Welcome to the Range Resources Third Quarter 2020 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. Laith Sando, Vice President Investor Relations at Range Resources. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining Range's Third Quarter Earnings Call. Speakers on today's call are Jeff Ventura, Chief Executive Officer; Dennis Degner, Chief Operating Officer; and Mark Scucchi, Chief Financial Officer. Hopefully, you've had a chance to review the press release and updated investor presentation that we've posted on our website. We also filed our 10-Q with the SEC. It's available on our website under the Investors tab, or you can access it using the SEC's EDGAR system. Please note, we'll be referencing certain non-GAAP measures on today's call. Our press release provides reconciliations of these to the most comparable GAAP figures. For additional information, we've posted supplemental tables on our website to assist in the calculation of EBITDAX, cash margins and other non-GAAP measures. With that, let me turn the call over to Jeff.

Thanks, Laith, and thanks everyone for joining us on this morning's call. As our company and our industry have matured, we are positioning Range to provide more consistent returns for shareholders by improving our cost structure, strengthening our balance sheet, operating safely and efficiently, lowering the capital intensity of our business, with the peer-leading capital and ultimately positioning the company to return capital to shareholders. The third quarter saw continued progress towards this, streamlining our business with the sale of North Louisiana, extending maturities, reducing debt and lowering our full year capital budget, as a result of efficient operations and disciplined spending. In addition to providing more consistent returns, we believe the market is also looking for companies to take a more holistic view of what sustainability means. For our industry, we believe that requires environmental leadership. On the environmental front, the natural gas industry has an advantaged position today and for the foreseeable future as the world moves towards cleaner, more efficient fuels. Within the natural gas industry, Appalachia has an advantage globally as an abundant low-cost resource with leading environmental standards, and we believe Range is best positioned within Appalachia as discussed in our most recent sustainability report. There are several highlights in the report, including our pioneering efforts on water recycling and our class-leading emissions intensity of 0.35 metric tons per million cubic feet equivalent produced, which is best-in-class amongst all E&P companies according to third party research. In addition, our target of net zero emissions by 2025 rather separates Range from other independents with respect to environmental targets and objectives. As we strive to achieve this goal, it all starts with efficient operations that reduces our environmental footprint and importantly, generates higher returns. I believe Range's peer-leading capital efficiency and maintenance capital is a key differentiator…

Thanks, Jeff. The focus of Range's 2020 operational plan is to deliver a sustainable maintenance program as efficiently as possible, and in doing so, align our annual capital spending with organic cash flow to further reduce debt. Our third quarter operational cadence, cost control and production levels remain consistent with these objectives. And lowering our capital spending by $15 million for the year speaks to the discipline and commitment of our team to achieve this. Production for the third quarter closed out at 2.2 Bcf equivalent per day, taking into account completion of the sale of our North Louisiana assets mid-quarter. Contributing to our Q3 production, include turning to sales 19 wells during the quarter, with approximately half of the lateral footage located in our dry acreage position. Production field run time exceeded our expectations along with strong well performance from both new and historical wells across Southwest Pennsylvania. Our operational program for the rest of the year will result in seven wells turning to sales in the fourth quarter, which puts us on track to achieve 67 turn-in-lines for the year and is consistent with our communicated targets. During the quarter, a combination of gas story levels and infrastructure outages across the basin created a challenging price environment for Appalachian natural gas. In response to low prices late in the quarter, Range strategically curtailed up to 210 million cubic feet per day of gross production with curtailments beginning in the second half of September and running through October. Based on significant improvements to price expected in the coming months, these curtailments are expected to be value accretive as deferred production will receive the benefit of a higher go forward commodity price. Throughout the year, managing both production and cash flow has evolved to be much more than a decision…

