Range Resources highlights strong Q3 performance, future growth

Range has consistently performed well this year, with our third quarter results showcasing our strong execution in various areas such as safety, drilling, completion, and production improvements. We have been able to generate free cash flow and allocate it wisely, balancing the returns to shareholders and the development of our asset base. Our low capital intensity, driven by efficient operations and talented team, has been a key factor in our profitability throughout different cycles. The diversity of our production stream, particularly in the liquids business, has been a significant asset for us, as seen in our strong NGL premium in the third quarter.

Despite challenging natural gas prices, we have continued to generate positive free cash flow, investing strategically in our operations. Our production levels have remained strong, and we are on track to meet our full-year capital guidance. Our ability to maintain production levels with minimal crews showcases the quality of our assets and our team’s expertise. Looking ahead to 2025, we anticipate continued growth and efficiency in our operations, positioning us well for the future.

In terms of marketing and NGLs, we have capitalized on international demand, driving export price premiums to new levels. Looking ahead to 2025, we expect these trends to continue, providing us with favorable price realizations and margins. We believe that Range’s business is capable of generating returns and free cash flow through cycles, positioning us for growth in the years ahead.

In summary, Range’s strong performance this year, coupled with our strategic investments and operational efficiency, sets us up for success in the future. We remain committed to generating value for our shareholders and maintaining our competitive position in the market. There are several unique aspects of Range’s story that contribute to its success, including a peer-leading reinvestment rate, diversification across products, transport, and end markets, strong customer relationships, and solid financial position. Range’s reinvestment rate of 63% through the first three quarters of 2024 is impressive, allowing for healthy free cash flow even in the face of low commodity prices. This low required reinvestment rate is supported by a peer-leading base decline rate and high-quality acreage position. Additionally, Range’s revenue diversification, with 30% of production being liquids, and strategic transportation contracts and customers, contribute to its resilient cash flow. The company’s flexible hedging framework further supports its financial stability and allows for attractive full cycle margins. Range’s net debt reduction over the past several years has strengthened its balance sheet, positioning it for long-term success and sustainable growth. Overall, Range is well-positioned to benefit from the continued demand growth for natural gas and NGLs, providing value to both customers and shareholders. What we have observed is that in areas where production may be limited on a smaller scale, we have seen some slight increases. With longer laterals producing at high levels, we have been able to move more through the system and maintain higher utilization rates. As we set our plans for 2025, we will have more information to share. The business is currently on track to grow by approximately 2% this year, which is a result of compression and the use of long laterals. We are proud of our base decline of 19%, which reflects the quality of our asset and the hard work of our team. We anticipate that this decline will continue to decrease over time.

In terms of 2025, running one frac crew will allow for modest growth. We are considering utilizing our productive capacity based on factors such as winter weather patterns, LNG infrastructure utilization, and price responses. We have generated inventory between 2024 and 2023, which allows us to add production when needed. Our transportation setup is equipped to handle incremental production. We may add a spot frac crew and utilize inventory when market conditions are favorable. Our lean-based activity program enables us to be efficient and responsive to market demands.

On Slide 38, we have seen strong price realizations for NGL differentials. Our marketing teams have played a key role in accessing international markets, leading to a significant increase in price differentials. This success is attributed to our development approach and product processing setup in Appalachia, which allows us to export products from Marcus Hook, Philadelphia. The premium opportunity in the Northeast is a result of our strategic setup 20 years ago. Exports from the Gulf have also been at a high level. The industry is currently exporting over 2 million barrels a day, with dock utilization around 90%. This congestion has created an opportunity for premium capture in the Northeast, where utilization rates are strong but below congestion levels. Demand continues to grow, especially with PDH infrastructure commissioning in the Asian market. Looking ahead to 2025, there is optimism for NGL realization, with dock capacity expansion not expected until the latter half of the year. As for capital planning, ’24 can serve as a proxy for ’25, with operational efficiencies and rig activity being key considerations. In terms of in-basin demand, Range sees opportunities in industrial expansion and energy transitions, such as coal retirements and increasing power burn. Takeaway capacity, including the MVP pipeline, is expected to support future growth. In the short term, we see a focus on line-of-sight projects, but there are also discussions emerging around data centers and future power demand. The recent PJM auction highlighted the importance of future power movements, with prices increasing significantly. This indicates the need for action in the power sector. Regionally, we see a shift in future demand, with LNG playing a significant role.

