Range Resources Corporation (ticker: RRC) is a leading independent oil and natural gas producer with operations focused in Appalachia and the southwest region of the United States. The Company pursues an organic growth strategy targeting high return, low-cost projects within its large inventory of low risk, development drilling opportunities.
On February 25, 2014, Range Resources announced double-digit share growth for both production and reserves for the eighth straight year in its 2013 year-end earnings announcement. Average production for 2013 was 940 MMcfe/d and adjusted cash flow hit $943 million, both 25% increases compared to fiscal 2012 results. Each total is a company record, and Range’s increasing revenues are being further aided by a 26% jump in total proved reserves to reach 8.2 Tcfe – good for production replacement of 612%. Unrisked unproven resources are estimated at 64 Tcfe to 85 Tcfe.
Cost Production per Mcfe
Source: RRC March 2014 Presentation
Production for Q4’13 increased 5% quarter over quarter to surpass the net 1 Bcfe/d milestone, which was achieved in December 2013. Quarterly liquids production increased 35% compared to Q4’12.
RRC management remains confident in line of sight growth of 20% to 25%, allowing production to double every three to four years. Revenue for 2013 equaled roughly $1.9 billion.
In a conference call following the release, RRC management said the company’s knowledge and growing efficiency of exploiting the Marcellus Shale has led to high growth at minimal costs. In a Bank of America study, RRC was the second-lowest cost producer in 2012 and has appeared within the top three of the report for nine straight years. Dropping unit costs per Bcfe has allowed RRC to maintain its position, and operating expenses per unit have dropped to $0.36 (57% lower than 2009 costs). Direct operating expense per Mcfe for the year declined 13% compared to 2012 and has fallen 52% since Q4’10. Compared to 2009, Range’s operating team drills 93% faster, the cost per foot of lateral drilled has decreased by 24% and the current average of 98 frac stages per crew per month is 87% greater compared to four years ago. Construction time has also been cut in half and facility costs per well are 3% cheaper. The capital efficiency has driven RRC to grow production by 1,161% for the given time period.
Marcellus Position
Source: RRC March 2014 Presentation
Continuing Into 2014
Range plans on spending $1.52 billion in 2014, with 78% intended for development. Roughly $1.3 billion (87%) will be allocated to the Marcellus – RRC’s core area. Yearly production in the Marcellus Shale increased 37% compared to 2012. RRC expects Q1’14 production to begin at 1.05 Bcfe/d gross (30% to 35% liquids), and 163 wells are planned to be turned to sales (roughly 71% in the wet or liquids-rich Marcellus) to keep with Range’s upward trend.
Source: RRC March 2014 Presentation
Jeffrey Ventura, President and Chief Executive Officer of Range Resources, said, “Given the renaissance of the U.S. oil and gas business, supply is temporarily ahead of demand, although I firmly believe demand growth is coming.” Ventura also said the company anticipated the impending oversupply of gas in the Northeast markets and prepared by adding dozens of new natural gas customers and tying sales to nine different indices. The foresight has allowed RRC to secure firm capacity for all of its current production, with the number scheduled to increase to 1.6 Bcfe/d by 2016. Its Appalachia production is currently being sold in 20 states. Management said its current movement level of 3.0 net Bcfe will increase to between four and five Bcfe/d by 2017 and will be distributed to where two-thirds of where current U.S. consumption exists. To date, 23 major projects for pipelines and processing plants have been completed and another 17 are currently under construction.
The company plans on hedging 80% of its production in order to lock in prices and reduce risk, allowing for a steady, more secure line of growth. Range’s current assets have laid the groundwork moving forward.
“Given our approximately 1 million acre position in Pennsylvania, focused in the southwest portion of the state where there’s great stacked pay potential,” said Ventura. “Because we have a great portfolio of dry, wet and super rich wells, we believe we can continue to grow at 20% to 25% for many years.”
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