(Source: Business Wire)
RANGE RESOURCES CORPORATION (NYSE: RRC) today announced third
quarter financial and operating results. Natural gas and oil production
averaged 437 Mmcfe per day, representing a record high for Range and a
13% increase over third quarter 2008. This represents Range's 27th
consecutive quarter of sequential production growth and was achieved
despite losing 15 Mmcfe per day of production due to asset sales, which
closed on June 30, 2009. While production increased 13%, realized prices
fell 30% compared to the same period in 2008. Range's average realized
price (including all derivative settlements) for oil and gas was $6.35
per mcfe in third quarter 2009, compared to $9.02 per mcfe in the third
quarter of 2008. This compares to average price realizations of $6.18
per mcfe for second quarter 2009. As a result, oil and gas sales
(including cash-settled derivatives a non-GAAP measure reconciled in the
attached tables), totaled $255 million, a 21% decrease compared to third
quarter 2008. For the quarter, Range reported, for GAAP purposes, a loss
of $29.8 million, which included a non-cash mark-to-market hedging loss
of $53 million. Diluted GAAP earnings (loss) per share was $(0.19) per
share compared to $1.81 per share in third quarter 2008. Adjusting for
certain non-cash items, net income comparable to analysts' estimates (a
non-GAAP measure reconciled in the attached tables) would have been $41
million compared to $82.8 million in third quarter 2008 with the most
significant difference being realized gas prices between the two
periods. Diluted earnings per share using net income comparable to
analysts' estimates would have been $0.26 in third quarter of 2009 and
$0.53 in third quarter 2008. Cash flow from operations before changes in
working capital (a non-GAAP measure reconciled in the tables attached)
declined 25% from the same period in 2008 to $171 million. Adjusted
earnings and cash flow both exceeded the average analysts' estimates.
(See the accompanying tables reconciling the non-GAAP measures discussed
in this release to the most directly comparable GAAP measures.)
Commenting on the announcement, John H. Pinkerton, Range's Chairman and
CEO, said, "While our financial results suffered from lower commodity
prices, our operating results were the best in our Company's history.
Despite losing 15 Mmcfe per day at the close of the second quarter due
to asset sales, we were able to more than overcome the loss and post our
27th consecutive quarter of sequential production growth in
the third quarter. The production increase was driven by the terrific
results of our drilling program, as we have not made a producing
property acquisition in nearly two years. The impact of selling higher
cost properties, combined with lower service costs and increasing
production in our core areas with low operating costs helped us drive
down operating costs by 25% per mcfe. All of this was accomplished while
maintaining a capital spending program that was less than cash flow,
allowing us to protect and strengthen our financial position. The third
quarter results are an exciting reflection of the progress we have made
in high grading our drilling inventory and the continued focus on our
low-cost structure. Our key projects, and in particular the Marcellus
Shale play, are having a profound impact on Range Resources. As a
result, we are extremely well-positioned to continue to provide
low-cost, per-share growth for our shareholders, even in this period of
low natural gas prices."
Financial Discussion --
(Excludes non-cash mark-to-market and non-cash stock-based
compensation items shown separately in attached tables.)
Direct operating expenses for the quarter were $0.75 per mcfe, a 25%
decrease compared to $1.00 in the third quarter of 2008 and a 13%
decrease compared to $0.86 in the second quarter of 2009. Production
taxes were $0.19 per mcfe, a 56% decline versus third quarter 2008 due
to lower commodity prices and level with the $0.19 per mcfe of taxes in
second quarter 2009. Exploration expense in the third quarter totaled
$10 million, down 44% from $18 million in the same period of 2008 due
primarily to lower seismic expenses. General and administrative expenses
were $0.57 per mcfe, an increase of $0.03 per mcfe from the prior-year
quarter and $0.06 per mcfe higher than second quarter 2009. The increase
was due primarily to one-time charges associated with closing our
Houston office and an allowance for bad debt. Interest expense rose to
$31 million compared to $25 million in third quarter 2008, primarily due
to the replacement of short-term floating rate bank debt with long-term
fixed rate subordinated notes in the second quarter of 2009.
Depreciation, depletion and amortization averaged $2.42 per mcfe, versus
$2.15 per mcfe in the third quarter of 2008 as of result of the changing
mix of production for the various cost centers. Third quarter lease
abandonment and impairment expense was $24 million compared to $5
million in the third quarter of 2008 as Range elected not to renew
certain leases, including those outside the core of our North Texas
Barnett Shale play and certain shallow, tight gas sand leases in
Appalachia.
Third quarter development expenditures of $143 million funded the
drilling of 128 (76.9 net) wells and no recompletions. A 100% success
rate was achieved. For the first nine months of 2009, 297 (186.5 net)
wells have been successfully drilled and are now on production, while 76
(50.0 net) wells are currently in various stages of completion or
waiting on pipeline connection. Third quarter cash capital expenditures
totaled $167 million. Third quarter cash flow of $171 million was
sufficient to fund all of the cash capital expenditures for the quarter.
