Q4 2022 Range Resources Corp Earnings Call
Eight minutes made during this conference call that are on 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 a forward looking statements.
After the speaker's remarks, there'll be a question and answer period.
At this time I would like to turn the call over to Mister Lady Sandow, Vice President Investor Relations at range resources. Please go ahead.
Thank you operator.
Good morning, everyone and thank you for joining Rangers, you're and earnings call.
The speakers on today's call or Jeff Ventura, Chief Executive Officer, Dennis Degner, Chief operating officer, and marks Gooky Chief Financial Officer.
Hopefully you've had a chance to review the press release, an updated investor presentation that we've posted on our website.
We may reference certain of those slides on the call. This morning.
You'll also find our 10-K on Rangers' website under the investors tab or you can access it using the SEC's Edgar system.
Please note will be referencing certain non-GAAP measures on today's call.
Our press release provides reconciliations of these to the most comparable gap figures.
For additional information, we've posted supplemental tables on our website to assist in the calculation of epidemics cash margins and other non-GAAP measures.
With that let me turn the call over to Jeff.
Thanks Lake and thanks, everyone for joining us on this morning's call.
While front months natural gas prices have no doubt wavered over the past couple of months ranges operations have remained consistent we've made steady progress on key objectives and our business is more resilient today than at any point in the company's history.
In 2022 range successfully managed a great opportunity the natural gas markets presented us with.
We delivered our operational plans safely and with pure leading efficiencies.
We generated record free cash flow.
<unk> strengthened our financial position.
And returned significant capital to shareholders.
At the end of the year, we had reduced debt by over a billion dollars, marking our fifth consecutive year of that reduction.
Repurchased $400 million in shares and established an annualized dividend of 32 per share.
We captured much of the upside presented to us in 2022 with the deliberate fit for purpose hedging program.
Ultimately every natural gas E&P company would have preferred to have been unhedged last year as a natural gas market moved higher but when looking back at our results ranges hedge program retained more of the upside on a per mcf basis that any of our natural gas peers.
Looking forward into 2023 and 2024, the natural gas market is in a different place, but our hedge program is once again positioned for success.
Our hedging activity is not aimed at picking tops and bottoms, but our program is aimed at supporting durable free cash flow through the cycles, while retaining exposure to improving longer term natural gas and NGL fundamentals.
Looking at our 2022 results and projections for the next two years I believe was struck that balance quite well.
Our business generates free cash flow down to very low prices and for 2023. We believe range has among the best annual breakevens in the industry well below $2 per Mcf.
The resilience that our business has been a lower price environment like we find ourselves in today is a positive differentiator for range.
Having hedges in place to cover our fixed cost and capital commitments as part of it.
The business model over the long run is really underpinned by ranges sustaining capital requirements.
Are relatively low capital requirements are the result of range is class, leading drilling and completion costs, coupled with our shallow base decline in large blocky core inventory.
Altogether. These result in a pure leading all in maintenance that is approximately 76 per mcse.
This provides range of solid foundation for consistently generating significant free cash flow and returns to shareholders.
For other bolstering range the store ability as our liquids production.
Ngls and condensate are approximately 30% of ranges production through.
Through the cycles are liquids revenue has provided an uplift to natural gas prices and using today's strip pricing for 2023 that uplift is meaningful.
For context ranges NGL pricing would currently be priced around $26 per barrel using strip prices for 2023.
That is the equivalent to a 40% or $1 30 per Mcf premium to current Henry hub strip pricing for 2000 2003.
When we roll all of that together are low maintenance capital R, leading hedge program and our liquids Optionality you get the lowest breakeven amongst natural gas producers and the most durable free cash flow in 2023.
As we showing our slides range is still generating several hundred million dollars in free cash flow at $2 50 natural gas prices.
Importantly are leading efficiencies and low breakevens are sustainable because the frame is large block the acreage position that provides this decades of core inventory.
A portion of the value of this massive inventory can be found in our year end reserves.
The after tax PV 10 of our reserves using $4 Nymex, which is approximately where the 10 year strip is equates to over $40 per share net of that over 50% higher than ranges current share price.
Sporadic context or reserve report includes are proved developed wells and only 367 undeveloped locations out of approximately 3000 undrilled quarter locations, we have in the Marcellus.
Simply put we do not believe this significant resource value is currently reflected in today's market presenting range the opportunity to create meaningful longterm per share value for equity holders through our buyback program, which has $1.1 billion of availability remaining.
As a reminder, we set a target in the spring of 2021 to reduce debt by more than $2 billion by the end of 2023 today.
Today, we are 90% of the way towards that target.
It's been a successful repositioning of our balance sheet within a short period of time and cleared a path for meaningful returns of capital to shareholders in the years ahead.
Before turning it over to Mark and Dennis I will reiterate what upset when the last many calls ranges in the best position in the company's history.
As the world continues to move towards cleaner more efficient fuels.
Natural gas and Ngls will be the affordable reliable and abundant supply that help power our everyday lives, while also helping billions of others improve their standard of living.
We believe Appalachian natural gas and natural gas liquids or position to meet that future demand.