Thanks Dennis. As discussed so far on this call, themes of the business continue to be cost reduction, debt reduction, managing the debt maturity profile and enhancing our liquidity. These trends continued during the third quarter situating Range well for what appear to be encouraging market signs for natural gas and NGLs in the fourth quarter and the coming year. During the third quarter, Range was busy on all fronts, bringing proceeds by closing asset sales launching another divestiture marketing process improving unit costs in several lasting ways improving the capital structure by refinancing bonds and maintaining liquidity with the reaffirmation of the credit facility. These accomplishments were possible due to the focus and dedication of the Range team. Starting with the net change in debt, cash proceeds and net results for the quarter reduced debt outstanding by $136 million compared to last quarter. There were a number of transactions in this quarter that are both immediate and lasting effects strengthening Range's business. First, we closed on the North Louisiana sale for net proceeds after closing investments of approximately $220 million with the difference received as production revenue and the time after the effective date of the sale. As discussed last quarter we retained certain North Louisiana midstream obligations. Using a portion of proceeds, $28.5 million, we prepaid and reduced the retained liability of midstream obligations. The GAAP accounting valuation of future costs through the year 2030 was recorded during the quarter totaling approximately $480 million. The actual payment obligation retained by Range may be reduced through incremental development to the asset and given publicly stated objectives of the Terryville acquirer, we believe this will ultimately be the case. Additionally the contingent proceeds payable to Range of up to $90 million represents upside linked to commodity prices, the majority to…

Operator, we're happy to take questions.

Thank you, Mr. Ventura. The question-and-answer session will now begin [Operator Instructions] The first question is from Josh Silverstein of Wolfe Research. Your line is open.

Yes, thanks. Good morning, guys. Just on the subject of – good morning, just keeping on the subject of the hedges you just talked about that. You mentioned that it was strategic hedging in there but it looks like you guys pretty aggressively added hedges this go around given the rising price environment. I'm just wondering why you did it throughout the course of the year as opposed to maybe the summer months more aggressively rather than the winter?

Good morning, Josh, this is Mark. I'll lead off on this one. So as I mentioned during the scripted portion. We have kind of a glide path, a ratable rate at which we add hedges over the course of the year. It's not programmatic. It's not just where it’s adding hedges blindly. We do a lot of data analytics. There is data-driven decision-making involved in the program. We intend to hedge a significant portion every year. That's the underlying premise to protect the balance sheet and protect the business. But there is judgment based off of the data that we see. If we look back earlier in the year in the shape of the curve and the levels in the forward curve on natural gas, it was simply at levels that for the industry was unsustainable. And as we've seen, you've seen responses by producers. What looks to be rational behavior with maintenance capital now becoming the common theme and the rational decision-making by producers. So with that as prices began to re-rate into levels that Range can thrive in, we began to add more hedges just out of prudent risk management. So with that we just exercised some judgment based off data and moved a little bit more slowly than we might have in prior years. And we'll continue to take that approach to protect the balance sheet, but also to retain exposure to what looks to be the continuing improvement in structural rerating in the price curve going forward.

Got it. Okay. And then, you did on the hedging side leave yourself open on the ethane and propane side. I'm guessing maybe you're maybe a little bit more structure bullish there. Can you just walk through some of the supply-demand fundamentals that you're seeing there why not hedge into the current price environment?

Yeah. This is Alan Engberg. I'm the VP of Liquids Marketing. So I'll start off just on addressing your question about the fundamentals. So, with -- we'll start with ethane. The current fundamentals are actually quite strong on ethane. We're looking at roughly -- or close to being fully recovered in terms of the ethane that's available in the Permian and in Pad III. We have new demand that's actually coming online over the rest of this year and into next year. That's really going to force the recovery of ethane out of basins that are outside of the major demand center in the U.S. Gulf Coast. So that's actually going to move the price floor up on ethane, and we see that actually as being pretty much inevitable. So the forward curve right now on ethane, with respect to hedging, was at a level that -- in fact, is actually under, what I would call the price floor based off of a Permian price, which is a Waha gas plus some TNF. So, it just really wasn't all that attractive from a hedging perspective. So our view is that going forward, eventually the curve is going to catch up with the fundamentals and it will be much more conducive to hedging at that point. Similarly, for propane, I would say, propane during the summer, people have been looking at the stock levels. They're actually at the high-end of the five-year range; although if you look at the overall days supply, they're near the low-end of the five-year range. We actually added during the injection season, which we defined for propane, April through the end of September, we added about 42 million barrels of stocks, which is well below, what we added last year, which is around 49 million barrels. So the fundamentals for propane actually have been improving. The price, as a result, is higher -- much higher than where it was in the second quarter. It's higher than where it was last year at this time, and it's higher on a relative percentage of crude type basis. But again, we see strong international demand continuing to pull propane, and then we've got seasonal demand coming up now. So the overall view is that the forward, pricing is going better for propane as we move through the rest of the year. And again, we'll provide a better opportunity for hedging.

