Q4 2024 Range Resources Corp Earnings Call
Okay.
Welcome to the range resources fourth quarter 2024 earnings conference call all lines have been placed on mute to prevent any background noise state.
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'll be a question and answer period.
Speaker Change: At this time I would like to turn the call over to Mr. Sandell, The excuse me SVP Investor Relations at range resources. Please go ahead Sir.
Speaker Change: Thank you operator.
Speaker Change: Good morning, everyone and thank you for joining range at year end 2024 earnings call.
Speaker Change: Speakers on today's call are Dennis Degner, Chief Executive Officer, and Mark <unk>, Chief Financial Officer.
Speaker Change: Hopefully you've had a chance to review the press release and updated Investor presentation that we posted on our website.
Speaker Change: We may reference certain slides on the call. This morning.
Speaker Change: Also find our 10-K on the ranges website under the investors tab.
Speaker Change: You can access it using the Sec's Edgar system.
Speaker Change: 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.
Speaker Change: We've also posted supplemental tables on our website that include realized pricing details by product along with calculations of EBITDAX cash margins and other non-GAAP measures.
Dennis: With that let me turn the call over to Dennis.
Dennis: Thanks, Laith and thanks to all of you for joining the call today.
Dennis: In the fourth quarter range continued its steady progress on key themes that we have discussed over the past year.
Dennis: We completed the operational programs safely efficiently and within budget, while generating free cash flow and investing in the long term development of our world class asset base.
Dennis: <unk> ability to generate free cash flow a trough level natural gas prices in 2024 allowed us to repurchase shares district.
Dennis: Distribute dividends.
Dennis: Our balance sheet targets, all while making counter cyclical capital investments that support the multi year plans will discuss here today.
Dennis: I believe that range is 2024 results are a testament to the resilience of our business and the financial flexibility we've created over the last several years.
Dennis: Range has low capital intensity as a key component of our through cycle profitability and is the result of ranges class, leading drilling and completion costs.
Dennis: Shallow base decline.
Dennis: Large blocky core inventory.
Dennis: And talented team.
Dennis: Another key component of ranges resilience is the diversity of our production stream.
Dennis: And the value of ranges liquids business was on display once again in 2024.
Dennis: Our ability to market ethane propane and butane into the international market drove the highest NGL premiums in company history.
Dennis: And we expect premiums versus the Mont Belvieu index once again in 2025.
Dennis: Looking at the entire production makeup range saw an aggregate unhedged price realization of $2 76 per Mcf for the year.
Dennis: Which is a 49% premium over Henry hub natural gas and a clear differentiator versus purely dry gas producers.
Dennis: When you combine our efficient operations low capital intensity and liquids revenue uplift the output was another quarter and another year of positive free cash flow despite challenging natural gas prices.
Dennis: Before diving into range as 2025 plans and the three year outlook, we announced I want to briefly touch on some of our results for 2024.
Dennis: For 2024 range ran two rigs and one completion crew driving capital investments of $654 million while generating.
Dennis: <unk> production for the year at approximately $2, one eight bcf equivalent per day.
Dennis: This production level was above guidance and as the result of strong well performance and continued optimization of gathering and compression infrastructure that was mentioned on recent earnings calls.
Dennis: This past year showcase to continued theme of operational excellence.
Dennis: Drilling saw several new efficiency record set for the program.
Dennis: While drilling a total combined lateral footage of over 800000 feet.
Dennis: For context maintenance production requires approximately 600000 lateral feet.
Dennis: So the 800000 plus feet from drilling points to the momentum range has in the program for future periods.
Dennis: For the year the team drilled 59 laterals with an average horizontal length over 14000 feet.
Dennis: Our large contiguous acreage position affords us the ability to drill these types of long laterals, increasing efficiencies and allowing us to access more reserves from a single location.
Dennis: All while reducing our overall footprint and consolidating infrastructure requirements.
Dennis: Completions also saw continued efficiency gains and strong safety performance from the electric fracturing fleet, we picked up at the start of 2024, but the team completing 3300 stages for the year and.
Dennis: And underpinned by a 6% increase in Frac stages per day versus the previous record set in 2023.
Dennis: Now turning to our plans for 2025.
Dennis: Consistent with our 2024 operational plan, we project to run an efficient two drilling rig and one Frac crew program for the year ahead.
Dennis: This drives an all in capital budget of $650 million to $690 million.
Dennis: Which consist of the following.
Dennis: Approximately $530 million of all in maintenance capital, including maintenance land and facilities.
Dennis: An incremental $70 million to $100 million of drilling and completions capital that will support future growth.
Dennis: Up to $30 million for targeted acreage that supports increased lateral lengths and offsets our lateral footage being turned to sales during the year.
Dennis: All while keeping our 28 million feet of Marcellus inventory relatively unchanged.
Dennis: And lastly.
Dennis: Approximately $20 million to $30 million for pneumatic devices and production facility upgrades to further reduce emissions.
Dennis: This is part of an estimated $50 million to $60 million project with $10 million already completed in 2024.
Dennis: This capital plan will result in modest production growth in 2025% to approximately $2 two bcf per day, while building additional in process inventory for increased growth capacity in 2026 and 2027.
Dennis: We expect first half of the year production to be slightly down before increasing into the second half of the year and carrying into 2026.
Dennis: Looking beyond 2025, we are planning to add approximately 400 million cubic foot equivalent of daily production over the three years.
Dennis: This will put 2027 annual production at approximately two six Bcf per day, but the capital required to reach this level of production at $650 million to $700 million per year.
