Q2 2022 Range Resources Corp Earnings Call

July 26, 2022

Yeah.

And uncertainties, which could cause actual results to differ materially from those in the forward looking statements.

After the Speakers' remarks, there'll be a question and answer period at this time I'd like to turn the call over to Leif Sando, Vice President Investor Relations at range resources. Please go ahead Sir.

Thank you operator.

Everyone and thank you for joining ranges second quarter earnings call. The speakers on today's call are Jeff Ventura, Chief Executive Officer, Dennis Degner, Chief operating officer, and Mark <unk> Chief Financial Officer.

Hopefully you've had a chance to review the press release and updated Investor presentation that we've posted on our website.

May reference certain of those slides on the call. This morning.

You will also find our latest 10-Q on ranges website under the investors tab.

Can access it using the SEC's Edgar system.

Please note, we'll be referencing certain non-GAAP measures on today's call. Our press release provides reconciliations of these to the most comparable GAAP figures.

For additional information, we've posted supplemental tables on our website to assist in the calculation of EBITDAX cash margins and other non-GAAP measures.

With that let me turn the call over to Jeff.

Thanks, Laith and thanks, everyone for joining us on this morning's call.

Before discussing the second quarter results I wanted to spend a few minutes on the broader global energy picture and how we see Appalachia and range of within that framework.

As we sit here today in the middle of a global energy crisis, we see a world that desperately needs access to ethical safe reliable and abundant fuel forces.

Europe challenges are a stark reminder, that evolving energy policy will need to be thoughtful prioritizing security affordability availability and environmental responsibility.

Within that framework, we believe Appalachia is well suited to play a key role in meeting the world's needs.

That perspective, it's an exciting time for U S natural gas producers.

Energy policy will need to be rooted in market realities.

If infrastructure projects, namely pipelines and LNG terminals are not prioritized and given reasonable regulatory review.

And then I believe it is simply impossible to meet the growing global demand for reliable safe and affordable fuels.

And warranted delays in permitting adverse policy decisions and a global push for various renewable initiatives have resulted an underinvestment in oil and gas infrastructure over the last few years.

This has stifled domestic supply growth leading to inflated global energy costs.

Current situation will not change unless there is support for the necessary infrastructure that would allow for increased supply.

Plain and simple.

I believe the industry like range is ready willing and able to assist in providing the much needed growth in supply of clean burning American natural gas to replace coal and also replace supplies of gas from less reliable hospital countries.

As it relates to the broader energy transition I don't believe it's an either or decision between renewables and natural gas.

Rather or acquire in all of the above approach to keep cost in inflation in check and to have energy security.

Oil and gas production is inextricably linked to nearly everything in our lives.

Food production medicine transportation shelter manufacturing heating and cooling to name a few.

As a result inflated energy costs from a lack of infrastructure becomes an onerous regressive tax on individuals and families struggling to afford food and shelter.

As we look for reliable safe and affordable energy, we believe Appalachian natural gas and range in particular are well suited to meet the call due to our current cost structure and environmental performance.

We believe Appalachian natural gas is.

These global demand and order for the U S to sustainably produce enough natural gas at affordable prices.

However, infrastructure approvals and investment are needed before it's possible to meaningfully increase Appalachian supply.

Additional infrastructure required permitting at the federal level and that process has been incredibly slow or impossible in recent years.

Given that our national leaders are looking for supply from other countries. They clearly understand the importance and need for more oil and natural gas globally as we try to fight inflation and provide energy security.

Unfortunately domestic suppliers are being stymied by short sighted energy policy, along with permitting delays and cancellations of prior approvals.

We really need to ask ourselves as a country, if we'd rather have additional energy supply from other countries.

Would we rather source it from right here in America, where we have the highest environmental and safety standards in the world.

Offer good paying jobs and provide significant tax revenue at the local state and federal level.

Specific to Appalachia, we also have the lowest finding costs and emissions intensity of any oil or natural gas field in the world.

As Appalachian shale production grew from virtually nothing just 15 years ago to now producing over one third of the nation's natural gas supplies.

It allowed the U S to lead the world in lowering Cotwo emissions, primarily from the substitution of natural gas for coal and power generation.

Natural gas has a 60% lower carbon footprint than coal.

The Marcellus and Utica shales in Appalachia are now the largest producing natural gas field in the world.

Making the U S. The largest natural gas producing country.

This has also resulted in significantly lower natural gas prices in the U S compared to Europe and Asia.

No doubt Americans are experiencing increased energy cost, but nowhere near the levels being experienced in Europe , and the rest of the world.

Currently U S natural gas pricing is about 75% lower than prices abroad.

Making U S manufacturing more competitive.

Helping to keep U S utility bills lower than other countries positively.

Contributing to the U S trade balance, while generating tax revenues for governments and providing energy security for our country.

Despite these meaningful contributions.

We believe that much more can and should be done in the years ahead to support the increased use of American natural gas both in our country and around the world.

We remain confident that we'll see many more opportunities over time for Appalachian natural gas.

So where does that leave range today.

We believe that we're positioning the company for success and whatever infrastructure scenario, we find ourselves in this year next year and for the foreseeable future.

As the most capital efficient operator, and the largest natural gas field in the world. We believe we sit on the low end of the global cost curve for natural gas.

Importantly range and other Appalachian producers have advantaged emissions intensity profiles, given the prolific nature of the Marcellus robust environmental standards and our focus on operational efficiencies being applied on a daily basis.

Looking longer term.

We see range as being differentiated amongst producers given our operational expertise.

<unk> multi decade core inventory and our access to natural gas and NGL markets outside of Appalachia.

The financial and operational results for the most recent quarter reflect those advantages as we made steady progress on our key objectives for 2022.

Completing our drilling program safely within budget and with peer leading capital efficiency.

Enhancing margins through thoughtful marketing and a focus on cost.

Bolstering our balance sheet with further absolute debt reduction and returning capital to shareholders.

Operationally range successfully delivered on our second quarter development plans with production coming in slightly better than expected in first half 2022 capital spending of $244 million or approximately 52% of the full year budget, putting us on track within our full year guidance.

Dennis and Mark will provide some additional details on the quarter in a minute, but the team has done an outstanding job operating safely and controlling costs.

Looking at margins starting with pricing.

Full marketing and deliveries to multiple end markets resulted in strong prices for the first half of the year and have allowed us to improve our corporate natural gas differential despite meaningfully higher Henry hub index prices.

Range is natural gas liquids production also received a premium to Mont belvieu equivalent price coming in at over $42 per barrel or greater than $7 per Mcf.

Overall range received 718 per Mcf in the second quarter for its aggregate production.

