Q4 2023 Range Resources Corporation Earnings Call

February 22, 2024

Welcome to the range resources fourth quarter 2023 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 the Speakers' remarks, there will be a question and answer period at this time I would like to turn the call over to Mr. Lee Sando, Vice President Investor Relations at range Resources. Please go ahead Sir.

Laith Sando: Thank you operator, good morning, everyone and thank you for joining ranges year end 2023 earnings call.

Laith Sando: The speakers on today's call are Dennis Degner, Chief Executive Officer, and Mark <unk>, Chief Financial Officer.

Laith Sando: But you've had a chance to review the press release and updated investor presentation that we posted on our website.

Laith Sando: May reference certain slides on the call. This morning, you'll also find our 10-K on ranges website under the investors tab or you.

Laith Sando: You can access it using the Sec's Edgar system.

Laith Sando: 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.

Laith Sando: We've also posted supplemental tables on our website that include realized pricing details byproduct, along with calculations of EBITDAX cash margins and other non-GAAP measures.

Laith Sando: With that let me turn the call over to Dennis.

Dennis L. Degner: Thanks, Laith and thanks to all of you for joining the call today.

Dennis L. Degner: <unk> 2023 plan was successfully executed with a consistent theme throughout the year.

Dennis L. Degner: Operating safely while driving continued operational improvements.

Dennis L. Degner: Generating free cash flow with a peer leading capital efficiency.

Dennis L. Degner: And prudent allocation of that free cash flow balancing returns of capital to shareholders with further debt reduction and the long term development of our world class asset base.

Dennis L. Degner: I believe our fourth quarter results are a great example of continue advancement against those key objectives.

Dennis L. Degner: And showcase the resilience of <unk> business and a low point of the cycle.

Dennis L. Degner: Likewise, our year end reserves update and 16th consecutive year of positive performance revisions points of the repeatable nature of our Marcellus inventory.

Dennis L. Degner: As we look towards the year ahead, youll hear those themes repeated and I believe the resilience that our business has at a lower price environment will be a key differentiator for range.

Dennis L. Degner: Maintaining a flexible hedge program to cover fixed costs and capital commitments is clearly beneficial in periods of price weakness like we find ourselves in today.

Dennis L. Degner: However, the real value proposition over the long run is underpinned by ranges low sustaining capital requirements.

Dennis L. Degner: Our low capital intensity as the result of ranges class, leading drilling and completion costs.

Dennis L. Degner: Shallow base decline.

Dennis L. Degner: Large blocky core inventory.

Dennis L. Degner: And talented team.

Dennis L. Degner: Altogether. These results in a required reinvestment rate that is lower than any of our peers, which provides range a solid foundation for consistently generating significant free cash flow and returns to shareholders.

Dennis L. Degner: Further bolstering rages durability as our liquids contribution which is approximately 30% of our total production volume.

Dennis L. Degner: Our liquids revenue is expected to provide an uplift in natural gas prices and using today's strip pricing, it's very meaningful.

Dennis L. Degner: For context rages NGL barrel is currently priced around $24 per barrel using strip prices for 2024.

Dennis L. Degner: That is equivalent to $1 60 per Mcf premium to recent Henry hub pricing.

Dennis L. Degner: While we roll all of that together.

Dennis L. Degner: Our liquids revenue uplift, our low maintenance capital.

Dennis L. Degner: In a thoughtful hedging program you get the lowest breakeven among natural gas producers and the most resilient organic free cash flow.

Dennis L. Degner: As evidenced by our 2023 results and 2020 for projections.

Dennis L. Degner: Importantly, with our vast inventory of de risk high quality Marcellus wells, we have the ability to compound our per share growth and free cash flow for decades to come.

Dennis L. Degner: Turning to our near term plans for.

Dennis L. Degner: Our 2024 range expects to generate healthy free cash flow at strip pricing.

Dennis L. Degner: All in capital spending between 620 $670 million.

Dennis L. Degner: This capital plan consists of approximately $575 million to support our base level maintenance production plan similar to the past few years.

Dennis L. Degner: Along with additional investments in three categories.

Dennis L. Degner: First is additional acreage spending above maintenance levels, which not only allows for longer laterals, but actually offsets most of our lateral footage being turned to sales.

Dennis L. Degner: Keeping our 28 million feet of core Marcellus inventory relatively unchanged.

Dennis L. Degner: Second is an investment in expanding our water infrastructure, which provides a very quick payback and supports a low D&C and low cost in the future.

Dennis L. Degner: And lastly, as flexible drilling and completion capital.

Dennis L. Degner: Like we had in 2023.

Dennis L. Degner: Which increases our year end inventory of drilled and or completed lateral footage.

Dennis L. Degner: Riding us optionality and flexibility as we evaluate the optimum setup for following years.

Dennis L. Degner: The overall number of drilling rigs and Frac crews will be the same as last year with the additional inventory generated as a result of simply retaining the equipment.

Dennis L. Degner: Which maintains operational efficiencies and provides flexibility for 2025 and beyond.

Dennis L. Degner: Given the macro backdrop.

Dennis L. Degner: Range is planning a maintenance production profile that is similar to recent years.

Dennis L. Degner: At $2, one two to $2, one six bcf equivalent per day.

Dennis L. Degner: Approximately three quarters of a lateral footage that will turn to sales. This year will be located across our wet and super rich acreage positions, providing the added benefit of our NGL uplift to overall cash flow and price realizations.

Dennis L. Degner: With the remainder of our program focused in our dry gas footprint.

Dennis L. Degner: Our operational cadence for 2024 will consist of two horizontal drilling rigs operating throughout the year, resulting in a total combined footage of approximately 750000 lateral feet being drilled.

Dennis L. Degner: Or about 100000 feet more than what we will turn to sales.

Dennis L. Degner: 2024 completions will be executed utilizing a single new electric fracturing fleet operating through the year as well.

Dennis L. Degner: Consistent with our maintenance production program approximately 640000 lateral feet from 15, New wells is expected to go into production in 2024.