Dennis: This should sound familiar to our investors as it approximates the two rig and one completion crew program. We ran in 2024 and plan to run again in 2025.
Dennis: Importantly, our production plan over the next three years will utilize incremental processing capacity at the MPLX Harmon Creek facility.
Dennis: Feed directly into natural gas transportation capacity, we have secured to the Midwest and Gulf coast regions.
Dennis: Range will also be sending incremental NGL production to our new East Coast terminal that is expected to generate the same export premiums that have benefited rates shareholders for many years.
Dennis: Over the three year period ranges reinvestment rate is expected to remain well below 50% and a $3 75 natural gas price level is.
Dennis: Allowing for increasing returns of capital, while thoughtfully growing the business into known end markets.
Dennis: And at current strip pricing the reinvestment rate would clearly be even lower.
Dennis: The resulting 19% increase in production over the three years will modestly improve margins as certain fixed costs improve on a per mcf basis.
Dennis: Further strengthening ranges breakeven to approximately $2 for Nymex natural gas.
Dennis: At the end of the three year period. We also expect to have maintained our 30 plus years of high quality Marcellus inventory with modest land spending in line with recent years.
Dennis: Having decades of inventory will support additional growth as it is called for.
Dennis: Alternatively at the end of this production profile range could maintain two six bcf per day of production with approximately $570 million of annual drilling and completions capital.
Dennis: Equivalent of only 60 per Mcf.
Dennis: This required maintenance capital is an improvement versus prior disclosures and as the result of continued strong well performance operational efficiencies and continued optimization of gathering and compression infrastructure.
Dennis: We believe this robust inventory and relatively low capital intensity provide range of differentiated foundation for generating through cycle returns for our investors.
Dennis: I'll now turn it over to Mark to discuss the financials.
Mark: Thanks Dennis.
Mark: 2024 as in years past highlighted the strength of <unk> business.
Mark: Throughout business cycles, we intend to generate free cash flow prudently invest in the business and return capital to shareholders.
Mark: Despite low commodity prices in 2024 range accomplished just that.
Free cash flow.
Mark: <unk> investments.
Mark: And returns of capital to shareholders.
Mark: Additionally, our prudent investments, we're not constrained by cash flow such that we were only able to simply maintain the business.
Mark: But instead, we have positioned the company to strategically take advantage of demand growth.
Mark: To recap range.
Mark: <unk> paid $77 million in dividends.
Mark: Invested $65 million in share repurchases at prices well below our view of long term value and.
Mark: And reduced net debt by $172 million, while investing in operations.
Mark: <unk> generated $453 million in free cash flow that made those capital allocation decisions possible executing an operational plan that stands in stark contrast to many industry peers.
Mark: For upstream producers quality assets with low full cycle cost the ability to reach a diverse set of customers with a variety of price points.
Mark: And a rock solid balance sheet to provide flexibility for all necessary to consistently create value.
Mark: As we sit here in early 2025 with an efficient plan to modestly grow production. We are also carefully positioning the business for evolving domestic and international demand for natural gas and natural gas liquids.
Mark: In the past we have stated that we wanted line of sight deliver ability to growing demand before we would grow production.
Mark: As incremental demand is materializing today range is positioned with its infrastructure and inventory to do just that as a reliable long term energy supplier that generates strong returns from our resilient business.
Mark: Over the past three years range has reduced net debt by over $1 3 billion.
Mark: While also returning $678 million to shareholders in the form of share repurchases and dividends.
Mark: In total that is more than $2 billion in capital returned to stakeholders.
Mark: With the balance sheet and our target range, we have increasing flexibility to exercise opportunistic use of the $1 billion available under our existing share repurchase plan.
Mark: In addition.
Mark: The fixed dividend is something that we expect over time to grow slowly but steadily.
Mark: It's our expectation to increase the quarterly dividend by a penny per share or 12, 5%, but the next announcement.
Mark: Here's a key message we intend to deliver today.
Mark: We can thoughtfully grow ranges business in order to increase returns of capital to shareholders. A goal that is underpinned by quality long duration assets and a strong balance sheet.
Mark: With perhaps the lowest decline rate of comparable companies.
Mark: <unk> capital efficiency stands out in terms of cost per Mcf.
Mark: Full cycle breakeven costs and the required reinvestment rate of cash flow to maintain production.
Mark: As a percentage of cash flow range should regularly being near the lowest call on cash for sustaining capex.
Mark: Critical in our assessment of growth potential is our ability to sustain a low full cycle cost structure low reinvestment rate and durable high margins.
Mark: Like Dennis mentioned range could hold two six Bcf per day of production with approximately $570 million of annual drilling and completion capital or approximately <unk> 60 per Mcf.
Mark: Simply put the result of efficient production growth by range is growth in cash flow per share, which we expect to be compounded by a declining share count.
Mark: And a profitable business cash taxes are a reality.
Mark: At year end 2024 range had federal NOL carryforwards totaling $1 4 billion.
Mark: These nols will serve to reduce taxable income in coming years.
Mark: These nols can be used to reduce up to 80% of a given years federal taxable income.
Mark: In addition range had Pennsylvania state Nols of roughly $770 million.
Mark: All combined the value of range of Nols and tax planning should enhance after tax cash flows over the next two years by more than $300 million.
Mark: For several years, we have spoken about the undervalued option of growth in the range of business.
Mark: We stated that growth would be appropriate.
When we had clear line of sight and deliverability to incremental demand.
Mark: Further we explain this could be accomplished with either new transportation capacity picking up and contracted capacity or through increased in basin demand.