And within Appalachia range will be among those leading the way on capital efficiency emissions intensity and transparency, which are all core to generating sustainable long term value for shareholders.
Ranch's Derisk, 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 with.
With the resilient business plan for 2023, and 24 and favorable long term fundamentals for natural gas natural gas liquids ranch's, well positioned to generate healthy returns on and returns of capital to shareholders I will now turn it over to Dennis to cover operations.
Thanks, Jeff.
I'll start with capital.
Ill in Capex for the year totaled $492 million and.
Included in our fourth quarter activity, where nine additional top holes as we were able to secure drilling equipment in December in advance of our 2023 program.
This added $11 million Tar original capital plans.
Production for the fourth quarter averaged 2.2 Bcf equivalent per day <unk>.
Resulting in an annual average daily production just above $2, one two BC equivalent per day for the year.
This was achieved despite a cumulative production of the loss of 2.7, DCF equivalent and if you will turn in lines being moved into January during the cold weather Appalachia experienced in late December .
As we look forward into 2023 hour all in capital spending is expected to be between 570 $650 million with this year's activity waited more towards our liquids reached acreage versus last year.
Approximately two thirds of the lateral footage turn to sales this year will be in the wet and super rich acreage physicians with the remainder enrages drag, yes footprint, including three wells in northeast PA.
This plan delivers a similar production level is last year at $2 122216 Bcf equivalent per day, while adding lateral footage are expected to inventory at year end.
The incremental inventory being added is underpinned by the drilling team's successes in late 2022.
And so far in 2023.
Off to an incredible start.
Sending daily foot each record so that will touch on just a moment.
As a result of 2023 capital plan includes approximately $30 million associated with this lateral inventory, providing us with increased optionality as we think about our 2024 and 2025 operational plans.
Approximately 95% of this year's capital is slated to be allocated towards drilling and completions related activity with.
With the remaining balance directed towards leasing and support functions.
Similar to prior years. The 2023 program is front end loaded with three horizontal rigs tapering off by year end, while completions will continuously utilized single electric frat crew with a second crew performing planned spot work.
68 horizontal wells are expected to be drilled which 61 wells turning to sales during the year.
Our average horizontal links for wells completed entered the sales during the year will be approximately 11000 feet per well.
With more than half of the wells developed on pads with existing production similar to prior years.
Our production is expected to be back have waited in 2023 similar to last year.
Which fits nicely with the current shape of the natural gas forward curve.
A review of our 2022 operational highlights begins with drilling.
And the fourth quarter, we drilled 13 top holes and five horizontals with an average drilled horizontally for the quarter.
Maximally 14700 feet.
As part of these results. We also added four new wells to our top 15 long lateral list with each of the Ford laterals drilled in excess of 18300 feet.
This success continued into 2023, where the team has set a new range record drilling in excess of 7300 feet in a single day.
And then beat that record again, it's 7900 feet in a single day and the days that followed.
These results so far this year represent a 20% increase versus the prior record.
Showing the teams continued efforts to improve efficiencies after drilling over 1200 wells.
Continuing with the flexibility afforded by our large contiguous acres physician and the practice of returning to existing pads.
75% of top holes drilled in the fourth quarter past with existing production.
In addition to the efficiency gains by returning to pads.
90% of the wells drilled in southwest PA in 2022 were drilled with dual fuel rigs, which successfully displaced more than 480000 gallons of diesel fuel.
The fuel savings equated to nearly $2 million, while improving emissions from our operations.
As a result of our fourth quarter long lateral development drilling.
Drilling costs, where approximately $230 for a lateral foot, which was a 15% improvement versus the prior quarter.
On the completion side, we reached eight eight Frank stages per day in the fourth quarter and completed over 3100 total fracs for the year.
Looking back on 2022 completion efficiencies continuing to improve while sitting several new records.
The first new record involves averaging nine frac stages per day for given quarter.
Second.
New benchmark of 15, Frac stages completed and a 24 hour period.
And third averaging eight two Frank stages per day for the full year.
One area driving these efficiency improvements as our return trips to existing pads and the data driven decisions enhancing each consecutive completion job.
For example operations returning depends as seen the average frac stages per day increase by 33% versus the first wave of development.
Applying data from prior completions, coupled with our use of strategic logistical planning and utilizing existing surplus equipment has supported our recent records and continued leadership amongst peers on well cost and overall capital efficiency.
Water recycling efforts for ranges water operations and logistics teams resulted in saving $2 $8 million for the fourth quarter with our full year savings, reaching a total of $12.9 million.
Looking back on the past three years, the average savings per year is $12.4 million.
And looking back even farther to 2018, the five year average is $11.8 million in savings per year.
Once again, demonstrating the repeatable components that underpin ranges operations.
In addition to our standard production procedures.
Technology is playing a role in our base production management.
This past year range pilot tested the use of artificial intelligence in our production operations.
Working in conjunction with our AI technology provider, an algorithm was created to monitor well production and make automated changes to parameters within our flow logic that enhanced production and reduce downtime.
The trial was completed last year and based upon the results. The project will be expanded this year with the potential to add approximately one bcf of growth production for the year.