Dennis L. Degner: With more than half of the new wells being drilled developed on pads with existing production.

Dennis L. Degner: Returning to pads with existing production has been a repeatable part of the range story for many years and supports both our capital and operational efficiency.

Dennis L. Degner: Similar to prior years, our activity and capital will be weighted towards the front half of the year, while our quarterly production profile is expected to be back half weighted as the new turn in lines materialize in the back half of 2024.

Dennis L. Degner: First quarter production is expected to be around two one bcf equivalent per day before building into the second half of the year.

Dennis L. Degner: Our operational review for the past year showcased a continued theme of execution excellence that starts with our drilling highlights.

Dennis L. Degner: 2023 saw several new efficiency records set for the program while drilling a total combined lateral footage of nearly 700000 feet.

Dennis L. Degner: The team managed to drill eight of the top 15 longest laterals enrages program history, with 40% exceeding 15000 feet laterally.

Dennis L. Degner: Four of the wells had a lateral lengths greater than 20000 feet, but the longest two laterals extending for miles.

Dennis L. Degner: Our large contiguous acreage position affords us the ability to drill these type of long laterals.

Dennis L. Degner: Creasing efficiencies and allowing us to access more reserves from a single location.

Dennis L. Degner: All while reducing our overall footprint and consolidating infrastructure requirements.

Dennis L. Degner: In addition to the new horizontal length records set by the team. We also set new benchmark rates for daily drilled footage.

Dennis L. Degner: The average daily lateral footage drilled in 2023 was more than 4600 feet per day.

Dennis L. Degner: A step change increase of 38% over the previous year with the fastest drilling day exceeding 70 450 feet drilled in a 24 hour period.

Dennis L. Degner: The efficiency gains, we see from longer laterals and faster daily drilling rates are key to the program's success, but equally important was that the team managed to simultaneously improve its pinpoint accuracy when zone.

Dennis L. Degner: Over the years, our drilling of Geoscience teams have set an extremely precise standard for our horizontal targeting.

Dennis L. Degner: Typically with a tolerance of less than 2000 feet.

Dennis L. Degner: In 2023 with all the long lateral and high drilling rates success. The team had they did it while staying within their high graded targets for more than 93% of the lateral footage drilled in the year.

Dennis L. Degner: A noteworthy achievement by the team.

Dennis L. Degner: This type of laser focus plays a role in the positive performance revisions and consistent reserve reporting that investors have come to expect from range.

Dennis L. Degner: Moving to completions several new completion efficiency records were established during the year to include the following.

Dennis L. Degner: Increasing overall efficiencies to nine stages per day.

Dennis L. Degner: A 10% improvement over the prior Mark which was just set in 2022.

Dennis L. Degner: Achieving our highest pad average of $13 four stages per day.

Dennis L. Degner: Our March set during the fourth quarter.

Dennis L. Degner: Successfully completing ranges longest well to date with a total measured depth of 29500 feet.

Dennis L. Degner: And setting a new record of 17 stages completed in a 24 hour period.

Dennis L. Degner: These incremental gains in operational efficiency could not have been accomplished without reliable logistics supporting each stage.

Dennis L. Degner: And the range water operations and logistics team played a critical role in supporting these efforts.

Dennis L. Degner: But these operational results are incomplete, if we can't execute safely.

Dennis L. Degner: In addition to the highlights share today. The team also delivered on one of our best safety and environmental performances in the Companys history.

Dennis L. Degner: We look forward to sharing more on these results in our upcoming corporate sustainability report in the months ahead.

Dennis L. Degner: Turning quickly to marketing.

Dennis L. Degner: During the quarter rages weighted average NGL price was $24 91 per barrel.

Dennis L. Degner: This is a $2 42 per barrel premium to the Mont Belvieu index and the highest quarterly premium in company history.

Dennis L. Degner: This performance was driven by ranges flexible LPG export program and strong seasonal butane values during the quarter.

Dennis L. Degner: Full year 2023 saw a $1 24 per barrel NGL premium. It was also a company best on an annual basis.

Dennis L. Degner: We expect range to maintain a differential to the Belvieu index of $1 minus to $1 premium for 2024 by leveraging our export capacity and flexible transportation options.

Dennis L. Degner: To the extent that export dynamics remained tight in the Gulf coast as they were in the second half of 2023.

Dennis L. Degner: We would expect our access to the east coast to be advantaged, pushing us towards the premium side of our guidance.

Dennis L. Degner: And as I mentioned at the beginning of these remarks ranges NGL barrel is currently priced well above natural gas prices supporting our durable free cash flow profile.

Dennis L. Degner: Turning to natural gas.

Dennis L. Degner: Near term prices are obviously incredibly challenging for the industry and.

Dennis L. Degner: And we expect these historically low price levels should help keep a lid on natural gas production across the U S.

Dennis L. Degner: We're encouraged by reduced industry activity in the Haynesville and tier two basins.

Dennis L. Degner: Along with maintenance programs being planned in the Marcellus.

Dennis L. Degner: This moderated industry activity, along with LNG projects startups expected in the second half of 2024 and continued strength in gas power generation.

Dennis L. Degner: Provides the potential for the domestic market to rebalance later this year.

Dennis L. Degner: While beyond this year continued growth in global demand for U S natural gas combined with domestic power and industrial demand.

Dennis L. Degner: In tier one well inventory absorption.

Dennis L. Degner: I'll set up a strong outlook for long term use gas fundamentals.

Speaker Change: Before handing over to Marc I'll reiterate a message we've shared previously.

Speaker Change: We believe the future of natural gas and Ngls is strong and the range team remains focused on generating free cash flow, while advancing our overall efficiencies and delivering repeatable well performance across our large contiguous inventory.

Marc: I believe the positive results, we generated in 2023 and plan to build upon in 2024 are a reflection of that focus and show the resilience of ranges business.

Dennis L. Degner: I'll now turn it over to Mark to discuss the financials.

Mark: Thanks Dennis.

Speaker Change: 2023 highlighted the strength and weaknesses of companies in the energy sector.

Mark: Extreme producers quality assets with low full cycle costs.

