Range Resources Corp. management said on Tuesday that it would consider selling the assets in North Louisiana’s Cotton Valley Sands Terryville Complex if they continue to underperform.

When pressed by a financial analyst during a second quarter earnings call, CEO Jeff Ventura said Range remains focused on deleveraging the balance sheet. He indicated that a sale of the Terryville assets, which the company acquired just two years ago in a $4.4 billion deal to take over Memorial Resource Development Corp., has not been ruled out.

“Given the results we saw in Terryville that were below expectations, we slowed way down and allocated even more of our capital to the Marcellus,” Ventura noted. Range recently scaled back its efforts in Louisiana after reporting poor results and has just one rig running, with plans to bring online only 11 wells this year.

The market has also been jarred by the Terryville decline profile, as Range again reported that it produced 313 MMcfe/d in North Louisiana during the second quarter, down from 366 MMcfe/d in 1Q2018, There also was an 8% year/year production decrease.

Range already is planning to cull other properties from the portfolio.

“In the short-run, what we’re saying is our focus is selling some assets in northeast Pennsylvania, southwest Pennsylvania,” Ventura said. “We’ll look at how those returns are either later this year or early next year, make that decision. If you look at our history, and there’s plenty of history to look at, basically $4 billion of asset sales really over roughly the last decade, when projects aren’t competitive, then we tend to sell them.”

Range had $4.2 billion of total debt on its books at the end of the second quarter. In early July, the company sold Midcontinent properties that produced 11 MMcfe/d for $23 million to an undisclosed buyer. Management is actively pursuing carve-out sales in Pennsylvania, including some of its core acreage in the southwest part of the state, to “fast forward leverage improvement,” Ventura said.

CFO Mark Scucchi said the company expects to announce a more meaningful sale in the coming months.

“What’s most important perhaps is to say what we won’t do,” Scucchi said of what a sale might include. Range won’t do “anything to impair the efficiencies and blocked-up, cost-efficient nature of our southwest Pennsylvania position. We certainly believe that half million acre footprint presents a very long-term drilling inventory, presents value opportunities that we can pull forward.”

Indeed, the outlook continues to improve for Range in Appalachia. Production, and in particular cash margins, were higher in the quarter, driven largely by a $20/bbl oil price uplift. That pushed natural gas liquids (NGL) prices to levels not seen since 2014, Ventura said. Better prices have incentivized more liquids-directed drilling across Appalachia. Range has capitalized on the price swing as one of the nation’s largest NGL producers. About 46% of its pre-hedge revenue came from Appalachian liquids during the quarter.  

“It’s important to recognize the differentiated position Appalachia has with in-basin fractionation, control of purity products and access to international markets,” Ventura said. “This type of market does not exist in any other major U.S. liquids play, as other basins typically send the y-grade barrel to the Gulf Coast.

“We think the unique nature of the Appalachian NGL model will become evident in the next year or so as purity products with access to international markets should garner premiums to typical y-grade NGL production from other plays."

Range’s natural gas differentials have also improved, as other operators have reported throughout the basin. The company has reached better markets on new infrastructure that’s come online. On a blended basis, including hedges and derivative settlements, Range reported an average realized price of $3.23/Mcfe in the second quarter, up 12% from the year-ago period.

The company also said it was able to work around downtime on Mariner East 1, which has been offline for nearly three months this year because of regulatory suspensions over safety concerns. The pipeline is again flowing ethane and propane. Range also scrambled to find a workaround for 300 MMcf/d after Columbia Gas Transmission’s Leach XPress exploded in West Virginia and required repairs that have since been completed. The company also expects the delayed Phase 2 of the 3.25 Bcf/d Rover pipeline to come online this quarter.

Range produced 2.2 Bcfe/d in the second quarter, up from 1.945 Bcfe/d in the year-ago period and from 2.188 Bcfe/d in 1Q2018. Appalachia accounted for 1.876 Bcfe/d of production.

The company reported a net loss of $80 million (minus 32 cents/share) for the quarter, compared with year-ago net income of $70 million (28 cents). Revenue declined 3% from a year ago to $656 million. During 2Q2018, Range had a $103 million derivative loss, a $55 million impairment related to expiring leases in North Louisiana and a $15 million impairment of legacy properties in northwest Pennsylvania.