His production edition may appear small versus our total production.
But it is this type of project that demonstrates our teams continued focus on production optimization and the use of technology to further support are low base declined and improve returns.
In addition to our operational highlights range saw similar advancements for our safety performance in 2022.
Through collaborative efforts with our range employees and contractors at.
50% reduction in our Osha incident rate was achieved versus last year.
While reaching a program record low for days away or restricted duty.
Making it our best safety performance and our program history.
Shifting over to marketing.
Range is pre hedge NGL price for Q4 was $27.17 per barrel.
Which was approximately 75 cents per barrel below the mop Bellevue equivalent.
Showing the differential improvement mentioned on our prior earnings call.
In November shell chemical announced that operations had begun and it's Pennsylvania project.
The facility includes an ethylene steam cracker that will consume an estimated 100000 barrels per day of ethane when it ranch to full production rep.
Representing a significant increase in based on demand.
As we have stated previously ranges NGL logistics and marketing program is designed to provide flexibility across seasons.
Markets and phases of the business cycle.
I'm pleased to report that the range team made uninterrupted deliveries to our customers with improved NGL pricing versus the prior quarter.
Looking ahead range is poised to benefit from improving NGL export economics in the first half of 2023 is China's reopening proceeds.
Ocean freight rates stabilized and exports via the market terminal continue to command a price premium versus the Mont Bellevue index.
Looking at this year ranges and yield differential guide for 2023 is between one dollar below and $1 premium relative to a lump bellevue equivalent barrel.
Our natural gas range reported a better than expected differential at 29 cents below Nymex for full year 2022.
Which beat the low end of our guidance.
As seen in our fourth quarter numbers and over the past several years rages natural gas marketing process and active basis hedging program helped mitigate some of the swings experienced in the daily markets.
Similar to our guidance at the start of last year range of setting 2023 natural gas differential guidance at 35 to 45 cents below Nymex.
As we wrap up our operations and marketing update I would like to congratulate our team for their accomplishments discussed today and their dedication to our continued improvements.
Thanks for your hard work and commitment to delivering on our safe efficient operations.
We look forward to the exciting things will achieve in the year ahead.
I will now turn it over to mark to discuss the financials.
Thanks Dennis.
On the earnings call a year ago, we spoke of a transformational year.
We defined target debt levels and discuss the priority of debt reduction alongside a return of capital program.
So in 2022, how do the actions and results compared to our stated objectives.
I believe the results speak for themselves that we met or exceeded stated objectives.
It was a record year for range resources in nearly every respect.
Safe efficient operations led to plant production levels.
Are on plan production levels sold through a diverse portfolio of sales points yielded strong realized prices.
A constant focus on costs help translate strong pricing into record cash flow and net income.
That cash flow with strategically deployed to reduce debt.
Repurchase common stock <unk>.
And to Reinitiate, a cash dividend.
In summary, we executed on the plan communicated a year ago exceeded goals and enhance the resilience of the company. So the business can thrive throughout commodity price cycles generating strong returns and free cash flow.
Let's start with a discussion of the balance sheet.
During 2022 range reduce that by approximately $1.1 billion.
This brings total debt reduction since 2018 to approximately $2.3 billion.
That reduction combined with a timely refinancing in January of last year.
Reduces current annualized interest expense by approximately $35 million with additional savings expected as that is further reduced.
Leverage.
EBITDAX stood at 0.8 times, a year and the lowest in company history.
Equity holders gained value from debt reduction as well as through return of capital programs, including our share repurchases in cash dividend.
In 2022 range repurchased $400 million in common equity.
Since initiating the share repurchase program ranch's repurchase $430 million in stock.
Reducing share count by 24 million shares are nearly 10%.
Additionally, the sustainable dividend was reinitiated mid year at an annualized rate of 32 cents per share.
Returning an additional $39 million to shareholders during the second half of the year.
In total capital returned to stakeholders in 2022 alone with more than $1.5 billion a.
Equating to roughly one quarter of current market cap.
With $1.1 billion remaining under the existing share repurchase program, we have ample capacity to prudently reinvest free cash flow and shares of the business.
As a reminder, our priority remains further improving the balance sheet to within our stated target range of one to one and a half a billion dollars net debt.
Which we have the potential to reach in coming months based on recent strip pricing.
As that declines we have incremental latitude to deploy free cash flow as.
As evidenced by our actions in 2022.
Driving balance sheet improvement and shareholder returns with the pilots operating team focused on safety and efficiency.
The team delivered planned production at a competitive all in capital cost of 64 cents per unit of production.
When measuring capital efficiency and a maintenance profile dividing capital expenditures by total production offers good perspective on relative performance.
Both in terms of cost and production profile.
Not all capital dollars invested are equal.
With perhaps the lowest decline rate of comparable companies.
Rangers capital efficiency stands out in terms of cost for Mcse as well as the required reinvestment rate of cash flow to maintain production.
At 64 cents per Mcse.
Or less than 30% of cash flow reinvested it maintenance capital in 2022.
Range was at or near best in the industry.
We expect the same to be true in 2023.