As a result, we realized our highest quarterly cash flow per share and free cash flow in company history.

This free cash flow is being directed towards the absolute debt reduction and capital returns, we announced in February including our base dividend to begin later this year and a $500 million share repurchase program.

Continued strength in commodity prices has further de risk our absolute debt targets, allowing us to repurchase shares at a steep discount to what we believe is the underlying value of the business.

This is particularly the case as long term natural gas prices have re rated from sub $3 to over $4 premium Btu.

The call for U S natural gas becomes more evident globally.

This re rating of long term prices is particularly beneficial to companies like range with multi decade core inventory life, though we don't believe it's recognized in the current equity market, which seems overly fixated on near term trading multiples rather than the true underlying asset value.

We have discussed our long term balance sheet target of one to one $5 billion in absolute debt.

We expect we can achieve this financial objective early next year at current strip pricing, while simultaneously funding the base dividend and share repurchases.

We believe the share buyback program continues to represent a compelling investment of our capital as we still trade at a substantial discount to the underlying value of the reserves and our resource base under what we believe are conservative mid cycle pricing assumptions and development plans.

While we run various scenarios and assessing company valuation we can point the range of SEC proved reserve valuation at year end 2021, as a proxy for the value of a portion of our inventory.

At recent strip pricing that value with well north of $60 per share and as many of you are aware the SEC definition of proved reserves only allows for five years of development.

Beyond this five year window range has thousands of additional core Marcellus wells beyond that we have what many consider to be core Utica and upper Devonian as well.

We put we do not believe this significant resource value is currently reflected in our range of share price presenting us the opportunity to create meaningful long term per share value for equity holders through our buyback program.

Before turning it over to Mark and Dennis I'll reiterate something I've mentioned on our past calls and remains true today, which is I truly believe ranges in the best position in the company's history.

As the world moves towards cleaner more efficient fuels natural gas and Ngls will continue to be the reliable abundant and affordable supply that helps power our everyday lives.

Also helping billions of others improve their standard of living while reducing the reliance on coal and other more carbon intensive fuels.

We believe Appalachian natural gas and natural gas liquids are well positioned to meet the current and future demand and within Appalachia, We expect range to be a leader in emissions intensity capital efficiency and transparency, which are all core to generating sustainable long term value for our shareholders.

Range has de risked a massive inventory of high quality wells in the Marcellus measured in decades, and translated that into a business capable of generating free cash flow through the cycles.

Underpinning this business is the low sustaining capital requirement that range enjoys reflected in our peer leading D&C spending per mcf.

Which allows us to weather service cost inflation and better than others. We're also supporting healthy margins.

At the same time range as balance sheet is in the best shape in company history with rapid improvements continuing in the coming months.

With significantly lower absolute debt range will be even more resilient.

Whenever we see the next cycle and with favorable fundamentals for natural gas and natural gas liquids range is well positioned to generate healthy returns on and returns of capital to shareholders.

I'll ask Dennis to cover operations.

Thanks, Jeff.

As we look back on the second quarter all in capital came in at $127 million with drilling and completion spending of approximately $119 million or 94% of total capital for the quarter.

Capital spending for the first half of the year totaled $244 million or approximately 52% of our annual plan.

As we mentioned on our call earlier this year, our operational cadence is frontloaded.

<unk> and a higher number of wells turned to sales in the second half of the year.

We exited the second quarter with two horizontal rigs and two frac crews.

And are on track with our operational program that we outlined earlier this year.

This tapered approach results in production growth in the third quarter and additional growth in the fourth quarter.

Joining us on firm footing to deliver on our annual capital spending and production guidance.

During the second quarter, we turned to sales 16 wells in our dry and wet acreage positions.

Similar to our approach discussed on previous calls 14 of the 16 wells turned to sales were located on pads with existing production.

One set of these wells was a result of a third return trip to that given pad, where we saw initial development in 2011.

I would buy a second phase of development in 2018, and with the third phase occurring this year.

The three new wells on this pad are producing over 1000 barrels per day of condensate. In addition to the gas and NGL contribution we see from our wet area.

This pad now has 12 producing wells with capacity for additional well development in the future.

This pad exemplifies the benefits of our large contiguous acreage position and the durable repeatable and capital efficient nature of our development program for decades to come.

Second quarter production came in at 2.074 Bcf equivalent per day.

Slightly ahead of our communicated guidance during our prior call.

Strong field run time during the quarter, which has become a cornerstone of our operations.

To offset downtime from scheduled infrastructure maintenance and upgrade projects.

Additionally, our liquids marketing team was able to work through potential turnaround impacts with our downstream petrochemical customers to maintain overall NGL product placement.

21 wells were drilled in our dry and wet acreage position during the quarter Rob.

While returning to pads with existing production on four of the six pad sites.

Of the 21 wells drilled 16 of them were in southwest, Pennsylvania with the other five in northeast.

The average horizontal length for the first half of 2022 averaged over 11000 feet or a 5% increase compared to the prior year.

Underpinning the year to date average range drilled four wells with horizontal lease exceeding 18000 feet.

These wells are just another example of our repeatable capital efficient long lateral development and places them among the longest laterals and ranges program history.

We're completions the team completed 11 wells during the second quarter.

The 11 wells completed four of them had horizontal lengths exceeding 18000 feet with two of them over 19000 feet.

Overall the team completed just under 600 stages during the quarter, while operating the majority of Q2 with a single Frac crew.

An additional crew was secured in the latter part of the second quarter to start completions for wells in northeast, Pennsylvania that are expected to come online later this year.

In previous calls we've reported on the efficiency gains the team has realized along with various records being set in.

And today, we're pleased to report a continuation of this theme.

For the second quarter fracturing efficiencies averaged nine stages per day, which is a new company record for quarterly completion efficiencies.

Along with setting a record for average stages per day in the quarter. The team also set a new standard for pad completion efficiency.

This past quarter, a four well pad in ranges dry gas acreage area completed with an overall pad efficiency of 11 three stages per day.

Which is a 5% increase over the previous Mark.

Just last quarter.

Similar to our message on the prior two calls these efficiency gains are a result of advancing our surface equipment design and completion procedures.

Through remote valves technology and quick connect wellhead equipment.

<unk> time between France, and resulting in a more capital efficient operation.

Along with increased efficiencies the team continues to find areas to capture incremental cost savings each quarter.

For example, fueling our contracted electric fracturing fleet with ranges clean burning natural gas. The team has been able to save capital dollars by displacing diesel fuel for various operations.

And through the end of the second quarter, our overall year to date fuel savings are estimated to exceed $4 million.

With the utilization of the electric Frac fleet and dual fuel drilling equipment.

Look forward to sharing updates on additional similar savings across Q3 and Q4.

