize on favorable market conditions. This approach has enabled positive free cash flow even in a low natural gas price environment (NYMEX averaged $2.09 for the first three quarters of 2024).

   • The company maintained a net debt of $1.44 billion at the end of Q3, within the target range of $1.0-$1.5 billion. Debt reduction has been a priority, with $2.7 billion in reductions over recent years, lowering interest expenses.

4. Infrastructure Projects:

   • Infrastructure upgrades, such as compression and gathering expansions, have helped maintain stable production without significant curtailments.

   • New takeaway capacity projects are underway in Appalachia, with expansions like the Transco SE Supply and MVP Southgate potentially adding 2.2 Bcf/d of capacity by 2028. The completion of the MVP project has already provided incremental capacity, supporting the company's regional marketing efforts.

   • The outlook for natural gas demand is strong, driven by anticipated growth in LNG exports and power generation. The company highlighted several upcoming LNG projects, including Plaquemines and Corpus Christi Train 3, which are expected to bring about 3 Bcf/d of capacity online by 2025. Additionally, Golden Pass Train 1 is set to commence at the end of 2025, contributing further to LNG capacity expansion.

   • Range benefits from its diverse access to domestic and international markets, with approximately 25% of its natural gas marketed to LNG and premium Gulf markets.

Q&A Session Summary

1. Production and Growth Plans:

   • Management addressed questions about growth potential, indicating that while they are prepared to maintain current production, they could scale up activity if market conditions justify it, such as adding a spot frac crew. The company has enough drilled but uncompleted wells (DUCs) to support incremental production growth if gas prices and demand conditions improve.

2. Infrastructure and Takeaway Capacity:

   • The discussion highlighted ongoing regional demand growth, driven by factors such as coal plant retirements and industrial projects. The company expects around 1 Bcf/d of additional demand from coal displacement in the next 1-2 years.

   • The MVP pipeline, currently operating below its 2.2 Bcf/d capacity, has room to accommodate increased production as other takeaway expansions come online.

3. Natural Gas Liquids (NGL) and Export Opportunities:

   • The company has capitalized on NGL export opportunities, achieving a premium over domestic prices due to favorable international market conditions and Gulf Coast congestion. With U.S. LPG exports running near capacity, the company anticipates similar conditions for 2025.

   • Export premiums have been a significant driver of revenue, with NGL realizations achieving the highest premium over the Mont Belvieu index in company history.

4. Capital Efficiency and Drilling Optimization:

   • Range continues to emphasize capital efficiency by utilizing existing infrastructure and optimizing well inventory. Approximately half of its wells are drilled on existing pads, leveraging already developed gathering systems, while the other half are new. This approach ensures stable operational costs and consistent production results.

   • Recent land investments have added about 500,000 feet of lateral inventory, improving the average lateral length from 10,000 feet at the start of the year to nearly 13,000 feet by year-end, enhancing capital efficiency.

5. Future Demand Trends:

   • The company sees increasing demand for natural gas driven by industrial and data center growth, particularly in the Northeast, along with LNG export expansions. Additionally, there is optimism for higher natural gas consumption in power generation due to ongoing coal retirements and renewable energy integration challenges.

   • Upcoming takeaway expansions, including Transco SE and MVP Southgate, will support demand growth over the next few years.