Mark: The ability to reach a diverse set of customers with a variety of price points and.

Mark: And a rock solid balance sheet to provide flexibility where all necessary to create value.

Mark: Range has each of these key attributes and through sound execution by the team the company generated strong free cash flow reduce debt.

Mark: Pay dividends.

Mark: <unk> shares and reinvested in operations, not only for maintenance, but to prudently position the company for the future.

Mark: As we sit here in early 2024 with an efficient plan to maintain steady production.

Mark: We're also carefully positioning the business for evolving domestic and international demand for natural gas and natural gas liquids.

Mark: As incremental demand materializes.

Mark: <unk> will be positioned to be a reliable long term energy supplier that generate strong returns from our resilient business.

Mark: Let's start with capital allocation in 2023.

Mark: Cash flow before working capital of approximately $1 1 billion.

Mark: Funded our capital investments of $614 million.

Mark: A reduction in debt net of cash of $292 million.

Mark: Along with roughly $96 million in dividends and share repurchases.

Mark: This allocation demonstrates the fact that in a low commodity price setting range comfortably maintained base production that drove strong cash flow on the back of cash margins equating to greater than 40% of realized price per unit.

Mark: This resilient margin attributable to an advantageous commodity mix paired with a diverse sales portfolio and competitive unit costs allow prudent investments in the business and cash returns from the business.

Mark: While further strengthening the balance sheet.

Mark: Over the past two years range has reduced net debt by an aggregate $1 2 billion.

Mark: And returned capital to shareholders in the form of share repurchases and dividends.

Mark: $535 million.

Mark: In total that is more than $1 7 billion in capital returned to stakeholders.

Mark: With our balance sheet in great shape, and a reduced share count continued resilient value generation is the goal.

Mark: Driving 2023 strong financial results with the tireless operating team focused on safety and efficiency.

Mark: The team delivered planned production at a competitive drilling and completion capital cost, which.

Mark: Which included building a few wells for inventory.

Mark: With perhaps the lowest decline rate of comparable companies.

Mark: Ranges capital efficiency stand out in terms of cost per Mcf.

Mark: Full cycle breakeven costs.

Mark: And the required reinvestment rate of cash flow to maintain production.

Mark: As a percentage of cash flow.

Mark: Range should regularly be near the lowest call on cash for sustaining capex.

Mark: We expect this to be true of this asset base for many years.

Mark: Focusing on the fourth quarter for a moment operating results achieved cash flow before working capital of $300 million.

Mark: Cash flow was a result of realized price per unit or $3 25 per Mcf.

Mark: Margin benefited from lower expenses with an 11% reduction in unit costs compared to fourth quarter last year, driven primarily by lower <unk> and lower interest expense.

Mark: Fourth quarter cash margins per unit of production were $1 42.

Mark: A healthy 44% margin despite lower commodity prices.

Mark: As we often mentioned ranges gas processing cost is linked to NGL prices, such that gathering processing and transportation expense decreased during the fourth quarter, serving as a right way risk relationship between cost and pricing.

Mark: Also reducing costs in Q4 were lower fuel and electricity costs.

Mark: Taxes have become a relevant topic with company profitability.

Mark: In 2023 range is cash taxes are only at the state level for a total of roughly $1 $5 million for the year.

Mark: At year end 2023 range had federal NOL carryforwards totaling $1 8 billion.

Mark: These nols will serve to reduce taxable income in coming years.

Mark: For some added understanding the first layer of federal Nols totaling approximately $158 million can be used to reduce up to 100% of taxable income.

Mark: The approximate remaining $1 $7 billion of federal Nols can be used to reduce up to 80% of a given year's taxable income.

Mark: At current strip pricing and range as expected profitability. We believe we will benefit from the full utilization of these NOL carryforwards in coming years.

Mark: Turning from 2023 accomplishments to where the company is headed in 2024 given.

Mark: Given the strong foundation provided by high quality assets and low financial leverage.

Mark: We intend for ranges strategic focus to remain consistent.

Mark: Maximize the value of a multi decade project inventory.

Mark: Generate free cash flow.

Mark: Prudently return capital and reinvest in the business.

Mark: With a thoughtfully constructed hedging program, we seek to participated improved long term market dynamics.

Mark: Increasing confidence in near term forecasted cash flow all to support consistent efficient operations.

Mark: Preserving the balance sheet and creating additional optionality around capital allocation.

Mark: We believe ranges results demonstrated successful hedging philosophy that has served the company well and will continue to do so in the future.

Mark: Presently range has approximately 55% of 2024 natural gas hedged with an average floor price of $3 70.

Mark: And in 2025, approximately 25% hedged with an average floor price of $4 11.

Mark: Providing range a stable base to consistently generate free cash flow through market cycles.

Mark: Ranger business plan continues to be executed on what we believe is the largest high quality asset in Appalachia.

Mark: Third with a transport and sales portfolio delivering production across the U S and internationally.

Mark: All underpinned by a strong financial foundation.

Mark: We have the team.

Mark: Assets and balance sheet to succeed through price cycles.

Mark: And we believe the range business can and will continue to deliver significant value to investors.

Dennis L. Degner: Dennis back to you.

Dennis L. Degner: Thanks Mark.

Dennis L. Degner: Before moving to Q&A I'd like to congratulate our team for their accomplishments discuss today and their dedication to our continued safety performance operational improvements and progress towards our stated financial objectives.

Dennis L. Degner: <unk> 2024, it looks like it's going to be a challenging year for the industry.

Dennis L. Degner: What ranges business has never been stronger having derisked, our high quality inventory measured in decades, and translate that into a business capable of generating free cash flow through these types of cycles.

Speaker Change: Let's open up the line for questions.

Speaker Change: Thank you Mr. Diagnosis, the question and answer session will now begin.

Speaker Change: I'd like to ask a question please indicate by pressing the star key.

Speaker Change: One one.

Speaker Change: You're on a speakerphone. Please pick up your handset before asking your question. If you would like to withdraw. Your question you may do so by pressing star one again again to ask a question. Please press star one.

