Current RRC Stock Info

Production approaching 2 Bcfe per day

During its second quarter of 2017, Range Resources (ticker: RRC) reported a net income of $70 million as compared to a net loss of $225 million a year ago. The company’s cash margins grew to $1.09 per Mcfe up from $0.70 per Mcfe in Q2, 2016.

Range reached a new record in production at an average of 1.945 Bcfe per day—37% higher than the production for Q2, 2016.  The company highlighted a seven-well pad in the liquids-rich portion of the Marcellus with an average initial production of approximately 29.1 Mmcfe per day, 73% liquids.

The company also highlighted a dry gas four-well pad on the eastern edge of the Marcellus with average production rates averaged 30.0 Mmcfe per day.

Range’s second quarter capital expenditures totaled $280 million for drilling and completion operations for 35 (32 net) wells. The company also spent $8.6 million on acreage, $1.4 million on gas gathering systems, and $7.1 million on seismic—on target with its projected $1.15 billion capital budget for 2017.

Production summary

In the second quarter Range turned 23 wells in line in the Marcellus—where it holds 610,000 net acres—and 6 in its northern Louisiana acreage—where it holds 220,000 net acres. The company intends to turn in line another 68 wells in the Marcellus and another 23 in northern Louisiana, during the third and fourth quarters of 2017.  The company intends to turn in line a total of 169 wells by the end of 2017—it has already turned in line 78 wells.

The majority of Range’s production was sourced from its Marcellus acreage—which averaged 1.5 net Bcfe per day. The majority of the Marcellus production came out of the southwest Marcellus properties—which produced 1.344 Bcfe per day. The remainder—155 net Mmcf per day, was sourced from the northeast properties.

Range averaged 416 net Mmcfe per day out of its north Louisiana acreage, where it is developing its Terryville assets.

Looking into the remainder of the year, Range anticipates that its average production will increase to 1.970 Bcfe per day in Q3, and to 2.170 Bcfe per day in Q4. Range believes that the introduction of new takeaway capacity in the form of the Rayne/Leach Express, Southwest, and Rover Phase 2 lines—which are expected to be in service before 2018—will grant improvements in the company’s gas differential.

Range is utilizing $16 million for the use of 3-D seismic operations to delineate the western portion of its north Louisiana assets. In Range chairman, president and CEO, Jeff Ventura’s words, “unlocking the potential across 220,000 net acre of stacked-pay requires a certain amount of time and well repetitions in order to establish a predictable economic development program.”

In Q1, Range drilled two expansion wells in north Louisiana, one in the east portion, one in the west. Two offset horizontal wells are planned for both areas, following promising results from the expansion wells. Range expects that the offsets will be spud in a month, as of August 1st.

Range Resources Q2, 2017 Conference Call Q&A

Q: Could you talk about the delineation plan in the north Louisiana assets?

Ray Walker, executive vice president and COO: Well, the second half of the year is pretty well lined out and like we’ve talked about the I think it was 23 wells that I mentioned in my prepared remarks and I think it was 12 Upper Reds and 5 Lower Reds and 3 Deep Pinks, and then 3 more wells in the extension area. Most of the focus this year still remains on Terryville, and I think going into 2018, that won’t change. We’re still looking at delineating the edges of Terryville, in other words we’ve kind of taken tiers of wells south from the existing development, we see a lot of potential there. There is still potential for stack pay and in-fill potential inside Terryville, it’s been taking some time to build the reservoir models and determine that, so we’ll be working on that also.

And then, like Jeff mentioned and I talked about a little bit, the extension wells, we’ve had some pretty exciting results, early results but pretty exciting to the east and west of Vernon Field, so we’re going to continue some work there with some additional offsets. We’ve got some science work going on the east side of Vernon Field to try to determine just how much potential was there and what’s going to be the best way to develop that.

One of the things we’ve learned in the Marcellus in the stack pay position that we have in southwest Pennsylvania, that it takes years and you need to be very thoughtful and strategic about how you develop and stack those laterals and what that program is going to look like. We’re taking all of that learning and we’re basically going to take our time, we’ll be very strategic in the same way throughout that whole 220,000 acre position.

We have a big 3D that’s going to be coming in later this year, that is going to open up a lot more of that extension area to the south of Terryville. So all of that said, the primary focus is still going to be drilling development wells in and around Terryville, but we’re still going to have a pretty steady program, pretty consistently but strategically, delineating that acreage around to the south. But I think it’s going to take some time to do that, because we are going to be very scientific, strategic database and really develop some long-term plans around that.

Samson Oil & Gas Limited is presenting at EnerCom’s The Oil & Gas Conference® 22 Samson will be a presenting company at the upcoming EnerCom conference in Denver, Colorado—The Oil & Gas Conference® 22. The conference is EnerCom’s 22nd Denver-based oil and gas focused investor conference, bringing together publicly traded E&Ps and oilfield service and technology companies with institutional investors.  The conference will be at the Denver Downtown Westin Hotel, August 13-17, 2017. To register for The Oil & Gas Conference® 22 please visit the conference website.