Regarding our capital efficiency, we have been able to maintain our current spending levels due to our strategy of returning to previously drilled but underutilized wells. By utilizing existing infrastructure and continuously optimizing our operations, we are able to maintain consistency in our capital productivity. This approach allows us to tap into a large inventory of drilling locations across our acreage position, providing long-term sustainability for our program. We continue to replenish partially-utilized pads as we drill new wells, ensuring ongoing efficiency and productivity.

In terms of incremental land spend, we are acquiring unique open space parcels and extending laterals to enhance our near-term opportunities. This allows us to capture additional inventory and optimize our development plans, leading to more capital-efficient wells. By seizing these opportunities, we can increase our lateral inventory and drive greater efficiency in our operations. It incorporates our most capital-efficient wells and aligns with our focus on efficient use of the gathering system, as discussed earlier this morning. The drilling and completion efficiencies we have seen quarter-over-quarter also contribute to this, as they result in cost-effective investments that add to our production for the year. This approach allows us to optimize our production levels and drive down interest expenses over time. It represents a robust data set that includes the base number we provide. When considering changes in production mix from this year to last year, it gives insight into what our future may look like. Over time, we expect to see a gradual increase in NGL contribution to our production stream, particularly from our capital efficient wells in the wet side. Our inventory consists of economically competitive wells, with about two-thirds in the wet side and one-third in the dry side.

Operator: Our next question is from Bertrand Donnes with Truist.

Bertrand Donnes: Good morning. I’d like to clarify how you plan to achieve modest growth. Are you waiting for price movements to hedge and then increase production, or are you basing it on supply-demand forecasts? Do you need to hedge, or does NGL pricing act as a natural hedge?

Mark Scucchi: Even at current prices, we are generating free cash flow. We are looking at demand fundamentals, such as new demand from power, LNG, and re-industrialization. We have existing transport exposure and underutilized pipeline capacity to tap into. Regarding hedging, we aim to cover fixed costs and generate free cash flow, with next year’s program as an example. We will make capital investment decisions based on supply calls and market conditions.

Bertrand Donnes: Thank you. Can you provide insight on data center demand and potential agreements for 2025? Are players in the space gearing up to sign agreements, or is it still in the early stages?

Mark Scucchi: Conversations are ongoing with various counterparties, including utilities, independent power producers, and data centers. These are long-term investments, so discussions will evolve over time. The potential displacement of gas demand by nuclear deals is around 1 Bcf a day, showing the need for reliable, clean power that natural gas can provide. I believe that further supporting Mark’s comments, if you revisit the recent PJM auction and the increase in power prices, it indicates that costs are rising. This will likely accelerate conversations on expanding the grid, adding power, and meeting future growing demand while balancing costs for residents and consumers. The State of Pennsylvania’s allocation of $400 million through the Sites Program for site readiness demonstrates a proactive approach to supporting industry jobs by ensuring a long-term, low-cost energy source. This is encouraging from our perspective. After observing some improvements in certain areas like consumables, frac sand, and tubular goods, it is evident that some sectors are holding steady at current price levels. The industry has shifted towards a standardized super spec rig configuration for drilling long laterals and similar depths, which has helped maintain rig rates. The team’s efficiency in achieving 9 to 10 frac stages per day consistently, along with strong water recycling practices, has been notable. Record-breaking drilling days in the lateral this past quarter have contributed to the overall success and momentum of the team. Looking ahead, the goal is to sustain a production capacity of 2.2 Bcf equivalent per day with one frac crew, while also maintaining low capital efficiency regardless of fluctuations in service costs.

As for future capital plans and opportunities related to inventory infrastructure and land spend, there may be a decrease in land exposure in the years to come as a significant portion of acreage is already held by production. While there are potential land opportunities around the producing footprint, such as state parks in the Southwest PA area, the overall exposure is expected to diminish over time. In terms of capital expenditure, the current year serves as a good indicator of the company’s future activities and production output. The addition of drilled but uncompleted wells (DUCs) in recent years positions the company well to respond to increasing demand when market conditions align. The focus remains on being prepared to leverage high-quality inventory and operational efficiency to capitalize on future growth opportunities.

Thank you to everyone for participating in today’s call. For further inquiries, please reach out to our Investor Relations team. We look forward to discussing our plans for 2025 in the next call. Thank you for your time.

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