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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
☑ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2023
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-12209
RANGE RESOURCES CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware |
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34-1312571 |
(State or Other Jurisdiction of Incorporation or Organization) |
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(IRS Employer Identification No.) |
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100 Throckmorton Street, Suite 1200 Fort Worth, Texas |
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76102 |
(Address of Principal Executive Offices) |
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(Zip Code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, (Par Value $0.01) |
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RRC |
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New York Stock Exchange |
Registrant’s telephone number, including area code
(817) 870-2601
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer |
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Accelerated Filer |
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Non-Accelerated Filer |
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Smaller Reporting Company |
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☐ |
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Emerging Growth Company |
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☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
241,352,080 shares of common stock were outstanding on July 21, 2023
1
RANGE RESOURCES CORPORATION
FORM 10-Q
Quarter Ended June 30, 2023
Unless the context otherwise indicates, all references in this report to "Range Resources," "Range," "we," "us," or "our" are to Range Resources Corporation and its directly and indirectly owned subsidiaries. For certain industry specific terms used in this Form 10-Q, please see "Glossary of Certain Defined Terms" in our 2022 Annual Report on Form 10-K.
TABLE OF CONTENTS
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Page |
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ITEM 1. |
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3 |
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3 |
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4 |
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Consolidated Statements of Comprehensive Income (Loss) (Unaudited) |
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5 |
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6 |
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7 |
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9 |
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ITEM 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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24 |
ITEM 3. |
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38 |
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ITEM 4. |
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41 |
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ITEM 1. |
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41 |
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ITEM 1A. |
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41 |
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ITEM 2. |
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42 |
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ITEM 6. |
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43 |
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44 |
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2
PART I – FINANCIAL INFORMATION
ITEM 1. Financial Statements
RANGE RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
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June 30, |
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December 31, |
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2023 |
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2022 |
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Assets |
(Unaudited) |
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Current assets: |
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Cash and cash equivalents |
$ |
162,075 |
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$ |
207 |
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Accounts receivable, less allowance for doubtful accounts of $308 and $314 |
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187,762 |
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481,050 |
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Contingent consideration receivable |
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— |
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24,500 |
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Derivative assets |
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176,247 |
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925 |
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Other current assets |
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35,487 |
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32,905 |
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Total current assets |
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561,571 |
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539,587 |
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Derivative assets |
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80,421 |
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40,990 |
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Natural gas properties, successful efforts method |
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10,950,249 |
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10,655,879 |
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Accumulated depletion and depreciation |
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(4,933,579 |
) |
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(4,765,475 |
) |
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6,016,670 |
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5,890,404 |
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Other property and equipment |
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74,725 |
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74,638 |
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Accumulated depreciation and amortization |
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(72,993 |
) |
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(72,204 |
) |
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1,732 |
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2,434 |
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Operating lease right-of-use assets |
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52,637 |
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84,070 |
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Other assets |
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77,141 |
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68,077 |
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Total assets |
$ |
6,790,172 |
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$ |
6,625,562 |
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Liabilities |
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Current liabilities: |
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Accounts payable |
$ |
139,352 |
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$ |
206,738 |
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Asset retirement obligations |
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4,570 |
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4,570 |
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Accrued liabilities |
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301,762 |
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442,922 |
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Deferred compensation liabilities |
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79,443 |
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89,334 |
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Accrued interest |
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38,645 |
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39,138 |
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Divestiture contract obligation |
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88,263 |
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86,546 |
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Derivative liabilities |
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— |
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151,417 |
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Total current liabilities |
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652,035 |
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1,020,665 |
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Bank debt |
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— |
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9,509 |
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Senior notes |
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1,772,655 |
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1,832,451 |
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Deferred tax liabilities |
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467,768 |
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|
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333,571 |
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Derivative liabilities |
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1,018 |
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|
|
15,495 |
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Deferred compensation liabilities |
|
64,633 |
|
|
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99,907 |
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Operating lease liabilities |
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18,135 |
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|
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20,903 |
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Asset retirement obligations and other liabilities |
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114,629 |
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112,981 |
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Divestiture contract obligation |
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311,692 |
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304,074 |
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Total liabilities |
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3,402,565 |
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3,749,556 |
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Commitments and contingencies |
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Stockholders’ Equity |
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Preferred stock, $1 par, 10,000,000 shares authorized, none issued and outstanding |
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— |
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— |
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Common stock, $0.01 par, 475,000,000 shares authorized, 265,751,577 issued at |
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2,657 |
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2,629 |
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Common stock held in treasury, 24,401,065 shares at June 30, 2023 and 24,001,535 shares |
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(439,302 |
) |
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(429,659 |
) |
Additional paid-in capital |
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5,813,408 |
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5,764,970 |
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Accumulated other comprehensive income |
|
485 |
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|
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467 |
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Retained deficit |
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(1,989,641 |
) |
|
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(2,462,401 |
) |
Total stockholders' equity |
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3,387,607 |
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2,876,006 |
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Total liabilities and stockholders’ equity |
$ |
6,790,172 |
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$ |
6,625,562 |
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The accompanying notes are an integral part of these consolidated financial statements.
3
RANGE RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenues and other income: |
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Natural gas, NGLs and oil sales |
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$ |
468,382 |
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$ |
1,356,892 |
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$ |
1,204,664 |
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$ |
2,389,243 |
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Derivative fair value income (loss) |
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123,734 |
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(239,922 |
) |
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491,701 |
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(1,178,979 |
) |
Brokered natural gas, marketing and other |
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44,861 |
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108,173 |
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126,972 |
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195,615 |
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Total revenues and other income |
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636,977 |
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1,225,143 |
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1,823,337 |
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1,405,879 |
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Costs and expenses: |
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Direct operating |
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23,896 |
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20,050 |
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50,880 |
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40,338 |
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Transportation, gathering, processing and compression |
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268,190 |
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327,907 |
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553,673 |
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625,694 |
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Taxes other than income |
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6,993 |
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8,053 |
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14,887 |
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15,132 |
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Brokered natural gas and marketing |
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44,800 |
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110,109 |
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111,868 |
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203,232 |
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Exploration |
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|
7,448 |
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7,506 |
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12,052 |
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|
12,205 |
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Abandonment and impairment of unproved properties |
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25,786 |
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7,137 |
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33,296 |
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|
9,133 |
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General and administrative |
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|
39,526 |
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|
42,908 |
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|
82,672 |
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|
85,445 |
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Exit costs |
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48,654 |
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|
36,069 |
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60,977 |
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|
47,184 |
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Deferred compensation plan |
|
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11,153 |
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(19,221 |
) |
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20,549 |
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|
54,122 |
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Interest |
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|
31,117 |
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|
42,001 |
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63,319 |
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|
89,176 |
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(Gain) loss on early extinguishment of debt |
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(439 |
) |
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22 |
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(439 |
) |
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|
69,232 |
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Depletion, depreciation and amortization |
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|
85,016 |
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|
86,498 |
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|
171,578 |
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|
172,102 |
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Gain on the sale of assets |
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(106 |
) |
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(82 |
) |
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(244 |
) |
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(413 |
) |
Total costs and expenses |
|
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592,034 |
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668,957 |
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1,175,068 |
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1,422,582 |
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Income (loss) before income taxes |
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44,943 |
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556,186 |
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648,269 |
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(16,703 |
) |
Income tax (benefit) expense: |
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Current |
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(300 |
) |
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9,000 |
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2,399 |
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|
|
13,751 |
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Deferred |
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|
15,012 |
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|
94,331 |
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134,192 |
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(26,501 |
) |
|
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|
14,712 |
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103,331 |
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|
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136,591 |
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(12,750 |
) |
Net income (loss) |
|
$ |
30,231 |
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$ |
452,855 |
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$ |
511,678 |
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|
$ |
(3,953 |
) |
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Net income (loss) per common share: |
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Basic |
|
$ |
0.12 |
|
|
$ |
1.81 |
|
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$ |
2.10 |
|
|
$ |
(0.02 |
) |
Diluted |
|
$ |
0.12 |
|
|
$ |
1.77 |
|
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$ |
2.07 |
|
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$ |
(0.02 |
) |
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Dividends declared per share |
|
$ |
0.08 |
|
|
$ |
— |
|
|
$ |
0.16 |
|
|
$ |
— |
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Weighted average common shares outstanding: |
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Basic |
|
|
238,970 |
|
|
|
243,492 |
|
|
|
238,497 |
|
|
|
244,416 |
|
Diluted |
|
|
241,105 |
|
|
|
248,650 |
|
|
|
241,069 |
|
|
|
244,416 |
|
The accompanying notes are an integral part of these consolidated financial statements.
4
RANGE RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in thousands)
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Net income (loss) |
$ |
30,231 |
|
|
$ |
452,855 |
|
|
$ |
511,678 |
|
|
$ |
(3,953 |
) |
Other comprehensive income: |
|
|
|
|
|
|
|
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|
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|
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Postretirement benefits: |
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|
|
|
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Amortization of prior service costs/actuarial gain |
|
12 |
|
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|
73 |
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|
24 |
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|
|
146 |
|
Income tax benefit |
|
(3 |
) |
|
|
(17 |
) |
|
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(6 |
) |
|
|
(15 |
) |
Total comprehensive income (loss) |
$ |
30,240 |
|
|
$ |
452,911 |
|
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$ |
511,696 |
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$ |
(3,822 |
) |
The accompanying notes are an integral part of these consolidated financial statements.
5
RANGE RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
|
Six Months Ended June 30, |
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2023 |
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2022 |
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Operating activities: |
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Net income (loss) |
$ |
511,678 |
|
|
$ |
(3,953 |
) |
Adjustments to reconcile net income (loss) to net cash |
|
|
|
|
|
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Deferred income tax expense (benefit) |
|
134,192 |
|
|
|
(26,501 |
) |
Depletion, depreciation and amortization |
|
171,578 |
|
|
|
172,102 |
|
Abandonment and impairment of unproved properties |
|
33,296 |
|
|
|
9,133 |
|
Derivative fair value (income) loss |
|
(491,701 |
) |
|
|
1,178,979 |
|
Cash settlements on derivative financial instruments |
|
111,054 |
|
|
|
(540,845 |
) |
Divestiture contract obligation, including accretion |
|
60,774 |
|
|
|
46,861 |
|
Amortization of deferred financing costs and other |
|
2,594 |
|
|
|
5,120 |
|
Deferred and stock-based compensation |
|
41,403 |
|
|
|
78,155 |
|
Gain on the sale of assets |
|
(244 |
) |
|
|
(413 |
) |
(Gain) loss on early extinguishment of debt |
|
(439 |
) |
|
|
69,232 |
|
Changes in working capital: |
|
|
|
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|
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Accounts receivable |
|
317,981 |
|
|
|
(107,198 |
) |
Other current assets |
|
(2,998 |
) |
|
|
(23,099 |
) |
Accounts payable |
|
(76,143 |
) |
|
|
36,374 |
|
Accrued liabilities and other |
|
(211,479 |
) |
|
|
(162,827 |
) |
Net cash provided from operating activities |
|
601,546 |
|
|
|
731,120 |
|
Investing activities: |
|
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|
|
|
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Additions to natural gas properties |
|
(277,088 |
) |
|
|
(211,232 |
) |
Additions to field service assets |
|
(87 |
) |
|
|
(381 |
) |
Acreage purchases |
|
(19,572 |
) |
|
|
(19,445 |
) |
Proceeds from disposal of assets |
|
771 |
|
|
|
380 |
|
Purchases of marketable securities held by the deferred compensation plan |
|
(39,346 |
) |
|
|
(37,499 |
) |
Proceeds from the sales of marketable securities held by the deferred |
|
43,663 |
|
|
|
39,823 |
|
Net cash used in investing activities |
|
(291,659 |
) |
|
|
(228,354 |
) |
Financing activities: |
|
|
|
|
|
||
Borrowings on credit facility |
|
185,000 |
|
|
|
648,000 |
|
Repayments on credit facility |
|
(204,000 |
) |
|
|
(647,000 |
) |
Issuance of senior notes |
|
— |
|
|
|
500,000 |
|
Repayment of senior notes |
|
(60,934 |
) |
|
|
(1,068,117 |
) |
Dividends paid |
|
(38,640 |
) |
|
|
— |
|
Treasury stock purchases |
|
(9,663 |
) |
|
|
(132,894 |
) |
Debt issuance costs |
|
— |
|
|
|
(15,798 |
) |
Taxes paid for shares withheld |
|
(39,150 |
) |
|
|
(25,491 |
) |
Change in cash overdrafts |
|
(19,657 |
) |
|
|
3,815 |
|
Proceeds from the sales of common stock held by the deferred |
|
39,025 |
|
|
|
20,653 |
|
Net cash used in financing activities |
|
(148,019 |
) |
|
|
(716,832 |
) |
Increase (decrease) in cash and cash equivalents |
|
161,868 |
|
|
|
(214,066 |
) |
Cash and cash equivalents at beginning of period |
|
207 |
|
|
|
214,422 |
|
Cash and cash equivalents at end of period |
$ |
162,075 |
|
|
$ |
356 |
|
The accompanying notes are an integral part of these consolidated financial statements.
6
RANGE RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in thousands, except per share data)
Fiscal Year 2023 |
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
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|
stock |
|
|
Additional |
|
|
|
|
|
other |
|
|
|
|
||||||||
|
Common stock |
|
|
Treasury |
|
|
held in |
|
|
paid-in |
|
|
Retained |
|
|
comprehensive |
|
|
|
|
|||||||||||
|
Shares |
|
|
Par value |
|
|
shares |
|
|
treasury |
|
|
capital |
|
|
deficit |
|
|
income |
|
|
Total |
|
||||||||
Balance as of December 31, 2022 |
|
262,887 |
|
|
$ |
2,629 |
|
|
|
24,002 |
|
|
$ |
(429,659 |
) |
|
$ |
5,764,970 |
|
|
$ |
(2,462,401 |
) |
|
$ |
467 |
|
|
$ |
2,876,006 |
|
Issuance of common stock |
|
2,794 |
|
|
|
28 |
|
|
|
— |
|
|
|
— |
|
|
|
(33,963 |
) |
|
|
— |
|
|
|
— |
|
|
|
(33,935 |
) |
Issuance of common stock upon |
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
278 |
|
|
|
(278 |
) |
|
|
— |
|
|
|
— |
|
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,096 |
|
|
|
— |
|
|
|
— |
|
|
|
9,096 |
|
Cash dividends paid ($0.08 per |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19,334 |
) |
|
|
— |
|
|
|
(19,334 |
) |
Treasury stock |
|
— |
|
|
|
— |
|
|
|
322 |
|
|
|
(7,717 |
) |
|
|
(20 |
) |
|
|
— |
|
|
|
— |
|
|
|
(7,737 |
) |
Excise tax on stock repurchases |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(97 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(97 |
) |
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9 |
|
|
|
9 |
|
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
481,447 |
|
|
|
— |
|
|
|
481,447 |
|
Balance as of March 31, 2023 |
|
265,687 |
|
|
|
2,657 |
|
|
|
24,324 |
|
|
|
(437,473 |
) |
|
|
5,740,361 |
|
|
|
(2,000,566 |
) |
|
|
476 |
|
|
|
3,305,455 |
|
Issuance of common stock |
|
65 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
64,360 |
|
|
|
— |
|
|
|
— |
|
|
|
64,360 |
|
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,687 |
|
|
|
— |
|
|
|
— |
|
|
|
8,687 |
|
Cash dividends paid ($0.08 per |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(19,306 |
) |
|
|
— |
|
|
|
(19,306 |
) |
Treasury stock |
|
— |
|
|
|
— |
|
|
|
77 |
|
|
|
(1,926 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,926 |
) |
Excise tax on stock repurchases |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
97 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
97 |
|
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9 |
|
|
|
9 |
|
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,231 |
|
|
|
— |
|
|
|
30,231 |
|
Balance as of June 30, 2023 |
|
265,752 |
|
|
$ |
2,657 |
|
|
|
24,401 |
|
|
$ |
(439,302 |
) |
|
$ |
5,813,408 |
|
|
$ |
(1,989,641 |
) |
|
$ |
485 |
|
|
$ |
3,387,607 |
|
The accompanying notes are an integral part of these consolidated financial statements.