As we've come to expect.

Water operations continue to build upon their prior successes in the second quarter with the team moving over $10 5 million barrels of water in support of our activities during the first half of the year.

As mentioned on previous calls.

The team also recycles water from third party producers to support our water recycling effort.

And in the Q2 this part of our programming safety just under $1 2 million barrels of third party recycled water.

Which translates to a savings of over $3 million to our operations.

These savings combined with the totals from Q1 amount to over $6 million in savings through the first half of the year.

These numbers mirror, our trajectory in 2021 and as we continue through the second half of the year, we look to meet or beat last year's savings realized.

The boots on the ground in the field along with our dedicated 24 hour logistics Department and software tools lead the way on this effort and the continued savings to our capital program.

Lease operating expense for the second quarter finished at 10 cents per Mcf equivalent, placing us on track for our 2022 plan.

During the second quarter, our production operations team shifted their attention from winter operations to warmer weather working with our midstream providers to ensure heat related issues are mitigated and keeping to field running at high rates.

Compressor cooler maintenance upgrades and taking operations, where the focus and played a key role in our quarterly operational success.

We often provide updates on our new wells and their execution.

But internally the base production receives the same level of attention day in and day out.

The production engineering and operations teams completed tubing installations on 47 wells year to date.

Normally our tubing program is spread across the program year.

However, due to scheduling optimization during planned maintenance and downtime. The team was able to complete all of this work and just under two months supporting production and minimizing downtime.

The team also installed 18 capillary streams in the second quarter.

Which were redeployments from other producing wells.

These streams were redeployed at a savings of 85% versus the original installation and increase production and tube dwell applications. While also extending the time for when tubing will eventually be needed in case well applications.

And lastly, we installed pad compression on an older pad in our dry gas acreage during Q2.

Testing the impacts of reduced line pressures.

The pilot test has been online since may with approximately 20% higher flow rates with the reduction in field pressure.

These type of results will help support future decisions on optimizing recoveries and project economics.

Shifting over to marketing.

Mont Belvieu ethane price continue to rise during the second quarter, averaging $58.05 per gallon, which is the highest quarter average in over a decade.

This price performance was driven by strong underlying domestic demand, resulting from new ethane cracker startups in late 2021, and the first half of 2022. In addition to some export growth.

Combined with ranges diversified LPG marketing strategy. This drove ranges NGL price for the quarter to $42 63 per barrel, which is a premium relative to Mont belvieu and ranges highest quarterly NGL realization in 10 years.

Looking ahead, we expect continued ethane demand growth in the second half of 2022 due to new cracker demand from Shell's southwest PA facility and from increased exports supported by the recent launch of several new carriers.

We expect this increase in demand, we will continue to support ethane prices into 2023 and beyond.

Range remains well positioned to supply both domestic and international markets through our flexible transportation portfolio and liquids rich Marcellus acreage position.

As we enter the second half of the year industrial activity in Asia.

To strengthen following seasonal maintenance turnarounds and COVID-19 related lockdowns that reduced petrochemical operating rates in the second quarter.

This coupled with above average European demand should support global LPG consumption through the third quarter, keeping propane and butane stocks near the low end of historical ranges as the winter buying season begins.

Low stocks strong international demand and limited global NGL supply growth in 2022 should combine to support both domestic and international NGL prices into 2023.

For our natural gas marketing efforts in Q2 range reported a natural gas differential of 2009, <unk> below nymex, including basis hedging with.

With ranges realized natural gas price closing out at $6 90 per Mcf.

Underpinning. This result was stable production levels across Appalachia next.

<unk> exports, reaching six seven Bcf per day and exports from LNG at 12 Bcf per day prior to the Freeport interruption.

With Freeport projected to return to full service along with reaching capacity at Calix assume in Sabine pass in Q4.

LNG exports are projected to reach 14 Bcf per day as the winter season begins providing a constructive outlook for Q4 and 2023.

Before turning it over to Mark I'd like to briefly touch on our environmental and safety performance.

Year to date.

Our thorough leak detection program has resulted in an additional 8% reduction in leach detected for component inspected versus last year.

Further reducing emissions and ensuring our facilities are operating as designed.

Looking back at last year and with the reported number is finalized for water recycling.

Range recycled approximately a 147% of our produced water.

A level, we've achieved for the fourth consecutive year.

And ranges greenhouse gas emissions equated to approximately <unk> six <unk> equivalent per Mcf equivalent.

A level within 10% of the prior year.

This places ranges at the low end of emission intensity on a global basis and places us on track with our stated emission targets.

And lastly for safety, we continue to see communication training and hazard identification pay dividends with no range employee or contractor Osha incidents during the second quarter and only one employee Osha incident in over two years.

We look forward to sharing more details on these as well as other accomplishments in our upcoming corporate sustainability report slated for release in the days ahead.

As we turned our focus to the second half of the year.

We look to build upon our year to date results.

Continue to improve our operational and capital efficiencies, while delivering on our operational and financial objectives.

I'll now turn it over to Mark to discuss the financials.

Thanks, Dennis second quarter financial results, Mark a company high and quarterly net income.

The race team collectively delivered on all fronts with operational results exceeding guidance driving strong financial results that were directly translated into shareholder value through debt reduction and share repurchases.

The second quarter themes or what range can deliver to investors and customers quarter after quarter for decades to come.

The principal teams our operational excellence developing an unrivaled asset in terms of quality and duration paired with a strong financial foundation and strategy that delivers value to shareholders.

As we've described before it's our mission to realize the value of ranges World class World scale asset base paired with our balance sheet fit for purpose to consistently deliver value to shareholders over a multi decade inventory life.

It was again, a busy quarter with substantial progress across much of the business.

Cash flow before working capital reached $519 million.

Which funded net debt reduction of approximately $105 million.

Share repurchases of $117 million.

After capital expenditures of $127 million.

And working capital of $179 million.

As a reminder.

As commodity prices go up.

Revenue and corresponding receivables rise as well.

The majority of our receivables are collected in the following months.

So virtually all of the working capital increase shown in the second quarter financial results will be collected in July it's simply a matter of timing.

Absolute debt reduction and growing earnings drove leverage down to a company LOE of one two times debt to EBITDAX.

And rapidly heading lower while growing returns of capital through both share repurchases and expected cash dividend.

As net debt continues to decline towards our absolute target range of one to one 5 billion.

Cash flow allocable to returns of capital continues to grow.

In other words, we've already begun buying back shares, which we expect to do at an increasing pace is that decline.

Paired with re initiation of cash dividend.

True today cumulative share repurchases to deployed over $165 million, a roughly 33% of the current plan.

And as we approach 50% utilization.