For the year, cash flow and the proceeds from already completed asset
sales are expected to fully fund capital expenditures. For the fourth
quarter of 2009, Range has approximately two-thirds of its gas
production hedged at an average floor price of $7.79 and an average cap
price of $8.53. Range has hedged 53% of its first half 2010 gas
production at a $5.50 floor and a $7.45 cap and 42% of its second half
2010 gas production at a $5.59 floor and a $7.50 cap. Details of the
hedge positions are posted on the Range's website at www.rangeresources.com.
Due to the drilling success and funds available from already completed
asset sales, Range's Board of Directors has increased the 2009 capital
budget from $700 million to $740 million. The increase will provide
funds to acquire additional leases in areas where we have had drilling
success this year. While capital expenditures were increased 6%, the
2009 production growth target was increased from 10% to 13%, a 30%
increase.
Operational Discussion --
Range is currently running 15 rigs versus 23 rigs at this time last
year. During the third quarter, the Marcellus Shale division continued
to make excellent progress. The Marcellus Division is continuing to
delineate and de-risk its large land position. We now have two rigs in
northeast Pennsylvania in Lycoming County drilling two horizontal wells
offsetting our high-rate vertical wells. We expect initial results from
these two wells by early next year. We also plan to drill a Utica Shale
horizontal and an upper Devonian horizontal before year-end. Results of
these two wells should be available by early first quarter 2010.
Marcellus Shale production is on plan and now exceeds 80 Mmcfe per day
net and is expected to approach the higher end of the previously
increased target of 90 - 100 Mmcfe per day net by year-end 2009. From
inception, Range has drilled 77 horizontal Marcellus Shale wells, of
which 60 have been completed and 54 are on production. The Company
expects to drill and case approximately 20 additional horizontal wells
in the Marcellus Shale play during the fourth quarter 2009 and carry
over approximately 20 for completion in 2010. The Marcellus division is
currently running a total of five horizontal rigs. We anticipate
entering 2010 with six custom-built horizontal rigs.
The build-out of the Marcellus midstream infrastructure in southwest
Pennsylvania is progressing as scheduled. By December 2009 or January
2010, gross cryogenic processing capacity is expected to increase to 155
Mmcf per day. An additional 30 Mmcf per day of processing capacity is
expected to be added in mid-2010 and another 150 Mmcf per day has been
ordered for start-up in mid-2011, increasing gross cryogenic processing
capacity to more than 300 Mmcf per day. The current 65 Mmcf per day
refrigeration processing is expected to be suspended during 2010 as the
new cryogenic processing is brought on.
The Southwest division also delivered strong drilling results in the
quarter. Production in the Barnett averaged 123 Mmcfe net per day during
the third quarter and is currently producing approximately 130 Mmcfe net
per day. The highlight of the quarter has been the completion of eight
wells in southern Tarrant County for a combined production rate of 32
(20.4 net) Mmcfe per day. Also in Hood County, Range's Barnett team
completed four wells for a combined rate of 8 (6.0 net) Mmcfe per day.
During the third quarter 2009, Range's Appalachian division continued to
focus on its key coal bed methane, shale and tight gas sand drilling
projects in the Nora area of Virginia. During the quarter, Range drilled
five horizontal Huron Shale wells, two horizontal Big Lime wells and one
horizontal Berea well. Year-to-date, 15 horizontal wells have been
completed in these three target zones, of which 10 are currently online
and producing on par with expectations. In addition, during the third
quarter of 2009, 71 coal bed methane and 20 vertical tight gas sand
wells were drilled in the Nora field.
Conference Call Information
A conference call to review the third quarter financial results is
scheduled on Thursday, October 22 at 1:00 p.m. ET. To participate in the
call, please dial 877-407-0778 and ask for the Range Resources third
quarter 2009 financial results conference call. A replay of the call
will be available through October 28. To access the phone replay dial
877-660-6853. The account number is 286 and the conference ID is 335439.
Additional financial and statistical information about the period not
included in this release but to be presented in the conference call will
be available on our home page at www.rangeresources.com.
A simultaneous webcast of the call may be accessed over the Internet at www.rangeresources.com
or www.vcall.com.
To listen, please go to either website in time to register and install
any necessary software. The webcast will be archived for replay on
Range's website for 15 days.
Non-GAAP Measures and Supplemental
Tables:
Net Income Comparable To Analysts' Estimates
Third quarter 2009 results included several non-cash items: a $54
million non-cash mark-to-market loss on unrealized derivatives, a $24
million impairment of unproved properties, a $16 million expense
recorded for the mark-to-market in the deferred compensation plan, $10
million of non-cash stock compensation expense and $840,000 associated
with closing the Houston office. Excluding these items, net income would
have been $41 million or $0.27 per share ($0.26 fully diluted). This
compares favorably to average analysts' estimates of $0.22 per share.
Excluding similar non-cash items from the third quarter of 2008, net
income would have been $82.8 million or $0.54 per share ($0.53 fully
diluted). By excluding these non-cash items from our earnings, we
believe we present our earnings in a manner consistent with the
presentation used by analysts in their projection of Range's earnings. A
supplemental table is included with this release which reconciles these
non-GAAP measures to the most directly comparable GAAP measures.