7
RANGE RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in thousands)
Fiscal Year 2022 |
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
stock |
|
|
Additional |
|
|
|
|
|
other |
|
|
|
|
||||||||
|
Common stock |
|
|
Treasury |
|
|
held in |
|
|
paid-in |
|
|
Retained |
|
|
comprehensive |
|
|
|
|
|||||||||||
|
Shares |
|
|
Par value |
|
|
shares |
|
|
treasury |
|
|
capital |
|
|
deficit |
|
|
loss |
|
|
Total |
|
||||||||
Balance as of December 31, 2021 |
|
259,796 |
|
|
$ |
2,598 |
|
|
|
10,003 |
|
|
$ |
(30,007 |
) |
|
$ |
5,720,277 |
|
|
$ |
(3,607,055 |
) |
|
$ |
(150 |
) |
|
$ |
2,085,663 |
|
Issuance of common stock |
|
2,980 |
|
|
|
29 |
|
|
|
— |
|
|
|
— |
|
|
|
(21,276 |
) |
|
|
— |
|
|
|
— |
|
|
|
(21,247 |
) |
Issuance of common stock |
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
78 |
|
|
|
(78 |
) |
|
|
— |
|
|
|
— |
|
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8,619 |
|
|
|
— |
|
|
|
— |
|
|
|
8,619 |
|
Treasury stock |
|
— |
|
|
|
— |
|
|
|
599 |
|
|
|
(16,152 |
) |
|
|
(46 |
) |
|
|
— |
|
|
|
— |
|
|
|
(16,198 |
) |
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
75 |
|
|
|
75 |
|
Net loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(456,808 |
) |
|
|
— |
|
|
|
(456,808 |
) |
Balance as of March 31, 2022 |
|
262,778 |
|
|
|
2,627 |
|
|
|
10,602 |
|
|
|
(46,159 |
) |
|
|
5,707,652 |
|
|
|
(4,063,941 |
) |
|
|
(75 |
) |
|
|
1,600,104 |
|
Issuance of common stock |
|
108 |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
33,132 |
|
|
|
— |
|
|
|
— |
|
|
|
33,133 |
|
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7,733 |
|
|
|
— |
|
|
|
— |
|
|
|
7,733 |
|
Treasury stock |
|
— |
|
|
|
— |
|
|
|
4,000 |
|
|
|
(116,695 |
) |
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
(116,696 |
) |
Other comprehensive income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
56 |
|
|
|
56 |
|
Net income |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
452,855 |
|
|
|
— |
|
|
|
452,855 |
|
Balance as of June 30, 2022 |
|
262,886 |
|
|
$ |
2,628 |
|
|
|
14,602 |
|
|
$ |
(162,854 |
) |
|
$ |
5,748,516 |
|
|
$ |
(3,611,086 |
) |
|
$ |
(19 |
) |
|
$ |
1,977,185 |
|
The accompanying notes are an integral part of these consolidated financial statements.
8
RANGE RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) SUMMARY OF ORGANIZATION AND NATURE OF BUSINESS
Range Resources Corporation is a Fort Worth, Texas-based independent natural gas, natural gas liquids (NGLs) and crude oil and condensate company engaged in the exploration, development and acquisition of natural gas and liquids properties in the Appalachian region of the United States. Our objective is to build stockholder value through returns-focused development of natural gas properties. Range is a Delaware corporation with our common stock listed and traded on the New York Stock Exchange under the symbol "RRC."
(2) BASIS OF PRESENTATION
These consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair statement of the results for the periods reported. All adjustments are of a normal recurring nature unless otherwise disclosed. These consolidated financial statements, including selected notes, have been prepared in accordance with the applicable rules of the Securities Exchange Commission (the SEC) and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America (U.S. GAAP) for complete financial statements.
These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our 2022 Annual Report on Form 10-K filed with the SEC on February 27, 2023. The results of operations for second quarter and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full year. We make certain reclassifications to prior year statements to conform with the current year presentation. These reclassifications have no impact on previously reported stockholders' equity, net income or cash flows.
(3) NEW ACCOUNTING STANDARDS
Not Yet Adopted
There were no issued pending accounting standards expected to have a material impact on our consolidated financial statements.
(4) REVENUES FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
We have three material revenue streams in our business: natural gas sales, NGLs sales and condensate sales (referred to below as oil sales). Brokered revenue attributable to each product sales type is included here because the volume of product that we purchase is subsequently sold to separate counterparties in accordance with existing sales contracts under which we also sell our production. Other marketing revenue for the three months ended June 30, 2023 includes the receipt of a $1.5 million make-whole payment and the six months ended June 30, 2023 includes a total of $5.1 million in make-whole payments. Accounts receivable attributable to our revenue contracts with customers was $165.8 million at June 30, 2023 and $463.3 million at December 31, 2022. Revenue attributable to each of our identified revenue streams is disaggregated below (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Natural gas sales |
$ |
225,359 |
|
|
$ |
909,754 |
|
|
$ |
666,939 |
|
|
$ |
1,539,677 |
|
NGLs sales |
|
200,717 |
|
|
|
374,699 |
|
|
|
457,157 |
|
|
|
713,068 |
|
Oil sales |
|
42,306 |
|
|
|
72,439 |
|
|
|
80,568 |
|
|
|
136,498 |
|
Total natural gas, NGLs and oil sales |
|
468,382 |
|
|
|
1,356,892 |
|
|
|
1,204,664 |
|
|
|
2,389,243 |
|
Sales of purchased natural gas |
|
39,034 |
|
|
|
103,368 |
|
|
|
114,094 |
|
|
|
187,430 |
|
Sales of purchased NGLs |
|
300 |
|
|
|
640 |
|
|
|
668 |
|
|
|
2,280 |
|
Interest income |
|
1,780 |
|
|
|
30 |
|
|
|
2,737 |
|
|
|
41 |
|
Other marketing revenue |
|
3,747 |
|
|
|
4,135 |
|
|
|
9,473 |
|
|
|
5,864 |
|
Total |
$ |
513,243 |
|
|
$ |
1,465,065 |
|
|
$ |
1,331,636 |
|
|
$ |
2,584,858 |
|
9
(5) INCOME TAXES
We evaluate and update our annual effective income tax rate on a quarterly basis based on current and forecasted operating results and tax laws. Consequently, based upon the mix and timing of our actual earnings compared to annual projections, our effective tax rate may vary quarterly and may make comparisons not meaningful. The effective income tax rate is influenced by a variety of factors including geographic sources and relative magnitude of these sources of income. Income taxes for discrete items are computed and recorded in the period that a specific transaction occurs. For three months and six months ended June 30, 2023 and 2022, our overall effective tax rate was different than the federal statutory rate due primarily to state income taxes, equity compensation, valuation allowances and other tax items. Current income taxes reflect estimated state income taxes due for 2023 which is based on our estimated earnings, taking into account state tax rates and laws regarding NOL limitations.
(6) INCOME (LOSS) PER COMMON SHARE
Basic income or loss per share attributable to common shareholders is computed as (1) income or loss attributable to common shareholders (2) less income allocable to participating securities (3) divided by weighted average basic shares outstanding. Diluted income or loss per share attributable to common shareholders is computed as (1) basic income or loss attributable to common shareholders (2) plus diluted adjustments to income allocable to participating securities (3) divided by weighted average diluted shares outstanding. The following sets forth a reconciliation of income or loss attributable to common shareholders to basic income or loss attributable to common shareholders to diluted income or loss attributable to common shareholders (in thousands, except per share amounts):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net income (loss), as reported |
$ |
30,231 |
|
|
$ |
452,855 |
|
|
$ |
511,678 |
|
|
$ |
(3,953 |
) |
Participating earnings (a) |
|
(679 |
) |
|
|
(12,056 |
) |
|
|
(11,636 |
) |
|
|
— |
|
Basic net income (loss) attributed to common |
|
29,552 |
|
|
|
440,799 |
|
|
|
500,042 |
|
|
|
(3,953 |
) |
Reallocation of participating earnings (a) |
|
2 |
|
|
|
244 |
|
|
|
112 |
|
|
|
— |
|
Diluted net income (loss) attributed to common |
$ |
29,554 |
|
|
$ |
441,043 |
|
|
$ |
500,154 |
|
|
$ |
(3,953 |
) |
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
$ |
0.12 |
|
|
$ |
1.81 |
|
|
$ |
2.10 |
|
|
$ |
(0.02 |
) |
Diluted |
$ |
0.12 |
|
|
$ |
1.77 |
|
|
$ |
2.07 |
|
|
$ |
(0.02 |
) |
(a) |
Restricted Stock Awards represent participating securities because they participate in nonforfeitable dividends or distributions with common equity owners. Income allocable to participating securities represents the distributed and undistributed earnings attributable to the participating securities. Participating securities, however, do not participate in undistributed net losses. |
The following details weighted average common shares outstanding and diluted weighted average common shares outstanding (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Weighted average common shares outstanding – basic |
|
|
238,970 |
|
|
|
243,492 |
|
|
|
238,497 |
|
|
|
244,416 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Director and employee restricted stock and performance |
|
|
2,135 |
|
|
|
5,158 |
|
|
|
2,572 |
|
|
|
— |
|
Weighted average common shares outstanding – diluted |
|
|
241,105 |
|
|
|
248,650 |
|
|
|
241,069 |
|
|
|
244,416 |
|
Weighted average common shares outstanding – basic for second quarter 2023 excludes 5.4 million shares of restricted stock held in our deferred compensation plan compared to 6.7 million shares in second quarter 2022 (although all awards are issued and outstanding upon grant). Weighted average common shares outstanding – basic for first six months 2023 excludes 5.5 million shares of restricted stock held in our deferred compensation plan compared to 6.4 million shares for first six months 2022. For the three months ended June 30, 2022, 2,000 equity grants were outstanding but not included in the computation of diluted net income because the grant prices were greater than the average market price of the common shares and would be anti-dilutive to the computation. Due to our net loss for first six months 2022, we excluded all equity grants from the computation of net loss per share because the effect would have been anti-dilutive to the computations.
10
(7) CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION (a)
|
|
June 30, |
|
|
December 31, |
|
||
|
|
(in thousands) |
|
|||||
Natural gas properties: |
|
|
|
|
|
|
||
Properties subject to depletion |
|
$ |
10,163,846 |
|
|
$ |
9,855,287 |
|
Unproved properties |
|
|
786,403 |
|
|
|
800,592 |
|
Total |
|
|
10,950,249 |
|
|
|
10,655,879 |
|
Accumulated depletion and depreciation |
|
|
(4,933,579 |
) |
|
|
(4,765,475 |
) |
Net capitalized costs |
|
$ |
6,016,670 |
|
|
$ |
5,890,404 |
|
(8) INDEBTEDNESS
We had the following debt outstanding as of the dates shown below. No interest was capitalized during the six months ended June 30, 2023 or the year ended December 31, 2022 (in thousands).
|
|
June 30, |
|
|
December 31, |
|
||
Bank debt |
|
$ |
— |
|
|
$ |
19,000 |
|
Senior notes: |
|
|
|
|
|
|
||
4.875% senior notes due 2025 |
|
|
688,388 |
|
|
|
750,000 |
|
8.25% senior notes due 2029 |
|
|
600,000 |
|
|
|
600,000 |
|
4.75% senior notes due 2030 |
|
|
500,000 |
|
|
|
500,000 |
|
Total senior notes |
|
|
1,788,388 |
|
|
|
1,850,000 |
|
Unamortized debt issuance costs |
|
|
(15,733 |
) |
|
|
(27,040 |
) |
Total debt, net of debt issuance costs |
|
$ |
1,772,655 |
|
|
$ |
1,841,960 |
|
Bank Debt
In April 2022, we entered into an amended and restated revolving bank facility, which we refer to as our bank debt or our bank credit facility, which is secured by substantially all of our assets and has a maturity date of April 14, 2027. The bank credit facility provides for a maximum facility amount of $4.0 billion and an initial borrowing base of $3.0 billion. The bank credit facility also provides for a borrowing base subject to periodic redeterminations and for event-driven unscheduled redeterminations. As of June 30, 2023, our bank group was composed of seventeen financial institutions. The borrowing base may be increased or decreased based on our request and sufficient proved reserves, as determined by the bank group. The commitment amount may be increased to the borrowing base, subject to payment of a mutually acceptable commitment fee to those banks agreeing to participate in the facility increase. Borrowings under the bank credit facility can either be at the alternate base rate (ABR, as defined in the bank credit facility agreement) plus a spread ranging from 0.75% to 1.75% or at the secured overnight financing rate (SOFR, as defined in the bank credit facility agreement) plus a spread ranging from 1.75% to 2.75%. The applicable spread is dependent upon borrowings relative to the borrowing base. We may elect, from time to time, to convert all or any part of our SOFR loans to base rate loans or to convert all or any of the base rate loans to SOFR loans. We had no outstanding balance on our credit facility during second quarter 2023. The weighted average interest rate was 4.1% for second quarter 2022. The weighted average interest rate was 8.4% for first six months 2023 compared to 3.4% for first six months of 2022. A commitment fee is paid on the undrawn balance based on an annual rate of 0.375% to 0.50%. At June 30, 2023, the commitment fee was 0.375% and the interest rate margin was 1.75% on our SOFR loans and 0.75% on our ABR loans.
As part of our redetermination completed in March 2023, our borrowing base was reaffirmed for $3.0 billion and our bank commitment was also reaffirmed at $1.5 billion. On June 30, 2023, we had no outstanding borrowings on our bank credit facility. Additionally, we had $292.9 million of undrawn letters of credit, leaving $1.2 billion of committed borrowing capacity available under the facility.
11
Early Extinguishment of Debt
In second quarter 2023, we repurchased in the open market $61.6 million principal amount of our 4.875% senior notes due 2025 at a discount. We recognized a gain on early extinguishment of debt of $439,000, net of the remaining deferred financing costs on the repurchased debt. Although we have no obligation to do so, we may continue, from time-to-time, to retire our outstanding debt through privately negotiated transactions, open market repurchases, redemptions or otherwise.
Senior Notes
If we experience a change of control, noteholders may require us to repurchase all or a portion of our senior notes at 101% of the aggregate principal amount plus accrued and unpaid interest, if any.
Guarantees
Range is a holding company that owns no operating assets and has no significant operations independent of its subsidiaries. The guarantees by our subsidiaries, which are directly or indirectly owned by Range, of our senior notes and our bank credit facility are full and unconditional and joint and several, subject to certain customary release provisions. The assets, liabilities and results of operations of Range and our guarantor subsidiaries are not materially different than our consolidated financial statements. A subsidiary guarantor may be released from its obligations under the guarantee:
Debt Covenants
Our bank credit facility contains negative covenants that limit our ability, among other things, to pay cash dividends, incur additional indebtedness, sell assets, enter into certain hedging contracts, change the nature of our business or operations, merge, consolidate or make certain investments. We are required to maintain a maximum consolidated debt to EBITDAX ratio (as defined in the bank credit facility agreement) of 3.75x and a minimum current ratio (as defined in the bank credit facility agreement) of 1.0x. We were in compliance with applicable covenants under the bank credit facility at June 30, 2023.
(9) ASSET RETIREMENT OBLIGATIONS
Our asset retirement obligations primarily represent the estimated present value of the amounts we will incur to plug, abandon and remediate our producing properties at the end of their productive lives. Significant inputs used in determining such obligations include estimates of plugging and abandonment costs, estimated future inflation rates and well lives. The inputs are calculated based on historical data as well as current estimated costs. A reconciliation of our liability for plugging and abandonment costs for the six months ended June 30, 2023 and the year ended December 31, 2022 is as follows (in thousands):
|
|
Six Months |
|
|
Year |
|
||
Beginning of period |
|
$ |
109,851 |
|
|
$ |
95,836 |
|
Liabilities incurred |
|
|
1,698 |
|
|
|
2,589 |
|
Liabilities settled |
|
|
(2,139 |
) |
|
|
(10,650 |
) |
Accretion expense |
|
|
2,944 |
|
|
|
6,569 |
|
Change in estimate |
|
|
219 |
|
|
|
15,507 |
|
End of period |
|
|
112,573 |
|
|
|
109,851 |
|
Less current portion |
|
|
(4,570 |
) |
|
|
(4,570 |
) |
Long-term asset retirement obligations |
|
$ |
108,003 |
|
|
$ |
105,281 |
|
Accretion expense is recognized as a component of depreciation, depletion and amortization expense in the accompanying consolidated statements of operations.
12
(10) DERIVATIVE ACTIVITIES
We use commodity-based derivative contracts to manage exposure to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. We utilize commodity swaps, collars, three-way collars or swaptions to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget, fixed costs and investment plans. The fair value of our derivative contracts, represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price, generally the New York Mercantile Exchange (NYMEX) for natural gas and crude oil or Mont Belvieu for NGLs, approximated a net gain of $216.8 million at June 30, 2023. These contracts expire monthly through December 2026. The following table sets forth our commodity-based derivative volumes by year as of June 30, 2023, excluding our basis swaps and divestiture contingent consideration which are discussed separately below:
Period |
|
Contract Type |
|
Volume Hedged |
|
Weighted Average Hedge Price |
|||||||||
|
|
|
|
|
|
Swap |
|
Sold Put |
|
Floor |
|
Ceiling |
|||
Natural Gas (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
Swaps |
|
381,658 Mmbtu/day |
|
$ |
3.52 |
|
|
|
|
|
|
|
|
2023 |
|
Collars |
|
256,685 Mmbtu/day |
|
|
|
|
|
|
$ |
3.37 |
|
$ |
4.50 |
2023 |
|
Three-way Collars |
|
140,000 Mmbtu/day |
|
|
|
$ |
2.25 |
|
$ |
3.25 |
|
$ |
4.28 |
2024 |
|
Swaps |
|
304,973 Mmbtu/day |
|
$ |
4.01 |
|
|
|
|
|
|
|
|
2024 |
|
Collars |
|
436,694 Mmbtu/day |
|
|
|
|
|
|
$ |
3.50 |
|
$ |
5.63 |
2024 |
|
Three-way Collars |
|
50,000 Mmbtu/day |
|
|
|
$ |
2.50 |
|
$ |
3.50 |
|
$ |
4.24 |
2025 |
|
Swaps |
|
360,000 Mmbtu/day |
|
$ |
4.12 |
|
|
|
|
|
|
|
|
2026 |
|
Swaps |
|
32,500 Mmbtu/day |
|
$ |
4.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude Oil |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
Swaps |
|
5,000 bbls/day |
|
$ |
71.30 |
|
|
|
|
|
|
|
|
January-September 2024 |
|
Collars |
|
832 bbls/day |
|
|
|
|
|
|
$ |
80.00 |
|
$ |
90.12 |
(a) |
We sold natural gas swaptions on 90,000 Mmbtu/day for 2025 at a weighted average price of $4.25/Mmbtu. These swaptions expire December 31, 2023. |
Every derivative instrument is required to be recorded on the balance sheet as either an asset or a liability measured at its fair value. We recognize all changes in fair value of these derivatives as earnings in derivative fair value income or loss in the periods in which they occur.