Fourth quarter operating results achieved cash flow of $513 million compared to $112 million in capital spending.
Resulting in free cash flow for approximately $400 million.
Significant improvements in fourth quarter free cash flow were driven by a combination of lower expenses and a 5% improvement in hedged realized prices per unit of production.
Versus the prior year period with realized price per unit, reaching $4.33 per mcse in the fourth quarter.
Fourth quarter cash margins per unit of production work $2 and 49.
An increase of 39 cents or 18% compared to fourth quarter last year.
Police operating expenses remained in the historic range and in line with guidance at 11 cents per unit.
Recurring cash G&A expense was approximately $32 million or 15 per unit roughly.
Roughly in line with preceding quarters despite inflation.
Cash interest expense declined to less than $36 million.
With the redemption of 2023 notes in December totalling $528 million.
Combined with debt reduction and refinancing earlier in 2022.
Annualized net interest expense run rate is estimated at $35 million lower than last year.
Further significant interest savings should follow up as we retire additional debt.
As we discuss these quarter ranges gas processing cautious linked to NGL prices such.
Such that gathering processing and transportation expense decreased during the fourth quarter, serving as a right way risk relationship between cost and pricing.
Also reducing costs and Q4 were lower fuel and electricity costs and some cost savings from winter weather downtime.
Additionally, rising commodity prices have improved the value of our contingent derivative asset such.
Such that the 2022 installment was maximize that $25 million.
Leaving an additional $21 million as a potential remaining balance for 2023.
Taxes and become a relevant topic with company profitability.
In 2022 ranges total cash taxes or state level for total of roughly $15 million for the year.
At year end 2022 range had federal NOL carryforwards totaling $2 billion.
And Ah wells will serve to reduce taxable income in coming years subject to utilization limitations.
For some added understanding the first layer of federal Nol's totaling $375 million can be used to reduce up to 100% of taxable income.
The remaining $1.7 billion of federal Nol's can be used to reduce up to 80% of a given year taxable income.
Curtains for pricing and range of expected profitability. We believe we will benefit from the full utilization of these NOL carryforwards in coming years.
Turning from 2022 accomplishment to where the company is headed in 2023.
Given the strong foundation provided by high quality assets paired with low financial leverage we expect range of strategic focus will remain consistent going forward.
Generate free cash flow.
Reduce debt per.
Currently returned capital and reinvest in the business.
This plan is reinforced with a thoughtfully constructed hedge book that in principle is the same risk management process, we have always used.
We seek to thoughtfully retained participation and improved longterm market pricing.
While increasing confidence in near term forecasted cash flow all in support of a consistent efficient operations.
Irving the balance sheet.
And thereby preserving optionality around returns a capital.
We believe ranges results demonstrated thoughtful approach to hedging has served the company well and will continue to do so in the future.
Presently range has approximately 55% of 2023 natural gas hedged with an average price of $3.57.
And in 2024, approximately 35% hedged with an average floor price of $3.75.
Which is at or near the head of the class among natural gas producers.
Ranges business plan continues to be executed on what we believe is the largest high quality asset in Appalachia.
Paired with a transport and sales portfolio delivering production across the U S and internationally.
All underpinned by a strong financial foundation.
We have the team assets and balance sheet.
To succeed through price cycle, and we believe a range business can and will continue to deliver significant value to investors.
Jeff back to Ya.
Operator will be happy to answer questions.
Thank you Mister Ventura in question and answer session will now begin if you would like to ask a question. Please indicate by pressing the star key and start one line.
On a speaker phone please pick up your handset before asking your question.
If you would like to withdraw your question you may do so by pressing start one one again once again please.
One one to ask a question.
Please stand by while the compiler Q&A roster.
First question comes from the line of Jacob Robert Tbh's Company. Your line is now open.
Good morning, guys.
Good morning.
Just looking at the queue for results I noticed bill liquids percent is.
Many bit higher than the 30%.
Throughout the year.
Comparing that to the turn of mind plan for 2023, I'm. Just curious if you could provide some guard rails around that 30%.
Either through the year or as we might see it progress over the quarters.
Good morning, Jacob this is Dennis.
When you look at a given quarter's results. There is some things that could could move that percentage factor around as we kind of take a step back and put some color around it and and one can be.
Variations in essays extraction, just given what's taking place at the market that particular time timing a vessel loading set something we've also clearly referenced as variable that can move some of our percentages around but when you look at 2023 vs 2022 or even queue for.
Half of our activity and are turned in loans is going to be clearly in the west portion of our field and when you look at from West of Super Rich, you're going to see really variations just even between those two areas from the amount of Ngls and also overall liquids production that will be generated from that activity as you start to look through the balance of the year, though.
That production profile as we touched on to the prepared remarks will be more back half wages. So we will see some fluctuations throughout the given quarters as we move.
From drive wet through the Super rich profile of our activity program.
Great that's helpful.
Yeah.
I follow up.
The commentary about the great work, you're marketing team does on results as well as the disclosures you guys give I'm just curious.
If you could talk a little bit about longer term. How you guys are approaching the market of 2025, plus new opportunities might present themselves in any conversations that are happening now we might think about longer term.