Speaker Change: Hi, My first question and it comes from the line of Doug Leggate with Bank of America. Your line is open. Please go ahead.

Doug Leggate: Thank you very much indeed, Don Thanks for all your comments on.

Doug Leggate: Obviously, a tremendous asset base that you've spelled out in spades every quarter.

Speaker Change: Certainly.

Doug Leggate: That's at least not yet recognizing your stock, but I do have a more macro question to kick off with if I may.

Doug Leggate: You've obviously seen will hopkins to gas prices on indeed due to ensure price in this sector in the last couple of days.

Doug Leggate: In response to one of your large peers, making some decisions about the timing of when to produce so I'm. Just curious curious about your thinking on that topic, obviously with one Frac crew you can't exactly call activity, but you could curtail the timing of completions.

Doug Leggate: Perhaps until better gas market. So im just curious if you could walk us through how you think about that.

Speaker Change: Yes, good morning, Doug I think the way you <unk>.

Speaker Change: Asked the question is something we've given a lot of conversation and thought to over the past several weeks, we liked the flexibility and I know we've used that word a lot in our prepared remarks today, but we like the flexibility. This program sits.

Speaker Change: If you look back for our ability to basically shape the curve of win win our wells will turn in line. This year. When you look at the past several years there've been times when clearly we've chosen to look at shutting economics, and we've looked at dry gas portions of the field.

Speaker Change: And we know where let's just say that gas curtailment could take place and have a commensurate cost reduction that goes along with it while supporting really our price realization uplift associated with our Ngls in the wet side of it. So as we look kind of on the program going forward and the inventory build.

Speaker Change: That would support our setup for 2025, we see that will have the flexibility to basically just timing for turned in lines based upon what the macro is telling us and what the basic fundamentals are looking like without.

Speaker Change: With our transport and the ability to get gas, 80% of our gas out of the basin virtually 100% of our Ngls out it does change the calculus for us quite a bit but.

Speaker Change: We will remain absolutely very sensitive given the flexibility that we've baked in and the cash flow that the business will throw off this year, we like our flexibility to shape those turned in lines with what makes sense for the business.

Speaker Change: Well I appreciate it.

Speaker Change: Ricky one to navigate that's easy for us to opine on it but.

Speaker Change: <unk> got to execute so thank you for that.

Speaker Change: My follow up is also a kind of high level question I mean, your operations a quarter, obviously with great productivity continues to be very predictable.

Speaker Change: On credit to lead from the team for helping us see that if you like but you are already the most capital efficient Gatsby, just sort of frankly.

Speaker Change: Frankly in the country My question as others are not.

Speaker Change: And with that in mind I'm curious how you see your role.

Speaker Change: And the consolidation wave if any on what's going on in the sector right now putting good assets behind the great management.

Speaker Change: A pretty easy way to create volume just curious how are you thinking about that.

Speaker Change: Well I think yes.

Speaker Change: As we look at M&A.

Speaker Change: Our view today isn't a whole lot different than way we've looked at it in the past we know what some of the innovation opportunities look like.

Speaker Change: Whatever we would embrace from an M&A standpoint has to make it as to look a lot like range and it has to make range a better company and stay keep us on the path of the objectives that we've been talking about kind of quarter after quarter and somewhat staying the course.

Speaker Change: When you look at the team that we've put in place the successes they've been able to accomplish there is no doubt the capital efficiency that ranges harvested is something that we think could be replicated if you will and other other parts of the basin, but we also know that.

Speaker Change: Again, we remain focused on the large inventory that we have.

Speaker Change: And even we haven't even talked about the inventory below the Marcellus with the Utica or even the upper Devonian, so and a lot of ways. We feel like we can take this what we're doing today replicate it year after year decade, after decade, and not have to necessarily look at an M&A possibility to further let's just say enhanced capital efficiency.

Speaker Change: But size and scale is something that certainly we've been asked about a number of times and it's a common question from there.

Speaker Change: There could be some positive benefits, whether it's leveraging cost of services.

Speaker Change: Just say combining transport and other processing and gathering cost structure. So we see that there are those opportunities, but when you look as you pointed out Doug where we're at with some of our metrics.

Speaker Change: Have to look a lot like reach or we go the other way so we like where we're at we feel like we've got the team in the inventory as Mark and I, both touched on today to kind of keep keep forging the path that we're on.

Speaker Change: Almost like an annuity.

Speaker Change: Thank you Budd thanks, so much John appreciate it.

Speaker Change: The answers.

Speaker Change: Thanks, Doug.

Speaker Change: Thank you and one moment, while we move to our next question.

Speaker Change: And our next question comes from the line of.

Speaker Change: Nitin Kumar with Mizuho Securities. Your line is open. Please go ahead.

Nitin Kumar: Good morning, guys and thanks for taking my question I'm going to start off Mark in your prepared remarks, you talked about returning cash to shareholders, but over the last couple of years you favor debt reduction.

Nitin Kumar: As a primary source for deploying our free cash flow.

Nitin Kumar: Now that you're at least within the range of the targets first your debt how should we think about cash returns going forward is this a year of extraordinary for a year, where we could see some more cash return for shareholders directly.

Speaker Change: Good morning.

Speaker Change: I think as.

Speaker Change: As Dennis has highlighted in a couple of his responses in both of US in our comments. This morning flexibility and resilience are a couple of the hallmarks of the range business and how we're trying to build it and have built it over the last couple of years have been paid off north of two 5 billion that we've come a long way in repositioning the balance sheet. So one of the.

Speaker Change: Key principles that we have laid out in the return of capital program is again flexibility optionality, rather than a hard and fast approach you've seen us over the last couple of years too.

Speaker Change: Larger share repurchase programs as prices come down we favorite.

Speaker Change: Debt reduction at the end of the day as I mentioned in my opening comments.

Speaker Change: Debt reduction is still a return to the equity holders do you think about enterprise value and shifting that value and in favor of the equity holders. So.

Speaker Change: Where im headed with that is the balance sheet is basically at the high end of our target range.

