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Appalachia-Focused Range to Cut 2020 Capex by Nearly 30%
Leading Appalachian operator Range Resources Corp. plans to cut capital spending by nearly 30% this year in another sign of retrenchment in the Northeast, where natural gas producers continue to take a beating on low prices.
Range’s “all-in” capital expenditures (capex) are set at $520 million to fund a program to keep year/year production flat at 2.3 Bcfe/d. The company said late Monday 2019 capex was estimated at $728 million, or about $30 million less than the original budget because of drilling and completion efficiencies, water recycling efforts and service cost reductions.
The company also said 4Q2019 production is likely to come in at the high end of 2.33-2.35 Bcfe/d guidance. Range guided for 2.28 Bcfe/d for the full year.
While the company has assets in the Cotton Valley Sands Terryville Complex of North Louisiana, all of this year’s spending is to be directed to the Marcellus Shale in Pennsylvania. Range acquired the Louisiana assets in 2016.
Operators across Appalachia have scaled back in the face of persistently low prices and demands from investors for stronger returns. According to data compiled late last year by NGI using financial results of nine publicly traded Appalachian producers, operators on average planned to cut capex by 19% year/year in 2020, with production up by 3.6%.
Spending could be cut further if the strip were to decline. For example, Appalachian pure-play Cabot Oil & Gas Corp. issued a preliminary plan last summer to spend up to $725 million this year, but warned in October it could cut spending to $575 million if gas prices continued to retreat. Cabot had guided for an $820 million 2019 budget.
Range said it has increased the hedge position to support 2020 spending by locking in more than 1 Bcf/d, or 60%-plus of this year’s anticipated gas production, at an average price of $2.64/Mcf. It also expects to get a lift from increased access to international natural gas liquids (NGL) markets when the Mariner East (ME) system ramps up to move volumes to an export terminal near Philadelphia. ME 2 is in service and ME 2X is expected to come online by mid-2020.
The 2020 program, Range management added, would also leave a similar inventory of drilled but uncompleted lateral footage at the end of the year, “supporting the option of a similar program in 2021 and beyond,” if the outlook doesn’t improve.
Like its peers, Range also has been strengthening the balance sheet and reducing debt. The company has $93 million remaining on a $100 million share repurchase program, it repurchased $202 million of senior notes last year, and it sold $1.1 billion of assets in the same time. Management has cut the dividend, which was $20 million annually.
Range added 1.2 Tcfe of proved reserves last year to finish with 18.2 Tcfe. Year-end proved reserves consisted of 67% natural gas, 31% NGLs and 2% crude oil.
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