Source: Range Resources

Samson Oil & Gas Limited is presenting at EnerCom’s The Oil & Gas Conference® 22

Samson will be a presenting company at the upcoming EnerCom conference in Denver, Colorado—The Oil & Gas Conference® 22.

The conference is EnerCom’s 22nd Denver-based oil and gas focused investor conference, bringing together publicly traded E&Ps and oilfield service and technology companies with institutional investors.  The conference will be at the Denver Downtown Westin Hotel, August 13-17, 2017. To register for The Oil & Gas Conference® 22 please visit the conference website.

Samson Oil & Gas Limited is presenting at EnerCom’s The Oil & Gas Conference® 22 Samson will be a presenting company at the upcoming EnerCom conference in Denver, Colorado—The Oil & Gas Conference® 22. The conference is EnerCom’s 22nd Denver-based oil and gas focused investor conference, bringing together publicly traded E&Ps and oilfield service and technology companies with institutional investors.  The conference will be at the Denver Downtown Westin Hotel, August 13-17, 2017. To register for The Oil & Gas Conference® 22 please visit the conference website.

Analyst Commentary

Stephens

RRC reported another solid production quarter highlighted by very strong operations in the Marcellus including a 7 well Super-Rich pad that averaged IP rates of 29.1 Mmcfepd (73% liquids). Despite the continued success in Appalachia, the Company did lower full year guidance slightly as a result of ongoing integration of Terryville assets.
The Company continued to experiment with completion changes in Terryville and was still completing wells drilled by the previous operator which proved somewhat disappointing. With that said, it is still early in the Terryville, and the evolution of RRC's Marcellus development is enough to remind us that the Company remains and will remain a low cost nat. gas provider for years to come. We reiterate our OW rating.

Stifel

Range reported negative 2Q earnings, missing consensus EBITDA by 11% on in-line production despite slightly higher capex and stronger liquids pricing due to higher operating expenses. Further, we do not anticipate the street receiving the full year production guide down positively. We anticipate shares to be weak tomorrow as the main sticking point for investors - Terryville productivity concerns - is exacerbated by the lower production guidance despite commentary on understimulated 2Q wells and impact of legacy drilling and completion designs in Terryville, as well as SW PA timing delays.

Johnson Rice & Company

Despite continued strong well performance in the Appalachian Basin, Range was negatively impacted by lower than expected well performance in north Louisiana due primarily to under-stimulation and by permitting delays in Pennsylvania. As a result, Range lowered its 2017 growth target to 30% (down from 33%-35%). While the permitting delays have been resolved, Range is counting on the return to a higher fluid-intensity completion design in north Louisiana to achieve expected well performance. Importantly, recent strong results on both the western and eastern flanks of its Appalachian position have essentially fully de-risked its entire 515,000 net acre position in southwest PA. With 60% of its 2017 Applachian wells still anticipated to come on-line over the remainder of the year, the Appalachian basin will be the primary driver behind its upcoming growth. Given our lowered production outlook and estimates, we now expect Range to exit 2017 and 2018 with higher leverage ratios of 3.8x and 3.3x, respectively. Given this release contained one of the largest guidance decreases we can recall, investors will likely take a “show-me” approach related to its growth outlook (especially in north Louisiana), which will likely put the shares under pressure in the short-term.

KLR

Range reported 2Q/17 recurring EPS of $0.06 in line with our $0.06 estimate due to slightly higher NGL price realizations offset by slightly higher LOE/transport expense. Production of ~1.94 Bcfepd (~32% liquids) in 2Q/17 approximates our ~1.94 Bcefpd (~33% liquids) estimate and is ~1% above consensus (~1.93 Bcefpd). The company anticipates 3Q/17 and 4Q/17 production of ~1.97 Bcfepd and ~2.17 Bcfepd respectively. As a result, Range lowered its ’17 production growth from 33%-35% to 30% due to lower production expectations for Terryville and timing delays on several well pads in southwest Pennsylvania. We expect to be fractionally above 3Q/17 and full year production growth guidance. In 2H/17, we anticipate a ~90 Mmcfepd reduction in forecasted production versus prior expectation. Southwest Appalachia net production was flat q/q at 1,344 Mmcfepd. Northeast Appalachia net production decreased 4% q/q to 155 Mmcfpd. Northern Louisiana net production increased 5% q/q to 416 Mmcfepd. The company expects to increase average southwest Pennsylvania well lateral lengths from ~7,500’ (1H/17) to over ~9,500’ in the second half of the year. In southwest Pennsylvania, delineation wells are performing comparable to core execution. In Terryville, Range has experimented with changes to completion design and more specifically, fluid intensity. These wells on average were stimulated with ~40% less fluid per foot than typical Terryville completions, while utilizing the same proppant per foot, and the initial production response in the wells has been below expectations by a similar percentage, though with a flatter decline profile. Range is planning to return to the larger fluid design as the wells appear to be understimulated.  


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