Range Announces Third Quarter 2020 Financial Results

Rhea-AI Summary

Range Resources Corporation (NYSE: RRC) reported its Q3 2020 results, revealing a GAAP loss of $680 million and non-GAAP revenues of $510 million. Notably, well costs averaged below $600 per foot, representing the lowest in Appalachia. The company reduced its 2020 capital spending forecast by at least $15 million, achieving a total capital expenditure of $63.5 million. After selling North Louisiana assets for $245 million, Range improved its financial position by extending debt maturities and maintaining a $3 billion borrowing base, positioning itself favorably for 2021 amid an improved natural gas price outlook.

Positive

• Well costs averaged less than $600 per foot, the lowest in Appalachia.
• Reduced 2020 capital spending expectation by at least $15 million.
• Closed North Louisiana asset divestiture for gross proceeds of $245 million.
• Extended debt maturities and maintained liquidity through refinancing efforts.

Negative

• GAAP loss of $680 million in Q3 2020.
• Outflow of $24 million in cash flow from operating activities.
• Significant exit and termination costs of $522 million related to asset sales.

FORT WORTH, Texas, Oct. 29, 2020 (GLOBE NEWSWIRE) -- RANGE RESOURCES CORPORATION (NYSE: RRC) today announced its third quarter 2020 financial results.

Third Quarter Highlights –

• Well costs continue to average less than $600 per lateral foot, including facility costs, the lowest in Appalachia
• 2020 annual capital spend expectation reduced by at least $15 million, due to efficiency improvements
• Total capital expenditures were $63.5 million during the quarter
• Transportation, gathering, processing and compression expense improved $0.10 per mcfe, or 7% versus prior year
• Lease operating expense improved to $0.10 per mcfe, a record low for the Company
• Total cash unit costs improved $0.18 per mcfe, or 9% versus prior year
• Closed on North Louisiana asset divestiture for gross proceeds of $245 million, plus an additional $90 million contingent on future commodity prices
• Issued $300 million in additional 2026 notes and repurchased $500 million in near-term maturities via tender offer, extending the Company’s debt maturities while maintaining liquidity
• Reaffirmation of the existing $3.0 billion borrowing base and elected commitments of $2.4 billion
• Published an updated Corporate Sustainability Report highlighting Range’s environmental leadership, strong governance, and focus on workforce health and safety.

Commenting on the quarter, Jeff Ventura, the Company’s CEO said, “Range continued to make steady progress in the third quarter by operating safely, improving our cost structure, reducing debt, extending our maturity runway, and methodically developing our core asset with peer-leading well costs and capital efficiency. As a result of efficient operations, we were able to reduce our capital budget for 2020 while accomplishing our operational objectives, setting us up well for 2021. Looking forward, our shallow base decline of less than 20% and peer leading well costs provide Range a sustaining capital requirement per unit of production that we believe is the best among peers, providing us a solid foundation for generating corporate returns. With an improved price outlook for natural gas and natural gas liquids, Range is well-positioned to generate durable free cash flow, which at today’s stock price equates to a free cash flow yield that competes with any sector.”

Financial Discussion

Except for generally accepted accounting principles (GAAP) reported amounts, specific expense categories exclude non-cash impairments, unrealized mark-to-market adjustment on derivatives, non-cash stock compensation and other items shown separately on the attached tables. “Unit costs” as used in this release are composed of direct operating, transportation, gathering, processing and compression, production and ad valorem taxes, general and administrative, interest and depletion, depreciation and amortization costs divided by production. See “Non-GAAP Financial Measures” for a definition of each of the non-GAAP financial measures and the tables that reconcile each of the non-GAAP measures to their most directly comparable GAAP financial measure.

GAAP revenues for third quarter 2020 totaled $299 million, GAAP net cash provided from operating activities (including changes in working capital) was an outflow of $24 million, and GAAP earnings was a loss of $680 million ($2.83 per diluted share).  Third quarter earnings include $522 million exit and termination costs associated with the sale of North Louisiana assets and a $125 million non-cash derivative loss due to increases in commodity prices.

Non-GAAP revenues for third quarter 2020 totaled $510 million, and cash flow from operations before changes in working capital, a non-GAAP measure, was $91 million.  Adjusted earnings comparable to analysts’ estimates, a non-GAAP measure, was a loss of $11 million ($0.05 per diluted share) in third quarter 2020.

Capital Expenditures

Third quarter 2020 drilling and completion expenditures were $60 million. In addition, during the quarter, a combined $3.5 million was invested in acreage and gathering systems. Total year-to-date expenditures were $298 million at the end of the third quarter. Well costs, including all facilities, averaged less than $600 per foot in the third quarter, the lowest normalized well costs in Appalachia. Given the realized efficiencies year-to-date, Range is lowering its anticipated capital spending by $15 million for 2020 to $415 million or less.