Basis Swap Contracts
In addition to the commodity derivatives described above, at June 30, 2023, we had natural gas basis swap contracts which lock in the differential between NYMEX Henry Hub and certain of our physical pricing indices. These contracts settle monthly through December 2026 and include a total volume of 371,577,500 Mmbtu. The fair value of these contracts was a gain of $30.7 million at June 30, 2023.
Divestiture Contingent Consideration
We have the right to receive contingent consideration in conjunction with the sale of our North Louisiana assets in third quarter 2020 that is a derivative financial instrument not designated as a hedging instrument. The remaining contingent consideration of up to $21.0 million is based on future achievement of natural gas and oil prices based on published indexes and realized NGLs prices of the buyer for 2023. All changes in the fair value are recognized as a gain or loss in earnings in the period they occur in derivative fair value income or loss in our consolidated statements of operations. For first six months 2023, this fair value has decreased $4.9 million for a fair value of $8.1 million as of June 30, 2023.
13
Derivative Assets and Liabilities
The combined fair value of derivatives included in the accompanying consolidated balance sheets as of June 30, 2023 and December 31, 2022 is summarized below. The assets and liabilities are netted where derivatives with both gain and loss positions are held by a single counterparty and we have master netting arrangements. The tables below provide additional information relating to our master netting arrangements with our derivative counterparties (in thousands):
|
|
|
June 30, 2023 |
|
|||||||||
|
|
|
Gross |
|
|
Gross |
|
|
Net Amounts of |
|
|||
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|||
Natural gas |
–swaps |
|
$ |
116,529 |
|
|
$ |
(3,359 |
) |
|
$ |
113,170 |
|
|
–swaptions |
|
|
— |
|
|
|
(2,492 |
) |
|
|
(2,492 |
) |
|
–collars |
|
|
94,885 |
|
|
|
(2,044 |
) |
|
|
92,841 |
|
|
–three-way collars |
|
|
10,017 |
|
|
|
(240 |
) |
|
|
9,777 |
|
|
–basis swaps |
|
|
47,065 |
|
|
|
(15,317 |
) |
|
|
31,748 |
|
Crude oil |
–swaps |
|
|
1,092 |
|
|
|
(391 |
) |
|
|
701 |
|
|
–collars |
|
|
2,783 |
|
|
|
— |
|
|
|
2,783 |
|
Divestiture contingent consideration |
|
|
8,140 |
|
|
|
— |
|
|
|
8,140 |
|
|
|
|
|
$ |
280,511 |
|
|
$ |
(23,843 |
) |
|
$ |
256,668 |
|
|
|
|
June 30, 2023 |
|
|||||||||
|
|
|
Gross |
|
|
Gross |
|
|
Net Amounts of |
|
|||
Derivative (liabilities): |
|
|
|
|
|
|
|
|
|
||||
Natural gas |
–swaps |
|
$ |
(3,359 |
) |
|
$ |
3,359 |
|
|
$ |
— |
|
|
–swaptions |
|
|
(2,492 |
) |
|
|
2,492 |
|
|
|
— |
|
|
–collars |
|
|
(2,044 |
) |
|
|
2,044 |
|
|
|
— |
|
|
–three-way collars |
|
|
(240 |
) |
|
|
240 |
|
|
|
— |
|
|
–basis swaps |
|
|
(16,335 |
) |
|
|
15,317 |
|
|
|
(1,018 |
) |
Crude oil |
–swaps |
|
|
(391 |
) |
|
|
391 |
|
|
|
— |
|
|
|
|
$ |
(24,861 |
) |
|
$ |
23,843 |
|
|
$ |
(1,018 |
) |
|
|
|
December 31, 2022 |
|
|||||||||
|
|
|
Gross |
|
|
Gross |
|
|
Net Amounts of |
|
|||
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|||
Natural gas |
|
–swaps |
$ |
19,438 |
|
|
$ |
(6,236 |
) |
|
$ |
13,202 |
|
|
|
–collars |
|
54,222 |
|
|
|
(45,452 |
) |
|
|
8,770 |
|
|
|
–three-way collars |
|
12,424 |
|
|
|
(12,424 |
) |
|
|
— |
|
|
|
–basis swaps |
|
25,493 |
|
|
|
(20,437 |
) |
|
|
5,056 |
|
Crude oil |
|
–collars |
|
1,807 |
|
|
|
— |
|
|
|
1,807 |
|
Divestiture contingent consideration |
|
13,080 |
|
|
|
— |
|
|
|
13,080 |
|
||
|
|
|
$ |
126,464 |
|
|
$ |
(84,549 |
) |
|
$ |
41,915 |
|
14
|
|
|
December 31, 2022 |
|
|||||||||
|
|
|
Gross |
|
|
Gross |
|
|
Net Amounts of |
|
|||
Derivative (liabilities): |
|
|
|
|
|
|
|
|
|
|
|||
Natural gas |
–swaps |
|
$ |
(115,374 |
) |
|
$ |
6,236 |
|
|
$ |
(109,138 |
) |
|
–collars |
|
|
(72,866 |
) |
|
|
45,452 |
|
|
|
(27,414 |
) |
|
–three-way collars |
|
|
(24,341 |
) |
|
|
12,424 |
|
|
|
(11,917 |
) |
|
–basis swaps |
|
|
(24,972 |
) |
|
|
20,437 |
|
|
|
(4,535 |
) |
Crude oil |
–swaps |
|
|
(13,908 |
) |
|
|
— |
|
|
|
(13,908 |
) |
|
|
|
$ |
(251,461 |
) |
|
$ |
84,549 |
|
|
$ |
(166,912 |
) |
The effects of our derivatives on our consolidated statements of operations are summarized below (in thousands):
|
Derivative Fair Value Income (Loss) |
|
|||||||||||||
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Commodity swaps |
$ |
43,067 |
|
|
$ |
(127,949 |
) |
|
$ |
252,159 |
|
|
$ |
(649,304 |
) |
Swaptions |
|
(2,492 |
) |
|
|
19,868 |
|
|
|
(2,492 |
) |
|
|
(14,854 |
) |
Three-way collars |
|
5,399 |
|
|
|
(27,506 |
) |
|
|
56,214 |
|
|
|
(207,432 |
) |
Collars |
|
11,787 |
|
|
|
(83,252 |
) |
|
|
172,358 |
|
|
|
(315,545 |
) |
Calls |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,363 |
) |
Basis swaps |
|
66,993 |
|
|
|
(21,083 |
) |
|
|
18,402 |
|
|
|
1,432 |
|
Freight swaps |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(33 |
) |
Divestiture contingent consideration |
|
(1,020 |
) |
|
|
— |
|
|
|
(4,940 |
) |
|
|
8,120 |
|
Total |
$ |
123,734 |
|
|
$ |
(239,922 |
) |
|
$ |
491,701 |
|
|
$ |
(1,178,979 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
(11) FAIR VALUE MEASUREMENTS
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three approaches for measuring the fair value of assets and liabilities: the market approach, the income approach and the cost approach, each of which includes multiple valuation techniques. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to measure fair value by converting future amounts, such as cash flows or earnings, into a single present value amount using current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace the service capacity of an asset. This is often referred to as current replacement cost. The cost approach assumes that the fair value would not exceed what it would cost a market participant to acquire or construct a substitute asset of comparable utility, adjusted for obsolescence.
The fair value accounting standards do not prescribe which valuation technique should be used when measuring fair value and does not prioritize among the techniques. These standards establish a fair value hierarchy that prioritizes the inputs used in applying the various valuation techniques. Inputs broadly refer to the assumptions that market participants use to make pricing decisions, including assumptions about risk. Level 1 inputs are given the highest priority in the fair value hierarchy while Level 3 inputs are given the lowest priority. The three levels of the fair value hierarchy are as follows:
15
Valuation techniques that maximize the use of observable inputs are favored. Assets and liabilities are classified in their entirety based on the lowest priority level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities within the levels of the fair value hierarchy.
Fair Values – Recurring
We use a market approach for our recurring fair value measurements and endeavor to use the best information available. The following tables present the fair value hierarchy for assets and liabilities measured at fair value, on a recurring basis (in thousands):
|
|
|
Fair Value Measurements at June 30, 2023 using: |
|
|||||||||||||
|
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
|
Total |
|
||||
Trading securities held in the deferred |
|
$ |
58,739 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
58,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commodity price derivatives |
–swaps |
|
|
— |
|
|
|
113,871 |
|
|
|
— |
|
|
|
113,871 |
|
|
–collars |
|
|
— |
|
|
|
95,624 |
|
|
|
— |
|
|
|
95,624 |
|
|
–three-way collars |
|
|
— |
|
|
|
9,777 |
|
|
|
— |
|
|
|
9,777 |
|
|
–basis swaps |
|
|
— |
|
|
|
30,730 |
|
|
|
— |
|
|
|
30,730 |
|
|
–swaptions |
|
|
— |
|
|
|
— |
|
|
|
(2,492 |
) |
|
|
(2,492 |
) |
Divestiture contingent consideration |
|
|
— |
|
|
|
8,140 |
|
|
|
— |
|
|
|
8,140 |
|
|
|
|
|
Fair Value Measurements at December 31, 2022 using: |
|
|||||||||||||
|
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
|
Total |
|
||||
Trading securities held in the deferred |
|
$ |
57,717 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
57,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commodity price derivatives |
–swaps |
|
|
— |
|
|
|
(109,844 |
) |
|
|
— |
|
|
|
(109,844 |
) |
|
–collars |
|
|
— |
|
|
|
(16,837 |
) |
|
|
— |
|
|
|
(16,837 |
) |
|
–three-way collars |
|
|
— |
|
|
|
(11,917 |
) |
|
|
— |
|
|
|
(11,917 |
) |
|
–basis swaps |
|
|
— |
|
|
|
521 |
|
|
|
— |
|
|
|
521 |
|
Divesture contingent consideration |
|
|
— |
|
|
|
13,080 |
|
|
|
— |
|
|
|
13,080 |
|
|
16
Our trading securities in Level 1 are exchange-traded and measured at fair value with a market approach using end of period market values. Derivatives in Level 2 are measured at fair value with a market approach using third-party pricing services which have been corroborated with data from active markets or broker quotes. Derivatives in Level 3 are also measured at fair value with a market approach using third-party pricing services which have been corroborated with data from active markets or broker quotes. However, the subjectivity in the volatility factors utilized can cause a significant change in the fair value measurement and is considered a significant unobservable input. As of June 30, 2023, a portion of our natural gas instruments contain swaptions where the counterparty has the right, but not the obligation, to enter into a fixed price swap on a pre-determined date. If exercised, the swaption contract becomes a swap treated consistently with our fixed-price swaps. At June 30, 2023, we used a weighted average implied volatility of 19% for natural gas for our swaptions. The following is a reconciliation of the beginning and ending balances for derivative instruments classified as Level 3 in the fair value hierarchy (in thousands):
|
|
Six Months Ended |
|
|
Balance at December 31, 2022 |
|
$ |
— |
|
Total losses: |
|
|
|
|
Included in earnings |
|
|
— |
|
Additions |
|
|
(2,492 |
) |
Balance at June 30, 2023 |
|
$ |
(2,492 |
) |
Trading securities. Our trading securities held in the deferred compensation plan are accounted for using the mark-to- market accounting method and are included in other assets in the accompanying consolidated balance sheets. We elected to adopt the fair value option to simplify our accounting for the investments in our deferred compensation plan. Interest, dividends, and mark-to-market gains or losses are included in deferred compensation plan expense in the accompanying consolidated statements of operations. For second quarter 2023, interest and dividends were $435,000 and the mark-to-market adjustment was a gain of $2.6 million compared to interest and dividends of $175,000 and a mark-to-market loss of $9.6 million in second quarter 2022. For first six months 2023, interest and dividends were $614,000 and the mark-to-market adjustment was a gain of $5.7 million compared to interest and dividends of $291,000 and a mark-to-market loss of $14.0 million in first six months 2022.
Divestiture Contingent Consideration. In August 2020, we completed the sale of our North Louisiana assets where we are entitled to receive contingent consideration based on future achievement of natural gas and oil prices based on published indexes along with NGLs prices based on the realized NGLs prices of the buyer. We used an option pricing model to estimate the fair value of the contingent consideration using significant Level 2 inputs that include quoted future commodity prices based on active markets.
Fair Values - Non-recurring
Certain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. Our proved natural gas and oil properties are reviewed for impairment periodically as events or changes in circumstances indicate the carrying amount may not be recoverable. There were no proved property impairment charges in second quarter or first six months 2023.
17
Fair Values – Reported
The following presents the carrying amounts and the fair values of our financial instruments as of June 30, 2023 and December 31, 2022 (in thousands):
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Commodity derivatives |
$ |
248,528 |
|
|
$ |
248,528 |
|
|
$ |
28,835 |
|
|
$ |
28,835 |
|
Divestiture contingent consideration |
|
8,140 |
|
|
|
8,140 |
|
|
|
13,080 |
|
|
|
13,080 |
|
Marketable securities (a) |
|
58,739 |
|
|
|
58,739 |
|
|
|
57,717 |
|
|
|
57,717 |
|
(Liabilities): |
|
|
|
|
|
|
|
|
|
|
|
||||
Commodity derivatives |
|
(1,018 |
) |
|
|
(1,018 |
) |
|
|
(166,912 |
) |
|
|
(166,912 |
) |
Bank credit facility (b) |
|
— |
|
|
|
— |
|
|
|
(19,000 |
) |
|
|
(19,000 |
) |
4.875% senior notes due 2025 (b) |
|
(688,388 |
) |
|
|
(676,940 |
) |
|
|
(750,000 |
) |
|
|
(714,870 |
) |
8.25% senior notes due 2029 (b) |
|
(600,000 |
) |
|
|
(624,696 |
) |
|
|
(600,000 |
) |
|
|
(618,312 |
) |
4.75% senior notes due 2030 (b) |
|
(500,000 |
) |
|
|
(450,430 |
) |
|
|
(500,000 |
) |
|
|
(442,350 |
) |
Deferred compensation plan (c) |
|
(144,076 |
) |
|
|
(144,076 |
) |
|
|
(189,241 |
) |
|
|
(189,241 |
) |
(a) |
Marketable securities, which are held in our deferred compensation plans, are actively traded on major exchanges. |
(b) |
The book value of our bank debt approximates fair value because of its floating rate structure. The fair value of our senior notes is based on end of period market quotes which are Level 2 inputs. |
(c) |
The fair value of our deferred compensation plan is updated to the closing price on the balance sheet date which is a Level 1 input. |
Our current assets and liabilities include financial instruments, the most significant of which are trade accounts receivable and payable. We believe the carrying values of our current assets and liabilities approximate fair value. Our fair value assessment incorporates a variety of considerations, including (1) the short-term duration of the instruments and (2) our historical and expected occurrence of bad debt expense. Non-financial liabilities initially measured at fair value include asset retirement obligations, operating lease liabilities and the divestiture contract obligation that we incurred in conjunction with the sale of our North Louisiana assets.
Concentrations of Credit Risk
As of June 30, 2023, our primary concentrations of credit risk are the risks of not collecting accounts receivable and the risk of a counterparty’s failure to perform under derivative obligations. Most of our receivables are from a diverse group of companies, including major energy companies, pipeline companies, local distribution companies, financial institutions and end-users in various industries. Letters of credit or other appropriate assurances are obtained as deemed necessary to limit our risk of loss. Our allowance for uncollectable receivables was $308,000 at June 30, 2023 and $314,000 at December 31, 2022. Our derivative exposure to credit risk is diversified primarily among major investment grade financial institutions, where we have master netting agreements which provide for offsetting payables against receivables from separate derivative contracts. To manage counterparty risk associated with our derivatives, we select and monitor our counterparties based on our assessment of their financial strength and/or credit ratings. We may also limit the level of exposure with any single counterparty. At June 30, 2023, our derivative counterparties include fourteen financial institutions, of which all but six are secured lenders in our bank credit facility. At June 30, 2023, our net derivative asset includes an aggregate net receivable of $20.5 million from five counterparties not included in our bank credit facility and a payable to the remaining counterparty of $190,000.
Allowance for Expected Credit Losses. Each reporting period, we assess the recoverability of material receivables using historical data, current market conditions and reasonable and supported forecasts of future economic conditions to determine their expected collectability. The loss given default method is used when, based on management’s judgment, an allowance for expected credit losses should be accrued on a material receivable to reflect the net amount to be collected.
(12) STOCK-BASED COMPENSATION PLANS
Description of the Plans
We have two active equity-based stock plans: our Amended and Restated 2005 Equity-Based Incentive Compensation Plan and our Amended and Restated 2019 Equity-Based Compensation Plan. Under these plans, various awards may be issued to non-employee directors and employees pursuant to decisions of the Compensation Committee, which is composed of only non-employee, independent directors.