It'll be timely to reevaluate.

And expand as approved by the board.

This type of re evaluation as part of a repetitive continuous process responsive to prevailing commodity prices.

When commodity prices stock.

Stock price and investment opportunities for Inc.

Taking a closer look at second quarter results cash flow $519 million was driven by better than guided production levels, achieving strong pre hedged realized prices of $7 18 per mcf.

<unk> to $3 25.

In the second quarter last year.

Strong realized pricing was driven by improved natural gas natural gas liquids and condensate pricing.

Range has diversified portfolio of transportation capacity and customer contracts.

Sort of differentials.

And in conjunction with pricing uplift from our liquids production fully offset basis differentials to realize a price equal to Henry hub.

Hedged cash margins per unit of production expanded to $2 79.

Up 200% compared to second quarter last year.

Ranges margins benefited from higher prices, resulting from careful hedging and continued focus on cost and efficiency.

The change in total cash unit costs in the second quarter compared to the prior year, primarily relates to processing costs, which are linked to NGL prices.

With minor variations in other line items related to higher commodity prices or inflation.

However, with rising production in the second half of the year <unk> expense per <unk> is expected to decline putting us on track for the full year <unk> expense guidance provided.

As planned interest expense savings from debt reduction has already reduced quarterly costs by over $15 million.

We expect further debt reduction to expand annualized savings such that in 2023 annualized interest savings can add greater than $100 million to cash flow compared to last year.

Successful second quarter results combined with a positive view of opportunities for range going forward further support our confidence in the return of capital program.

As Jeff mentioned, we continue to believe the repurchase program as an attractive investment opportunity given the significant gap between the value of inventory and production.

<unk> current share price.

We will remain flexible and adapt to market conditions.

Project returns and prudent reinvestment with.

With our repurchase program, providing a compelling option for use of free cash flow to acquire greater per share exposure through our own multi decade inventory and production at a very protracted price.

Taking a step back from ranges results and looking at the profitability of some natural gas producers. This quarter I believe it's important to put in perspective, what this means in the context of an inflationary environment.

Range in the industry have been for many years stewards of investor capital and bringing fully online the productive capability of the Marcellus shale.

It was a dozen years commissioning what is now the largest natural gas producing fields in the world.

However, large scale projects typically require patients before returns.

Real tangible returns are realized.

Range and peers to varying degrees are reaching sustainable cash flow generation returnable to pension plant.

<unk>, K and retirees, who hold our stock.

At the same time range provides a reliable clean energy sources to customers across the U S and globally.

The supply that is cheaper for customers here in the U S and most of the world.

So what does this mean.

Range is profitable and benefits the U S economy and environment all at the same time.

Range stands ready to continue developing its unrivaled asset as infrastructure expansion become available to better serve customers here at home and abroad.

All in a fiscally and environmentally responsible manner.

Hard work focus and swift, but precise adjustments to our business plan without veering from our core objectives are.

We're demonstrating the value of ranges portfolio and business.

Patients with diligence allowed early returns of capital to come in the form of debt reduction and.

And now accelerating share repurchases.

Share repurchases remain a compelling investment of capital given the substantial gap between current share price and intrinsic per share value.

The largest portfolio of quality inventory in Appalachia.

We seek to continue this trend of disciplined value creation for our shareholders.

Jeff back to you.

Operator, we'll be happy to take questions.

Thank you Mr. Ventura.

A question and answer session will now begin.

If you'd like to ask a question. Please indicate by pressing the star key than one one.

If you are on speakerphone, please pick up your handset before asking your question.

Once again, please press star one one to ask a question.

Our first question comes from Scott Hanold with RBC capital markets.

Thanks, Good morning all.

Good morning, I was wondering if.

I was wondering if you all could.

So on the shareholder return plan.

Utilize the buyback pretty.

Pretty aggressively in the second quarter can you just give us a sense that youre going forward what are your thoughts regarding the plan.

Along with debt reduction.

How do you see those two working in concert.

Especially at current valuations and also.

As you look forward does it make sense at some point with your visibility to those debt.

Insight over the next say 12 months.

Does it make sense to start thinking about like having more of a.

Formulaic type shareholder return plan like a.

Fewer.

I guess E&P peers do.

Sure. Good morning, Scott This is mark I'll start off the answer so.

We've laid out for some time, we have the priority the waterfall for allocation of capital.

Maintenance capital and debt reduction shareholder returns and growth at the appropriate time when market conditions.

Makes sense of prudent.

Reinvestment of free cash flow.

So with that we provided the debt target as you well know absolute debt in the one to $1 $5 billion area as we are quickly heading towards that.

We have done is execute both the return of capital and the debt reduction in parallel and the way I would think about that as like a rheostat as you get closer to your debt target risk profile has gone down your financial strength up. So you can increase the capital that it can be <unk>.

The return of capital.

And youre, reducing how much has to go to debt reduction so where we stand today at quarter end, we were about $2. Three just shy of $2 4 billion and net debt one two times Levered again the company best by the end of this year or very early next year, we're falling within we anticipate to be within the range that one 5%.

One absolute debt.

Debt levels. So ratably you can increase the share repurchases and like we talked about before we fully intend to reinitiate the dividend here in the second half of the year.

So what that means is just to refer you to slide 13, where we give some calculations of free cash flow numbers.

We're estimating an aggregate about $1 5 billion free cash flow this year $1, three and 20 $312 24, and then that slope is just based on the backwardation and pricing curves for using strip pricing to do that so what it means is there is a pretty significant amount of free cash flow that's unallocated.

Unallocated what this does is it gives us tremendous flexibility.

As we hit that targets early next year to prove.

Prudently reinvest capital at the moment as we repeatedly highlight the gap between current share price and what we think the intrinsic value of the shares is would dictate that a prudent reinvestment would be share repurchases.

We haven't to date provided a hard and fast formulaic approach because we think the flexibility has allowed us to better execute both debt reduction and the share repurchase program.

Yes.

Days in the market is very strong.

Range stock, maybe outperforming that perhaps your execution is better if you are a little bit lighter those days and there are other opportunities. When we have market pullbacks that range is getting a better return on the dollars. We are getting more shares by being a bit more active again when there is a macro pullback in the market so that flexibility by being a little bit less.

Formulaic.

<unk> achieved a better result for range in terms of shares and the average price. So as we go forward is that the way. It will remain we will continue to evaluate whether a more formulaic approach.

Is prudent whether that formulaic approach actually helps investors value our shares does does it improve the value.

But just stepping back to 100000 feet what is our job as management is allocation of capital.

Is it the best return to buy back a share is that the best return to invest in some facilities that drive production and reserves and reduce unit costs.

