Range Resources Corp. is taking a hard look at its portfolio as it pursues multiple asset sales to help delever its balance sheet, with properties being marketed in northeast Pennsylvania and the Midcontinent. Management also has not ruled out unloading some core inventory that isn’t in the development plans anytime soon.
At the end of the first quarter, Range had outstanding debt of $4.1 billion, including $2.9 billion in senior notes, $1.2 billion in bank debt and $49 million in senior subordinated notes.
“Our plan is to continue the process of high-grading our portfolio and accelerate the deleveraging process by targeting noncore asset sales and the thoughtful monetization of under-appreciated inventory in our portfolio,” CEO Jeff Ventura told financial analysts on Thursday during a call to discuss first quarter earnings. “We currently have processes underway, pursuing various transactions.”
The company continues to lean on its Appalachian assets, primarily those in southwest Pennsylvania. Range produced 2.188 Bcfe/d during the first quarter, just above guidance for the period. The Appalachian division accounted for 1.809 Bcfe/d of the total, a 20% increase from the year-ago period. The northeast Marcellus volumes declined by 20%, while those in its southwest area increased 25% year/year.
Range put investors on edge earlier this year when it said poor results in North Louisiana’s Cotton Valley Sands Terryville Complex would find it scaling back in the play. The North Louisiana division produced 366 MMcfe/d in the first quarter, or 8% less than in the year-ago period. However, management sounded a more optimistic tone about the play during the conference call.
Operations Senior Vice President Dennis Degner, who took over for COO Ray Walker after he retired earlier this month, said Range has “high hopes” that its North Louisiana operations team can build on an improvement in results late last year.
“Our first quarter Terryville well results are early, but as we look at the normalized type curve, the new wells are producing at, or above, their forecast due to well placement and improved completion design,” Degner said. “As we look at both historical and recent well results, fluid intensity is proving to be a key driver in our Lower Cotton Valley performance. The technical work by our North Louisiana team is ongoing, but the effort is translating into an improved completion design for the 2018 plan.”
Range acquired the Terryville assets in a $4.4 billion deal in 2016 when it took over Memorial Resource Development Corp. The move was aimed at giving the company more optionality and a footprint on the Gulf Coast.
But the slow pace of the Gulf Coast program has kept the focus on Appalachia. Range drilled two of its longest laterals there to date during the first quarter at 18,129 feet and 17,875 feet. The company plans to share results from those wells soon.
Ventura said if the wells produce estimated ultimate recoveries that are in line with the company's type curves, then extended laterals would improve Range’s normalized well costs and returns by 17%.
The Leach and Rayne Xpress projects came online for the company during the first quarter. Management also expects the second and final phase of the Rover Pipeline to come online sometime in 2Q2018. While Range plans to ramp volumes throughout the year to fill its capacity on the system, Ventura said the project would immediately allow it to move about 130 MMcf/d from local Appalachian markets to premium priced outlets on the Gulf Coast and in the Midwest.
Range is also an anchor shipper on Mariner East 1, which moves natural gas liquids (NGL). It was shut down by Pennsylvania regulators during the first quarter after three sinkholes formed near it in the southeast part of the state. The pipeline remains offline, and Ventura said the outage has created “operational challenges.” Still, it was able to maintain NGL production, with an increase to 103,000 b/d in 1Q2018 from 94,853 b/d in 1Q2017.
Range’s average realized prices, including hedges, were $3.58/Mcfe during the first quarter, a 12% increase from the year-ago period. Revenues dropped 4% year/year to $743 million on an accounting method change.
Range reported net income of $49.2 million (20 cents/share) for the first quarter, compared with net income of $170.1 million (69 cents) in 1Q2017.