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Range Resources Again Cuts 2015 Spending on Commodity Price Outlook

In a move to further protect its balance sheet from eroding commodity prices, Range Resources Corp. has cut its previously announced spending plans for this year from $1.3 billion to $870 million.

When it announced 2015 capital expenditures in December the company put forth a plan to reduce spending 18% from last year's $1.52 billion. Range said it would rely on longer laterals, better targeting and improved completions to drive-up production 20-25% and keep spending mostly flat (see Shale Daily, Dec. 15, 2014)

Late Thursday, the company revised its outlook and said the initial budget did not include reductions in service costs. Range is still targeting the low end of its production growth target of 20%.

"The 12-month strip was at $3.60/MMBtu...when [Range] released initial guidance," said analysts at Wells Fargo Securities Inc. "Winter weather has engendered a bounce off of recent lows and the strip now stands at $3.16/MMBtu. So, from our view, it makes sense for the company to high-grade activity given the absolute level of gas prices in the region."

Range, one of the leading operators in the Marcellus Shale, where the company produced roughly 139 Bcf through the first six months of 2014 (1H2014), still plans to dedicate nearly 95% of its budget this year to the Marcellus. It is also worth noting, especially given oil's steep decline in recent months, that Range is one of the leading condensate producers in the Marcellus.

State records show that of the 1.8 million bbl of condensate produced in Pennsylvania through 1H2014, Range accounted for 1.7 million bbl of that total (see Shale Daily, Sept. 19, 2014).

"I believe there are three essential components to be successful in this commodity price environment: a large, high-quality asset base, a very low cost structure and a strong financial position," said CEO Jeff Ventura. "The time and effort that Range spent in identifying and capturing one of the largest acreage positions in the core of the Marcellus with three stacked reservoirs and low development costs, gives Range a distinct competitive advantage in this period of low commodity prices, and we will continue to adapt and take advantage of opportunities as commodity markets change."

Range also said it expects its 2014 exit rate to be 1.16 Bcfe/d, a 24% increase from the previous year, once its audit is complete. Fourth quarter production, however, came in at 1.27 Bcfe/d, or about 80 MMcfe/d lower than the company had guided for. The drop was driven by construction delays on several compressor start-ups during the quarter that are now expected to be online by the end of next month.

Range also noted that Sunoco Logistics Partners LP's Mariner East propane pipeline in Pennsylvania was commissioned earlier than expected. As a result, Range was forced to deliver 133,000 bbl of propane for line fill, which is counted as inventory rather than sales.

The company also said that it had booked 10.3 Tcfe of proved reserves at year-end, up 26% from 2013.

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