Yes. This is Dennis Ian Jacob I'll Die then on this one.
As we start to think about 2025 and beyond clearly the the topic that starts to surfaces really the LNG second wave expansion that will start to come into surface and beyond and potential additional infrastructure. When you look at the way our program is shaped today.
A couple of things, we think about one or our organization has what we would say it is from a marketing perspective experience and not only transacting conventional indices and market share the load lower 48, but also as we've also got exposure to international indices as we currently sit with our liquids exposure.
And we'd like that the way that has diversified our program are transported as we've touched on before we get essentially 25% of our gas gets to the Gulf yield of 25% of that 50 that gets there is already transacting and the LNG space today, we would continue to look at.
Participating in that space further as we go forward, but it also has to compete owner returns basis is March touched on with our financial objective. So those are those are two key items.
As we think about what the program will look like in the future.
We want to continue to have conversations with varying we'll just say we're going to continue to have diversity as a part of our transportation portfolio and our customers that we transaction was whether it's on the agl's side or it will be on the net guests side as well.
We think when you look at this all ties back to our inventory conversation, we know that the expansion of infrastructure.
In the future. These are multi decade financial investment decisions for organizations, and we think that our inventory in our transport aligns really well with the ability to participate in this infrastructure and opportunities as they further materialize.
Thanks, So much appreciate the Congress.
Thank you.
Please stand by for our next question.
Our next question comes in the line of <unk> of Goldman Sachs. Your line is now open.
Hi, good morning, and thank you for taking my questions.
I Wonder if you could do it all.
Thank you.
I wanted to get you updated thoughts on on the natural gas and then Joseph macro as we see today.
And then I also had a follow up on your thoughts around free cash flow location.
That reduction and chatted Bush is giving you a a line of sight to it.
The $1.5 billion number so what are your thoughts on both those stomach. Thank you.
Good morning, among I'll start with the natural gas and NGL market, our macro sorry, and then hand over to Mark for the financial questions, but as we think about the natural gas metro.
I think through this earnings season has been fairly apparent that you're seeing.
Companies like that have had.
Maintenance level programs continue that effort. This year range is clearly in that in that category as well as something we've talked about a lot.
But also you are starting to hear about rig activity potentially starting to slow and other bases like the Haynesville example, we think that bodes well for the go forward outlook for natural gas you've got three Ford LNG now starting to see fee gas come through the facility and you should start to leave the dogs and we think that's also.
No doubt constructive and positive for the go forward look and then we of course got the next wave of LNG that'll be coming online starting some time in the balance of 2024. So we thank all of this line as well as we look forward.
Couple that with the demand outlook is still going to be.
Materializing in the background through 23, and 24, you're still talking about something as you can kind of link all this back to the days supply from a natural gas perspective, that's not too dissimilar to before we were at before going into this winter. So we think that there is still could have no doubt a constructive outlook as we start to see activity.
To modulate through the balance of the year, especially in the base instead of had a higher level of activity going forward and gop's almost touched on it a number of times and prior to call, but as you start to look at the number of exports barrels that are leaving the dogs from a propane perspective is the example in LPG, we're still seeing some record level exports.
Occurred today, which is really encouraging and of course, we're all watching the reopening of China take place that we know that that will translate into further supporting of reducing stock levels and continuing to support a back half of the year.
Constructive outlook for further NGL price improvements and I will turn it over to Mark for the financial fees that good morning, among I think the nature of your question is in it of itself important that it rains. This year as we look at prices, obviously off somewhat from the last year or so our story remains the same we're talking about free cash flow in the same business plan that we've talked.
About for the last couple of years generate free cash flow reduce that return capital shareholders, although executing on a really efficient capital program looking full cycle cost structure looking at our line items unit costs remained extremely competitive and certainly on the capital front. If you take capex dollar per mcse it'll be best in the business so with that.
We're talking about free cash flow generation and degrees of free cash flow generation. So due to your question more directly how do we think about the allocation between that and share repurchases, we haven't hard-coated that with a specific.
Percentage, but what I'll say as a reiterate as our priorities debt reduction.
But we're very close to coming within our targeted net that range of one to one $5 billion.
We are just a couple of hundred million away from that in free cash flow. Examples we have one slide seven of the Investor relations decks provide some hypothetical context around that so free cash flow generation. This year could quite easily put us within that range from the coming quarter or two which gives us latitude on sherry.
Purchases and certainly keeps us and firm support of our dividend going forward and keeping that integral part of the program. So we have incremental latitude as we get within that range.
In 2023, as we get within that net debt range, we've got incremental attitude on how to execute on the share repurchase program. So I would give you. The example of what we did in 2022 over the course of the year as we pay down debt.
Ratably increased share repurchases, we were responsive to prices in our overall free cash flow generation and in principle will be the same in 2023 and going forward.
That's really helpful. Thank you so much.
Thank you.
Please stand by for our next question.
Our next question comes from the line of John Abbott, a B line.
Mine is now open.
Good morning, and I'm on for Doug leg.
Good morning first question.