Drilling an extra well.

Ultimately the decision, it's a broad reinvestment of cash flow decision that really underlies.

Underlies our daily responsibilities.

Yeah.

I appreciate it Barry zero. Thanks.

And as a follow up.

As you know.

I think youre starting to see the inflationary pressures.

Really build through the year, what is your thoughts on leading edge kind of inflation thinking about into say 2023, I know, it's a bit early but.

And can you give us your thoughts on a maintenance capex trajectory like.

How do you see.

The base spending plan moving into next year with inflation.

And if you also get the benefit I think this year you're drilling the percent of your existing pads do you still have about the same.

Into next year.

Yes, Scott this is Dennis good morning, I'll tackle this one.

As we as we start to we talked on this touched on this a little bit on the Q1 call and we have seen inflationary.

<unk> in our cost structure.

Like a lot of other folks between areas such as like labor steel and fuel.

Worked really diligently the team has done a great job in trying to mitigate those impacts as much as possible.

And with areas like pre purchasing our tubular goods I know, we did some of that to end of last year.

So securing some throughout the year to make sure that not only making sure that we have the supply but it was also at a price below where we thought the market is has been heading.

The other part is working with our service providers pretty closely we've had long term relationships with a number of our service providers.

Look at just the average timeframe with our top active service.

Service providers, it's well over a decade, so building upon those relationships looking to strategically make sure that we're efficient together because we know that efficiencies like we touched on in the prepared remarks today are going to help drive not only our returns but also there as well.

And then lastly, we've done things like trying to secure pricing as much as possible on the other areas like say the rigs that we utilized in the field, but also in areas like with our completion equipment.

As we start to think about next year's program.

<unk> is is we're going to have a much better response I think to your question as we go through our annual bid process in the fall and we start to align that with what our program looks like we can lay out what our activity program is going to consist of which we're clearly in the throes of evaluating but it's not out of the realm of expectation I think.

For us to consider something in the 10% to 15% impact range for 2023, but again, we'll know a lot more as we get into the fall and have a much higher clarity answer for us as we get into.

The end of the year for 2023, but also see this as you look at our cost structure, our low base decline. When you look at our class leading D&C per foot structure that we've had over the past not just this year, but the past several years, it's really a natural hedge against inflationary effects that range would see versus.

Our peer groups or in other basis. So we've had this in the slide deck now for a few cycles, but we see 60 per Mcf.

Just for that replacement molecule, whereas other basins may see more.

Three times debt type numbers. So we feel like that provides a natural hedge and protects where we're headed in the event of whatever inflationary effects come our way.

Yes, I appreciate that so quickly.

What percentage of wells, you'll drill on existing pads next Jeremy just ballpark is it giving you all at the same next year or.

Is there any reason to shift one way or the other.

Yes, Scott.

I think year in and year out we tend to range somewhere between say, 30% to 50% I would expect us to be in that same category as we touched on today, we've got a pad site. We've returned two for the third time now and consistently we're returning to pad sites to add additional additional wells. So we've got a long runway of being able to do.

Do that.

We're going to continue to factor that in as much as possible. We know that some of our most efficient operations, we have a high level of repeat ability from a well performance standpoint, and it also keeps the gathering system fully utilized which helps with our unit cost.

Thanks.

Thanks Scott.

Thank you.

Okay.

Our next question comes from Michael <unk> with Stifel. Your line is now open.

Good morning, everybody.

I wanted to ask on the philosophy on pullbacks or excuse me on share buybacks one of the push backs on that is that.

Companies don't do that when the revenues are high in the case of oil and gas companies when commodity prices are high and then they don't have the cash to do it.

Revenues.

Lower commodities, the lower so our realized and see a large gap between the stock price and the intrinsic value of the company, we see it as well I think everybody does but any thoughts on.

Building up the.

The cash balance at all.

Commodity prices, where they are now.

Sure. So as we evaluate the capital structure overall, I think the risk profile.

The financial risk, you're really referring to there is why we laid out absolute debt targets of one to one 5 billion why those have been targets established.

Along with our board of directors setting those targets alongside management and they are in the proxy. So it's not just the leverage ratios at absolute numbers and a strong cycle clearly prices are attractive today, you would think you could continue to push towards the lower end of that leverage target.

So that gives you greater flexibility is that number is rapidly approaching us to be able to execute share repurchases and to your point that large gap between current share price and the intrinsic value and the intrinsic value number. We're quoting is just proved reserves. So we think we are using a pretty conservative yardstick.

There.

At least conversationally to validate to get check the prudent allocation of capital back to share repurchases. So.

We think.

So far average.

Price repurchasing is around $28, we've put about 165 million back in.

Intrinsic value of proved reserve strip pricing is greater than $60. We think that's a tremendous value and it's creating permanent value and that you're reducing the number of share count hopefully in perpetuity.

And growing cash flow per share and exposure to our inventory on a per share basis. So.

I think that gives us great confidence in continuing to do what we've been doing which is announced the first share repurchase program at the end of 2019 executing it in 2020 and bought back 10 million shares we've really accelerated program. This year and I think as I mentioned earlier as we approach, 50% utilization I think thats timely to take.

Fresh look at it make sure it remains prudent.

And subject to board approval get an appropriate resize our increase in that program.

Okay, Thanks and.

Jeff I appreciate the comments on.

How do you view Appalachia.

Gas being well suited.

Very important role in the future in the energy transition I guess, along those lines anything that youre seeing.

At the local state or federal level that has you more or less encouraged about <unk>.

Your export capacity out of the basin.

Yes, there is.

<unk> talked in Pennsylvania legislator legislation about an LNG project.

In Pennsylvania on the East coast, So Dan largest producing gas field in the world coupled with the lowest emissions with a big demand for U S natural gas globally.

Given the conflict in Europe , coupled with the <unk>.

Our to lift quality of life globally. So.

Well positioned to do that.

It would be clearly would be supported I think with the trade unions holds popular in the space.

And we've got the longest the core inventory within the Appalachian Basin.

The other thing the Appalachian basin with low cost curve globally. So.

With range being at the low end of the cost curve best emission footprint basin, and a desire to do that.

I think you will see growth.

Takeaway infrastructure ultimately come from the basin, and we're well positioned to fulfill that when it's available.

Very good thank you guys.

Thank you.

Our next question comes from Doug Leggate with Bank of America. Your line is now open.

Yeah.

Hey, good morning, everyone. Thanks for taking my questions.

Jeff I Wonder if I could my question is really on hedging strategy.

Absolute debt drops, but I wonder if I could use that also taking a segue.

On your views on the recent spot price volatility.

And it seems to us to pursue.