18
Total Stock-Based Compensation Expense
Stock-based compensation represents amortization of restricted stock and performance units. Unlike the other forms of stock-based compensation, the mark-to-market adjustment of the liability related to the vested restricted stock held in our deferred compensation plan is directly tied to the change in our stock price and not directly related to the functional expenses and therefore, is not allocated to the functional categories. The following details the allocation of stock-based compensation to functional expense categories (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Direct operating expense |
$ |
426 |
|
|
$ |
362 |
|
|
$ |
841 |
|
|
$ |
711 |
|
Brokered natural gas and marketing expense |
|
460 |
|
|
|
686 |
|
|
|
1,121 |
|
|
|
1,205 |
|
Exploration expense |
|
303 |
|
|
|
318 |
|
|
|
623 |
|
|
|
770 |
|
General and administrative expense |
|
8,415 |
|
|
|
10,270 |
|
|
|
18,015 |
|
|
|
21,843 |
|
Total stock-based compensation expense |
$ |
9,604 |
|
|
$ |
11,636 |
|
|
$ |
20,600 |
|
|
$ |
24,529 |
|
Stock-Based Awards
Restricted Stock Awards. We grant restricted stock units under our equity-based stock compensation plans to our employees. These restricted stock units, which we refer to as restricted stock Equity Awards, generally vest over a three-year period, contingent on the recipient’s continued employment. The grant date fair value of the Equity Awards is based on the fair market value of our common stock on the date of grant. Beginning in 2023, we began granting restricted stock under our equity-based compensation plans that vests at the end of a three-year period for employee grants and a one-year period for non-employee directors. Vesting is also based upon the employee's continued employment with us. The grant date fair value of these Equity Awards is based on the fair market value of our common stock on the date of grant. Prior to vesting, recipients of restricted stock typically earn dividends payable in cash upon vesting but they have no voting rights prior to vesting.
The Compensation Committee also grants restricted stock to certain employees and non-employee directors of the board of directors as part of their compensation. Compensation expense is recognized over the balance of the vesting period, which is typically at the end of three years for employee grants and at the end of a one-year period for non-employee directors. All restricted stock awards are issued at prevailing market prices at the time of the grant and the vesting is based upon an employee’s continued employment with us. Prior to vesting, all restricted stock award recipients have the right to vote such stock and receive dividends thereon. Upon grant of these restricted shares, which we refer to as restricted stock Liability Awards, these shares are placed in our deferred compensation plan and, upon vesting, withdrawals are allowed in either cash or in stock. These Liability Awards are classified as a liability and are remeasured at fair value each reporting period. This mark-to-market amount is reported in deferred compensation plan expense in the accompanying consolidated statements of operations.
Stock-Based Performance Awards - (PSUs). We grant two types of performance share awards: one based on performance conditions measured against internal performance metrics and one based on market conditions measured based on Range’s performance relative to a predetermined peer group (TSR Awards).
Each unit granted represents one share of our common stock. These units are settled in stock and the amount of the payout is based on the vesting percentage, which can range from zero to 200% and (1) the internal performance metrics achieved, which is determined by the Compensation Committee and (2) for our TSR Awards, the value of our common stock on the vesting date compared to our peers. Dividend equivalents accrue during the performance period and are paid in stock at the end of the performance period. The performance period is three years.
Restricted Stock – Equity Awards
In first six months 2023, we granted 1.6 million restricted stock Equity Awards to employees at an average grant date fair value of $25.01 compared to 1.4 million at an average grant date fair value of $18.50 in first six months 2022. We recorded compensation expense for these outstanding awards of $15.3 million in first six months 2023 compared to $10.9 million in the same period of 2022. Restricted stock Equity Awards are not issued until such time as they are vested and grantees do not have the option to receive cash.
19
Restricted Stock – Liability Awards
In first six months 2023, we granted 11,000 shares of restricted stock Liability Awards as compensation to employees at an average grant date fair value of $24.70 which generally vest at the end of a three-year period and 8,000 shares were granted to non-employee directors at an average price of $25.07 with vesting at the end of one year. In first six months 2022, we granted 602,000 shares of restricted stock Liability Awards as compensation to employees at an average grant date fair value of $20.43 with vesting generally at the end of a three-year period and 47,000 shares were granted to non-employee directors at an average price of $27.52 with vesting at the end of one year. We recorded compensation expense for these Liability Awards of $2.7 million in first six months 2023 compared to $6.9 million in first six months 2022. These awards are held in our deferred compensation plan, are classified as a liability and are remeasured at fair value each reporting period. This mark-to-market amount is reported as deferred compensation expense in our consolidated statements of operations (see additional discussion below).
Stock-Based Performance Awards
Internal Performance Metric Awards. These awards vest at the end of the three-year performance period. The performance metrics are set by the Compensation Committee. If the performance metric for the applicable period is not met, that portion is considered forfeited and there is an adjustment to the expense recorded. In first six months 2023, we granted 81,000 internal performance units compared to 153,000 in the same period of the prior year. We recorded compensation expense for these awards of $1.4 million in first six months 2023 compared to expense of $3.5 million in first six months 2022.
TSR Awards. These awards granted are earned, or not earned, based on the comparative performance of Range’s common stock measured against a predetermined group of companies in the peer group over a three-year performance period. The fair value of the TSR Awards is estimated on the date of grant using a Monte Carlo simulation model which utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair value of the award. The fair value is recognized as stock-based compensation expense over the three-year performance period. Expected volatilities utilized in the model were estimated using a combination of a historical period consistent with the remaining performance period of three years and option implied volatilities. The risk-free interest rate was based on the United States Treasury rate for a term commensurate with the life of the grant. The following assumptions were used to estimate the fair value of these awards granted during first six months 2023 and 2022:
|
|
Six Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Risk-free interest rate |
|
|
3.8 |
% |
|
|
1.4 |
% |
Expected annual volatility |
|
|
61 |
% |
|
|
68 |
% |
Grant date fair value per unit |
|
$ |
30.37 |
|
|
$ |
27.90 |
|
In first six months 2023, we granted 64,000 TSR Awards compared to 112,000 in the same period of the prior year. We recorded compensation expense of $886,000 in first six months 2023 compared to $1.5 million in the same period of 2022. Fair value is amortized over the performance period with no adjustment to the expense recorded for actual targets achieved.
The following is a summary of the activity for our restricted stock and performance awards at June 30, 2023:
|
Restricted Stock |
|
|
Restricted Stock |
|
|
Stock-Based |
|
|||||||||||||||
|
Shares |
|
|
Weighted |
|
|
Shares |
|
|
Weighted |
|
|
Number |
|
|
Weighted |
|
||||||
Outstanding at |
|
1,736,688 |
|
|
$ |
14.44 |
|
|
|
379,633 |
|
|
$ |
14.71 |
|
|
|
1,950,632 |
|
|
$ |
9.02 |
|
Granted |
|
1,608,170 |
|
|
|
25.01 |
|
|
|
18,732 |
|
|
|
24.86 |
|
|
|
145,747 |
|
|
|
26.86 |
|
Vested |
|
(955,354 |
) |
|
|
16.49 |
|
|
|
(193,483 |
) |
|
|
14.20 |
|
|
|
(1,158,797 |
) |
|
|
4.80 |
|
Forfeited |
|
(25,090 |
) |
|
|
17.64 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Outstanding at June 30, 2023 |
|
2,364,414 |
|
|
$ |
20.77 |
|
|
|
204,882 |
|
|
$ |
16.11 |
|
|
|
937,582 |
|
|
$ |
17.01 |
|
(a) |
Amounts granted reflect performance units initially granted. The actual payout will be between zero and 200% depending on achievement of either total stockholder return ranking compared to our peers at the vesting date or on the achievement of internal performance targets. |
20
Deferred Compensation Plan
Our deferred compensation plan gives non-employee directors and officers the ability to defer all or a portion of their salaries, bonuses or director fees and invest in Range common stock or make other investments at the individual’s discretion. Range provides a partial matching contribution to officers which vests at the end of three years. The assets of the plan are held in a grantor trust, which we refer to as the Rabbi Trust, and are therefore available to satisfy the claims of our general creditors in the event of bankruptcy or insolvency. Our common stock held in the Rabbi Trust is treated as a liability award as employees are allowed to take withdrawals from the Rabbi Trust either in cash or in Range stock. The liability for the vested portion of the stock held in the Rabbi Trust is reflected as deferred compensation liability in the accompanying consolidated balance sheets and is adjusted to fair value each reporting period by a charge or credit to deferred compensation plan expense on our consolidated statements of operations. The assets of the Rabbi Trust, other than our common stock, are invested in marketable securities and reported at their market value as other assets in the accompanying consolidated balance sheets. The deferred compensation liability reflects the vested market value of the marketable securities and Range stock held in the Rabbi Trust. Changes in the market value of the marketable securities and changes in the fair value of the deferred compensation plan liability are charged or credited to deferred compensation plan expense each quarter. We recorded a mark-to-market loss of $11.2 million in second quarter 2023 compared to a mark-to-market gain of $19.2 million in second quarter 2022. We recorded a mark-to-market loss of $20.5 million in first six months 2023 compared to a mark-to-market loss of $54.1 million in first six months 2022. The Rabbi Trust held 3.1 million shares (2.9 million of which were vested) of Range stock at June 30, 2023 compared to 5.6 million shares (5.3 million of which were vested) at December 31, 2022.
(13) EXIT COSTS
Exit Costs
In third quarter 2020, we sold our North Louisiana assets and retained certain gathering, transportation and processing obligations which extend into 2030. These are contracts where we will not realize any future benefit. The estimated obligations are included in current and long-term divestiture contract obligation in our consolidated balance sheets. In second quarter 2023, we recorded a net adjustment of $37.8 million to increase this obligation primarily for higher rates due to inflation. In second quarter 2022, we recorded a net adjustment of $24.8 million to increase the obligation for a change in our forecasted drilling plans of the buyer. In first six months 2023, we recorded accretion expense of $21.0 million compared to $22.1 million in the same period of the prior year. The estimated discounted divestiture contract obligation was $400.0 million at June 30, 2023.
In second quarter 2020, we negotiated capacity releases on certain transportation pipelines in Pennsylvania effective May 31, 2020 and extending through the remainder of the contract. The estimated remaining discounted obligation for these transportation capacity releases as of June 30, 2023 was $3.8 million.
The following summarizes our exit costs for the three and six months ended June 30, 2023 and 2022 (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Transportation contract capacity releases |
$ |
95 |
|
|
$ |
162 |
|
|
$ |
203 |
|
|
$ |
323 |
|
Divestiture contract obligation (including accretion |
|
48,559 |
|
|
|
35,907 |
|
|
|
60,774 |
|
|
|
46,861 |
|
|
$ |
48,654 |
|
|
$ |
36,069 |
|
|
$ |
60,977 |
|
|
$ |
47,184 |
|
The following details the accrued exit cost liability activity for the six months ended June 30, 2023 (in thousands):
|
|
Exit |
|
|
Balance at December 31, 2022 |
|
$ |
395,680 |
|
Accretion of discount |
|
|
21,216 |
|
Changes in estimate |
|
|
39,761 |
|
Payments |
|
|
(52,868 |
) |
Balance at June 30, 2023 |
|
$ |
403,789 |
|
(a) |
Includes the divestiture contract obligation and the transportation contract capacity release obligation. |
21
(14) CAPITAL STOCK
We have authorized capital stock of 485.0 million shares which includes 475.0 million shares of common stock and 10.0 million shares of preferred stock. We currently have no preferred stock issued or outstanding. The following is a schedule of changes in the number of common shares outstanding since the beginning of 2022:
|
|
Six Months Ended |
|
|
Year Ended |
|
||
Beginning balance |
|
|
238,885,730 |
|
|
|
249,792,908 |
|
Restricted stock grants |
|
|
47,800 |
|
|
|
671,303 |
|
Restricted stock units vested |
|
|
1,752,991 |
|
|
|
1,827,625 |
|
Performance stock units issued |
|
|
1,057,245 |
|
|
|
590,940 |
|
Performance stock dividends |
|
|
6,276 |
|
|
|
1,843 |
|
Treasury shares |
|
|
(399,530 |
) |
|
|
(13,998,889 |
) |
Ending balance |
|
|
241,350,512 |
|
|
|
238,885,730 |
|
Stock Repurchase Program
In 2019, the board of directors approved a stock purchase program to acquire up to $100.0 million of our outstanding common stock. In early 2022, our board authorized an additional repurchase of up to $430.0 million of our outstanding common stock for an aggregate available amount at that time of $500.0 million. On October 21, 2022, our board of directors authorized an additional repurchase of up to $1.0 billion for common stock repurchases. Under this program, we may repurchase shares in open market transactions, from time to time, in accordance with applicable SEC rules and federal securities laws. Purchases under the program are made at our discretion and may change based upon market conditions. In first six months 2023, we repurchased 400,000 shares at an aggregate cost of $9.7 million. The following is a schedule of the change in treasury shares for the three and six months ended June 30, 2023:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||
Beginning balance |
|
|
24,401,065 |
|
|
|
24,001,535 |
|
Rabbi trust shares distributed/sold |
|
|
— |
|
|
|
(470 |
) |
Shares repurchased |
|
|
— |
|
|
|
400,000 |
|
Ending balance |
|
|
24,401,065 |
|
|
|
24,401,065 |
|
|
|
|
|
|
|
|
||
(15) SUPPLEMENTAL CASH FLOW INFORMATION
|
|
Six Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Net cash provided from operating activities included: |
|
|
|
|
|
|
||
Income taxes paid to taxing authorities |
|
$ |
(2,200 |
) |
|
$ |
(12,467 |
) |
Interest paid |
|
|
(60,987 |
) |
|
|
(111,733 |
) |
Non-cash investing and financing activities included: |
|
|
|
|
|
|
||
Increase in asset retirement costs capitalized |
|
|
1,917 |
|
|
|
2,965 |
|
Increase (decrease) in accrued capital expenditures |
|
|
28,440 |
|
|
|
(10,740 |
) |
22
(16) COMMITMENTS AND CONTINGENCIES
Litigation
We are the subject of, or party to, a number of pending or threatened legal actions, administrative proceedings or investigations arising in the ordinary course of our business including, but not limited to, royalty claims, contract claims and environmental claims. While many of these matters involve inherent uncertainty, we believe that the amount of the liability, if any, ultimately incurred with respect to these actions, proceedings or claims will not have a material adverse effect on our consolidated financial position as a whole or on our liquidity, capital resources or future annual results of operations.
When deemed necessary, we establish reserves for certain legal proceedings. The establishment of a reserve is based on an estimation process that includes the advice of legal counsel and subjective judgment of management. While management believes these reserves to be adequate, it is reasonably possible we could incur additional losses with respect to those matters in which reserves have been established. We will continue to evaluate our litigation on a quarterly basis and will establish and adjust any litigation reserves as appropriate to reflect our assessment of the then current status of litigation.
We have incurred and will continue to incur capital, operating and remediation expenditures as a result of environmental laws and regulations. As of June 30, 2023, liabilities for remediation were not material. We are not aware of any environmental claims existing as of June 30, 2023 that have not been provided for or would otherwise have a material impact on our financial position or results of operations. Environmental liabilities normally involve estimates that are subject to revision until final resolution, settlement or remediation occurs.
(17) COSTS INCURRED FOR PROPERTY ACQUISITION, EXPLORATION AND DEVELOPMENT (a)
|
|
Six Months Ended |
|
|
Year Ended |
|
||
|
|
(in thousands) |
|
|||||
Acquisitions: |
|
|
|
|
|
|
||
Acreage purchases |
|
$ |
20,007 |
|
|
$ |
28,735 |
|
Development |
|
|
304,577 |
|
|
|
460,668 |
|
Exploration: |
|
|
|
|
|
|
||
Drilling |
|
|
— |
|
|
|
— |
|
Expense |
|
|
11,429 |
|
|
|
25,194 |
|
Stock-based compensation expense |
|
|
623 |
|
|
|
1,578 |
|
Gas gathering facilities: |
|
|
|
|
|
|
||
Development |
|
|
1,211 |
|
|
|
1,466 |
|
Subtotal |
|
|
337,847 |
|
|
|
517,641 |
|
Asset retirement obligations |
|
|
1,917 |
|
|
|
18,096 |
|
Total costs incurred |
|
$ |
339,764 |
|
|
$ |
535,737 |
|
(a) Includes costs incurred whether capitalized or expensed.
23
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview of Our Business
We are a Fort Worth, Texas-based independent natural gas, natural gas liquids (NGLs) and crude oil and condensate company primarily engaged in the exploration, development and acquisition of natural gas properties in the Appalachian region of the United States. We operate in one segment and have a single company-wide management team that administers all properties as a whole rather than by discrete operating segments. We measure financial performance as a single enterprise and not on a geographical or an area-by-area basis.
Our overarching business objective is to build stockholder value through returns-focused development of natural gas properties. Our strategy to achieve our business objective is to generate consistent cash flows from reserves and production through internally generated drilling projects occasionally coupled with complementary acquisitions and divestitures of non-core assets. Our revenues, profitability and future growth depend substantially on prevailing prices for natural gas, NGLs and oil and on our ability to economically find, develop, acquire, produce and market these reserves. Commodity prices have been and are expected to remain volatile. Our primary near-term focus includes the following:
We prepare our financial statements in conformity with U.S. GAAP which requires us to make estimates and assumptions that affect our reported results of operations and the amount of our reported assets, liabilities and proved reserves. We use the successful efforts method of accounting for our natural gas, NGLs and oil activities.
Prices for natural gas, NGLs and oil fluctuate widely and affect:
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the preceding consolidated financial statements and notes in Item 1.