Mark: We believe today's announcements illustrate the physical link of range of inventory through gathering processing and long haul transport directly to growing demand centers, enabling efficient.
Mark: For growth to harvest additional value from ranges immense inventory.
Mark: The consistent capital allocation strategy carefully executed we believe has positioned range uniquely within the industry to capture significant value for our shareholders, both today and long into the future.
Dennis: Dennis back to you.
Dennis: Thanks Mark.
Speaker Change: Before moving to Q&A I'd like to congratulate our team for their accomplishments discussed today and their ongoing dedication to our continued safety performance operational improvements and progress toward our stated financial objectives.
Speaker Change: These results harvested in 2024 and across prior years have laid the foundation for our plants in the years ahead and beyond.
Speaker Change: Simply put ranges business has never been stronger having derisked, our high quality inventory measured in decades, and translated that into a business capable of generating free cash flow through cycles.
Speaker Change: With that let's open the line for questions.
Degner: Thank you Mr Degner.
Speaker Change: The question and answer session will begin now.
Speaker Change: If you would like to ask a question. Please indicate by pressing star one on your telephone if you're on a speakerphone. Please pick up your handset before asking your question. If you would like to withdraw your question Press Star one again.
Speaker Change: One moment, while we go ahead and compile the Q&A roster and our first question from today, we will be coming from the line of Scott Hannan of RBC. Your line is open.
Scott Hannan: Yes. Thanks.
Speaker Change: Morning.
Speaker Change: Taking a look at your three year outlook and your plans to grow into 2027 could you.
Speaker Change: Give us a little bit of a sense on the thought process first could have you grown.
Speaker Change: Sooner than later, you obviously had some some docs that in theory could push growth a little bit more in 'twenty five and why.
Speaker Change: Why the decision to kind of hold back for 2007 versus do it now and you know as.
Speaker Change: As you look into the 2027 outlook can you give us a sense of.
Speaker Change: Is there a mix shift between the gas and the liquids.
Speaker Change: Yes, good morning, Scott I think when you start to look at 2025, a lot of things you've heard us say in the past and Mark touched on this morning in the prepared remarks have really started to come together and inform our approach for not only this year, but then what that looks like for 2006, and 2007 and I think we really wanted to.
Speaker Change: See some clear line of sight on some of those demand growth opportunities and also have a home for the production. We know that that is in a critical.
Speaker Change: Part of the overall equation because it feeds to the top line and that is our cash flow and our cash flow goals.
Speaker Change: We're going to have over the next several years. So as you think about 2025 could there have been some utilization of the inventory generation over the past one to two years, maybe so but again, we wanted to see that clearer line of sight around those demand growth opportunities and then start to translate that into a trajectory over the following.
Speaker Change: A couple of years, but I kind of get back to something you've heard US say is we'll we're really running a lean program and it's operationally efficient with the one completion crew in the two drilling rigs and we feel like that presents a strikes that correct balance of appropriate modest healthy growth.
Speaker Change: To those that production to end markets that can utilize that that they're known in markets that we've transacted in and around for the past several decades.
Speaker Change: So again, our knowledge level is high in that space, but it also allows us to continue to grow around our efficient operational program. So we think this strikes the right balance, but the inventory will get utilized and how we see as really kind of the best trajectory over the next three years.
Speaker Change: Got it and as you look at that.
Speaker Change: Growth in the 2027, just can you give me your thoughts on do you hedge some of that to mitigate.
Speaker Change: Potential we did some price like what if prices are weak as you build into 2027 are you willing to kind of hedge into 2027 at the right prices to kind of secure.
Speaker Change: Some of that in <unk>.
Speaker Change: You evaluate.
Speaker Change: Doing.
Speaker Change: I guess, a end user kind of transactions you can kind of lock in a price.
Speaker Change: I think the answer to your question is kind of yes to all of the above one of the hallmarks of our program is flexibility that we built into it.
Speaker Change: True diversity of the outlets.
Speaker Change: Fundamentally I think it's important to keep in mind, the structural hedge hedges that are built into our business.
Speaker Change: The nature of our production with 70% gas, 30% liquids, the uplift and the resilience.
Speaker Change: Combine that with where the balance sheet is the need to hedge is simply greatly reduced what we do hedge that philosophical approach to providing some level of insurance for a steadiness to protect the balance sheet to preserve the optionality of being a bit countercyclical in order to create really outsize value.
Speaker Change: The fundamental guiding principle there. So I think the simplest answer is yes, we do tend to continue to hedge a very modest portion of our production, but we do have flexibility and I think as we look at the macro backdrop on both gas and liquids and markets to where we're going to be.
Speaker Change: Delivering this production and what that incremental demand really demand pull is we feel very good about that at the end of the day as Dennis stated free cash flow generation and growing free cash flow is the goal here. So we can adapt.
Speaker Change: The program based on macro trends that we see but we're very confident given our low breakeven low capital per unit of production of low cost per incremental production and the margin will generate off of where these molecules are being deliberate about what that path looks like.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you one moment for the next question. Please.
Speaker Change: Yes.
Speaker Change: And our next question will be coming from the line of Jake Roberts of T. P. H <unk> company. Your line is open.
Jake Roberts: Good morning.
Speaker Change: J J.
Speaker Change: Maybe starting out with the new gas takeaway agreements. So I was wondering if you could frame those relative to your current agreement and what you might see on the cost side over time as you start utilizing those and also if you.
Speaker Change: Could disclose the ultimate split between Gulf Coast, and Midwest and if there is the ability to kind of move those volumes around if necessary.