Good morning, or.
Our first question is there was some obvious M&A chatter last week.
If anything might've missed might've highlighted the miss valuation in range of shares.
What can you do at this point to further bolster recognition of the value opportunity for range.
Well I would argue just consistently execute stick on the plan, where we are on which is I think a really strong story of having.
Best in class inventory really long core inventory, we put some new data and adapt to kind of highlight that and give you more color.
Having the lowest cost per Mcf, the added being able to do that for a long long time into what we think are better markets. So I think it's just consistent execution Mark just talked about our strategy in return to capital prioritization of that.
I appreciate it.
And then Jeff with the second question you highlighted the Amp, Atari and you've had the benefits of 15000 foot laterals I mean, just sort of when you look at your inventory in general what is the opportunity on the 15th put Lotto plus going forward.
I mean, that's the beauty of our position to be in a first mover, having a big blocking position, where you think is the best areas stack paces.
And with the really talented team that keeps finding ways to add value so extending laterals landing loading.
Et cetera, I think our team has demonstrated year in and you're out so we can.
Add value and just get a little bit better each year and you'll see when you look at the recoveries per thousand and things like that in there.
One of the few companies in the industry is consistently be able to.
Ah replicate those results are improved when others are seeing court exhaustion.
You want to add anything to that.
Yes, I think if you look back I'll just add one quick item that you look back over when your question was what's the opportunity. There. We see is a long runway a year ago I believe that this call or at the April call. We kind of walk through an example of where the pass US we had returned to versus the <unk>, we have not yet returned too and it was.
The pads, we've returned to only represented a small percentage of the overall.
Data set this past year, we return to a purge site again for the third time, and we drilled more lateral footage and that third return that we did in the prior to showing the further continual incremental development of drilling along laterals, having some of our most efficient DNC development costs and.
Utilization of those roads infrastructure gathering system et cetera, So we see a long runway as we think about our our inventory total and the ability to return to those feds sites and have further <unk>.
Capital efficiently and cost structures.
I appreciate it thank you for taking our questions.
Q for being on <unk>.
Okay.
Our next question comes in the line of Paul Diamond of City Elon line is now opening.
Good morning, <unk>, Thanks for taking my call. Thanks for taking the job.
Just a quick question for you. So you pushed your expectations through the year, obviously still trending directionally upward of you guys. In your conversations you guys seeing any of those.
Are you somebody aggregate anything, particularly starting to grate or any particular, where those concerns you saw them.
You are specifically talking about the costs and inflation just to clarify your yes.
I'm, sorry, yes, correct.
Thanks, Paul Yeah, as we all.
All kind of take a half a step back and what we're not seeing is.
Mmm questions or requests to increase costs today, while we have seen as we'll call. It a stabilization and you start to look through the balance of this year, though we would expect with some of the announcements of rig activity starting to may be slow and other bases. These maintenance level programs that have been announced we would expect.
Take that as you get deeper into the year, there would be further opportunities that will surface for us to reduce service costs.
That could come at eight and a variety of forms and fashions I think if you look at where as an example, where fuel prices are today versus maybe where they work in the back half of 2022 that could present, an opportunity to shore up let's just say some savings for the balance of the year along with tubular good starting to see some relief. So we've been.
Expect the deeper you get into the year there to be some opportunities that would further present themselves surface cost reductions.
Understood. Thank you and I just have one quick follow up.
Given the volatility that we're seeing in the market and that gas natural gas pricing is zero point direction, we either upward or downward that would kind of have you guys revisiting your operational plan for the year is it pretty much market.
Okay.
This is mark I'll take that one off I think.
We've each mentioned in various forms throughout our discussions of our this morning, we are talking about degrees of free cash flow. So I'll bring it back to our waterfall and capital allocation first is reinvesting cash flow to maintain production levels that maximizes margins we have.
Well utilized infrastructure system that delivers production too diverse locations, 90% of our revenue roughly is outside the Appalachian basin across gas and natural gas liquids. So we're coming into this market.
Prices may be software this year, but we're still generating extremely competitive returns enabled to reduce debt and return capital to shareholders. So I think being at a maintenance level of spend again. This year still is prudent reinvestment a cash flow of the business.
And as far as being adapted to prices. We've also got a good base set of hedges.
Insulate.
Cash flow and provide us greater predictability near medium term and then of course will be responsive to any severe moves we clearly are not going to.
Look away from prices and the realities of realized netbacks, but all that being said under virtually any reasonable pricing scenario. We've got a variety of scenarios down to $2 250. For example on page seven of our deck range of generating extremely competitive levels of free cash flow. So we feel good about the program and doesn't expect there to be any material alteration.
That said, we remain nimble and we'll adapt as AP.
Understood makes me clarity gotcha.
Thank you.
Please stand by for our next question.
Our next question comes from the line of Neil Gaiman of chewing Security. Your line is now open.
Moaning I'll take some time, hoping you can hear me.
My question is on oilfield services I'm, just wanted to be seen in a bit of a decline now and the some of the gas areas like I'm. Just wondering does that shone through on maybe not rigged yet, but maybe someday oilfield services or is it maybe still too early to tell.
