Range Resources Corp. got a boost from improved commodity pricing in 1Q2021, including a 44% rise in natural gas prices and a 77% increase in natural gas liquids (NGL) prices.

Range Resources

The Appalachian Basin pure-play on Tuesday reported an average realized natural gas price of $2.58/Mcf compared to $1.74/Mcf a year ago. 

Range also reported an average NGL realization of $26.35/bbl, a 77% improvement over 1Q2020 and the highest level since 2018, CEO Jeff Ventura said Tuesday during a conference call to discuss quarterly results. The increase led to a $1.52 premium over the Mont Belvieu index, the highest in company history, he added.

Looking ahead, the Fort Worth-based company laid out a bullish forecast for NGL pricing as global demand surges. 

Range’s Allen Engberg, vice president of liquids marketing, said the company expects its premium over the Mont Belvieu index to remain strong going forward. He pointed to organic growth as global economies recover from the Covid-19 pandemic as well as new demand from propane dehydrogenation plants and liquefied petroleum gas crackers expected to come online soon.

“We’re pretty bullish on the demand side,” Engberg said. “And from the supply side, we still see things kind of flat this year.”

Range is forecasting a 50 cents/bbl-$2/bbl premium over the Mont Belvieu index for 2021. The company is poised to take advantage of the improving international market with a set of new contracts to export propane and butane that began in early April.

“We had a big contract that expired recently, and it gave us the opportunity to put new contracts in place that really add to our flexibility and add to our capability to generate strong premiums relative to Belvieu,” Engberg said.

Ventura said the improvement in NGL prices was driven by propane. Range is expected to continue to post strong gains in the near future as storage balances are tighter than they were a year ago.

“Given the strong international demand we are seeing with new chemical capacity coming online and recovering global economies, we believe it will be challenging for propane to replenish U.S. stocks to a comfortable level by fall,” he said. “As a result, we expect propane prices to transact at levels at or above 60% of” West Texas Intermediate crude in the coming fall and winter.

Range also saw higher crude prices compared to last year. The company reported an average realized price of $49/bbl for crude, a 10% improvement over last year. The increases drove the company’s reported $109 million in free cash flow, Ventura said.

Despite higher prices, Range’s management said they would stick with plans to maintain production at 2.1 Bcfe/d and keep the company’s 2021 capital budget at $425 million. 

“We are staying the course from a maintenance level program perspective,” COO Dennis Degner said. “If you look at where the commodity strip is at this point in time, it’s really not incentivizing any growth.”

Quarterly production was down year/year, and came in at 2.08 Bcfe/d, slightly under the maintenance goal of 2.1 Bcfe/d. The company produced 2.3 Bcfe/d in 1Q2021.

Broken down, Range produced 1.5 Bcf/d of natural gas in the first quarter, a 10% decline over the same period a year ago. Liquids followed suit, with NGL output dropping 8% to 97,144 b/d and crude oil production falling 12% to 8,422 b/d.

Range reported quarterly net income of $27 million (11 cents/share), down from $166 million (66 cents/share) in the same period for 2020.