Speaker Change: We have positioned the balance sheet.

Speaker Change: Actually where we want it and we'll continue to do so over the years, but we have added flexibility.

Speaker Change: So the starting point for 2024 is our program generates free cash flow.

Speaker Change: So we have optionality and we'll lean in and be opportunistic in those share repurchases, we certainly have latitude to make those.

As I'll, just say you get through that back half weighted type turned in line profile, you'll see our liquids contribution would be very consistent with what we reported in prior quarters.

I appreciate the consistent program thanks, guys.

Thank you.

Okay.

Thank you and one moment as we move on to our next question.

And our next question is going to come from the line of Paul Diamond with Citi. Your line is open. Please go ahead.

Thank you good morning, Thanks for taking my call.

A quick question on guidance, you guys talked about $15 million to $20 million and deploy around water infrastructure.

Some other.

Kind of operational.

Expenses, just wanted to get an idea of how you guys see that being deployed whether it's consistent over time and you see that doing more summer weighted or kind of how to think about the directionality of that and when when do you expect to deploy.

Yes, good morning, Paul I think a good way to think about how that capital will get deployed would be really fairly evenly through the balance of the year, we're talking about small capital and really small projects in the grander scheme of things but.

The majority of that is going to be on the water infrastructure build out it allows us as we continue to get to this place where we've got 500, producing drilled and completed wells you can imagine we've moved farther and farther from our core water infrastructure that we invested in little over a decade ago now at this point.

So as we're building that out through the balance of this year, we'll be able to start to utilize it in the second half or the back half of the year. So I would expect that.

Expenditures component or that bucket of spend to really be more spread across fairly evenly through the year.

Understood. Thank you and just a quick follow up on just kind of touching on your guys' philosophy surrounding loans 100000 feet of wells in progress.

Do you envision that being deployed overtime is that purely a.

Economics based on the fundamental pricing on the ground or is it something you anticipate holding inventory just.

To some level or how are you guys thinking about.

Eventual deployment.

Yes.

Yeah, Paul I think this is one of the I'll go back to kind of the fundamental thought it really gets back to whats the macro and the basic fundamentals international macro what do we what signals are we seeing from the market that would suggest how we utilize that that in process inventory. So I know, we keep using the word flexibility but.

We do believe that that's the right setup for us it'll either allow us to think about getting a head start into 2025, depending upon what pricing looks like or it allows us to be even more capital efficient through that 2025 program. Maybe I think you are pointing out we could utilize that inventory without having to be in a blowdown mode.

Like like we've seen maybe from some other reports.

I was looking for which you can kind of hold it there.

Thanks, Paul.

Thank you and one moment as we move on to our next question.

And our next question is going to come from the line of Jacob Roberts with Tpa <unk> Co. Your line is open. Please go ahead.

Good morning.

Good morning Jacob.

We were hoping to if you were able to provide some commentary or even percentages as to where the wells in progress inventory sits in terms of our spud to awaiting turned in line timeline.

Could you repeat the question one more time for me.

Sure I'll try to also have I'll try to simplify it perhaps just at the end of 2020 for the wells in progress inventory can you frame. If these are ducks are deferred turned in lines in the mix there.

Okay. Thanks, Thanks, Jay sorry about that it was a little hard to hear on my end I.

I think as we a good way of thinking about that that inventory at the year end it will be a bit of a mix. So as you can imagine by retaining we've got a really lean program and so by having two horizontal rigs that we're going to maintain through the balance of the year of which we would need.

Those for a maintenance level type program for 2025, some of the inventory that gets generated their horizontal wells that basically are not getting completed that there'll be ready for completion right out of the gates to start the year and some of this.

And that we've outlined it is retaining our keeping good efficiencies with our one dedicated frac crews. So when you think about it as kind of a low level program, where two rigs are generating enough activity for that one base level Frac crude day in and day out and it's really as a function of the efficiencies that we've talked about really through our prepared remarks, 10% improvement in frac.

Pages per days last year, and then of course, a 38% improvement on daily drilled footage on the drilling side. So it's kind of all of our byproducts that but we will have some extra fracs that we will complete this year, but there will be let's just say in composite theres going to be somewhere between seven to 10 wells in total aggregate that will basically on an equivalent basis be carried into next year.

Great. Thank you.

My second question is on the incremental land spend.

Your comments about replacing the lateral feet drilled every year.

Laith Sando: Against.

What is a very long inventory, we're curious how aggressive range will be I'm spending. These dollars and then perhaps in subsequent years, what the runway looks like to continue that sort of replacement rate of 500000 versus the 650 kind of base case.

Yeah.

Well Jake I think the way we would think about it is as we put that framework in there from a cat land spend and we view it as an opportunistic kind of view when you think about 'twenty three and all kind of backup for half a second if you look at 2023 at this very time a year ago, we were communicating our plan that haven't had an average lateral length of 10000.

500 feet, but by the time, we got to the end of the year and you look at the turn in lines in the drilling activity. The average was just under 13000 feet. So by nature of what we did through the year by extending laterals. Some of that resulted in some opportunistic we'll call. It open track leasing that we deployed through the year to extend those laterals.

Provide some of our most capital efficient wells in the numbers that we report on so this is a way of framing it where we think we can we can do this year over year and a lot of portions of our field.

But we also have a lot of it Thats also secured that's HCP as well. So we see line of sight for the next few years to continue to do this and there is also leasing opportunities.

I will just say within the heart of the field that we haven't fully expanded on whether it's <unk>.

Some of the state parks or other areas that could also provide future opportunities for us. So we see a decent runway here yet.

Thanks, I appreciate the time.

Thanks Jake.

Thank you and one moment as we move on to our next question.

And our next question is going to come from the line of Michael Kim with Stephens. Your line is open. Please go ahead.

Hey, good morning, guys.

Just wanted to ask about the decision to spin.

Some of these other things above the maintenance capital level.

Are you really looking for.

I guess the.

My question is why now.

It's obviously youre looking at things in the future but.

With gas prices, where they are.

And some of your competitors.

Trimming budget.

What was the compelling.