Market Conditions
We believe we are positioned for sustainable long-term success. We continue to monitor the impact of the actions of OPEC and other large producing nations, the Russia-Ukraine conflict, global inventories of oil and natural gas, future monetary policy and governmental policies aimed at transitioning towards lower carbon energy and we expect prices for some or all of the commodities we produce to remain volatile given the complex dynamics of supply and demand that exist in the market. In first quarter 2023, natural gas prices declined based on the relatively mild winter and extended down time at a liquefied natural gas export facility. Subsequently, high levels of domestic U.S. gas storage compared with the five-year average kept natural gas prices below $3.00 in second quarter 2023. Longer term natural gas futures have remained strong based on market expectations that associated gas-related activity in oil basins and dry gas basin activity will show modest rates of growth when compared with the past due to infrastructure constraints, capital discipline and core inventory exhaustion. In addition, the global energy crisis further highlighted the low cost and low emissions shale gas resource base in North America, supporting continued strong structural demand growth for U.S. liquefied natural gas exports, domestic industrial gas demand and power generation.
24
Other factors such as geopolitical disruptions, supply chain disruptions, cost inflation, concerns over a potential economic recession and the pace and extent of tightening global monetary policy may impact the supply and demand for oil, natural gas and NGLs. We continue to assess and monitor the impact and consequences of these factors on our operations.
While expected commodity prices have declined in 2023 compared to prior year, we believe market data supports a positive outlook given significant new demand and export infrastructure currently under construction. We believe that our competitive full-cycle cost structure, robust drilling inventory, reduced debt levels and risk reduction through hedging have us well positioned within the industry.
Prices for natural gas, NGLs and oil that we produce significantly impact our revenues and cash flows. Natural gas, NGLs and oil benchmarks significantly decreased in second quarter 2023 when compared to the same period of 2022 and also decreased in first six months 2023 compared to the same period of 2022. As a result, we experienced a significant decrease in price realizations. The following table lists related benchmarks for natural gas, oil and NGLs composite prices for the three and six months ended June 30, 2023 and 2022:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Benchmarks: |
|
|
|
|
|
|
|
|
|
|
|
||||
Average NYMEX prices (a) |
|
|
|
|
|
|
|
|
|
|
|
||||
Natural gas (per mcf) |
$ |
2.10 |
|
|
$ |
7.18 |
|
|
$ |
2.79 |
|
|
$ |
6.04 |
|
Oil (per bbl) |
|
73.98 |
|
|
|
108.40 |
|
|
|
74.95 |
|
|
|
101.60 |
|
Mont Belvieu NGLs composite (per gallon) (b) |
|
0.50 |
|
|
|
1.04 |
|
|
|
0.56 |
|
|
|
1.01 |
|
(a) |
Based on weighted average of bid week prompt month prices on the New York Mercantile Exchange. |
(b) |
Based on our estimated NGLs product composition per barrel. |
Our price realizations (not including the impact of our derivatives) may differ from these benchmarks for many reasons, including quality, location or production being sold at different indices.
Consolidated Results of Operations
Overview of Second Quarter 2023 Results
During second quarter 2023, we recognized net income of $30.2 million, or $0.12 per diluted common share compared to net income of $452.9 million, or $1.77 per diluted common share during second quarter 2022. The lower net income in second quarter 2023 compared to second quarter 2022 reflects the impact of significantly lower commodity prices on our natural gas, NGLs and oil sales and on our reported derivative fair value income (loss). In addition, we recorded a mark-to-market loss on our deferred compensation plan compared to a gain in the same period of the prior year. See page 30 for more information on our derivative fair value income (loss).
For second quarter 2023, we experienced a decrease in revenue from the sale of natural gas, NGLs and oil due to a 56% decrease in net realized prices (average prices including all derivative settlements and third-party transportation costs paid by us) when compared to the same quarter of 2022. Daily production averaged 2.1 Bcfe in both the second quarter 2023 and 2022.
Our second quarter 2023 financial and operating performance included the following results:
25
During second quarter 2023, we continued to enhance our balance sheet, return capital to investors and preserve liquidity:
Our cash flow from operating activities in second quarter 2023 was $126.6 million, a decrease of $198.1 million from the second quarter 2022 with significantly lower commodity prices partially offset by a favorable impact from the change in working capital.
Overview of First Six Months 2023 Results
During first six months 2023, we recognized net income of $511.7 million, or $2.07 per diluted common share compared to a net loss of $4.0 million, or $0.02 per diluted common share during first six months 2022. The improvement in our net income for first six months 2023 compared to 2022 reflects the impact of significantly lower commodity prices on our reported derivative fair value income or loss. Given the significant decrease in commodity prices, our derivative fair value income or loss, which includes the non-cash fair value adjustment related to our derivatives, was a gain of $491.7 million in first six months 2023 compared to a loss of $1.2 billion in first six months of the prior year. In addition, first six months 2023 includes a gain on extinguishment of debt compared to a loss in the same period of the prior year offset by the impact of significantly lower commodity prices on our natural gas, NGLs and oil sales. For additional information on our derivative fair value income (loss), see page 30.
For first six months 2023, we experienced a decrease in revenue from the sale of natural gas, NGLs and oil due to a 39% decrease in net realized prices (average prices including all derivative settlements and third-party transportation costs paid by us) somewhat offset by slightly higher production volumes when compared to the same period of 2022. Daily production averaged 2.1 Bcfe in both the first six months 2023 and 2022.
Our first six months 2023 financial and operating performance included the following results:
First six months 2023 also included the following highlights to enhance our balance sheet, return capital to investors and preserve liquidity:
26
Our cash flow from operating activities in first six months 2023 was $601.5 million, a decrease of $129.6 million from the same period of 2022 with significantly lower realized prices partially offset by slightly higher production volumes and a favorable impact from the change in working capital.
Natural Gas, NGLs and Oil Sales, Production and Realized Price Calculations
Our revenues vary primarily as a result of changes in realized commodity prices and production volumes. Our revenues are generally recognized when control of the product is transferred to the customer and collectability is reasonably assured. In second quarter 2023, natural gas, NGLs and oil sales decreased 65% compared to second quarter 2022 with a 66% decrease in average realized prices (before cash settlements on our derivatives) and slightly higher production. In first six months 2023, natural gas, NGLs and oil sales decreased 50% compared to the same period of 2022 with a 51% decrease in average realized prices (before cash settlements on derivatives) partially offset by a 2% increase in production. The following table illustrates the primary components of natural gas, NGLs and oil sales for the three and six months ended June 30, 2023 and 2022 (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
||||||||
Natural gas, NGLs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Natural gas |
$ |
225,359 |
|
|
$ |
909,754 |
|
|
$ |
(684,395 |
) |
|
|
(75 |
)% |
|
$ |
666,939 |
|
|
$ |
1,539,677 |
|
|
$ |
(872,738 |
) |
|
|
(57 |
)% |
NGLs |
|
200,717 |
|
|
|
374,699 |
|
|
|
(173,982 |
) |
|
|
(46 |
)% |
|
|
457,157 |
|
|
|
713,068 |
|
|
|
(255,911 |
) |
|
|
(36 |
)% |
Oil |
|
42,306 |
|
|
|
72,439 |
|
|
|
(30,133 |
) |
|
|
(42 |
)% |
|
|
80,568 |
|
|
|
136,498 |
|
|
|
(55,930 |
) |
|
|
(41 |
)% |
Total natural gas, |
$ |
468,382 |
|
|
$ |
1,356,892 |
|
|
$ |
(888,510 |
) |
|
|
(65 |
)% |
|
$ |
1,204,664 |
|
|
$ |
2,389,243 |
|
|
$ |
(1,184,579 |
) |
|
|
(50 |
)% |
Our production is determined by drilling success which offsets the natural decline of our natural gas and oil reserves through production. Our production for the three and six months ended June 30, 2023 and 2022 is set forth in the following table:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
||||||||
Production (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Natural gas (mcf) |
|
129,416,394 |
|
|
|
131,721,014 |
|
|
|
(2,304,620 |
) |
|
|
(2 |
)% |
|
|
263,062,458 |
|
|
|
262,971,351 |
|
|
|
91,107 |
|
|
|
— |
% |
NGLs (bbls) |
|
9,330,430 |
|
|
|
8,784,851 |
|
|
|
545,579 |
|
|
|
6 |
% |
|
|
18,620,169 |
|
|
|
17,238,296 |
|
|
|
1,381,873 |
|
|
|
8 |
% |
Crude oil (bbls) |
|
658,249 |
|
|
|
716,168 |
|
|
|
(57,919 |
) |
|
|
(8 |
)% |
|
|
1,231,285 |
|
|
|
1,446,630 |
|
|
|
(215,345 |
) |
|
|
(15 |
)% |
Total (mcfe) (b) |
|
189,348,468 |
|
|
|
188,727,128 |
|
|
|
621,340 |
|
|
|
— |
% |
|
|
382,171,182 |
|
|
|
375,080,907 |
|
|
|
7,090,275 |
|
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Average daily |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Natural gas (mcf) |
|
1,422,158 |
|
|
|
1,447,484 |
|
|
|
(25,326 |
) |
|
|
(2 |
)% |
|
|
1,453,384 |
|
|
|
1,452,880 |
|
|
|
504 |
|
|
|
— |
% |
NGLs (bbls) |
|
102,532 |
|
|
|
96,537 |
|
|
|
5,995 |
|
|
|
6 |
% |
|
|
102,874 |
|
|
|
95,239 |
|
|
|
7,635 |
|
|
|
8 |
% |
Crude oil (bbls) |
|
7,234 |
|
|
|
7,870 |
|
|
|
(636 |
) |
|
|
(8 |
)% |
|
|
6,803 |
|
|
|
7,992 |
|
|
|
(1,189 |
) |
|
|
(15 |
)% |
Total (mcfe) (b) |
|
2,080,752 |
|
|
|
2,073,924 |
|
|
|
6,828 |
|
|
|
— |
% |
|
|
2,111,443 |
|
|
|
2,072,270 |
|
|
|
39,173 |
|
|
|
2 |
% |
(a) |
Represents volumes sold regardless of when produced. |
(b) |
Oil and NGLs volumes are converted to mcfe at the rate of one barrel equals six mcf based upon the approximate relative energy content of oil to natural gas, which is not indicative of the relationship between oil and natural gas prices. |
27
Our average realized price received (including all derivative settlements and third-party transportation costs) during second quarter 2023 was $1.46 per mcfe compared to $3.29 per mcfe in second quarter 2022. Our average realized price received (including all derivative settlements and third-party transportation costs) during first six months 2023 was $1.99 per mcfe compared to $3.26 per mcfe in first six months 2022. We believe computed final realized prices should include the total impact of transportation, gathering, processing and compression expense. Our average realized price (including all derivative settlements and third-party transportation costs) calculation also includes all cash settlements for derivatives. Average realized prices (excluding derivative settlements) do not include derivative settlements or third-party transportation costs which are reported in transportation, gathering, processing and compression expense in the accompanying consolidated statements of operations. Average realized prices (excluding derivative settlements) do include transportation costs where we receive net revenue proceeds from purchasers. Average realized price calculations for three and six months ended June 30, 2023 and 2022 are shown below:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
||||||||
Average Prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Average realized prices (excluding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Natural gas (per mcf) |
$ |
1.74 |
|
|
$ |
6.91 |
|
|
$ |
(5.17 |
) |
|
|
(75 |
)% |
|
$ |
2.54 |
|
|
$ |
5.85 |
|
|
$ |
(3.31 |
) |
|
|
(57 |
)% |
NGLs (per bbl) |
|
21.51 |
|
|
|
42.65 |
|
|
|
(21.14 |
) |
|
|
(50 |
)% |
|
|
24.55 |
|
|
|
41.37 |
|
|
|
(16.82 |
) |
|
|
(41 |
)% |
Crude oil and condensate (per bbl) |
|
64.27 |
|
|
|
101.15 |
|
|
|
(36.88 |
) |
|
|
(36 |
)% |
|
|
65.43 |
|
|
|
94.36 |
|
|
|
(28.93 |
) |
|
|
(31 |
)% |
Total (per mcfe) (a) |
|
2.47 |
|
|
|
7.19 |
|
|
|
(4.72 |
) |
|
|
(66 |
)% |
|
|
3.15 |
|
|
|
6.37 |
|
|
|
(3.22 |
) |
|
|
(51 |
)% |
Average realized prices (including all |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Natural gas (per mcf) |
$ |
2.34 |
|
|
$ |
4.12 |
|
|
$ |
(1.78 |
) |
|
|
(43 |
)% |
|
$ |
2.97 |
|
|
$ |
4.08 |
|
|
$ |
(1.11 |
) |
|
|
(27 |
)% |
NGLs (per bbl) |
|
21.51 |
|
|
|
41.46 |
|
|
|
(19.95 |
) |
|
|
(48 |
)% |
|
|
24.55 |
|
|
|
40.04 |
|
|
|
(15.49 |
) |
|
|
(39 |
)% |
Crude oil and condensate (per bbl) |
|
62.54 |
|
|
|
59.46 |
|
|
|
3.08 |
|
|
|
5 |
% |
|
|
62.74 |
|
|
|
58.95 |
|
|
|
3.79 |
|
|
|
6 |
% |
Total (per mcfe) (a) |
|
2.88 |
|
|
|
5.03 |
|
|
|
(2.15 |
) |
|
|
(43 |
)% |
|
|
3.44 |
|
|
|
4.93 |
|
|
|
(1.49 |
) |
|
|
(30 |
)% |
Average realized prices (including all |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Natural gas (per mcf) |
$ |
1.24 |
|
|
$ |
2.78 |
|
|
$ |
(1.54 |
) |
|
|
(55 |
)% |
|
$ |
1.85 |
|
|
$ |
2.80 |
|
|
$ |
(0.95 |
) |
|
|
(34 |
)% |
NGLs (per bbl) |
|
8.03 |
|
|
|
24.25 |
|
|
|
(16.22 |
) |
|
|
(67 |
)% |
|
|
10.67 |
|
|
|
23.31 |
|
|
|
(12.64 |
) |
|
|
(54 |
)% |
Crude oil and condensate (per bbl) |
|
62.14 |
|
|
|
59.46 |
|
|
|
2.68 |
|
|
|
5 |
% |
|
|
62.37 |
|
|
|
58.94 |
|
|
|
3.43 |
|
|
|
6 |
% |
Total (per mcfe) (a) |
|
1.46 |
|
|
|
3.29 |
|
|
|
(1.83 |
) |
|
|
(56 |
)% |
|
|
1.99 |
|
|
|
3.26 |
|
|
|
(1.27 |
) |
|
|
(39 |
)% |
(a) |
Oil and NGLs volumes are converted to mcfe at the rate of one barrel equals six mcf based upon the approximate relative energy content of oil to natural gas, which is not indicative of the relationship between oil and natural gas prices. |
Realized prices include the impact of basis differentials and gains or losses realized from our basis hedging. The prices we receive for our natural gas can be more or less than the NYMEX price because of adjustments for delivery location, relative quality and other factors. The following table provides this impact on a per mcf basis:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Average natural gas differentials below NYMEX |
|
$ |
(0.36 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.25 |
) |
|
$ |
(0.19 |
) |
Realized (losses) gains on basis hedging |
|
$ |
(0.11 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.04 |
) |
|
$ |
0.06 |
|
The following tables reflect our production and average realized commodity prices (excluding derivative settlements and third-party transportation costs paid by Range) (in thousands, except prices):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2022 |
|
|
Price |
|
|
Volume |
|
|
2023 |
|
|
2022 |
|
|
Price |
|
|
Volume |
|
|
2023 |
|
||||||||
Natural gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Price (per mcf) |
$ |
6.91 |
|
|
$ |
(5.17 |
) |
|
$ |
— |
|
|
$ |
1.74 |
|
|
$ |
5.85 |
|
|
$ |
(3.31 |
) |
|
$ |
— |
|
|
$ |
2.54 |
|
Production (Mmcf) |
|
131,721 |
|
|
|
— |
|
|
|
(2,305 |
) |
|
|
129,416 |
|
|
|
262,971 |
|
|
|
— |
|
|
|
91 |
|
|
|
263,062 |
|
Natural gas |
$ |
909,754 |
|
|
$ |
(668,478 |
) |
|
$ |
(15,917 |
) |
|
$ |
225,359 |
|
|
$ |
1,539,677 |
|
|
$ |
(873,271 |
) |
|
$ |
533 |
|
|
$ |
666,939 |
|
28
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2022 |
|
|
Price |
|
|
Volume |
|
|
2023 |
|
|
2022 |
|
|
Price |
|
|
Volume |
|
|
2023 |
|
||||||||
NGLs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Price (per bbl) |
$ |
42.65 |
|
|
$ |
(21.14 |
) |
|
$ |
— |
|
|
$ |
21.51 |
|
|
$ |
41.37 |
|
|
$ |
(16.82 |
) |
|
$ |
— |
|
|
$ |
24.55 |
|
Production |
|
8,785 |
|
|
|
— |
|
|
|
545 |
|
|
|
9,330 |
|
|
|
17,238 |
|
|
|
— |
|
|
|
1,382 |
|
|
|
18,620 |
|
NGLs sales |
$ |
374,699 |
|
|
$ |
(197,252 |
) |
|
$ |
23,270 |
|
|
$ |
200,717 |
|
|
$ |
713,068 |
|
|
$ |
(313,073 |
) |
|
$ |
57,162 |
|
|
$ |
457,157 |
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2022 |
|
|
Price |
|
|
Volume |
|
|
2023 |
|
|
2022 |
|
|
Price |
|
|
Volume |
|
|
2023 |
|
||||||||
Crude oil |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Price (per bbl) |
$ |
101.15 |
|
|
$ |
(36.88 |
) |
|
$ |
— |
|
|
$ |
64.27 |
|
|
$ |
94.36 |
|
|
$ |
(28.93 |
) |
|
$ |
— |
|
|
$ |
65.43 |
|
Production |
|
716 |
|
|
|
— |
|
|
|
(58 |
) |
|
|
658 |
|
|
|
1,447 |
|
|
|
— |
|
|
|
(216 |
) |
|
|
1,231 |
|
Crude oil |
$ |
72,439 |
|
|
$ |
(24,275 |
) |
|
$ |
(5,858 |
) |
|
$ |
42,306 |
|
|
$ |
136,498 |
|
|
$ |
(35,611 |
) |
|
$ |
(20,319 |
) |
|
$ |
80,568 |
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2022 |
|
|
Price |
|
|
Volume |
|
|
2023 |
|
|
2022 |
|
|
Price |
|
|
Volume |
|
|
2023 |
|
||||||||
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Price (per mcfe) |
$ |
7.19 |
|
|
$ |
(4.72 |
) |
|
$ |
— |
|
|
$ |
2.47 |
|
|
$ |
6.37 |
|
|
$ |
(3.22 |
) |
|
$ |
— |
|
|
$ |
3.15 |
|
Production |
|
188,727 |
|
|
|
— |
|
|
|
621 |
|
|
|
189,348 |
|
|
|
375,081 |
|
|
|
— |
|
|
|
7,090 |
|
|
|
382,171 |
|
Total natural gas, |
$ |
1,356,892 |
|
|
$ |
(892,977 |
) |
|
$ |
4,467 |
|
|
$ |
468,382 |
|
|
$ |
2,389,243 |
|
|
$ |
(1,229,744 |
) |
|
$ |
45,165 |
|
|
$ |
1,204,664 |
|
Transportation, gathering, processing and compression expense was $268.2 million in second quarter 2023 compared to $327.9 million in second quarter 2022. These third-party costs are lower in second quarter 2023 when compared to second quarter 2022 due to lower fuel prices, lower electricity costs and the impact of lower NGLs prices which result in lower processing costs. The second quarter 2022 included a one-time adjustment of $7.5 million for a settlement regarding transportation, gathering and processing charges.