Yeah. And Josh, this is Dennis. Just to bolt-on to something, Alan sharing here for -- as we mentioned earlier in the prepared remarks for every dollar adjustment to our NGL component, we basically see that adding $30 million in extra cash flow for Range in 2021. So, we certainly have a view that that could be certainly accretive for us as we look into 2021 and as Alan says, once the fundamentals and the pricing starts to align.

Got it. Sorry, maybe just a quick follow-up there. Is there a price on ethane, which you guys start to take whatever you're rejecting out?

I'll jump in on that one. We look at that on a regular basis. A lot of it has to do with what kind of sales structure it is? Is it FOB? Is it -- does it involve using additional transport? So, it's difficult for us to point to an exact price, but certainly as you heard us talk about curtailments during the remarks this morning, ethane was a compelling story for us to be able to take advantage of opportunities when they do present themselves because of the relative pricing and cash flow opportunity versus natural gas in the quarter.

Okay. Thanks, guys.

Our next question comes from Holly Stewart of Scotia Howard Weil. Your line is open.

Good morning, gentlemen.

Good morning.

Good morning

Maybe just kind of starting off with the curtailment. This is probably one of the first time that we've seen Range talk about curtailments at least in a fairly material way. So, can you just maybe talk about the process? Is this just based on pricing, or has something changed in your view that made you move to curtailing production?

Yes, good morning Holly, this is Dennis. When you look at where let's just say pricing has been in-basin over the balance of September and October, it became pretty apparent that there were accretive options for us to basically move some of our production rather than maybe just call it curtail we really look at it from a production management standpoint. So, things that we considered or where we had commitments we took a look at opportunities to pull maintenance into the quarter that may be later this year when we have improved pricing environment. So, we try to structurally look at all of that plus scheduling adjustments for turning lines that could shift slightly getting out of some of the let's just say lower price environment. When you start to look at October being sub $1 and again using M2 as a bit of a proxy, September being around $1, October being $0.65, November's outlook is now in the $1.65 range. And again using that as a proxy, you can see where the framework supported us looking at curtailing some of our production where it was also commensurate in line with some potentially reduced cost and other activity. So, October was a key month. We started to see some curtailments toward the end of September as well. But when we saw improved pricing in the daily structure we certainly took advantage of those opportunities as well. So, it certainly wasn't just a flat curtailment. We wanted to look at further supporting our business objectives and the balance sheet as Mark talked about earlier.

I'd like to point out that most of our gas goes out of basin about 80% of our gas goes out of the basin.

Yes. No, that's a good point Jeff. And then maybe as a follow-on to that Mark has talked about reducing the firm commitments and as they roll off over time. I think you guys highlighted an $0.11 or so improvement in the GP&T line just over the last year or so. So maybe balancing those comments with the production shut-ins that you just did we still have very weak pricing in the basin even as I guess weather is kind of rolling in. So, how do you balance the FT rolling off with really the fact that maybe MVP is kind of the last major pipeline that we have with the fact that pricing just remains very weak. I generally talk about new the thought process. If there's a thought to keeping some of this epi as it comes due?

Yes, good series of question there Holly. So, let me break that down into a couple of pieces. So, for Range fortunately we are fully utilizing our infrastructure. So, our long-haul transport firm transport to the Gulf to the Midwest and so forth is fully utilized. We produce like Jeff said over 80% is going out of Basin. So, there's a portion that's left in basin which given that full utilization we had optionality built into our business that allowed us to selectively curtail just to optimize cash flow. And that did not leave unutilized any long-haul transport because we were talking about in-basin sales at that point. So, to your point on the firm transportation capacity we hope we have shown a schedule in prior quarters. As you roll forward through time over the next few years you do get to the maturity dates the exploration base if you will of capacity. But Range holds the option to extend those. So that represents an option to Range that we simply make the economic call on is it more economic, or the net backs better for Range to retain that and achieve a better sales price at the endpoint or at that point does there still exist and excess unutilized capacity coming out of the base and not to Range specifically just talking about the basin in total? Is there still capacity available that we could access on an interruptible basis. So, those will be decisions for each piece of capacity as they come due completely within Range's choice. So, it's a really great position to be in where we have the choice fully utilizing what we have today and then have a series of options. So, that represents potential for declining costs over time but also options to control and improve our margins. One thing I would say though is that, there is still a declining cost built into the gathering processing and transport, due to the declining gathering costs that run over time?