Forced to spend those dollars today.

Or this year rather.

Yes, good morning, Michael.

I would start this by by kind of saying look the water infrastructure is weak.

We've had a very low.

I'll, just say ongoing investment into the water infrastructure, but as an example, it has been a significant piece of our story that kind of supports our.

Our low capital efficiency. So this felt this felt like the right time for us to invest in expanding of that infrastructure as.

As we think about what the future could hold.

Additional activity again, as we continue to move back to pads with existing infrastructure.

<unk> supports again that low cost dollar per foot or dollars per barrel type basis, and quite honestly. It supports recycling of water from other producers, which is a key component for low cost water to our doorstep on location. If you will I think the other part from a land perspective, I think we just talked about it a little bit, but we kind of see some of this is lease man.

<unk>, but also it's it's overall, allowing us to extend these laterals and the ability to deliver some of our most capital efficient wells.

The additional activity that's in that bucket, that's really just not picking up three rigs going down to one at the end of the year and they are trying to pick those other two rigs up in January it's utilizing existing drilling rigs. We've got relationships with these service partners to deliver some of our best efficiencies, which we've highlighted this past year, we couldnt be.

Happier with the direction that we've been moving with both the crews the service partners and our team. It feels like this is the right time to continue to maintain that momentum as you think about 2025 and look we can make decisions to make changes based upon what the setup is for 2025, but we've got one based frac crew and one drilling rig alone.

We will not us supply enough, we'll just say wells to keep that one frac crew busy. So this is a very lean program is something that we've we've reinforced now time and time again, but.

I think when you look at also some of the investments, we're making now I guess the other part would be probably in a lot of ways. Depending upon how you think about 2025 and 2026 could be lower cost investments at this moment versus what we could see in the future years. So we feel like it's a good good window. These are low dollars in the grander scheme of the overall.

The value of the program and we think it sets up a really nice story I'll hand, it over to Mark real quick.

Sure I think Dennis obviously, just highlighted the key operational reasons and drivers. So just zooming back out to the financial point of view is now an appropriate time to do it I think the simple answer. The question is yes. If you look at what the program is achieving our core objectives to generate free cash flow funded maintenance program strengthened and bolster the balance sheet return capital to investors.

And prudently invest in the company I think we check each of those boxes quite comfortably. So if you look at our reinvestment rate.

Into D&C activity for the year for a maintenance program its peer leading there's a slide on page seven of our deck highlight that if you look over the last couple of years ranges in the 25 to call it 50% of cash flow for reinvestment and maintenance and maintenance program, depending on the prevailing price environment industry is at.

75% to greater than 100% call on capital to hold their production flat. So if a range at this point. This is an opportunity when we think costs are appropriate in advance of what they could be in coming years as demand eventually does materialize and grow we can build again very modest investments.

Just in time inventory works fine most of the time, but if you can make very modest investments and have a small inventory of wells the former.

Our operationally efficient and friendly from a cost perspective and creates that flexibility to repeat something that I said earlier for 2025 do we maintain the inventory do we build it or do we have the option of using some of that if for some reason prices remain subdued.

The resilience and the flexibility of the range story of why we generated cash flow last year, and we will do so again in 'twenty four we fully expect.

That makes a lot of sense and I appreciate all the detail.

Hum.

You mentioned Dennis.

<unk> 2009.

They are a little over 29000 foot lateral that you keep pushing that further and further I guess.

As you do that does the infrastructure there.

Create any infrastructure requirements for longer laterals and do you see any.

Have you had any issues producing these longer laterals over the longer term.

Yes, we've actually seen good repeatable performance out of the wells no issues on the operational front from a from a I'll just say the ability to complete. These wells also production facilities at the surface Hasnt, we've upgraded some of our design over the course of time, but what we haven't done Michael is try to design them for Pete.

<unk>, so we keep the infrastructure fully utilized.

And we basically keep our cost structure as low as possible by doing. So so then we have the ability to continue to do this for quite a while so it's pretty encouraging the way we've set up the signs so keeps us from basically spending I think too much money inefficiently on the facility designed by trying to reach that peak performance out of the out of the gates knowing.

Net.

Whether it's in the months that followed were going to basically be well within the limitations of that equipment.

Yeah.

Thank you I appreciate the answers thanks.

Thanks, Michael.

Thank you and one moment as we move on to our next question.

And our next question comes from the line of Leo Mariani with Ross and Cam. Your line is open. Please go ahead.

Hi, guys wanted just to hit on a couple of the numbers here I appreciate some of the detail on the taxes and Thats always helpful for the analyst community, but just to kind of maybe done that down a little bit for me here day.

Did I hear that you guys are maybe expecting around 80% shield on your cash taxes on the federal level.

In 2024.

Youre going to be better than that.

Deferred taxes, the first layer of.

The federal NOL call it 100.

$60 million lets you offset 100% of your pre tax income and you still have the annual deductions for that year and then there is the next layer that allows you to offset up to 80% of taxable income in 2024 at the federal level I would expect mid.

Minimal taxes.

The effective tax rate, probably looks quite similar to where we were in 2023.

And for the next couple of years, you might slowly as you move into that second layer of Nols, where youre shielding.

Taxes on 80% of your income you would still have several years to work through a couple of more years in any event.

Six and probably into 2007 to dramatically reduce taxes before you start to see.

Any material sort of uptick.

Okay, that's nice to hear for sure.

And then just wanted to talk a little bit on what you guys were seeing on kind of cadence of capital in production I. Appreciate you've given that first quarter production number it sounds like it's down about 5% versus the prior quarter.

Ed mentioned that you are looking at potentially deferring some turn in lines with the weaker.

Gas prices here I'm not sure if that's a factor.

In the first quarter or maybe it's just fewer turn in lines here and perhaps some of the maintenance and then just on the Capex side, you did say with a little more front end weighted.

Any any help on that it should be like 55% in the first half just trying to get a little sense of the cadence on the production and the Capex here in the near term.

So I think a good way to think about our production is going to feel very consistent.

I'll say a normal profile to what we delivered actually last year. So you might see that character.