Transportation, gathering, processing and compression expense was $553.7 million in the first six months 2023 compared to $625.7 million in the same period of the prior year. These third party costs are lower in first six months 2023 when compared to the same period of 2022 due to the impact of lower NGL prices which result in lower processing costs, lower electricity and fuel costs. We have included these costs in the calculation of average realized prices (including all derivative settlements and third-party transportation expenses paid by Range). The following table summarizes transportation, gathering, processing and compression expense for the three and six months ended June 30, 2023 and 2022 on a per mcf and per barrel basis (in thousands, except for costs per unit):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
||||||||
Transportation, gathering, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Natural gas |
$ |
142,121 |
|
|
$ |
176,788 |
|
|
$ |
(34,667 |
) |
|
|
(20 |
)% |
|
$ |
294,710 |
|
|
$ |
337,224 |
|
|
$ |
(42,514 |
) |
|
|
(13 |
)% |
NGLs |
|
125,815 |
|
|
|
151,119 |
|
|
|
(25,304 |
) |
|
|
(17 |
)% |
|
|
258,527 |
|
|
|
288,459 |
|
|
|
(29,932 |
) |
|
|
(10 |
)% |
Oil |
|
254 |
|
|
|
— |
|
|
|
254 |
|
|
|
100 |
% |
|
|
436 |
|
|
|
11 |
|
|
|
425 |
|
|
|
3,864 |
% |
Total |
$ |
268,190 |
|
|
$ |
327,907 |
|
|
$ |
(59,717 |
) |
|
|
(18 |
)% |
|
$ |
553,673 |
|
|
$ |
625,694 |
|
|
$ |
(72,021 |
) |
|
|
(12 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Natural gas (per mcf) |
$ |
1.10 |
|
|
$ |
1.34 |
|
|
$ |
(0.24 |
) |
|
|
(18 |
)% |
|
$ |
1.12 |
|
|
$ |
1.28 |
|
|
$ |
(0.16 |
) |
|
|
(13 |
)% |
NGLs (per bbl) |
$ |
13.48 |
|
|
$ |
17.20 |
|
|
$ |
(3.72 |
) |
|
|
(22 |
)% |
|
$ |
13.88 |
|
|
$ |
16.73 |
|
|
$ |
(2.85 |
) |
|
|
(17 |
)% |
Oil (per bbl) |
$ |
0.39 |
|
|
$ |
— |
|
|
$ |
0.39 |
|
|
|
100 |
% |
|
$ |
0.35 |
|
|
$ |
0.01 |
|
|
$ |
0.34 |
|
|
|
3,400 |
% |
29
Derivative fair value income (loss) was income of $123.7 million in second quarter 2023 compared to a loss of $239.9 million in second quarter 2022. Derivative fair value income was $491.7 million in first six months 2023 compared to a loss of $1.2 billion in the same period of the prior year. All of our derivatives are accounted for using the mark-to-market accounting method. Mark-to-market accounting treatment can result in more volatility of our revenues as the change in the fair value of our commodity derivative positions is included in total revenue. As commodity prices increase or decrease, such changes will have an opposite effect on the mark-to-market value of our derivatives. Gains on our derivatives generally indicate potentially lower wellhead revenues in the future while losses indicate potentially higher future wellhead revenues. The following table summarizes the impact of our commodity derivatives for the three and six months ended June 30, 2023 and 2022 (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Derivative fair value income (loss) per |
$ |
123,734 |
|
|
$ |
(239,922 |
) |
|
$ |
491,701 |
|
|
$ |
(1,178,979 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-cash fair value income (loss): (a) |
|
|
|
|
|
|
|
|
|
|
|
||||
Natural gas derivatives |
$ |
42,622 |
|
|
$ |
139,249 |
|
|
$ |
370,001 |
|
|
$ |
(603,004 |
) |
Oil derivatives |
|
5,546 |
|
|
|
9,434 |
|
|
|
15,586 |
|
|
|
(43,951 |
) |
NGLs derivatives |
|
— |
|
|
|
19,105 |
|
|
|
— |
|
|
|
815 |
|
Freight derivatives |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(114 |
) |
Divestiture contingent consideration |
|
(1,020 |
) |
|
|
— |
|
|
|
(4,940 |
) |
|
|
8,120 |
|
Total non-cash fair value income (loss) (a) |
$ |
47,148 |
|
|
$ |
167,788 |
|
|
$ |
380,647 |
|
|
$ |
(638,134 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net cash receipt (payment) on derivative settlements: |
|
|
|
|
|
|
|
|
|
|
|
||||
Natural gas derivatives |
$ |
77,725 |
|
|
$ |
(367,347 |
) |
|
$ |
114,375 |
|
|
$ |
(466,805 |
) |
Oil derivatives |
|
(1,139 |
) |
|
|
(29,858 |
) |
|
|
(3,321 |
) |
|
|
(51,217 |
) |
NGLs derivatives |
|
— |
|
|
|
(10,505 |
) |
|
|
— |
|
|
|
(22,823 |
) |
Total net cash receipt (payment) |
$ |
76,586 |
|
|
$ |
(407,710 |
) |
|
$ |
111,054 |
|
|
$ |
(540,845 |
) |
(a) |
Non-cash fair value adjustments on commodity derivatives is a non-U.S. GAAP measure. Non-cash fair value adjustments on commodity derivatives only represent the net change between periods of the fair market values of commodity derivative positions and exclude the impact of settlements on commodity derivatives during the period. We believe that non-cash fair value adjustments on commodity derivatives is a useful supplemental disclosure to differentiate non-cash fair market value adjustments from settlements on commodity derivatives during the period. Non-cash fair value adjustments on commodity derivatives is not a measure of financial or operating performance under U.S. GAAP, nor should it be considered a substitute for derivative fair value income or loss as reported in our consolidated statements of operations. This also includes the change in fair value of our divestiture contingent consideration. |
Brokered natural gas, marketing and other revenue in second quarter 2023 was $44.9 million compared to $108.2 million in second quarter 2022 which is the result of significantly lower broker sales prices somewhat offset by higher broker sales volumes (volumes not related to our production). The revenue in second quarter 2023 also includes the receipt of a $1.5 million make-whole payment and $1.8 million of interest income. Brokered natural gas, marketing and other revenue was $127.0 million in first six months 2023 compared to $195.6 million in first six months 2022 which is the result of significantly lower broker sales prices somewhat offset by higher broker sales volumes. The six months ended June 30, 2023 also includes the receipt of $5.1 million in make-whole payments and $2.7 million of interest income. We continue to optimize our transportation portfolio using these volumes. See also Brokered natural gas and marketing expense below for more information on our net brokered margin.
30
Operating Costs per Mcfe
We believe some of our expense fluctuations are best analyzed on a unit-of-production or per mcfe basis. Our costs for certain services, labor and supplies have remained high due to on-going demand and, to a lesser extent, inflation and supply chain disruptions, all of which affected the cost of our operations throughout 2022. Market conditions suggest these costs will continue to stabilize in the second half of 2023. The following table presents information about certain of our expenses on a per mcfe basis for the three and six months ended June 30, 2023 and 2022:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
||||||||
Direct operating expense |
$ |
0.13 |
|
|
$ |
0.11 |
|
|
$ |
0.02 |
|
|
|
18 |
% |
|
$ |
0.13 |
|
|
$ |
0.11 |
|
|
$ |
0.02 |
|
|
|
18 |
% |
Taxes other than income |
|
0.04 |
|
|
|
0.04 |
|
|
|
— |
|
|
|
— |
% |
|
|
0.04 |
|
|
|
0.04 |
|
|
|
— |
|
|
|
— |
% |
General and administrative |
|
0.21 |
|
|
|
0.23 |
|
|
|
(0.02 |
) |
|
|
(9 |
)% |
|
|
0.22 |
|
|
|
0.23 |
|
|
|
(0.01 |
) |
|
|
(4 |
)% |
Interest expense |
|
0.16 |
|
|
|
0.22 |
|
|
|
(0.06 |
) |
|
|
(27 |
)% |
|
|
0.17 |
|
|
|
0.24 |
|
|
|
(0.07 |
) |
|
|
(29 |
)% |
Depletion, depreciation and |
|
0.45 |
|
|
|
0.46 |
|
|
|
(0.01 |
) |
|
|
(2 |
)% |
|
|
0.45 |
|
|
|
0.46 |
|
|
|
(0.01 |
) |
|
|
(2 |
)% |
Direct operating expense was $23.9 million in second quarter 2023 compared to $20.1 million in second quarter 2022. Direct operating expenses include normally recurring expenses to operate and produce our wells, non-recurring well workovers and repair-related expenses. Our direct operating costs increased in second quarter 2023 primarily due to higher water handling/hauling costs, higher equipment costs and higher contract labor and services along with higher workover costs. Our production volumes were slightly higher in second quarter 2023 compared to the same period of the prior year. We incurred $784,000 of workover costs in second quarter 2023 compared to $203,000 in second quarter 2022. These costs are expected to enhance production from existing wells. On a per mcfe basis, direct operating expense was $0.13 in second quarter 2023 compared to $0.11 in the same quarter of the prior year due to higher equipment costs and higher water handling/hauling costs.
Direct operating expense was $50.9 million in the first six months 2023 compared to $40.3 million in the same period of the prior year. Our direct operating costs increased in the first six months 2023 when compared to the same period of the prior year due to higher workover costs, higher water handling/hauling costs and higher contract labor and services. We incurred $3.7 million of workover costs in first six months 2023 compared to $1.1 million of workover costs in first six months 2022. These costs are expected to enhance production from existing wells. On a per mcfe basis direct operating costs increased $0.02 from $0.11 to $0.13 due to higher workover costs and higher water/hauling costs. The following table summarizes direct operating expense per mcfe for the three and six months ended June 30, 2023 and 2022:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
||||||||
Direct operating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Lease operating expense |
$ |
0.13 |
|
|
$ |
0.11 |
|
|
$ |
0.02 |
|
|
|
18 |
% |
|
$ |
0.12 |
|
|
$ |
0.11 |
|
|
$ |
0.01 |
|
|
|
9 |
% |
Workovers |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
% |
|
|
0.01 |
|
|
|
— |
|
|
|
0.01 |
|
|
|
100 |
% |
Stock-based compensation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
% |
Total direct operating |
$ |
0.13 |
|
|
$ |
0.11 |
|
|
$ |
0.02 |
|
|
|
18 |
% |
|
$ |
0.13 |
|
|
$ |
0.11 |
|
|
$ |
0.02 |
|
|
|
18 |
% |
31
Taxes other than income expense is predominately comprised of the Pennsylvania impact fee which is paid based on market commodity prices. In February 2012, the Commonwealth of Pennsylvania enacted an "impact fee" which functions as a tax on unconventional natural gas and oil production from the Marcellus Shale in Pennsylvania. This impact fee was $6.7 million in second quarter 2023 compared to $7.5 million in second quarter 2022. The impact fee is based on drilling activities and is adjusted based on prevailing natural gas prices. Taxes other than income includes an impact fee of $13.5 million in first six months 2023 compared to $14.1 million in the first six months 2022 which reflects lower natural gas prices. This category also includes franchise, real estate and other taxes. The following table summarizes taxes other than income per mcfe for the three and six months ended June 30, 2023 and 2022:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
||||||||
Taxes other than income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Impact fee |
$ |
0.04 |
|
|
$ |
0.04 |
|
|
$ |
— |
|
|
|
— |
% |
|
$ |
0.04 |
|
|
$ |
0.04 |
|
|
$ |
— |
|
|
|
— |
% |
Other |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
% |
Total taxes other than |
$ |
0.04 |
|
|
$ |
0.04 |
|
|
$ |
— |
|
|
|
— |
% |
|
$ |
0.04 |
|
|
$ |
0.04 |
|
|
$ |
— |
|
|
|
— |
% |
General and administrative (G&A) expense was $39.5 million in second quarter 2023 compared to $42.9 million in second quarter 2022. The second quarter 2023 decrease of $3.4 million when compared to the same period of 2022 is primarily due to lower stock-based compensation expense and lower legal fees. On a per mcfe basis, second quarter 2023 G&A expense was 9% lower than second quarter 2022 primarily due to lower stock-based compensation and lower legal fees.
G&A expense for first six months 2023 decreased $2.8 million when compared to the same period of 2022 due to lower stock-based compensation expense of $3.8 million and lower legal fees partially offset by higher salaries and benefits. On a per mcfe basis first six months 2023 G&A expense decreased 4% from the first six months of the prior year due to lower stock-based compensation. The following table summarizes G&A expenses on a per mcfe basis for the three and six months ended June 30, 2023 and 2022:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
||||||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
General and |
$ |
0.17 |
|
|
$ |
0.18 |
|
|
$ |
(0.01 |
) |
|
|
(6 |
)% |
|
$ |
0.17 |
|
|
$ |
0.17 |
|
|
$ |
— |
|
|
|
— |
% |
Stock-based |
|
0.04 |
|
|
|
0.05 |
|
|
|
(0.01 |
) |
|
|
(20 |
)% |
|
|
0.05 |
|
|
|
0.06 |
|
|
|
(0.01 |
) |
|
|
(17 |
)% |
Total general and |
$ |
0.21 |
|
|
$ |
0.23 |
|
|
$ |
(0.02 |
) |
|
|
(9 |
)% |
|
$ |
0.22 |
|
|
$ |
0.23 |
|
|
$ |
(0.01 |
) |
|
|
(4 |
)% |
Interest expense was $31.1 million in second quarter 2023 compared to $42.0 million in second quarter 2022. Interest expense was $63.3 million for first six months 2023 compared to $89.2 million for first six months of 2022. The following table presents information about interest expense per mcfe for the three and six months ended June 30, 2023 and 2022:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
||||||||
Bank credit facility |
$ |
0.01 |
|
|
$ |
0.02 |
|
|
$ |
(0.01 |
) |
|
|
(50 |
)% |
|
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
— |
|
|
|
— |
% |
Senior notes |
|
0.14 |
|
|
|
0.19 |
|
|
|
(0.05 |
) |
|
|
(26 |
)% |
|
|
0.14 |
|
|
|
0.21 |
|
|
|
(0.07 |
) |
|
|
(33 |
)% |
Amortization of deferred |
|
0.01 |
|
|
|
0.01 |
|
|
|
— |
|
|
|
— |
% |
|
|
0.01 |
|
|
|
0.01 |
|
|
|
— |
|
|
|
— |
% |
Total interest expense |
$ |
0.16 |
|
|
$ |
0.22 |
|
|
$ |
(0.06 |
) |
|
|
(27 |
)% |
|
$ |
0.17 |
|
|
$ |
0.24 |
|
|
$ |
(0.07 |
) |
|
|
(29 |
)% |
Average debt outstanding |
$ |
1,829,021 |
|
|
$ |
2,556,185 |
|
|
$ |
(727,164 |
) |
|
|
(28 |
)% |
|
$ |
1,855,493 |
|
|
$ |
2,669,295 |
|
|
$ |
(813,802 |
) |
|
|
(30 |
)% |
Average interest rate (a) |
|
6.5 |
% |
|
|
6.1 |
% |
|
|
0.4 |
% |
|
|
7 |
% |
|
|
6.5 |
% |
|
|
6.3 |
% |
|
|
0.2 |
% |
|
|
3 |
% |
(a) |
Includes commitment fees but excludes debt issuance costs. |
32
On an absolute basis, the decrease in interest expense for second quarter 2023 from the same period of 2022 was primarily due to lower overall average outstanding debt balances. We had no debt outstanding on the bank credit facility for second quarter 2023 compared to $90.0 million in second quarter 2022 and the weighted average interest rate on the bank credit facility was 4.1% in second quarter 2022.