Speaker Change: Yes. Good morning, I think when you look at the transport that we have been able to.
Speaker Change: Acquire it's going to look and feel a lot like what you've seen from our current portfolio. So in a lot of ways Jake the percentages really don't move.
Speaker Change: Significantly or really materially.
Speaker Change: Versus what you've heard us talk about in the past, where essentially 80% of our guest gets out of basin total 50% gets down to the Gulf. So it's a little bit more weighted in the direction of the Midwest, but there is a significant exposure in this transportation that gets us to the Gulf, which we really like.
From a cost perspective, it's going to be right in line with what you've seen us in prior recycle prior cycles on GPT reporting so really no change from a cost structure, there, but inherently from a total perspective, we would expect to see some relief as we talked about in the prepared remarks over the course of time.
Speaker Change: As we see an efficient use of that infrastructure and also some portions of our contracts in the past that have some costs roll off over the course of time. So there is still an opportunity for us in the near term to see GTT look really consistent and in the future continue to see it actually roll off as well.
Speaker Change: I think when you look at where this transport gets to one thing that gets US excited is the storylines around the emerging demand that could exist in the Midwest, where this transport essentially terminate set so there's a real opportunity for us as you think about the utilization of it.
Speaker Change: Thanks, I appreciate the detail there and then my second question is.
Speaker Change: The multiyear outlook specifically the capital that you guys have laid out can you frame, how we should be thinking about the cadence about 675 or 2020 search in 2027, and then what exactly is falling off the program to get to the $5 70, and the longer term environment and what rig count does that contemplate.
Speaker Change: Yes, I think the way I would frame. This this morning would be capital should look really pretty consistent and I know, we framed it with some guardrails for $650 to $700 million.
Speaker Change: And I think ultimately therein lies the variation of what we think the next three years will look like as we deliver on this profile.
Speaker Change: When you start to get to 2026 and 2027, though what you start to see is some of those capital dollars on a on a I'll just say allocation basis start to get a little bit more weighted toward completing.
Speaker Change: Completions activity for that DUC inventory, that's slowly been building over 'twenty three 'twenty four and that will get built over the balance of 2025. So we will get to use that as a tailwind then for those following two years of this three year outlook that we've communicated and again the capital we'd expect to really be consistent in that $650 to 700 type level.
Speaker Change: Thank you I appreciate the time.
Speaker Change: Awesome. Thanks Jake.
Speaker Change: Thank you for a moment for the next question.
Speaker Change: And our next question will be coming from the line of Bert Brant Donna's of choice. Your line is open.
Speaker Change: Hey, Good morning, guys just wanted to start off in one of your peers made a meaningful distinction this quarter on the difference between maybe an attractive gas strip price.
Speaker Change: Versus what they were actually seeing on the supply demand side. So I'm just wondering first if it was this decision made using one or the other and then maybe when we get to early next year and you're staring down that that ramp into 'twenty. Seven are you looking at the strip price at that point or are you looking at maybe there were some hyperscale deals or maybe in basin.
Speaker Change: Demand, just which one you're looking at more.
Speaker Change: Yes, I'll start this morning on that on that question a virtuous thanks for joining the call.
Speaker Change: There is I will just say commodity price alone really wasn't the driver in this conversation as we started to formulate a three year plan and I think we touched on a couple of aspects in the prepared remarks, but really it was around our free cash flow goals and objectives over the balance of the next three year, coupled with the demand that we see we have.
Speaker Change: A site on in the transport that it gets us to the again those known in market. So when you start to look at the balance of the go forward you have seen some significant strengthening in strip pricing no doubt and it's more it's tied to a lot more than just a conversation around weather and Nat gas storage levels, which that starts to get us pretty excited it includes <unk>.
Speaker Change: LNG commissioning and the run rates and includes the NGL story for for our overall realizations and what that means from a cash flow force more.
Speaker Change: Old supplier for range. So I think as we look forward again commodity price wasn't the wasn't the biggest driver it was really our cash flow outlook and our goals and objectives around that.
Speaker Change: As we talked about earlier the ability to have that production get too.
Speaker Change: Demand centers and node in markets, we fully expect that theres going to be.
Speaker Change: I will just say power demand conversations and AI and data center type growth opportunities in basin, but that really doesn't have to be a part of the conversation today for us on this three year path because of our ability to market. This production into that known that those known markets and again on existing transport. So if other.
Speaker Change: Opportunities start to materialize then we can have an opportunity to help feed some of that growing demand either through future growth outside of what we're talking about today or it could be through existing production that is sold in basin that could get reallocated to that future growth profile.
Speaker Change: So very optimistic about the no doubt the future of natural gas prices as we start to think about quite honestly, where things have shaped up over the last several years.
Speaker Change: Got you and then the second one just is there room for external growth through maybe acquisitions in this three year outlook.
Speaker Change: Maybe you outlined this growth scenario to highlight that you don't you don't need to add any more inventory or could you may be grow and still find a way to make it accretive with an acquisition I'm, just not sure but that either or situations.
Speaker Change: Yes.
Mark: Sure. This is mark I'll jump in it.
Speaker Change: I wouldn't say necessarily it's an either or however, this organic growth is so compelling the quality and depth of our inventory as we've talked about in the past with a quality in 30 plus years.
Speaker Change: For an acquisition to make sense. It really has to make range, even better than it is today and create incremental value. So I think the phrase we've used before is that the high bar.
Speaker Change: We study the basin, we study the assets to understand geology and pipeline flows and what the potential opportunities may be.
Speaker Change: But range.
