Range Resources(RRC) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The second quarter cash flow totaled $187 million, funding capital expenditures and dividends while maintaining balance sheet strength [30][34] - Realized unit price was$ 2.47 per Mcfe, which is $0.37 above NYMEX Henry Hub [34] - Cash interest expense declined by$ 9 million compared to Q2 last year, equating to $0.05 per Mcfe in savings [37] Business Line Data and Key Metrics Changes - Production for Q2 was 2.08 BCF equivalent per day, slightly ahead of guidance [13] - The average daily lateral footage drilled exceeded 4,700 feet per day in Q2, representing a 42% increase compared to the previous year [17] - Completions averaged over 10 stages per day throughout the quarter, with a 13% increase in frac stages per day compared to the previous year [18] Market Data and Key Metrics Changes - NGL prices were historically low in Q2 but are expected to improve later in the year due to robust LPG exports and recovering petrochemical demand [22][23] - Ethane prices have shown recovery, supported by strong domestic and export demand, averaging 2.5 million barrels a day year-to-date [23] - The domestic natural gas market is expected to gradually rebalance later this year, with increased LNG exports anticipated next year [24] Company Strategy and Development Direction - The company aims to maintain peer-leading capital efficiency, generate free cash flow, and return capital to shareholders while balancing debt reduction and opportunistic share repurchases [7][33] - The focus remains on developing high-quality assets and enhancing the position to participate in demand growth through low-cost, long-life inventory [33][46] - The company is committed to safety and environmental leadership, achieving low emissions intensity and completing the MIQ certification process with an A grade [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business despite low commodity prices, highlighting the ability to generate free cash flow [28][46] - The company is optimistic about the future demand for natural gas and NGLs, positioning itself to lead in capital efficiency and emissions intensity [51][52] - Management noted that the current pricing environment allows for visibility into the economic durability of assets across the E&P space [32] Other Important Information - The company has reduced debt by approximately$ 2.5 billion since 2018, nearing its target net debt range of $1 billion to$ 1.5 billion [43][44] - The cash balance at the end of Q2 was $162 million, providing ample liquidity for operations and market opportunities [42] Q&A Session Summary Question: Discussion on turn-in-line disclosure versus CapEx - Management explained that the lower percentage of turn-in-lines compared to higher CapEx is due to increased drilling activity in Q2, with most turn-in-lines expected in Q3 [54][58] Question: Thoughts on pulling capital from 2024 to 2023 - Management confirmed that internal discussions about optimizing capital allocation for 2024 are ongoing, allowing for flexibility in the program [60][62] Question: Insights on cost inflation and implications for 2024 - Management noted early signs of relief in costs, particularly in tubular goods, while some equipment remains in high demand [66][70] Question: Hedging strategy for 2025 - Management indicated that while they are currently 80% unhedged for 2025, they will monitor market developments and adjust their hedging strategy accordingly [76] Question: Capital allocation priorities - Management emphasized that debt reduction remains a priority, but they are also open to share repurchases if market conditions allow [78][85] Question: Maintenance mode on production outlook - Management stated that maintenance mode will continue into 2024, but they are optimistic about future growth opportunities driven by LNG and inventory exhaustion [88][89] Question: Maintaining capital efficiency with increased activity - Management highlighted their focus on logistics and operational efficiencies to sustain capital efficiency as activity levels rise [92][96] Question: Recent strength in ethane pricing - Management attributed the recent strength in ethane pricing to tight fundamentals and increased demand, while cautioning that prices may not remain at current highs [100][106]