S. LNG utilization, we're now got almost gas on gas competition with storage for at a higher level for the first time in quite a while and I'm. Just wondering if you could offer a comment on that so I guess I'll ask a macro question, but also how it plays into how are you thinking about hedging going forward, obviously, you hedge exposure rolls off pretty hard in 2024 at this point.

Let me start and I'll flip it probably to markdown to that yes.

You are seeing.

Strong demand for U S. LNG power generation, where you used to have the gas to coal switching not occurring right now and we have to believe we have a slide in there that shows that.

Coupled with strong industrial demand so the demand side's good and then at a high level as our balance sheet hits the approaches the targets and again, we'll be looking at.

Less than one time levered by the end of this year net debt.

Within the level that we want then theoretically it could even approach zero by year end 2023.

With that gives us a lot more flexibility.

How we hedge and our ability to turn it over to Mark for some more specific comments.

I think thats. The most important point there is the interplay between the financial risk the debt level and how we.

Need to hedge versus how we choose to hedge so the need to hedge.

On a more defensive fashion to protect the balance sheet.

Has passed so where we stand today is choosing to hedge to cover.

Base level.

<unk> cashflow choosing to hedge to mitigate some of the basically the fixed cost of the business, we may elect with strong prices.

<unk> hedging a portion of outside returns and by outsized returns I mean, our business is able to generate returns competitive more competitive just about any other industrial type business out there today.

Certainly when you look at the valuations.

NPS in range in particular relative to other industries.

So with that what does it mean, you can look at where we stand today, we've changed how we hedge.

To repeat our upside.

You're paying for the floors with some opportunity costs on top of the collar the call you're effectively selling but we think thats a good risk reward to effectively purchase.

Insurance protection around.

Your fixed cost component as you look at the percentages hedged again, we can hedge significantly less we think hedging still plays a part of our program going forward, but at a significantly lower rate. If you look at the percentages today for 2022, you could even look over the course of the year gas was hedged about 70% of that tails off even in the fourth.

<unk> closer to like 50% as a percentage of revenue for 'twenty. Two we were about 50% hedged looking forward to 2003 gas is around 50% hedged volumetric Lee but.

In terms of revenue Youre about 35% hedged next year.

And you are only about 15% hedged in 2024.

So again, we have significant flexibility those numbers will likely remain lower the thought process behind it is protected fixed costs largely with some I would position it as opportunistic business decision to perhaps take a bit of outsize returns off the table and lock those in but again much lower percentages than you've seen range execute historically.

Thanks for that Mark just to be clear so swaps that off the table on a go forward basis is a good read of what you are to interpret your comments.

I wouldn't say they are off the table no I would say, we're going to adapt to how we see the market.

Positive skew to the market or youre getting more value from the call option, then perhaps to put the value of the caller is better than our swaps. So it depends on what the fundamental supply demand situation isn't it depends on whats being priced into the derivatives market. So I wouldn't say, they're off the table, but I would say at present, we are favoring callers.

Okay Alright. Thank you for that so I guess my follow up question is really just.

A quick one on inflation.

You guys have got relatively stable level of activity and obviously youre in a basin that has not seen the same level of competition is for example, the Permian. So I'm just curious as you look into 2023.

And maybe longer term to the extent you can.

Protected or benign do you expect your capital to be to inflationary pressures and to put it in context, we're hearing some of your peers talking about.

2030% year over year increases in 2023, Im just curious how you would frame that range.

For yourselves I guess.

You bet, Doug This is Dennis.

I'll kind of maybe.

Take a step back to some comments earlier kind of through the prepared remarks, but.

Ultimately as we start thinking about 2023, we're going to really have I think a much better handle on what thats going to look like as we get into the fall annual bid process that we go through.

Really a strong component of what we do.

Our service providers I think we would like to thank have come to appreciate that we deliver on the program that we put in front of them so their bid process.

The bid price with process. We do together has a lot of validity we know that their returns are going to be tied to our efficiencies.

A big way so were ours as.

As we look at it right now, we're estimating somewhere between 10% to 15%.

Inflationary effects for 2023, but again once we start to see what the what happens through the balance of the year example, do we start to see some changes in steel price. If you look at diesel fuel as it ties to oil you can make the argument that maybe you are starting to see some upper limits of where that fuel could go at this point in time. So there is some cash.

<unk> as you would expect we've seen small movements in 2020 to maybe low single digits and then theres some categories, we've seen maybe 30% on.

On a service unit cost basis, but then when you couple that with our efficiencies in some of those we touched on today like our water efficiencies as an example, the team continues to do a great job being creative there with our our teams are tools that we use in our logistics route and also the focus on the execution side in general we've had another.

$6 million in savings year to date, we know that that helps offset some of what we're most likely going to experience for 2023, So again I'll kind of kind of close out by saying this whatever it is 10% to 15%. We also know that when you start to tie this back to a per mcf basis in that 60% Mark we know that.

We have a natural hedge against these inflationary impacts versus what we're seeing in other peers and also in other basins.

Appreciate the answers guys. Thank you.

Thank you.

Yeah.

Thank you.

Our next question comes from Neal Dingmann with <unk>. Your line is now open.

Good morning, all.

The interesting comments you had earlier on production I think.

More than you all mentioned.

The increased second half killed in the fourth quarter growth, which is nice to hear given the front end load and some just wondering with that again I'm not asking for 2003 guide but.

You anticipate a bit of growth continuing.

It sounded like through the end of the year and right into next year.

I guess, what I'm trying to get at is just would you think about maybe a little bit more growth next year than what you had this year.

Is that just more of a.

Timing sort of towards the end of this year.

Yes.

Let me just be clear if you look at where we are this year and where we've been our focus has been and.

He is maintenance capital and you see that typical profile like Youre seeing this year you would see in the last few years, it's pretty similar but I think.

If and when we grow most likely will be low single digits. Later this year, we'll be looking at or plan for next year as usual, we'll probably communicate that early next year, but the good news is given our long life core inventory, we're well positioned to take advantage when that opportunity for growth comes up.

I think the other thing importantly, when you looked at us even in a maintenance capital case, we can grow cash flow per share.

Mark do you want to expand on that a little bit.

Yes, I think the profile you are talking about is really seasonal I would say our program base levels of activity.

<unk>.

Again, it's a question of when range chooses to grow but I think for the time being for old infrastructure related reasons that Jeff highlighted earlier.

A growth program.

Maybe a little bit off but for range I think a very important point to take away from it is the maintenance capital does not mean, a no growth story in terms of cash flow and cash flow per share range is very much a growth in cash flow and cash flow per share and not just because we're buying back shares it's because of the built in reduction in gathering costs as we've laid out in the <unk>.

Mr Relations materials.