Speaker Change: Stand alone entity operating and harvesting the value of the existing inventory with the overlay of our business our contracts the marketing prowess of the team.
Speaker Change: It is a great path, so we'll be open minded but.
Speaker Change: It's challenging.
Speaker Change: Perfect just just to clarify so if you made an acquisition you would need to slow down growth or anything to adjust for that then thanks guys.
Speaker Change: That would be a hypothetical so.
Speaker Change: If that were to happen, we'd evaluate it at that time.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And the next question will be coming from the line of Kevin Mccarty of Pickering. Your line is open.
Kevin Mccarty: Hey, good morning, I appreciate the details on the multi year production and Capex plan.
Speaker Change: I Wonder if you could help help.
Speaker Change: Help us bridge the gap between the production to two Bcf a day in 2025 and $2 six and 2027 with the production ramp up at a measured pace in 2026 or will it be kind of a steeper growth in the back half of the year and any specifics on when those contracts come online.
Speaker Change: Yes, I think if you if you start to look at the production profile in 2025 I'll start there.
Speaker Change: It will look pretty similar character wise to what you've seen in the past where the front half of the year can be activity driven.
Speaker Change: Youre going to see some turn in lines start to materialize through through the back half of the year into I will just say, adding that incremental production. So it'll it'll be higher in the back half of the year, a little flatter than the front half of the year, but some of the infrastructure that is in process of being constructed and will get commissioned some of that gets commissioned in late.
Speaker Change: Spring and some of it's going to be in the in the fall time period. So as you can imagine that.
Speaker Change: That compression and gathering support for this growth profile will then start to materially move our production profile in the back half of the year and then provide momentum as we start to look into 2006 and 2007.
Speaker Change: The transport and the processing at the MPLX facility that all comes together in 2026. So again further supporting that momentum that we talked about for the production growth in 2016 into 2007, so it will be and I'll, just say, a slow and steady incremental increase across that.
Speaker Change: Back in 24 months.
Speaker Change: But as we talked about also a little bit earlier, you'll see some of the capital then start to get distributed are weighted more towards the completion side to utilize that DUC inventory thats be ratably built over the balance of the last few years and this year. So it'll just be it'll look smooth and steady I think from a capital standpoint, an activity basis, where it will look like two rigs in.
Speaker Change: One frac crew that Youll see a little more completion activity start to materialize and get into the program as you see this infrastructure reach commissioning phase.
Speaker Change: Got it I appreciate those details and then you touched a little bit about the margin expansion on the prepared remarks, but I was curious if you had any more particular details on the contracts.
Speaker Change: You get better margins on the extra gas and Ngls.
Speaker Change: <unk> and into 2027, or maybe where do you see those breakeven.
Speaker Change: I think all in as we pointed to in the materials at $2 type of breakeven.
Speaker Change: When you factor in the deliverability of all of our production with the uplift from Ngls and so forth that $2 is a decent frame of reference for breakeven.
Speaker Change: Far as driving down fixed costs be it direct.
Speaker Change: Direct operating costs be it some elements of the G. PMT G&A continuing to drive down interest expense as we pay off debt. There is theres pennies here and a penny there across.
Speaker Change: There are a variety of discussions on the marketing side and what those contracts look like so as we have a long history of doing long term contracts with partners domestically and internationally those margins.
Speaker Change: Can be impacted simply by long term relationships in the creative ability that we've brought to pricing structures in the past so it's.
Speaker Change: It's going to be a variety of all of the above in terms of continuing to control costs prudently and hang on to durable margin and expand that margin over the.
Speaker Change: The next several years as we see this demand come online.
Speaker Change: Thank you.
Kevin Mccarty: Thank you Kevin.
Kevin Mccarty: Thank you one moment for the next question.
Speaker Change: And our next question will be coming from the line of John <unk> of Texas Capital. Your line is open.
John: Hey, good morning, all and congrats on a strong year end.
Speaker Change: For my first question you noted that you have secured additional transport processing and export capacity to support your planned production profile.
Speaker Change: Is the right way to think about growth beyond that two six Bcf a day level post 2027, requiring additional transport capacity or incremental in basin demand to support it.
Speaker Change: And then perhaps if you could also provide some color on the opportunity set to secure additional on.
Speaker Change: Contracted takeaway thanks.
Speaker Change: Yes. Good question. This morning, John and thanks for joining US I think when you start to think about what's beyond 2027, I think it in a lot of ways, we can be patient and thats really whats happened over the balance of the last couple of years and there could be opportunities for us to take on transport that goes under utilized by others.
Speaker Change: In the future as well.
Speaker Change: It's hard to have line of sight on what the volume of that could look like today, but I think when you start to really look at what inventory exhaustion and the role that could play for basin producers and the competition for capital allocation within their given portfolios versus range.
Speaker Change: You certainly heard Mark touched on it a couple of minutes ago, I mean, 30, plus years of inventory in the Marcellus alone really affords us a lot of opportunity to grow the company as demand continues to materialize and we can be patient and look to add transportation.
As it comes available in the future or.
Speaker Change: We've touched on in prior calls in today to some degree what future opportunities at a regional or in basin materialize over the next few years. If you look at the AI and data center forecasting numbers Theres a lot of numbers floating around but.
Speaker Change: Ultimately if you look at the forecast from PJM here recently, that's been increased yet again ultimately you are talking about if natural gas plays it's lion's share of supplying a consistent with historical supply percentages that power generation growth Youre talking about the opportunity for another four Bcf a day.