Move a little bit where our low point is going to be more I think looking like Q1. Instead of last year was more Q2, but if you look quarter over quarter. The profile is very consistent and so having the one frac crew again as we're kind of churning through our turn in lines Youre going to start to see that production profile names start to manifest itself through Q2.

Two three and four with the peak be clearly in Q4, as we get ready to walk into the.

The winter of 'twenty, four 'twenty, five, but it'll be real consistent with the profile that we've delivered the last couple of years. It will look kind of business as usual for us.

Okay. No. That's helpful. And then just any comment on the capital I know its front end weighted but is it significantly front end weighted or maybe just a little bit because I know you guys are talking about some of the extra capital which might happen late in the year. This year.

Yes, I would expect the capital to look again real similar to last year.

All service on a quarter over quarter basis surface costs really have moved down a little so you would expect to see I will just say mid to low single digit relief in that front, but as you look through the year or quarter over quarter capital reporting from 'twenty, three should look pretty similar to <unk>.

Okay. Thanks, guys.

Thank you.

Thank you Lee are nearing the end of today's conference we will go to the line.

Noel parks.

With Tuohy Brothers. Your line is open. Please go ahead.

Hi, good morning.

Just had a couple of things.

Touching on the service cost cycle, just now and I wonder.

If you.

This last cycle was.

It's pretty unusual with kind of everybody coming back online after COVID-19 and so I, just wondered kind of where.

Where we have some operators talking about.

Slowing their rig activity, a rig and frac activity do you have any sense of where we are it might be headed in the service cost cycle are we are we headed back to say 2019 levels do you think.

Any thoughts you have on that.

Yes, good morning, no I think I would start off by saying it's early.

It is it's tough to kind of frame I think at this point, what what the math in the calculus could really look like.

I do think that you probably heard me say this in the past with service costs have come up and I do think that this this environment that we're in could look and feel a little different than past cycles, where you have traditionally.

Say commodity prices up service costs commodity prices down service costs down I think it'll be a blend of those and I think we've already seen that through the balance of 2023, where we've seen relief in areas like tubular goods as an example, and maybe some of the other consumables that we've had and our that we utilized in other in some services, but as you.

Imagine.

The electric fracturing fleet side those those fleets are at very high utilization. So it certainly created its unique demand if you will so.

Drilling rigs, we've all coalesced to kind of a similar super spec rig configuration overall drilling long laterals across multiple basins and so thats provided even though some rigs will certainly could come out of the mix based upon some of the recent reporting I would expect there to be some relief potentially there, but it's kind of play out with some other other rig.

Potentially drop out of the mix of the next three to six months I think we look at last year as a trend it took a while for us to see some relief and it probably came more at the midyear point.

In Q1 so.

You could see some relief, but I think it's still early.

Know that as you look at our capital efficiency numbers.

And really just the overall cost per foot values that we've reported in the past because of our strong relationships and history with our service providers.

And our service partners know that we will look to basically take opportunities, where we can to work together reduce costs.

Because we know at some point in time that will probably go the other way.

Got it and.

Just thinking about the commodity price environment.

Weak winter weather and a weak heating season to do a movie we have seen before and with still.

Pretty much everyone focused on.

The uptick or I should say the step up in demand that we're going to see the next couple of years with LNG capacity.

Kind of things that we have the speeding train cut at each other where you have seasonality having its traditional effect this year, but we know that.

Theres, a big ramp up of demand coming.

Do you do you think we are we kind of getting to about last years of the last innings of having things be so heavily impacted by winter weather as far as demand.

Because it just seems like at some point and I don't know if it was really in the strip yet at some point.

This is kind of half the collide excuse me so any thoughts around that would be great.

Yeah. Good question is something we talk about as you can imagine pretty frequently here.

Here in the shop.

Thank you.

We basically have highlighted something on slide 19, we think is worth pointing out I think when you start to think about LNG demand.

It's going to be coming online through the balance of <unk>.

We know in 2028, when you look at rent Com industrial.

You look at.

Exports to Mexico have remained really resilient you start to factor all of that in plus power burn what we saw last year in my mind, a little bit of an underappreciated story on the repeatability of that as you start to see at times.

Underperformance by some of the other alternative power sources. So when you start to factor all that in we really see that you've got to get to a 126 Bcf to 125 of overall demand by 2028, and where we stand today. There is a significant delta there and so LNG is going to play a role in this but LNG is not.

Going to be the only factor as you start to consider demand growth on the go forward. We think infrastructure is going to need to play a really key parts of this and so whether it's advancing permit.

Amit reform or other conversations around utilization at brownfield expansions, it's going to be key to meet some of this growing demand and I'm going to touch haven't even touched on coal retirements and other sources. When you look at some of the infrastructure.

Going in from a manufacturing standpoint is associated with.

Some of the chip development and other other processes. So.

We kind of see there is a real opportunity for us to continue to move towards trading like a global commodity and less being influenced by weather alone.

Great. Thanks, a lot.

Thank you.

Yeah.

Thank you. This concludes today's question and answer session and I would like to turn the call back to Mr. Degner for his concluding remarks.

I'd like to thank everyone for joining us on the call. This morning, and walking through the results from Q4 and the plan that we have ahead. If you have any questions feel free to follow up with our Investor Relations team will see in the next quarter. Thank you.

Thank you for participating in today's conference you may now disconnect.

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 the Speakers' remarks, there will be a question and answer period at this time I would like to turn the call over to Mr. Lee Sando, Vice President Investor Relations at range Resources. Please go ahead Sir.

Thank you operator, good morning, everyone and thank you for joining ranges year end 2023 earnings call.

The speakers on today's call are Dennis Degner, Chief Executive Officer, and Mark <unk>, Chief Financial Officer.

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

May reference certain slides on the call. This morning.

You'll also find our 10-K 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.

We've also posted supplemental tables on our website.

That include realized pricing details byproduct, along with calculations of EBITDAX cash margins and other non-GAAP measures.

With that let me turn the call over to Dennis.