Yeah. Thanks for the question Neil.
I'd say, it's a little bit early I think for those service cost reductions to us.
At this point fully surfaced.
But again kind of tried to touch on this just a little bit earlier. The good news is we're not seeing any further requests for increase at this time, we've seen in some ways a good strong stabilization of the service costs market, but we fully expect us rigs fully materialized in being dropped in.
In the months ahead, when we start to get deeper into the year there to be further opportunities for us to evaluate service cost reduction opportunities and I'll throw this on I mean, we also.
Service costs is always one component of our cost structure, but our efficiencies or the other as we look at how we are attacking the program. This year, we would further expect to repeat our efficiencies and continue to build upon them further reducing that cost structure. So.
And she kind of dialogue. This back we kind of feel like at the end of the day in March touched on it this morning as well in his remarks, but we expect regardless of the outcome to be at the at the leading edge of what that dollar per in efficiency value looks like it that 70 676 level.
Being a point in one follow up.
Thank you and you have talked about this but on the additional inventory inventory you see it in the next year too is most of that will that'd be the longer the lateral and so if you could just maybe talk a little color on the type of wells you anticipate that seems like.
It seems like you can see your way that you could keep but behavior better margins on that what is that because of the potential laterals. Those are more things to do that.
As we think about the inventory that we're adding this year, it's really to to do a couple of things one it. It allows us to have some optionality as we think about 2024 and 2025, but you should really take a step back we're really talking about adding somewhere between one to two pads sites of wells and well Morse.
And so again, that's going to allow us to further operationally derisked the program not only.
Maintain our current efficiency levels, but also to build upon them and as we kind of look at the at the drilling efficiencies and records that the team said already in 2023 by having some of those efficiencies that were already capturing plus completion efficiency improvements from last year, you can see some of that activity that would further making it introduced.
<unk> program, but again, we also liked the optionality that it has for next year and that can be capital debt.
Comes out of next year program or become still a part of the base program in 2000 2405.
Thank you, but as we all spend that now.
Can you repeat that meal.
I said thanks.
Really good to see that y'all spending that now for <unk>. Okay. Thank you. Thank you.
Please stand by for our next question.
Our next question comes in the line of <unk>.
More than your line is now open.
Yeah good morning.
Jeff Mark I wanted to get your thoughts.
Just.
Potentially unlocking value, it's clear that you think the stock.
Is undervalued based on your P. B 10.
Date at strip and is wondering your thoughts on and how you unlock value beyond using the buyback.
And if someone came knocking on the door what type of approach would you take in terms of evaluating.
Some sort of bid.
Pregnant relative your views on what's inappropriate mid cycle natural gas prices.
Yes, you are.
You are you are talking amount of somebody came knocking on the door. So clearly you're probably referring to the Reuters article in the good news airs pioneer.
Confirmed.
Their position that they are not considering a deal and.
And then the the good part is the position we're in we're extremely confident in our inventory life in in our assets and our ability to deliver shareholder value. So we're in a great position, where we don't need to pursue any sort of emanated.
And again back to talk about unlocking value I think just consistently executing you're seeing.
If you looked at in your work that you put out with some of your research to see declining productivity and most basins and most companies across the U S doesn't matter with basement soon.
And that we're one of the few companies that doesn't see that the.
You're seeing consistent results year after year and in fact, when you look at page 30 in our future projections of drilling elected or whether you're eur's per thousand over three bcf per thousand that we're we're confident in those numbers.
We're one of the few companies that have positive reserve revisions 15 years and adjusted in a row. So I think just consistently executing into what we think is a better environment will add value, but mark you want to.
Yeah, I think earn you ask a question about basically I'll rephrase. It when does the market recognize the value of range for even more broadly just energy I think you've got a slow return of investor dollars into the sector.
Have the.
The energy sector had gone down to what roughly 2% of the Bs&p 500, we're getting back close to 5% ish. The ZIP code as you look at what free cash flow yields are for energy, specifically upstream and then more specifically range, you're talking teamed up north with greater than 20 per cent free cash flow yield for range.
Under whatever your pricing and expectations are those are valuations.
Other company with a multi decade inventory with 15 years of production history to prove it and audited reserves to back that up that is simply can't be ignored over the long haul and does it take a few more quarters does it take some stability in commodity prices to allow perhaps more generalists to come back in and begin to step in perhaps.
And that's fine that is something that the consistency of the range program. The stability of our drilling program. The diversity of our outlets I think allows us to prove up overtime in the interim just simply generating significant cash flow and reinvesting in in our business proves our point. So I think we can continue to highlight that we have very constructive <unk>.
Log with investors in fact.
Volume of that I have on a number of phone calls is as high as we've ever seen it. So we feel very good about the state of Investor Relations and the general trend of our shareholder base and and I think the premium of our inventory both the quality and the depth of that inventory is recognizing a relative valuation to our closest peers. So we'll see.
To use a highlighter and I think over near and medium term that will continue to be rewarded in better recognized in the price of the stock. So we have a great stand alone plan, a great business to operate here and a lot of value yet to deliver.