At next year reduce gathering costs by $25 million and that ramps to well over $100 million by the end of the decade.

As we commented earlier in 2023 relative to 'twenty, one you are reducing interest expense by $100 million.

As we continue to hold production and grind down costs.

Swear and various other line items again, we have the ability to grow cash flow and cash flow per share and then again, we're deploying capital to buy back shares.

Further accelerating that growth and per share cash flow. So I think it's just a question of when and how that growth manifest itself.

Okay, Great add mark.

The details and then just a follow up.

On M&A.

Can you talk about how actively you're looking at bolt ons and then maybe separately.

Would you consider anything more on primary of Utica acreage in.

In light of given the obviously the materials and depth of inventory that you already have.

No you were kind of breaking up on the end, but I think the question was on M&A.

One of the things, we pointed out and we really believe that we've got.

The longest core inventory in Appalachia, so given our core inventory and we've been pretty clear.

Sure.

In terms of our path forward will be.

Staying focused on what we're doing would have to be something that's extremely accretive on all measures again.

Weighted even against our share repurchase where we see a big disconnect there.

Great. Thanks, Jeff.

Thank you. Thank you.

Thank you.

We are nearing the end of todays conference.

We'll go to Neil Mehta of Goldman Sachs for our final question.

Neil Your line is open.

Thank you team.

I appreciate all the great macro color I wanted your perspective on propane prices.

As you show in Slide 37 has come off a little bit how you think about whether this is sort of temporary disruption for.

Or is there a change in sort of the way we should be thinking about normalized and then the other question was on the gas macro.

Unbelievably strong environment right now how has that affected your view of mid cycle for natural gas and how should do you think the market should be repricing nor.

Normalized as we get through.

2022, and really focus on.

The gas equity should be discounting over the long term. Thank you.

Hey, Neil this is Alan Engberg I.

I'd manager, our liquids business, so I'll tackle the first part there on the propane prices.

So we were really tight on stocks through the winter and then as we got into spring.

Seasonally that's kind of like a shoulder months with natural gas so things typically weaken a bit in the backdrop crude was really really strong so propane as a percent of crude on slide 37 really did come in a little bit.

Some of that also due to high maintenance levels in the spring months as.

As well as the Lockdowns in China due to Covid in Beijing, Shanghai, and then finally, the last item that really affected price was overall naphtha prices in Europe . So naphtha competes with propane internationally as a feedstock into ethylene crackers in naphtha was long in Europe .

In fact, the naphtha crack or the spread relative to Brent was at historic lows during the second quarter. So all of that kind of pushed propane a little lower than what it otherwise would have gone to relative to crude looking forward, though we still see all kinds of new demand coming online in fact, we've got roughly.

600 call it 700000 barrels per day of new.

LPG related demand internationally coming online over the next two years, that's 25% of the current global waterborne market.

Add on to that if you just put in 2% raise com demand internationally, you get close to a million barrels of new demand coming online over the next two years.

Internationally, they might contribute maybe 300000 barrels per day supply growth to that and then the latest.

July .

AIA short term energy outlook has us only contributing about 300000 barrels per day of new supply over the next two years. So the macro actually looks like the markets can be really really tight and we would expect then that propane prices relative to crude will go back to more like what we saw over the past year.

60% to 70% range.

Yes, I would just add on the gas side again, we talked about we think natural gas is.

Critical fuel world's moving towards cleaner more efficient fuels.

Look at U S gas or particularly Appalachian gas was on the low end of the cost curve, even globally or towards the low end of the cost curve and in Appalachia gas is at the low end of the.

The cleanest natural gas produced.

Rate position.

U S gas really is the only commodity in the U S that doesn't trade like a global commodity, but it's it's been moving up into that demands. There. So I think with time Youll see international prices come down some in the U S prices might come up some.

So I think gas is going to be a great place to be.

Okay.

Thank you.

Today's question and answer session I would like to turn the call back over to Mr. Ventura for his closing remarks.

Yes, I just wanted to thank everybody for taking time to visit with US. This morning are please follow up with our IR team with any additional questions.

Some remarks.

I just wanted to participation in today's conference you may disconnect at this time.

The conference will begin shortly to raise Johan during Q&A you can dial one one.

[music].

Okay.

Yes.

[music].

Okay.

[music].

Okay.

Sure.

Yes.

[music].

Yes.

[music].

Welcome to the range resources second quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise statements made during this conference call that are not historical facts are forward looking statements such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those in the forward looking statements. After this.

His remarks there'll be a question and answer period at this time I'd like to turn the call over to Leif Sando, Vice President Investor Relations at range resources. Please go ahead Sir.

Thank you operator.

Good morning, everyone and thank you for joining ranges second quarter earnings call.

Speakers on today's call are Jeff Ventura, Chief Executive Officer, Dennis Degner, Chief operating Officer, and Mark <unk> Chief Financial Officer.

Hopefully you've had a chance to review the press release and updated Investor presentation that we've posted on our website.

May reference certain of those slides on the call. This morning.

You will also find our latest 10-Q on ranges website under the investors tab or.

You can access it using the SEC's Edgar system.

Please note, we'll be referencing certain non-GAAP measures on today's call. Our press release provides reconciliations of these to the most comparable GAAP figures.

For additional information, we've posted supplemental tables on our website.

Assist in the calculation of EBITDAX cash margins and other non-GAAP measures with that let me turn the call over to Jeff.

Thanks, Laith and thanks, everyone for joining us on this morning's call.

Before discussing the second quarter results I wanted to spend a few minutes on the broader global energy picture and how we see Appalachia and range of within that framework.

As we sit here today in the middle of a global energy crisis, we see a world that desperately needs access to ethical safe reliable and abundant fuel forces.

Europe challenges are a stark reminder, that evolving energy policy will need to be thoughtful.

Prioritizing security affordability availability and environmental responsibility.

Within that framework, we believe Appalachia is well suited to play a key role in meeting the world's needs and from that perspective, it's an exciting time for U S natural gas producers.

Energy policy, you will need to be rooted in market realities.

If infrastructure projects, namely pipelines and LNG terminals are not prioritized and given reasonable regulatory review.

And I believe it's simply impossible to meet the growing global demand for reliable safe and affordable fuels.

And warrants had delays in permitting adverse policy decisions and a global push for various renewable initiatives have resulted an underinvestment in oil and gas infrastructure over the last few years.

This has stifled domestic supply growth, leading to an inflated global energy costs.

Current situation will not change unless there is support for the necessary infrastructure that would allow for increased supply.

Plain and simple.

I believe the industry like range is ready willing and able to assist in providing the much needed growth in supply of clean burning American natural gas.