Speaker Change: Hey, that's something that range to play a part in as an example, so again I'll underline this with the conversation around we have the opportunity to be patient and see what materializes. It could be a combination of holding production flat beyond that it could be more growth with filling demand that contingent continues to materialize either in our backyard where are.
Speaker Change: Assets are or in other markets on transport that those underutilized by others.
Speaker Change: Terrific color.
Speaker Change: As my follow up you highlighted how maintenance D&C continues to trend lower decrease in around $50 million. This year versus last could you help us understand the drivers of those savings and tacking on to that what additional levers do you have to continue to drive that down over time.
Speaker Change: Yes, I think the first place I would start is the team has continued to just exceed expectations around long lateral development and the efficiencies that you've captured there I could spend the whole earnings call probably talking about some of those results alone, but ultimately if you look over the past couple of years.
Speaker Change: <unk> seen double digit percentage increases in our drilling efficiencies.
Speaker Change: Set several records in the program and so I think when I start thinking about what the future is going to look like I would expect us to continue to chip away at further improvements in our long lateral development and the efficiencies there and that translates into a lower D&C cost per foot or the potential for that now.
Speaker Change: The flip side of that is as you also have then the challenge of a.
Speaker Change: Pad site that was at the beginning of the year. Following program year gets pulled into your current program here and so that will result in us thinking about how that translates into production growth.
Speaker Change: Over the balance of the three to five years as we start to look out or does that allow us to be more efficient and pulled down capital on a given program years. So.
Speaker Change: But our drilling and completion efficiencies have just really been great I think the other areas as we've seen efficiency improvements we've returned to pad sites with existing facilities and that's allowed us to re utilize roads and infrastructure all of that translates into lower cost we look back in our operational performance.
Speaker Change: And Rudolf Nonproductive time, that's a big significant portion of this and so when you have a large contiguous acreage position that we have and I know, it's something we talk about often.
Speaker Change: But the reality is it does translate into the numbers, we harvest in the results that we communicated on a quarterly basis and we would further expect that to see improvement as we go quarter after quarter and year after year in the future.
Speaker Change: Thanks, guys.
Speaker Change: Thank you John.
Speaker Change: Thank you, we'll miss it the next question please.
Speaker Change: And the next question will be coming from the line of Michael <unk>.
Speaker Change: <unk>.
Speaker Change: Of Stephens. Your line is now open.
Speaker Change: Good morning, everybody.
Speaker Change: Obviously your.
Speaker Change: Good morning, pretty bullish on both net gas and NGL demand growth is one or the other.
Speaker Change: Werent to materialize like you think.
Speaker Change: Can you talk to your ability to shift the production mix to respond or is that fairly limited.
Speaker Change: Yes, I think if you good morning, Michael I think if you look at how we balance the activity over the last several years from a a well mix standpoint, it could look a really similar to on the go forward. So we typically been somewhere in the 70% to 80% on the Processible gas.
Speaker Change: And then ultimately 20% to 30% on the dry gas side, but we've always led some flexibility within the program to allocate capital from one side of our asset base to the other so we think that affords us some good optionality, but the other part of this is we also it can be flexible in how we utilize in basin gas.
Speaker Change: To basically utilize the transport that we've committed to coupled with the processing and again still harvesting that NGL uplift I think when you have heard Allen talk about it in the past, but with all of the PVH facilities that had been commissioned over the past 24 months and those that are remaining plus the steam crackers in the in the year or two.
Speaker Change: Head.
Speaker Change: The vessels that are getting constructed there is a real momentum around this NGL side that we feel strongly there is the support there for the future of this profile and so it's hard for us to see the proverbial what breaks down if one of these doesn't materialize, especially when you couple it with all of the net gas demand conversation. So we do have flexibility in the pro.
Speaker Change: Graham.
Speaker Change: We can change the growth profile if it were required.
Speaker Change: While still utilizing this infrastructure on the wet gas side. We just don't think that's going to be required when you start to look at all the other details.
Speaker Change: Got it.
Speaker Change: Obviously, your net gas outlooks heavily dependent upon LNG demand growth there has been some split views there wanted to get your.
Speaker Change: View on.
Speaker Change: So I'm, saying that.
Speaker Change: LNG market could be oversupplied with all the supply that's coming online next few years. So.
Speaker Change: I wanted to see if you could speak to the demand side for LNG over the next few years.
Speaker Change: Yes, I'll kick this one off and then hand, it off with a more detailed macro thoughts too Alan but I think what we have tried to be careful as we articulate the range story is diversification LNG as a part of the story, but so with power so.
Speaker Change: Reindustrialization in the Midwest.
Speaker Change: Our Ngls in those end markets, so certainly NGL.
Speaker Change: The LNG story rather.
Speaker Change: The biggest piece affecting U S production, but.
Speaker Change: With the diversification of our ultimate end of sales points.
Speaker Change: It's a linkage to a number of different economic drivers so that risk of an oversupplied global market. While there is obviously potential commodity business is a cyclical commodity business for that to occur that does not represent two significant risk to our business profile.
Speaker Change: Again, it's the production mix of Ngls with our gas are our domestic sales.
Speaker Change: And Midwest sales and sales into Canada sales in the Gulf Coast, petrochemical and industrial base load as well as just power demand. So it's in all of the above for lack of a better term, but if you want to add anything on the LNG side as well.
Speaker Change: I would just add that for.
Speaker Change: For 24, I think we averaged around 13 Bcf a day.
Speaker Change: LNG demand out of the U S.
Speaker Change: And right now with line of sight coming on just over the next couple of years.