Yeah. Holly, this is Dennis. And just really a quick bolt-on here. When you look at just kind of the numbers of total production in Appalachia today, we see somewhere in the neighborhood of about 32 Bcf. But when you look at current takeaway capacity minus MVP, plus local demand, there's still around 3 Bcf to 4 Bcf of additional, let's just say room and capacity in totality. And that's without the MVP. When you roll the tape forward for 2021, along with us and others talking about activity of maintenance-type levels holding production flat, we really see that whether it's a discussion around basis or really just overall takeaway. We see this aligning well with us for the next 12 to 24 months. Certainly beyond that, harder to predict, but we see this actually lining with us pretty well. So MVP is there. And now you've got a couple of more Bcf. Again, we're going to have to see the -- with the backward dated strip, most likely an improvement in that structure today to support and promote growth that could build that infrastructure.

Yeah. No Thank you. That's it. Mark good point on the gathering and processing. Maybe just one other question for me and maybe this one is for, Jeff. I mean Jeff we've seen a lot of M&A. I don't want to say a lot, but you've certainly seen quite a bit of M&A kind of start to popup. I'm just curious your views on, maybe what we've seen thus far in the Appalachian Basin? And maybe where you could see Range kind of fitting into this consolidation?

Yeah. Yeah, we've seen in the industry, a lot of M&A recently. And I think you'll continue to see it. You're seeing certain transactions in Appalachia. That I think will continue as an industry, down that path, which again I think is helpful for supply-demand balance and all that type of thing. So for Range specifically, let me start, we're open to whatever is best for Range of shareholders. But to pop back out again to a high level, obviously if we're in a commodity business, in a commodity business you want to be low cost, and when you have a large inventory. And in today's environment, I think you really want to have a strong environmental track record and performance. So those are critical. And then, if you kind of zoom down the Range, I think we're very well positioned. At Range we have the best cost of drilling complete in-basin below $600 per foot. We have the lowest base decline in basin, at less than 20%, lowest maintenance capital and largest Tier 1 inventory. So when you kind of fast forward, into 2021 and 2022, I think we generate a very competitive free cash flow yield against other E&P companies. And really I think it will be competitive against other sectors as well. And importantly, if you look at our latest CSR report sustainability report that we put out in August I think we have -- what we do have according to third-party data, the lowest emissions of any oil or gas company, based on that third-party data. So for Range specifically, again, we're open to whatever is best for shareholders. You'll see us stay very, focused. Whatever we do will be in basin, we'll be deleveraging. And will be free cash flow accretive on a cash flow basis. So that's kind of how we think about it.

Great. Thank you, guys.

Thank you.

Our next question comes from Neal Dingmann of Truist Securities. Your line is open.

Good morning, Neal.

Good morning, Neal. My first part for you Dennis, my question is around that slide 15 you guys in the past have done a good job. And you talked about returning to existing pads. Just wondering, my question is, definitely you save on the infrastructure there, but are there issues such as the offset frac, shut-ins or things that present challenges, or you basically -- that just goes as part of your plan and you don't -- that's not a big deal.

Yeah. So let me start. And then, Dennis and I will kind of pad team this one. But yeah we've been returning to existing pads for a long-time. And we have and it clearly is helpful from a cost perspective. When you look at the long-term performance of the pads and the wells that we drill in those areas, they're great and there really haven't been any issues for us at all there. So it is a competitive advantage of having a big blocky position and the ability to go back. Of course it helps with extending laterals and water recycling and all those utilizing all, the existing infrastructure. But let me flip it over to Dennis, for more specifics.

Yes, Neal. Good morning. Just to really bolt-on to what Jeff said, we've been doing this for a number of years. And what we haven't seen is some of the challenges that may play some of the other basins as they start maybe talking about cube development and other creative strategies to try and offset or rest, let's just say, parent-child relationships. We just really haven't seen that on our side. And I think a good thing for us to point to is, the continual repeatability with our published type curves that we put in our slide deck. And in some cases, we've had positive revisions, especially, as it pertains to the super-rich area, where we see increases in our well productivity over the course of time, as we provide things like landing target and also our completion strategy in each one of the respective areas. So, we see this being very repeatable. We're excited about the cost and capital efficiency -- efficiencies we harvest by moving back into those pad sites, utilizing the existing infrastructure and just overall being able to also minimize our footprint. So really encouraged by the results and we're not seeing anything that would suggest a degradation in well productivity, if anything, just the opposite, very repeatable.