On an absolute basis, the decrease in interest expense for first six months 2023 from the same period in 2022 was primarily due to lower overall outstanding debt balances. Average debt balance outstanding on the bank credit facility was $16.0 million for first six months 2023 compared to $77.6 million for first six months 2022 and the weighted average interest rates on the bank credit facility was 8.4% in first six months 2023 compared to 3.4% in first six months 2022.
Depletion, depreciation and amortization expense was $85.0 million in second quarter 2023 compared to $86.5 million in second quarter 2022. This decrease is due to a 2% decrease in depletion rates. Depletion expense, the largest component of DD&A expense, was $0.44 per mcfe in second quarter 2023 compared to $0.45 per mcfe in second quarter 2022.
DD&A expense was $171.6 million in first six months 2023 compared to $172.1 million in the same period of 2022. This decrease is due to a 2% decrease in depletion rates somewhat offset by a slight increase in production volumes. Depletion expense per mcfe was $0.44 in first six months 2023 compared to a $0.45 in the same period of 2022. We have historically adjusted our depletion rates in the fourth quarter of each year based on the year-end reserve report and at other times during the year when circumstances indicate there has been a significant change in reserves or costs. The following table summarizes DD&A expense per mcfe for the three and six months ended June 30, 2023 and 2022:
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
||||||||
DD&A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Depletion and amortization |
$ |
0.44 |
|
|
$ |
0.45 |
|
|
$ |
(0.01 |
) |
|
|
(2 |
)% |
|
$ |
0.44 |
|
|
$ |
0.45 |
|
|
$ |
(0.01 |
) |
|
|
(2 |
)% |
Depreciation |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
% |
Accretion and other |
|
0.01 |
|
|
|
0.01 |
|
|
|
— |
|
|
|
— |
% |
|
|
0.01 |
|
|
|
0.01 |
|
|
|
— |
|
|
|
— |
% |
Total DD&A expense |
$ |
0.45 |
|
|
$ |
0.46 |
|
|
$ |
(0.01 |
) |
|
|
(2 |
)% |
|
$ |
0.45 |
|
|
$ |
0.46 |
|
|
$ |
(0.01 |
) |
|
|
(2 |
)% |
Other Operating Expenses
Our total operating expenses also include other expenses that generally do not trend with production. These expenses include stock-based compensation, brokered natural gas and marketing expense, exploration expense, abandonment and impairment of unproved properties, exit and termination costs, deferred compensation plan expenses and loss or gain on early extinguishment of debt. Stock-based compensation includes the amortization of restricted stock grants and PSUs. The following table details the allocation of stock-based compensation to functional expense categories for the three and six months ended June 30, 2023 and 2022 (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Direct operating expense |
$ |
426 |
|
|
$ |
362 |
|
|
$ |
841 |
|
|
$ |
711 |
|
Brokered natural gas and marketing expense |
|
460 |
|
|
|
686 |
|
|
|
1,121 |
|
|
|
1,205 |
|
Exploration expense |
|
303 |
|
|
|
318 |
|
|
|
623 |
|
|
|
770 |
|
General and administrative expense |
|
8,415 |
|
|
|
10,270 |
|
|
|
18,015 |
|
|
|
21,843 |
|
Total stock-based compensation |
$ |
9,604 |
|
|
$ |
11,636 |
|
|
$ |
20,600 |
|
|
$ |
24,529 |
|
33
Brokered natural gas and marketing expense was $44.8 million in second quarter 2023 compared to $110.1 million in second quarter 2022 due to significantly lower commodity prices partially offset by higher broker purchase volumes (volumes not related to our production). Brokered natural gas and marketing expense was $111.9 million in first six months 2023 compared to $203.2 million in first six months 2022 due to significantly lower commodity prices partially offset by higher broker purchase volumes. The following table details our brokered natural gas, marketing and other net margin for the three and six months ended June 30, 2023 and 2022 (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
||||||||
Brokered natural gas and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Brokered natural gas sales |
$ |
39,034 |
|
|
$ |
103,368 |
|
|
$ |
(64,334 |
) |
|
|
(62 |
)% |
|
$ |
114,094 |
|
|
$ |
187,430 |
|
|
$ |
(73,336 |
) |
|
|
(39 |
)% |
Brokered NGLs sales |
|
300 |
|
|
|
640 |
|
|
|
(340 |
) |
|
|
(53 |
)% |
|
|
668 |
|
|
|
2,280 |
|
|
|
(1,612 |
) |
|
|
(71 |
)% |
Interest income |
|
1,780 |
|
|
|
30 |
|
|
|
1,750 |
|
|
|
5,833 |
% |
|
|
2,737 |
|
|
|
41 |
|
|
|
2,696 |
|
|
|
6,576 |
% |
Other marketing revenue |
|
3,747 |
|
|
|
4,135 |
|
|
|
(388 |
) |
|
|
(9 |
)% |
|
|
9,473 |
|
|
|
5,864 |
|
|
|
3,609 |
|
|
|
62 |
% |
Brokered natural |
|
(42,072 |
) |
|
|
(106,229 |
) |
|
|
64,157 |
|
|
|
60 |
% |
|
|
(106,347 |
) |
|
|
(195,424 |
) |
|
|
89,077 |
|
|
|
46 |
% |
Brokered NGLs purchases |
|
(262 |
) |
|
|
(682 |
) |
|
|
420 |
|
|
|
62 |
% |
|
|
(602 |
) |
|
|
(2,329 |
) |
|
|
1,727 |
|
|
|
74 |
% |
Other marketing expense |
|
(2,466 |
) |
|
|
(3,198 |
) |
|
|
732 |
|
|
|
23 |
% |
|
|
(4,919 |
) |
|
|
(5,479 |
) |
|
|
560 |
|
|
|
10 |
% |
Net brokered natural gas and |
$ |
61 |
|
|
$ |
(1,936 |
) |
|
$ |
1,997 |
|
|
|
103 |
% |
|
$ |
15,104 |
|
|
$ |
(7,617 |
) |
|
$ |
22,721 |
|
|
|
298 |
% |
|
(a)
|
Includes transportation costs. |
Exploration expense was $7.4 million in second quarter 2023 compared to $7.5 million in second quarter 2022 with lower delay rentals and other expense offset by higher seismic costs. Exploration expense was $12.1 million in first six months 2023 compared to $12.2 million in first six months 2022 with lower delay rentals and other expense offset by higher seismic costs. The following table details our exploration expense for the three and six months ended June 30, 2023 and 2022 (in thousands):
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
% |
|
||||||||
Exploration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Delay rentals and other |
$ |
4,612 |
|
|
$ |
5,899 |
|
|
$ |
(1,287 |
) |
|
|
(22 |
)% |
|
$ |
7,151 |
|
|
$ |
8,842 |
|
|
$ |
(1,691 |
) |
|
|
(19 |
)% |
Personnel expense |
|
1,372 |
|
|
|
1,209 |
|
|
|
163 |
|
|
|
13 |
% |
|
|
2,947 |
|
|
|
2,514 |
|
|
|
433 |
|
|
|
17 |
% |
Stock-based compensation |
|
303 |
|
|
|
318 |
|
|
|
(15 |
) |
|
|
(5 |
)% |
|
|
623 |
|
|
|
770 |
|
|
|
(147 |
) |
|
|
(19 |
)% |
Seismic |
|
1,161 |
|
|
|
80 |
|
|
|
1,081 |
|
|
|
1,351 |
% |
|
|
1,331 |
|
|
|
79 |
|
|
|
1,252 |
|
|
|
1,585 |
% |
Total exploration expense |
$ |
7,448 |
|
|
$ |
7,506 |
|
|
$ |
(58 |
) |
|
|
(1 |
)% |
|
$ |
12,052 |
|
|
$ |
12,205 |
|
|
$ |
(153 |
) |
|
|
(1 |
)% |
Abandonment and impairment of unproved properties expense was $25.8 million in second quarter 2023 compared to $7.1 million in second quarter 2022. Abandonment and impairment of unproved properties was $33.3 million in first six months 2023 compared to $9.1 million in the same period of 2022. Abandonment and impairment of unproved properties for second quarter and first six months 2023 increased when compared to the same period of 2022 due to higher expected lease expirations in Pennsylvania. When we do not intend to drill on a property prior to expiration, we have allowed acreage to expire and we expect to allow acreage to expire in the future. However, we also believe acres needed for future development can be leased again.
Exit costs were $48.7 million in second quarter 2023 compared to $36.1 million in second quarter 2022. In second quarter 2023, we recorded $10.9 million accretion expense primarily related to retained liabilities for certain gathering, transportation and processing obligations extending until 2030 compared to accretion expense of $11.3 million in the same quarter of the prior year. The second quarter 2023 also includes an adjustment of $37.8 million to increase this obligation primarily due to an increase in forecasted rates due to inflation. The second quarter 2022 also included an adjustment of $24.8 million to increase the obligation for a change in our forecasted drilling plans of the buyer and other adjustments.
Exit costs were $61.0 million in first six months 2023 compared to $47.2 million in first six months 2022. We recorded accretion expense of $21.2 million in first six months 2023 compared to accretion expense of $22.4 million in the same period of 2022. The first six months 2023 also includes an adjustment of $39.8 million to increase this obligation primarily for an increase in forecasted rates due to inflation compared to an adjustment of $24.8 million in the same period of the prior year to increase this obligation for a change in forecasted drilling plans of the buyer and other adjustments.
34
Deferred compensation plan expense was a loss of $11.2 million in second quarter 2023 compared to income of $19.2 million in second quarter 2022. This non-cash item relates to the increase or decrease in value of the liability associated with our common stock that is vested and held in our deferred compensation plan. The deferred compensation liability is adjusted to fair value by a charge or a credit to deferred compensation plan expense. Our stock price increased from $26.47 at March 31, 2023 to $29.40 June 30, 2023. In the same period of the prior year our stock price decreased from $30.38 at March 31, 2022 to $24.75 at June 30, 2022. During first six months 2023, deferred compensation was a loss of $20.5 million compared to a loss of $54.1 million in the same period in 2022. Our stock price increased from $25.02 at December 31, 2022 to $29.40 at June 30, 2023. In the same period of the prior year, our stock price increased from $17.83 at December 31, 2021 to $24.75 at June 30, 2022.
(Gain) loss on early extinguishment of debt was a gain of $439,000 in both second quarter and six months ended 2023 compared to a loss of $69.2 million in first six months 2022. In second quarter 2023, we purchased in the open market $61.6 million principal amount of 4.875% senior notes due 2025 at a discount and recorded a gain of $439,000, net of transaction costs and the expensing of deferred financing costs on the repurchased debt. In first quarter 2022, we announced a call for the redemption of $850.0 million of our outstanding 9.25% senior notes due 2026. The redemption price equaled 106.938% of par plus accrued and unpaid interest. We recognized a loss on early extinguishment of debt in first quarter 2022 of $69.2 million, net of transaction costs and the expensing of the remaining deferred financing costs on the repurchased debt.
Income tax expense (benefit) was an expense of $14.7 million in second quarter 2023 compared to expense of $103.3 million in second quarter 2022. Income tax expense was $136.6 million in first six months 2023 compared to a benefit of $12.8 million in the same period of 2022. The 2023 and 2022 effective tax rates were different than the statutory tax rate due to state income taxes, equity compensation, valuation allowances and other discrete tax items.
Management’s Discussion and Analysis of Financial Condition, Capital Resources and Liquidity
Cash Flows
Cash flows from operations are primarily affected by production volumes and commodity prices, net of the effects of settlements of our derivatives. Our cash flows from operations are also impacted by changes in working capital. Short-term liquidity needs are satisfied by borrowings under our bank credit facility and/or cash on hand. Because of this, and because our principal source of operating cash flows (proved reserves to be produced in future years) cannot be reported as working capital, we often have low or negative working capital. From time to time, we enter into various derivative contracts to provide an economic hedge of our exposure to commodity price risk associated with anticipated future natural gas, NGLs and oil production. The production we hedge has varied and will continue to vary from year to year depending on, among other things, our expectation of future commodity prices and capital requirements. Any payments due to counterparties under our derivative contracts should ultimately be funded by proceeds received from the sale of our production. Production receipts, however, often lag payments to the counterparties. As of June 30, 2023, we have entered into derivative agreements covering 148.7 Bcfe for the remainder of 2023, 291.1 Bcfe for 2024, 149.7 Bcfe for 2025 and 11.9 Bcfe for 2026, not including our basis swaps.
35
The following table presents sources and uses of cash and cash equivalents for the six months ended June 30, 2023 and 2022 (in thousands):
|
|
Six Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Sources of cash and cash equivalents |
|
|
|
|
|
|
||
Operating activities |
|
$ |
601,546 |
|
|
$ |
731,120 |
|
Disposal of assets |
|
|
771 |
|
|
|
380 |
|
Issuance of senior notes |
|
|
— |
|
|
|
500,000 |
|
Borrowing on credit facility |
|
|
185,000 |
|
|
|
648,000 |
|
Other |
|
|
82,688 |
|
|
|
64,291 |
|
Total sources of cash and cash equivalents |
|
$ |
870,005 |
|
|
$ |
1,943,791 |
|
|
|
|
|
|
|
|
||
Uses of cash and cash equivalents |
|
|
|
|
|
|
||
Additions to natural gas properties |
|
$ |
(277,088 |
) |
|
$ |
(211,232 |
) |
Repayment on credit facility |
|
|
(204,000 |
) |
|
|
(647,000 |
) |
Acreage purchases |
|
|
(19,572 |
) |
|
|
(19,445 |
) |
Additions to field service assets |
|
|
(87 |
) |
|
|
(381 |
) |
Repayment of senior notes |
|
|
(60,934 |
) |
|
|
(1,068,117 |
) |
Treasury stock purchases |
|
|
(9,663 |
) |
|
|
(132,894 |
) |
Dividends paid |
|
|
(38,640 |
) |
|
|
— |
|
Debt issuance costs |
|
|
— |
|
|
|
(15,798 |
) |
Other |
|
|
(98,153 |
) |
|
|
(62,990 |
) |
Total uses of cash and cash equivalents |
|
$ |
(708,137 |
) |
|
$ |
(2,157,857 |
) |
Sources of Cash and Cash Equivalents
Cash flows provided from operating activities in first six months 2023 was $601.5 million compared to $731.1 million in first six months 2022. Cash provided from operating activities is largely dependent upon commodity prices and production volumes, net of the effects of settlement of our derivative contracts. The decrease in cash provided from operating activities from first six months 2022 to first six months 2023 reflects lower realized prices partially offset by the impact of a favorable change in working capital (the timing of cash receipts and disbursements). As of June 30, 2023, we have hedged more than 45% of our projected total production for the remainder of 2023, with more than 50% of our projected natural gas production hedged. Changes in working capital (as reflected in our consolidated statements of cash flows) for first six months 2023 were a positive $27.4 million compared to a negative $256.8 million for first six months 2022.
Uses of Cash and Cash Equivalents
Additions to natural gas properties for first six months 2023 were consistent with expectations relative to our announced 2023 capital budget.
Repayment of senior notes for first six months 2023 includes the repurchase in the open market $61.6 million principal amount of our 4.875% senior notes due 2025, at a discount.
Treasury stock purchases for first six months 2023 include the repurchase of 400,000 shares for a total of $9.7 million as part of our previously announced stock repurchase program.
Liquidity and Capital Resources
Based on the current commodity price environment, we believe we have sufficient liquidity and capital resources to execute our business plan for the foreseeable future. We continue to manage the duration and level of our drilling and completion commitments in order to maintain flexibility with regard to our activity level and capital expenditures. As of June 30, 2023, we had cash on hand in the amount of $162.1 million and availability under our credit facility of $1.2 billion.
36
Sources of Cash
We expect our 2023 capital program to be funded by cash flows from operations. During the six months ended June 30, 2023, we generated $601.5 million of cash flows from operating activities. As of June 30, 2023, we had approximately $1.4 billion of liquidity, consisting of $1.2 billion available under our bank credit facility and $162.1 million of cash on hand. Our borrowing base can be adjusted as a result of changes in commodity prices, acquisitions or divestitures of proved properties or financing activities. We may draw on our bank credit facility to meet short-term cash requirements.
Although we expect cash flows and capacity under the existing credit facility to be sufficient to fund our expected 2023 capital program, we may also have the option to raise funds through new debt or equity offerings or from other sources of financing. All of our sources of liquidity can be affected by the general conditions of the broader economy, force majeure events and fluctuations in commodity prices, operating costs and volumes produced, all of which affect us and our industry. We have no control over market prices for natural gas, NGLs or oil, although we may be able to influence realized revenues through the use of derivative contracts as part of our commodity price risk management.
Bank Credit Facility
Our bank credit facility is secured by substantially all of our assets. As of June 30, 2023, we had no outstanding borrowings under our bank credit facility and we maintained a borrowing base of $3.0 billion and aggregate lender commitments of $1.5 billion. We also have undrawn letters of credit of $292.9 million as of June 30, 2023. We were in compliance with the applicable covenants under the bank credit facility as of June 30, 2023.