Replace coal and also replace supplies of gas from less reliable hospital countries.

As it relates to the broader energy transition I don't believe it's an either or decision between renewables and natural gas.

Rather or acquire in all of the above approach to keep cost in inflation in check and to have energy security.

Oil and gas production is inextricably linked to nearly everything in our lives.

Food production medicine transportation shelter manufacturing heating and cooling to name a few.

As a result inflated energy costs from a lack of infrastructure becomes an onerous regressive tax on individuals and families struggling to afford food and shelter.

We believe Appalachian natural gases.

These global demand and order for the U S to sustainably produce enough natural gas at affordable prices.

However, infrastructure approvals and investment are needed before it's possible to meaningfully increase Appalachian supply.

Additional infrastructure required permitting at the federal level and that process has been incredibly slow or impossible in recent years.

Unfortunately domestic supplies are being stymied by short sighted energy policy, along with permitting delays and cancellations of prior approvals.

We really need to ask ourselves as a country, if we'd rather have additional energy supply from other countries or would we rather source. It from right here in America, where we have the highest environmental and safety standards in the world.

Offer good paying jobs and provide significant tax revenue at the local state and federal level.

Specific to Appalachia, we also have the lowest finding costs and emissions intensity of any oil or natural gas field in the world.

As Appalachian shale production grew from virtually nothing just 15 years ago to now producing over one third of the nation's natural gas supplies.

It allowed the U S to lead the world in lowering Cotwo emissions, primarily from the substitution of natural gas for coal and power generation as natural gas has a 60% lower carbon footprint than coal.

The Marcellus and Utica shales in Appalachia are now the largest producing natural gas field in the world.

Making the U S. The largest natural gas producing country.

This has also resulted in significantly lower natural gas prices in the U S compared to Europe and Asia.

No doubt Americans are experiencing increased energy cost, but nowhere near the levels being experienced in Europe , and the rest of the world.

Currently U S natural gas pricing is about 75% lower than prices abroad.

Making U S manufacturing more competitive.

To keep U S utility bills lower than other countries.

Positively contributing to the U S trade balance, while generating tax revenues for governments and providing energy security for our country.

Despite these meaningful contributions.

We believe that much more can and should be done in years ahead to support the increased use of American natural gas both in our country and around the world.

We remain confident that we will see many more opportunities over time for Appalachian natural gas.

So where does that leave range today.

We believe that will position the company for success and whatever infrastructure scenario, we find ourselves in this year next year and for the foreseeable future.

As the most capital efficient operator, and the largest natural gas field in the world. We believe we sit on the low end of the global cost curve for natural gas <unk>.

Importantly range and other Appalachian producers have advantaged emissions intensity profiles, given the prolific nature of the Marcellus robust environmental standards and a focus on operational efficiencies being applied on a daily basis.

Looking longer term, we see range as being differentiated amongst producers given our operational expertise.

<unk> multi decade core inventory and our access to natural gas and NGL markets outside of Appalachia.

The financial and operational results in the most recent quarter reflect those advantages as we made steady progress on our key objectives for 2022.

Completing our drilling program safely within budget with peer leading capital efficiency.

Enhancing margins through thoughtful marketing and a focus on cost.

Bolstering our balance sheet with further absolute debt reduction and returning capital to shareholders.

Dennis and Mark will provide some additional details on the quarter in a minute, but the team has done an outstanding job operating safely and controlling cost.

Looking at margins starting with pricing.

For marketing and deliveries to multiple end markets resulted in strong prices for the first half of the year and have allowed us to improve our corporate natural gas differential despite meaningfully higher Henry hub index prices.

Range is natural gas liquids production also received a premium to Mont belvieu equivalent price coming in at over $42 per barrel or greater than $7 per Mcf.

Overall range received $7 18 per Mcf in the second quarter, where its aggregate production.

As a result, we realized our highest quarterly cash flow per share and free cash flow in company history.

Continued strength in commodity prices has further de risk our absolute debt targets, allowing us to repurchase shares at a steep discount to what we believe is the underlying value of the business.

This is particularly the case as long term natural gas prices have re rated from sub $3 to over $4 premium btu as the call for U S natural gas becomes more evident globally.

We have discussed our long term balance sheet target of one to one $5 billion in absolute debt.

We expect we can achieve this financial objective early next year at current strip pricing, while simultaneously funding the base dividend and share repurchases.

While we run various scenarios and assessing company valuation we can point the ranges SEC proved reserve valuation at year end 2021, as a proxy for the value of a portion of our inventory.

At recent strip pricing that value with well north of $60 per share and as many of you are aware the SEC definition of proved reserves only allows for five years of development <unk>.

And beyond this five year window range has thousands of additional core Marcellus wells beyond that we have what many consider to be core Utica and upper Devonian as well.

Simply put we do not believe this significant resource value is currently reflected in range of share price.

Renting us the opportunity to create meaningful long term per share value for equity holders through our buyback program.

As the world moves towards cleaner more efficient fuels natural gas and Ngls will continue to be the reliable abundant and affordable supply that helps power our everyday lives. While also helping billions of others improve their standard of living while reducing the reliance on coal and other more carbon intensive fuels.

We believe Appalachian natural gas and natural gas liquids are well positioned to meet the current and future demand.

In Appalachia, we expect range to be a leader in emissions intensity capital efficiency and transparency, which are all core to generating sustainable long term value for our shareholders.

Range has de risked a massive inventory of high quality wells in the Marcellus measured in decades, and translated that into a business capable of generating free cash flow through the cycles.

Underpinning this business is the low sustaining capital requirement that range enjoys reflected in our peer leading D&C spending per mcf.

Which allows us to weather service cost inflation and better than others, while also supporting healthy margins.

At the same time range as balance sheet is in the best shape in company history with rapid improvements continuing in the coming months.

With significantly lower absolute debt range will be even more resilient.

Whenever we see the next cycle and with favorable fundamentals for natural gas and natural gas liquids range is well positioned to generate healthy returns on and returns of capital to shareholders.

I'll ask Dennis to cover operations.

Thanks, Jeff.

As we look back on the second quarter all in capital came in at $127 million with drilling and completion spending of approximately $119 million or 94% of total capital for the quarter.

Capital spending for the first half of the year totaled $244 million or approximately 52% of our annual plan.

As we mentioned on our call earlier this year, our operational cadence is frontloaded.

<unk> and a higher number of wells turned to sales in the second half of the year.

We exited the second quarter with two horizontal rigs and two frac crews.

And are on track with our operational program that we outlined earlier this year.

This tapered approach results in production growth in the third quarter and additional growth in the fourth quarter.

Putting us on firm footing to deliver on our annual capital spending and production guidance.