Speaker Change: It's going to have this up to like 26 Bcf a day by 2028, and that's all backed by existing contracts.
Speaker Change: The current administration is supporting.
Speaker Change: Fast tracking or approvals of projects that we're not even talking about here yet.
Speaker Change: And again these are backed by international demand and contracted tons.
So we feel pretty strongly around that additionally, we've got.
Speaker Change: LNG, Canada that starting up soon and that will add another two bcf a day of demand and it wasn't in that 26 referencing.
Speaker Change: As well as just expansions of the pipeline to Mexico, adding another.
Speaker Change: One five Bcf a day, so again just in the near term.
Speaker Change: We have contracts supporting strong demand.
Speaker Change: I don't think gives us any pause.
Speaker Change: I appreciate the color guys. Thank you.
Michael: Hey, Michael.
Michael: Thank you one moment please.
Speaker Change: And our next question will come from the line of Neil Mehta.
Neil Mehta: <unk> Goldman Sachs. Your line is open.
Neil Mehta: Hey, Thanks, so much Dennis Mark and team I guess the first question is just around the NGL side. We spent a lot of time talking about dry gas, but one of the hallmarks of your 2024 realization. We just how good your differential was in Ngls I think it was <unk> 33.
Neil Mehta: Okay.
How do you think about that premium.
Neil Mehta: As we work our way through 2025.
Neil Mehta: And you talked about a pretty big Green tier zero to $1 25, why would be sequentially lower in <unk>.
Neil Mehta: Is there a potential for outperformance once again.
Neil Mehta: Yes. Thanks, Neil this is Alan good question.
Neil Mehta: Mike talked about Ngls or at least I do.
Neil Mehta: Premium last year really was fantastic and I think it goes back to just.
Neil Mehta: Our activity in the international markets that started way back in 2016, when we were part of the first ever export of ethane.
Neil Mehta: Okay.
Neil Mehta: Yes.
Neil Mehta: The contracts internationally some of them are priced on international indices.
Neil Mehta: Some of them are just price on premiums to domestic indices and they really do make a difference in our returns and as you saw last year overall dock capacity in the U S on ethane as well as the LPG was relatively tight.
Neil Mehta: Supply demand if anything gets type value that goes up in value at the dock went up as a result of that where we are today, we have quite a bit of new capacity coming online.
Neil Mehta: For export docks for both ethane and LPG in fact, almost a doubling.
Neil Mehta: The export capacity on ethane, we're adding about 400000 barrels per day of export dock capacity over the next two years.
Neil Mehta: Roughly call. It 500, a day of propane or LPG export capacity coming on over the next couple of years and what that will do is it really tighten up the U S fundamentals.
Neil Mehta: Because that's going to be a huge pull on.
Neil Mehta: U S supply of Ngls, So I think when that happens we will get the benefit of the higher overall domestic prices.
Neil Mehta: But it could actually result in a tighter arm and maybe a little bit less of a premium on the international So we win actually typically both ways when when things are tight internationally, we get the benefit from the higher premiums when things are tight domestically, we get the benefit from the higher base low prices in the domestic market.
Neil Mehta: That's really helpful. So thank you and then split flipping back to the gas side I guess.
Speaker Change: Range has announcement today. It does represent I think one of the first large producers to talk about.
Speaker Change: Shifting back from maintenance to a growth mode and justified certainly by very strong demand fundamentals.
Speaker Change: As you think about this do you see the risk.
Speaker Change: The industry over response.
Speaker Change: What is a strong demand environment, but.
Speaker Change: <unk> TCE range is uniquely positioned to grow at this level.
Speaker Change: Does your low cost good inventory and takeaway.
Speaker Change: The Genesis of the question is how many times over the last 20 years that we've seen strong demand fundamentals that get swamped by an oversupply of response.
Speaker Change: Good morning meal that that is the age old problem of many of the commodity industry I would say that range is in a somewhat special and unique position given the lifespan of our inventory we were able to underwrite the transport to reach these.
Speaker Change: Growing demand and markets, so while aggregate takeaway capacity out of Appalachia has not changed materially.
Speaker Change: Got it to change material in the next several years, we have taken additional capacity on ranges book to move those molecules.
Speaker Change: Into known demand growth. So while range is growing our concerns around the broader market growing and outstripping demand is really pretty moderated the trends you've seen bid rational economic decision, making based on the relative consolidation of the industry wallet still not.
Speaker Change: Totally consolidated there has been quite a bit of discipline instilled across the industry to be rational allocate capital to drive free cash flow. Another element that is different that allowance range to be opportunistic here is the fact that we're at or below 50% reinvestment rate at $3 75.
Speaker Change: We are the only company.
Speaker Change: At or below 50% at 375 other.
Speaker Change: Other basins that are going to be the primary sources of growth.
Speaker Change: Require $4.
Speaker Change: Just to hit 70% reinvestment rates to supply the growth to LNG.
Speaker Change: So.
Speaker Change: Our concern is.
Speaker Change: The minimal about the industry being irrational in growing production for production sake as we highlighted as we began this discussion today and Dennis kicked it off our priority is free cash flow and I think that that basic principle permits the industry today and we collectively will be just rational business people trying to drive returns for our shareholders.
Speaker Change: Thanks, Tim.
Tim: Thanks Neil.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And our next question will be coming from the line of Betty Jang of Barclays. Your line is open.
Speaker Change: Good morning.
Speaker Change: Wanted to ask about <unk>.
Speaker Change: Okay.
Speaker Change: The implied improvement in capital efficiency, that's showing that three year outlook.