I appreciate the fulsome answer.
My follow up is I don't know if Allen is on the line, but wanted to get some thoughts you gave us a $15 1 billion dollar <unk>.
Prove reserve PB 10 value using the strip.
I was wondering if you could break out maybe the PDP value embedded in that number and I noted that you made some some minor tweaks to your type curve Eurasia.
Area type covered by about 7% and.
Drag, yes came down a little bit memory address some of the changes to type curve as as well.
Sure, let me address the type curve first and we'll take it in reverse order.
I think if you look at the last several years from 20 through 22, well results I think really dictate the increase in terms of the word gas area well performance continues to remain strong we continue to really high quality wells. If you noticed some of the wells in 2001, we were probably some of the worst best wells that wherever drove into play as a matter of.
Back so it really it really suggests that there is a high quality of locations lip. When you look at the slide of our inventory Salonika received very low breakeven costs on a portion of our what else did they would reiterate in support.
Extremely great well performance. So I think what you see is just recognition historically, we have never gone out and after a year increase a diaper, we look at a little bit longer term.
Support data to be able to increase it and of course, a development plan that we have identified four.
The next five plus years will also support that as well Minder tweak down.
On gas just once again kind of looking at where the well results have been and recognizing them and where the well performance.
What we can expect to see going forward. So we have a much larger positions in the wet gas portions than what we do to the drawn so there's a lot more of the inventory is going to be words, so it's going to be sustainable for longer periods of time on the first part of the question I don't remember what the PDP percentages. So we will.
Get back with you I will get with late in the team will get back with you on that as well I just don't recall.
Thanks, Alex.
On slide <unk> kind of there's a new slide with more of that color and detail that Alan was referring to Amazon.
Well, we are nearing the end of today's conference. We will go to David Kassebaum of calling for our final question.
The line is now open.
Thank you can you hear me yeah.
Thank you.
Thanks for squeezing me and.
I just wanted to ask about the the lateral length progression for us it sounds like.
2022.
It was kind of like a landmark here in terms of as an average lateral length, obviously, the till count goes up a bit and twenty-three as lateral lines comes down it seems like there's still some potential to increase that throughout the year. How does that look when you get beyond 2324, and 25 or should we see that program.
Kind of.
Conforming towards this 10000 foot kind of standardized lateral that you have.
Assuming in long term costs.
Yeah, Good morning, David.
I would say as we look forward, we have yet to risk to experience the technical limit of our horizontal lateral capacity.
But we also take a very methodical data driven approach to how we extend levels because I know you've heard us talk about this on prior calls but in order to be successful, we know we need to be repeatable.
So.
King Big leagues is is something that we're not opposed to doing that we try and incrementally extend our liberal leaves and operationally take those learnings. So that we can do it in a very cost effective way. We can also be very repeatable I think if you look back over the last couple of years as you point out we continue to make them progression to as we.
Just touched on in our prepared remarks, we drove some of our top 50, lunges laterals and the balance of the fourth quarter and we have more wells like that plan for the 2023 program as we look in our eternally our five year plan in outlook of well inventory, where we would move rigs to gathering system and how that would.
Get that that activity level. There are lots of wells that we would consider to be at or beyond that 50000 foot level, but as you move throughout the field. There will be cases, where you maybe you have some lease limitations.
That would prevent you from always drooling in excess of 15000 feeder, which did creates more of an average of 10, we know that our long laterals create our most capital efficient opportunity and so we see a really really long runway with our inventory to be able to drill.
<unk> reached laterals, we will continue to do so.
Thank you and then my second question is Jeff maybe the clothes out the call on something a little bit more exciting just it sounds like you you.
Confirms that perhaps there were not conversations around M&A last week.
But longer term does the board or management believe that there is perhaps a a philosophical.
<unk> goal of getting towards perhaps some sort of combination with an oil waited company to create a differentiated.
Investment proposition as an organization or given your constructive view on gas macro do you think your best pass best path forward is to focus on.
Natural gas development in the U S.
To answer that I would just say, we're really in a great position. We have what we believe is the largest core inventory and the best gas field in the world Big Blocky position, we have the new disclosure on.
Page five or whatever talking about the quality of the wells and the longevity. So we can.
We've got the lowest decline right, we've got the lowest cost structure and what we think.
It's going to be a much better natural gas story long term I think natural gas is going to be a great place to be theirs.
We think there's a slot in the back.
<unk>, we talked about the next wave big wave of 2025 Dennises starts in 2000 2004, but when you look at the Org slide in the back.
We see that by the end of 2007, LNG exports, 29th Bcf per day, and there's a slide inherited described and so when you without the ability to access those markets. So we think we are in a great position, where we can just and we will consistently execute and create value.
We are in great shape, just continue to do what we're doing.
Thanks Jess.
Thank you.
Thank you.
Today's question and answer session I'd like to turn the call back over to Mister Ventura for his concluding remarks.
Yeah, I just want to thank everybody for taking time to be on the call. This morning, and feel free to follow up with our team. If you have additional questions. Thank you.
Thank you for your participation in today's conference and you may disconnect at this time.
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