Cash Flow From Operations Before Changes In Working Capital
"Cash flow from operations before changes in working capital" used in
this release represents net cash provided by operations before changes
in working capital and exploration expense adjusted for certain non-cash
compensation items. Cash flow from operations before changes in working
capital is widely accepted by the investment community as a financial
indicator of an oil and gas company's ability to generate cash to
internally fund exploration and development activities and to service
debt. Cash flow from operations before changes in working capital is
also useful because it is widely used by professional research analysts
in valuing, comparing, rating and providing investment recommendations
of companies in the oil and gas exploration and production industry. In
turn, many investors use this published research in making investment
decisions. Cash flow from operations before changes in working capital
is not a measure of financial performance under GAAP and should not be
considered as an alternative to cash flows from operations, investing,
or financing activities as an indicator of cash flows, or as a measure
of liquidity. A supplemental table is included which reconciles net cash
provided by operations to cash flow from operations before changes in
working capital as used in this release. On its website, Range provides
additional comparative information on prior periods.
Hedging and Derivatives
In this news release, Range has reclassified within total revenues its
financial reporting of the cash settlement of its commodity derivatives.
Under this presentation those hedges considered "effective" under the
derivatives and hedging topic of the Accounting Standards Codification
(formerly SFAS No. 133) (Appalachia oil and gas hedges and Southwest oil
hedges) are included in "Oil and gas sales" when settled. For those
hedges designated to regions where the historical correlation between
NYMEX and regional prices is "non-highly effective" (Southwest gas) or
is "volumetric ineffective" due to sale of the underlying reserves
(Southwest oil), they are deemed to be "derivatives" and the cash
settlements are included in a separate line item shown as "Derivative
fair value income (loss)" in Form 10-Q along with the change in
mark-to-market valuations of such unrealized derivatives. The Company
has provided additional information regarding oil and gas sales in a
supplemental table included with this release, which would correspond to
amounts shown by analysts for oil and gas sales realized, including
cash-settled derivatives.
RANGE RESOURCES CORPORATION (NYSE: RRC) is an independent oil and
gas company operating in the Southwestern and Appalachian regions of the
United States.
Except for historical information, statements made in this release,
including those relating to estimated reserves, potential, future or
expected earnings, rates of return, expected debt reduction, asset
sales, cash flow, targeted capital expenditures, production growth,
processing capacity, planned number of wells to be drilled, assessments
of financial condition and liquidity, drilling inventory, unrisked
resource potential and emerging plays resource potential are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These statements are based on assumptions and estimates that
management believes are reasonable based on currently available
information; however, management's assumptions and Range's future
performance are subject to a wide range of business risks and
uncertainties and there is no assurance that these goals and projections
can or will be met. Any number of factors could cause actual results to
differ materially from those in the forward-looking statements,
including, but not limited to, the volatility of oil and gas prices, the
results of our hedging transactions, the costs and results of drilling
and operations, the timing of production, mechanical and other inherent
risks associated with oil and gas production, weather, the availability
of drilling equipment, changes in interest rates, litigation,
uncertainties about reserve estimates and environmental risks. Range
undertakes no obligation to publicly update or revise any
forward-looking statements. Further information on risks and
uncertainties is available in Range's filings with the Securities and
Exchange Commission, which are incorporated by reference.
The Securities and Exchange Commission permits oil and gas companies,
in filings made with the SEC, to disclose only proved reserves, which
are estimates that geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions. Range uses
the terms "probable" and "possible" reserves, "unproven" or "unrisked
resource potential" or "upside" or other descriptions of volumes of
reserves or resources potentially recoverable through additional
drilling or recovery techniques that the SEC's guidelines strictly
prohibit us from including in filings with the SEC. These estimates are
by their nature more speculative than estimates of proved reserves and
accordingly are subject to substantially greater risk of being actually
realized by Range. Resource potential refers to Range's internal
estimates of hydrocarbon quantities that may be potentially discovered
through exploratory drilling or recovered with additional drilling or
recovery techniques. Resource potential does not constitute reserves
within the meaning of the Society of Petroleum Engineer's Petroleum
Resource Management System and does not include any proved reserves.
Area wide unproven, unrisked resource potential has not been risked by
Range's management. Actual quantities that may be ultimately recovered
from Range's interests will differ substantially. Factors affecting
ultimate recovery include the scope of Range's drilling program, which
will be directly affected by the availability of capital, drilling and
production costs, availability of drilling services and equipment,
drilling results, lease expirations, transportation constraints,
regulatory approvals and other factors; and actual drilling results,
including geological and mechanical factors affecting recovery rates.
Estimates of resource potential may change significantly as development
of our resource plays provides additional data. Investors are urged to
consider closely the disclosure in our most recent Annual Report on Form
10-K, available from our website at www.rangeresources.com
or by written request to 100 Throckmorton Street, Suite 1200, Fort
Worth, Texas 76102.