Speaker Change: If I look at what you guys seeing on 2027 maintenance capital, it's $570 million you maintain two six bcf per.
Speaker Change: And then in 2025, youre doing that $500 million too.
Speaker Change: Two two so copper.
Capital is going up less than production.
Speaker Change: Wondering if there is any.
Speaker Change: Imply like improvement in well costs or.
Drew: Thanks drew.
Speaker Change: Drivers here a bit.
Speaker Change: Kind of.
Speaker Change: <unk> got our capital efficiency launched harp versus today.
Speaker Change: Yes, good morning, <unk> I would tell you what's really embedded in that outlook of capital spend as you start to get to that $570 million. In 2027 time period is it really is on the back of our continued efficiencies of our operation, but also in extending lateral lengths again.
Speaker Change: Touched on that a lot, but it's on the back of our ability with our contiguous acreage position to extend laterals. Some of the incremental land spend that we've talked about it on a very low level to pick up those open parcels that will again allow us to extend the lateral lengths. I think you saw that this past year, where our average drilled lateral length was 14000 feet as an example.
Speaker Change: So it's going to be supported by that but also.
Speaker Change: The other part of this is just the ability to continue to re utilized infrastructure.
Speaker Change: Again drilling those long laterals and our low base decline when you start to look at how the field continues to perform over the course of time, our assets really do have a unique.
Speaker Change: Base decline profile versus some other basins and some others in our basin and it allows us to continue to capitalize on that with a strong foundation.
Got it Thats helpful.
Speaker Change: My follow up is on the DUC inventory could you help us.
Speaker Change: Perhaps quantify what is the level of DUC inventory do you expect to have by the end of this year.
Speaker Change: And what that will mean TR.
Incremental activity for that.
Speaker Change: For 2026 and 27.
Speaker Change: Sure thing when you start to look at the end of 2025, and the capital and activity program that we have in place. What we would expect is to have a DUC inventory of approximately 400000 lateral feet.
Speaker Change: Above our maintenance programs. So you are talking about around 30 wells. If you just approximate that to a 12000 foot type lateral as an example, or something comparable to what we've been drilling and completing over the last couple of years now as you start to move forward into 2026, ADC against some of the compression and gathering yet.
Speaker Change: Commissioned on the back half of this year that would then support the utilization of that DUC inventory as we start to look into 2026 and 27.
Speaker Change: No that makes sense. Thank you for that color.
Speaker Change: Thank you Ben.
Speaker Change: Thank you one moment for the next question. Please.
Speaker Change: And our next question will be coming from the line of Doug Leggate of Wolfe Research. Your line is now open.
Speaker Change: Good morning. This is John Abbott on for Doug Leggate.
Mark: Mark Our first question is for you.
Speaker Change: As for you on capital returns.
Speaker Change: I mean, youll, probably youll, probably continue to allocate capital between debt reduction and buybacks.
Speaker Change: But really want to talk more about long term dividend growth.
Speaker Change: So how do you think about.
Speaker Change: The ultimate size of the dividend burden of the firm.
Speaker Change: And then to grow that over time via buybacks you have a 30 year inventories, which is probably greater than what the market.
Speaker Change: As willing to recognize as you are basically an annuity.
Speaker Change: So how do you look to create gain greater market value by growing the dividend over time.
Speaker Change: Sure I think you are highlighting a distinction we've we've tried to make in.
Speaker Change: Hopefully we can continue to beat that drum that the value of ranges in the longevity of the story that long duration of the inventory the repeatability.
Speaker Change: And at the appropriate times when growth is appropriate investing in the business to drive incremental cash flow. So to your point returns of capital are a key part of that.
Speaker Change: Reality is we are in upstream Nat.
Patrick asked and natural gas liquids company, it's a commodity business with cycles.
Speaker Change: We are not a regulated utility and we are unlikely to be valued based on the dividend yield.
Speaker Change: The dividend yield we think is an important commitment by the business. It is an important element too.
Speaker Change: Demonstrate the durability of the story through cycles to payout a steady slowly growing modest dividend.
Speaker Change: So expect or rather our intent would be to regularly but very radically modestly grow that dividend, where the share repurchase will be opportunistic with the lion's share of the return of capital what that means is that we would certainly hope and expect to have a declining share count where even a growing per share dividend.
Speaker Change: In the aggregate may not grow that much in the total cash call on dividend payouts.
Speaker Change: So.
Speaker Change: To say it more briefly the dividend, we expect to be a more modest piece, but.
Speaker Change: Eddie slowing slowly growing element of the return of capital program.
Speaker Change: In your remarks, it sounds like we're going to get a $300 million benefit from the Nols over the next two years.
Speaker Change: How to cash taxes.
Speaker Change: In 2027 and beyond.
Speaker Change: Yes, we would expect over the next two years at current prices to pretty much fully utilized.
Speaker Change: Those Nols, so youll move from a low very low single digit type.
Speaker Change: <unk> cash tax rate.
Speaker Change: Two in 2027 and beyond you're likely high teens, you still have IDC deductions and other tax planning options. So think.
Speaker Change: High teens cash effective tax rate 27 and beyond.
Speaker Change: Thank you very much for taking our questions. Thank.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: We will close out the Q&A. This morning, we appreciate everyone joining us for the call. This morning listening to our exciting plans of news that we've got for the next three years ahead. If you have any questions. Please follow up with our Investor Relations team as always we look forward to talking about our plans on the road in the months ahead.
We'll see you on the next call. Thanks, everyone.
Speaker Change: Thank you. This does conclude today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
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