Asset Sale and Financial Position
                                
In August, Range finalized the sale of its North Louisiana assets for gross proceeds of $245 million, with the potential for $90 million in additional proceeds contingent on future commodity prices.

During the quarter, Range issued $300 million aggregate principal amount of 9.25% senior notes due 2026. Proceeds from the senior notes offering and North Louisiana divestiture were used to redeem $500 million aggregate principal amount of the Company’s notes due 2021 through 2023. In addition, Range retired approximately $2.9 million in principal amount of senior and subordinated notes through open market repurchases during the third quarter at a weighted average discount to par of 7%.  In total during 2020, Range has reduced note maturities through 2024 by approximately $1.2 billion through refinancing and repayments.

At the end of the quarter, pursuant to the scheduled semi-annual borrowing base redetermination process, Range received reaffirmation of its $3.0 billion borrowing base under the Company’s existing revolving credit facility. Aggregate lender commitments under the credit facility remain at $2.4 billion. Range had $706 million drawn on its revolver and approximately $1.4 billion of additional borrowing capacity under the commitment amount as of September 30, 2020.

Unit Costs and Pricing

The following table details Range’s unit costs per mcfe^(a):

Expenses		3Q 2020 ($/Mcfe)			3Q 2019 ($/Mcfe)			Increase (Decrease)
Direct operating(a)	$	0.10		$	0.17			(41	%)
Transportation, gathering, processing and compression		1.33			1.43			(7	%)
Production and ad valorem taxes		0.03			0.04			(25	%)
General and administrative (G&A)(a)		0.15			0.16			(6	%)
Interest expense(a)		0.23			0.22			5	%
Total cash unit costs(b)		1.84			2.02			(9	%)
Depletion, depreciation and amortization (DD&A)		0.48			0.67			(28	%)
Total cash unit costs plus DD&A(b)	$	2.31		$	2.68			(14	%)
(a)   Excludes stock-based compensation, legal settlements and amortization of deferred financing costs.
(b)   May not add due to rounding.

The following table details Range’s average production and realized pricing for third quarter 2020:

	3Q20 Production & Realized Pricing
		Natural Gas (Mmcf)				NGLs (Bbl)				Oil (Bbl)				Natural Gas Equivalent (Mmcfe)
Net Production per day			1,553				99,745				7,134				2,194
Average NYMEX price		$	1.95							$	40.90
Differential, including basis hedging			(0.42	)							(9.43	)
Realized prices before NYMEX hedges			1.53			$	16.27				31.47
Settled NYMEX hedges			0.47				(0.10	)			19.34
Average realized prices after hedges (a)		$	2.00			$	16.17			$	50.81			$	2.32
(a)   May not add due to rounding.

Third quarter 2020 natural gas, NGLs and oil price realizations (including the impact of derivative settlements which correspond to analysts’ estimates) averaged $2.32 per mcfe. Additional detail on commodity price realizations can be found in the Supplemental Tables provided on the Company’s website.  

• The average natural gas price, including the impact of basis hedging, was $1.53 per mcf, or a ($0.42) differential to NYMEX. Appalachian storage remained higher than normal during the third quarter while the basin experienced maintenance on multiple infrastructure projects, both weakening local prices. Range expects this weakness to dissipate with the onset of winter weather leading to improvements in basis pricing.  
  
  
• Pre-hedge NGL realizations were $16.27 per barrel during the quarter, or approximately 40% of WTI (West Texas Intermediate), and in-line with the Mont Belvieu-equivalent barrel. NGL component pricing improved compared to second quarter as demand remained strong. Following the continued increase in C3+ pricing at Mont Belvieu and internationally, Range expects its fourth quarter and 2021 pre-hedge realized NGL price to reach the highest levels since early 2019, based on current strip pricing.
  
  
• Crude oil and condensate price realizations, before realized hedges, averaged $31.47 per barrel, or $9.43 below WTI. Range expects condensate differentials to continue improving through the rest of 2020 and further into 2021.  
  

Operational Discussion

The table below summarizes estimated activity for 2020 regarding

FAQ

What were Range Resources' Q3 2020 earnings results?

Range Resources reported a GAAP loss of $680 million for Q3 2020, with adjusted earnings amounting to a loss of $11 million.

How did Range Resources perform in terms of capital expenditures in Q3 2020?

The company reported total capital expenditures of $63.5 million in Q3 2020 and reduced its annual capital spend forecast by at least $15 million.

What is the current status of Range Resources' debt?

Range Resources reaffirmed a $3 billion borrowing base and extended its debt maturities through refinancing, maintaining liquidity.

What were the implications of Range Resources' asset sale?

The sale of North Louisiana assets for $245 million helped improve Range's financial position and liquidity.

What is the outlook for Range Resources following Q3 2020 results?

With an improved price outlook for natural gas, Range Resources anticipates better performance and durable free cash flow moving forward.