Thanks, Laith and thanks to all of you for joining the call today.

<unk> 2023 plan was successfully executed with a consistent theme throughout the year.

Operating safely while driving continued operational improvements.

Generating free cash flow with a peer leading capital efficiency.

And prudent allocation of that free cash flow balancing returns of capital to shareholders with further debt reduction and the long term development of our world class asset base.

I believe our fourth quarter results are a great example of continued advancement against those key objectives.

And showcase the resilience of <unk> business and the low point of the cycle.

Likewise, our year end reserves update and 16th consecutive year of positive performance revisions points of the repeatable nature of our Marcellus inventory.

As we look towards the year ahead, youll hear those themes repeated and I believe the resilience that our business has at a lower price environment will be a key differentiator for range.

Maintaining a flexible hedge program to cover fixed costs and capital commitments is clearly beneficial in periods of price weakness like we find ourselves in today.

However, the real value proposition over the long run is underpinned by ranges low sustaining capital requirements.

Our low capital intensity as the result of ranges class, leading drilling and completion costs.

Shallow base decline.

Large blocky core inventory.

And talented team.

Altogether. These results in a required reinvestment rate that is lower than any of our peers, which provides range a solid foundation for consistently generating significant free cash flow and returns to shareholders.

Further bolstering rages durability as our liquids contribution which is approximately 30% of our total production volume.

Our liquids revenue is expected to provide an uplift in natural gas prices and using today's strip pricing, it's very meaningful.

For context rages NGL barrel is currently priced around $24 per barrel using strip prices for 2024.

That is equivalent to $1 60 per Mcf premium to recent Henry hub pricing.

When we roll all of that together.

Our liquids revenue uplift, our low maintenance capital and a thoughtful hedging program you get the lowest breakeven among natural gas producers and the most resilient organic free cash flow.

As evidenced by our 2023 results and 2020 for projections.

Importantly, with our vast inventory of Derisked high quality Marcellus wells, we have the ability to compound our per share growth and free cash flow for decades to come.

Turning to our near term plans for.

For 2024 range expects to generate healthy free cash flow at strip pricing.

Laith Sando: All in capital spending between 620 $670 million.

Laith Sando: This capital plan consists of approximately $575 million to support our base level maintenance production plan similar to the past few years.

Laith Sando: Along with additional investments in three categories.

Laith Sando: First is additional acreage spending above maintenance levels, which not only allows for longer laterals, but actually offsets most of our lateral footage being turned to sales.

Laith Sando: Keeping our 28 million feet of core Marcellus inventory relatively unchanged.

Laith Sando: Second is an investment in expanding our water infrastructure, which provides a very quick payback and supports a low D&C and low cost in the future.

Laith Sando: And lastly, as flexible drilling and completion capital.

Dennis L. Degner: We had in 2023, which.

Dennis L. Degner: Which increases our year end inventory of drilled and or completed lateral footage, providing us optionality and flexibility as we evaluate the optimum setup for following years.

Dennis L. Degner: The overall number of drilling rigs and Frac crews will be the same as last year.

Dennis L. Degner: With the additional inventory generated as a result of simply retaining the equipment.

Dennis L. Degner: Which maintains operational efficiencies and provides flexibility for 2025 and beyond.

Dennis L. Degner: Given the macro backdrop.

Dennis L. Degner: Range is planning a maintenance production profile that is similar to recent years.

Dennis L. Degner: At $2, one two to $2, one six bcf equivalent per day.

Dennis L. Degner: Approximately three quarters of the lateral footage that will turn to sales. This year will be located across our wet and super rich acreage positions, providing the added benefit of our NGL uplift to overall cash flow and price realizations.

Dennis L. Degner: With the remainder of our program focused in our dry gas footprint.

Dennis L. Degner: Our operational cadence for 2024 will consist of two horizontal drilling rigs operating throughout the year <unk>.

Dennis L. Degner: Resulting in a total combined footage of approximately 750000 lateral feet being drilled.

Dennis L. Degner: Or about 100000 feet more than what we will turn to sales.

Dennis L. Degner: 2024 completions will be executed utilizing a single new electric fracturing fleet operating through the year as well.

Michael Dugan Kelly: Consistent with our maintenance production program approximately 640000 lateral feet from 15, New wells is expected to go into production in 2024.

Dennis L. Degner: With more than half of the new wells being drilled developed on pads with existing production.

Dennis L. Degner: Returning to pads with existing production has been a repeatable part of the range story for many years and supports both our capital and operational efficiency.

Dennis L. Degner: First quarter production is expected to be around two one bcf equivalent per day before building into the second half of the year.

Dennis L. Degner: Our operational review for the past year showcased a continued theme of execution excellence that starts with our drilling highlights.

Dennis L. Degner: 2023 saw several new efficiency records set for the program while drilling a total combined lateral footage of nearly 700000 feet.

Dennis L. Degner: The team managed to drill eight of the top 15 longest laterals and ranges program history, with 40% exceeding 15000 feet laterally.

Dennis L. Degner: Four of the wells had a lateral lengths greater than 20000 feet with the longest two laterals extending for miles.

Dennis L. Degner: Our large contiguous acreage position affords us the ability to drill these type of long laterals, increasing efficiencies and allowing us to access more reserves from a single location.

Dennis L. Degner: All while reducing our overall footprint and consolidating infrastructure requirements.

Dennis L. Degner: In addition to the new horizontal length records set by the team. We also set new benchmark rates for daily drilled footage.

Dennis L. Degner: The average daily lateral footage drilled in 2023 was more than 4600 feet per day.

Dennis L. Degner: A step change increase of 38% over the previous year.

Dennis L. Degner: With the fastest drilling day exceeding 70 450 feet drilled in a 24 hour period.

Dennis L. Degner: The efficiency gains, we see from longer laterals and faster daily drilling rates are key to the program's success.

Dennis L. Degner: But equally important was that the team managed to simultaneously improve its pinpoint accuracy when Enzo.

Dennis L. Degner: Over the years, our drilling of Geoscience teams have set an extremely precise standard for our horizontal targets.