Got it. And then, just my follow-up, just probably for Jeff or Mark, is around your leverage. You're certainly making some notable progress on the pay down. But it looks like leverage still, obviously, certainly, a bit higher than some of the peers. Could you talk about -- you all have done asset sales, work interest sales, you've been kind of pretty creative on what you've done. I'm just wondering what are the thoughts, sort of, in the 2021 out there, as far as -- is it to do more similar type deals like this? Are there other types of transactions that you all kind of consider? I'm just wondering, sort of, what's on the table to continue to address this in addition to obviously the free cash flow.

Sure, Neil. It's a good question. And, obviously, something we've been very busy focusing on for two years now, reducing total debt, asset sales approaching $1.4 billion. That's down by -- from a peak to about $1.2 billion, just this year, if you add everything else, nearer-term maturities through 2024, down by about $1.2 billion, refinanced or redeemed into longer-term -- longer-term maturities. So in terms of evaluating what we need to do versus what we would like to do, we have some time, we have some flexibility to make sure we're doing things that are in the best interest of risk management for the balance sheet, but also in the best interest of shareholders in preserving that per share exposure and value to Range’s inventory. So all that having been said, it is still our target to get leverage down, to continue reducing absolute debt. Long term, the leverage target will be substantially below 2 times, much lower than that. That's where we'll get the company to and run. If we just look at what cash -- what commodity prices can do into next year, there's material deleveraging, even in the absence of an additional asset sale. That being said, we'll still continue to explore those, but it again comes down to value. So, in summary, for a long-winded answer, I would say that we'll continue to focus on reducing absolute debt and continue working in the fashion that we have for the last two years.

Really good. Thanks a lot.

Thank you.

We are nearing the end of today's conference. We'll go to Brad Heffern of RBC Capital Markets for our final question.

Hi. Good morning, everyone. Thanks for taking my questions.

Good morning.

Mark, just a sort of a bit of follow-on to the last one. How do you think about the use of cash, either towards paying down the revolver versus repurchasing debt? Obviously, you've been able to get some of the bonds at a discount, but they're back to trading close to par. So how do you think about increasing liquidity versus maybe making the well maturities a little easier?

Sure. It's a good question. The answer is it's a balance. We have ample liquidity. At quarter end, total liquidity was approximately $1.4 billion under the credit facility. So there is not a need to further expand that. We're going to be an organically funded free cash flow generating businesses. So over time you would expect the need for range and for the industry for that matter to rely and use these bank credit facilities to decline over time. So we'll use it as a tool. We use it as a tool to redeem bonds at advantageous prices and manage maturities, but we'll also just continue to push maturities out and then pay them down with cash flow and asset sales. So there's not a simple direct formulaic answer for you to that other than we have ample liquidity. We'll continue to preserve that. And then just balance cash proceeds in terms of applying them to bond maturities as they come up and/or principal under the revolver.

Okay. Thanks for that. And then just sort of an administrative question on the retained transport obligations in the Terryville. Can you just talk about how those are going to flow through going forward? Is that something where we're going to see sort of a revaluation of the balance sheet asset on a quarterly basis and it won't flow through the transport line, or will we see continued transport charges related to that?

Sure. So the liabilities that were retained just to kind of frame subject these are the processing capacity by and large unutilized in that region that we've been paying all along since the original acquisition of the Terryville asset. So with the divestiture of Terryville the utilized portion and some went with that asset. So Range is left with a reduced liability, reduced retained than what we had otherwise. So that was a benefit of the transaction in addition to bringing in cash upfront. Add to that the potential and hopefully likely potential further reducing this liability with development that's expected to occur in that asset. So, to get more direct to your question the mechanics of that. The present value of that likely liability payment over the next 10 years was recorded in a one-time I'll call the lump sum as non-cash. The recurring cash flow associated with that as a consequence will be a reduction in that liability over time as we pay it and you'll see that flow through in working capital on the cash flow statement. So the income statement impact has been taken in full. You might see some minor adjustments up and down just on variations of development activity. For example, if they accelerate development potentially see it reduced. But by and large, you will only see that in the cash flow statement going forward.

Okay. Perfect. Thank you.

Thank you.

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

I just want to thank everybody for taking time to participate in the call this morning and feel free to follow-up with additional questions with our team. Thank you.

Thank you for your participation in today's conference. You may now disconnect.