The borrowing base is subject to regular, semi-annual redeterminations and is dependent on a number of factors but primarily the lender’s assessment of our future cash flows. Our scheduled borrowing base redetermination was completed in March 2023 with our borrowing base and lender commitments reaffirmed.
Our daily weighted-average bank credit facility debt balance was $16.0 million for first six months ended June 30, 2023 compared to $77.6 million for the same period of the prior year. Borrowings under the amended and restated revolving bank credit facility can either be at the alternate base rate (ABR, as defined in the bank credit facility agreement) plus a spread ranging from 0.75% to 1.75% or at the secured overnight financing rate (SOFR, as defined in the bank credit facility agreement) plus a spread ranging from 1.75% to 2.75%. The applicable spread is dependent upon borrowings relative to the borrowing base. We may elect, from time to time, to convert all or any part of our SOFR loans to base rate loans or to convert all or any of the base rate loans to SOFR loans.
Uses of Cash
We use cash for the development, exploration and acquisition of natural gas properties and for the payment of gathering, transportation and processing costs, operating, general and administrative costs, taxes and debt obligations, including interest, dividends and share repurchases. Expenditures for the development, exploration and acquisition of natural gas properties are the primary use of our capital resources. During first six months 2023, we funded $296.7 million of capital expenditures as reported in our consolidated statement of cash flows with operating cash flows. The amount of our future capital expenditures will depend upon a number of factors including our cash flows from operating, investing and financing activities, infrastructure availability, supply and demand fundamentals and our ability to execute our development program. In addition, the impact of commodity prices on investment opportunities, the availability of capital and the timing and results of our development activities may lead to changes in funding requirements for future development. We periodically review our budget to assess changes in current and projected cash flows, debt requirements and other factors.
We may from time to time repurchase or redeem all or portions of our outstanding debt securities for cash, through exchanges for other securities or a combination of both. Such repurchases or redemptions may be made in open market transactions and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Our next significant long-term debt maturity is in the amount of $688.4 million due 2025. As part of our strategy for 2023, we will continue to focus on improving our financial strength.
Our quarterly cash dividend was reinstated in third quarter 2022. See also Cash Dividend Payments below. During first six months 2023, we repurchased 400,000 shares of our common stock at an aggregate cost of $9.7 million. The total remaining share repurchase authorization was approximately $1.1 billion at June 30, 2023.
Shelf Registration
We have a universal shelf registration statement filed with the SEC under which we, as a well-known seasoned issuer for purposes of SEC rules, have the ability to sell an indeterminate amount of various types of debt and equity securities.
37
Cash Dividend Payments
On May 31, 2023, our board of directors approved a dividend of $0.08 per share payable on June 30, 2023 to stockholders of record at the close of business on June 16, 2023. The determination of the amount of future dividends, if any, to be declared and paid is at the sole discretion of the board of directors and primarily depends on cash flow, capital expenditures, debt covenants and various other factors.
Cash Contractual Obligations
Our contractual obligations include long-term debt, operating leases, derivative obligations, asset retirement obligations and transportation, processing and gathering commitments including the divestiture contractual commitment. As of June 30, 2023, we do not have any significant off-balance sheet debt or other such unrecorded obligations and we have not guaranteed any debt of any unrelated party. As of June 30, 2023, we had a total of $292.9 million of undrawn letters of credit under our bank credit facility.
Since December 31, 2022, there have been no material changes to our contractual obligations.
Interest Rates
At June 30, 2023, we had approximately $1.8 billion of debt outstanding which bore interest at fixed rates averaging 6.0%. We had no variable rate debt outstanding at June 30, 2023.
Off-Balance Sheet Arrangements
We do not currently utilize any significant off-balance sheet arrangements with unconsolidated entities to enhance our liquidity or capital resource position, or for any other purpose. However, as is customary in the oil and gas industry, we have various contractual work commitments, some of which are described above under Cash Contractual Obligations.
Inflation and Changes in Prices
Our revenues, the value of our assets and our ability to obtain bank loans or additional capital on attractive terms have been and will continue to be affected by changes in natural gas, NGLs and oil prices and the costs to produce our reserves. Natural gas, NGLs and oil prices are subject to significant fluctuations that are beyond our ability to control or predict. Certain of our costs and expenses are affected by general inflation and we expect costs for the remainder of 2023 to continue to be a function of supply and demand.
Forward-Looking Statements
Certain sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations include forward-looking statements concerning trends or events potentially affecting our business. These statements typically contain words such as "anticipates," "believes," "expects," "targets," "plans," "estimates," "predicts," "may," "should," "would" or similar words indicating that future outcomes are uncertain. In accordance with "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, which could cause future outcomes to differ materially from those set forth in the forward-looking statements. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our current forecasts for our existing operations and do not include the potential impact of any future events. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. For additional risk factors affecting our business, see Item 1A. Risk Factors as set forth in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 27, 2023.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term "market risk" refers to the risk of loss arising from adverse changes in natural gas, NGLs and oil prices and interest rates. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market-risk exposure. All of our market-risk sensitive instruments were entered into for purposes other than trading. All accounts are U.S. dollar denominated.
38
Market Risk
We are exposed to market risks related to the volatility of natural gas, NGLs and oil prices. We employ various strategies, including the use of commodity derivative instruments, to manage the risks related to these price fluctuations. These derivative instruments apply to a varying portion of our production and providing partial price protection. These arrangements can limit the benefit to us of increases in prices but offer protection in the event of price declines. Further, if our counterparties defaulted, this protection might be limited as we might not receive the benefits of the derivatives. Realized prices are primarily driven by worldwide prices for oil and regional index prices for North American natural gas production. However, natural gas and NGLs prices are becoming global commodities similar to oil. Natural gas and oil prices have been volatile and unpredictable for many years. Changes in natural gas prices affect us more than changes in oil prices because approximately 65% of our December 31, 2022 proved reserves are natural gas and 2% of proved reserves are oil and condensate. In addition, a portion of our NGLs, which are 33% of proved reserves, are also impacted by changes in oil prices. We are also exposed to market risks related to changes in interest rates, based on our credit facility balance. These risks did not change materially from December 31, 2022 to June 30, 2023.
Commodity Price Risk
We use commodity-based derivative contracts to manage exposures to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. At times, certain of our derivatives are swaps where we receive a fixed price for our production and pay market prices to the counterparty. Our derivatives program can also include collars, which establish a minimum floor price and a predetermined ceiling price. Our program may also include a three-way collar which is a combination of three options. We have also entered into natural gas derivative instruments containing a fixed price swap and a sold option (which we refer to as a swaption). At June 30, 2023, our derivative program includes swaps, collars, three-way collars and swaptions. The fair value of these contracts, represented by the estimated amount that would be realized upon immediate liquidation based on a comparison of the contract price and a reference price, generally NYMEX for natural gas and crude oil or Mont Belvieu for NGLs, as of June 30, 2023, approximated a net unrealized pretax gain of $216.8 million. These contracts expire monthly through December 2026. At June 30, 2023, the following commodity derivative contracts were outstanding, excluding our basis swaps which are discussed below:
Period |
|
Contract Type |
|
Volume Hedged |
|
|
Weighted Average Hedge Price |
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
Swap |
|
|
Sold Put |
|
|
|
Floor |
|
|
|
Ceiling |
|
|
Fair Market Value (in thousands) |
|
|||||
Natural Gas (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2023 |
|
Swaps |
|
381,658 Mmbtu/day |
|
$ |
|
3.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
37,923 |
|
|||
2023 |
|
Collars |
|
256,685 Mmbtu/day |
|
|
|
|
|
|
|
|
$ |
|
3.37 |
|
|
$ |
|
4.50 |
|
|
$ |
25,835 |
|
||
2023 |
|
Three-way Collars |
|
140,000 Mmbtu/day |
|
|
|
|
|
$ |
2.25 |
|
|
$ |
|
3.25 |
|
|
$ |
|
4.28 |
|
|
$ |
9,443 |
|
|
2024 |
|
Swaps |
|
304,973 Mmbtu/day |
|
$ |
|
4.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
51,305 |
|
|||
2024 |
|
Collars |
|
436,694 Mmbtu/day |
|
|
|
|
|
|
|
|
$ |
|
3.50 |
|
|
$ |
|
5.63 |
|
|
$ |
67,006 |
|
||
2024 |
|
Three-way Collars |
|
50,000 Mmbtu/day |
|
|
|
|
|
$ |
2.50 |
|
|
$ |
|
3.50 |
|
|
$ |
|
4.24 |
|
|
$ |
334 |
|
|
2025 |
|
Swaps |
|
360,000 Mmbtu/day |
|
$ |
|
4.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
21,353 |
|
|||
2026 |
|
Swaps |
|
32,500 Mmbtu/day |
|
$ |
|
4.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,589 |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Crude Oil |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2023 |
|
Swaps |
|
5,000 bbls/day |
|
$ |
|
71.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
701 |
|
|||
January-September 2024 |
|
Collars |
|
832 bbls/day |
|
|
|
|
|
|
|
|
$ |
|
80.00 |
|
|
$ |
|
90.12 |
|
|
$ |
2,783 |
|
||
|
(a)
|
We sold natural gas swaptions of 90,000 Mmbtu/day for 2025 at a weighted average price of $4.25. These swaptions expire December 31, 2023. The fair market value of these swaptions at June 30, 2023 was a net derivative liability of $2.5 million. |
We believe NGLs prices are somewhat seasonal, particularly for propane. Therefore, the relationship of NGLs prices to NYMEX WTI (or West Texas Intermediate) will vary due to product components, seasonality and geographic supply and demand. We sell NGLs in several regional and international markets. If we are not able to sell or store NGLs, we may be required to curtail production or shift our drilling activities to dry gas areas.
The Appalachian region has limited local demand and infrastructure to accommodate ethane. We have agreements where we have contracted to either sell or transport ethane from our Marcellus Shale area. We cannot ensure that these facilities will remain available. If we are not able to sell ethane under at least one of these agreements, we may be required to curtail production or, as we have done in the past, purchase or divert natural gas to blend with our rich residue gas.
39
Other Commodity Risk
We are impacted by basis risk, caused by factors that affect the relationship between commodity futures prices reflected in derivative commodity instruments and the cash market price of the underlying commodity. Natural gas transaction prices are frequently based on industry reference prices that may vary from prices experienced in local markets. If commodity price changes in one region are not reflected in other regions, derivative commodity instruments may no longer provide the expected hedge, resulting in increased basis risk. Therefore, in addition to the swaps, collars, three-way collars and swaptions discussed above, we have entered into natural gas basis swap agreements. The price we receive for our gas production can be more or less than the NYMEX Henry Hub price because of basis adjustments, relative quality and other factors. Basis swap agreements effectively fix the basis adjustments. The fair value of the natural gas basis swaps was a gain of $30.7 million at June 30, 2023 and they settle monthly through December 2026.
At June 30, 2023, we are entitled to receive contingent consideration associated with the sale of our North Louisiana assets, for the year ended 2023, of up to $21.0 million based on future achievement of certain natural gas and oil prices based on published indexes along with the realized NGLs prices of the buyer. The fair value at June 30, 2023 was a gain of $8.1 million.
The following table shows the fair value of our derivatives and the hypothetical changes in fair value that would result from a 10% and a 25% change in commodity prices at June 30, 2023. We remain at risk for possible changes in the market value of commodity derivative instruments; however, such risks should be mitigated by price changes in the underlying physical commodity (in thousands):
|
|
|
|
Hypothetical Change in Fair Value |
|
|
Hypothetical Change in Fair Value |
|
|||||||||||
|
|
|
|
Increase in Commodity |
|
|
Decrease in Commodity |
|
|||||||||||
|
Fair Value |
|
|
10% |
|
|
25% |
|
|
10% |
|
|
25% |
|
|||||
Swaps |
$ |
113,871 |
|
|
$ |
(114,926 |
) |
|
$ |
(287,316 |
) |
|
$ |
114,926 |
|
|
$ |
287,315 |
|
Collars |
|
95,624 |
|
|
|
(45,278 |
) |
|
|
(111,942 |
) |
|
|
47,348 |
|
|
|
124,463 |
|
Three-way collars |
|
9,777 |
|
|
|
(9,132 |
) |
|
|
(23,196 |
) |
|
|
8,958 |
|
|
|
19,858 |
|
Swaptions |
|
(2,492 |
) |
|
|
(5,500 |
) |
|
|
(20,467 |
) |
|
|
2,031 |
|
|
|
2,481 |
|
Basis swaps |
|
30,730 |
|
|
|
27,191 |
|
|
|
67,979 |
|
|
|
(27,191 |
) |
|
|
(67,979 |
) |
Divestiture contingent |
|
8,140 |
|
|
|
900 |
|
|
|
2,560 |
|
|
|
(730 |
) |
|
|
(1,650 |
) |
Our commodity-based derivative contracts expose us to the credit risk of non-performance by the counterparty to the contracts. Our exposure is diversified primarily among major investment grade financial institutions and we have master netting agreements with our counterparties that provide for offsetting payables against receivables from separate derivative contracts. Our derivative contracts are with multiple counterparties to minimize our exposure to any individual counterparty. At June 30, 2023, our derivative counterparties include fourteen financial institutions, of which all but six are secured lenders in our bank credit facility. Counterparty credit risk is considered when determining the fair value of our derivative contracts. While our counterparties are primarily major investment grade financial institutions, the fair value of our derivative contracts has been adjusted to account for the risk of non-performance by certain of our counterparties, which was immaterial.
Interest Rate Risk
At June 30, 2023, we had total debt of $1.8 billion. All of our outstanding debt is based on fixed interest rates and, as a result, we do not have significant exposure to movements in market interest rates. Our credit facility provides for variable interest rate borrowings; however, we did not have any borrowings outstanding as of June 30, 2023.
40
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of June 30, 2023 at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There was no change in our system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 16 to our unaudited consolidated financial statements entitled "Commitments and Contingencies" included in Part I Item 1 above for a summary of our legal proceedings, such information being incorporated herein by reference.
Environmental Proceedings
From time to time, we receive notices of violation from governmental and regulatory authorities in areas in which we operate relating to alleged violations of environmental statutes or the rules and regulations promulgated thereunder. While we cannot predict with certainty whether these notices of violation will result in fines and/or penalties, if fines and/or penalties are imposed, they may result in monetary sanctions, individually or in the aggregate, in excess of $250,000.
ITEM 1A. RISK FACTORS
We are subject to various risks and uncertainties in the course of our business. In addition to the factors discussed elsewhere in this report, you should carefully consider the risks and uncertainties described under Item 1A. Risk Factors filed in our Annual Report on Form 10-K for the year ended December 31, 2022.
41
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of our common stock during the second quarter 2023 is as follows:
|
|
Three Months Ended June 30, 2023 |
|
|||||||||||||
Period |
|
Total Number |
|
|
Average Price |
|
|
Total Number |
|
|
Approximate |
|
||||
April 2023 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
1,090,737,354 |
|
May 2023 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
1,090,737,354 |
|
June 2023 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
1,090,737,354 |
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
(a) |
Includes any fees, commissions or other expenses associated with the share repurchases. |
(b) |
In October 2019, our board of directors authorized a $100 million common stock repurchase program. In February 2022, our board of directors subsequently increased the authorization for repurchases under the program for a cumulative approval of $530.0 million which includes fees, commissions and expenses. The share repurchase authority does not obligate us to acquire any specific number of shares. The program may be changed based upon our financial condition and is subject to termination by the board of directors prior to completion. On October 21, 2022, the board of directors authorized an additional repurchase of up to $1.0 billion of our outstanding common stock under this program. Shares repurchased as of June 30, 2023 were held as treasury stock. |
|
|
42
ITEM 6. EXHIBITS
Exhibit index
Exhibit |
|
|
Exhibit Description |
|
|
3.1 |
|
|
Restated Certificate of Incorporation of Range Resources Corporation (incorporated by reference to Exhibit 3.1.1 to our Form 10-Q (File No. 001-12209) as filed with the SEC on May 5, 2004, as amended by the Certificate of First Amendment to Restated Certificate of Incorporation of Range Resources Corporation (incorporated by reference to Exhibit 3.1 to our Form 10-Q (File No. 001-12209) as filed with the SEC on July 28, 2005) and the Certificate of Second Amendment to Restated Certificate of Incorporation of Range Resources Corporation (incorporated by reference to Exhibit 3.1 to our Form 10-Q (File No. 001-12209) as filed with the SEC on July 24, 2008) |
|
|
|||
|
3.2
|
|
|
Amended and Restated By-laws of Range Resources Corporation (incorporated by reference to Exhibit 3.1 to our Form 8-K (File No. 001-12209) as filed with the SEC on May 19, 2016) |
|
|
|
|
|
|
31.1* |
|
|
|
|
|
|||
|
31.2* |
|
|
|
|
|
|||
|
32.1** |
|
|
|
|
|
|||
|
32.2** |
|
|
|
|
|
|||
|
101. INS* |
|
|
Inline XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document |
|
|
|||
|
101. SCH* |
|
|
Inline XBRL Taxonomy Extension Schema |
|
|
|||
|
101. CAL* |
|
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|||
|
101. DEF* |
|
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|||
|
101. LAB* |
|
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|||
|
101. PRE* |
|
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
|
104 * |
|
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* filed herewith
** furnished herewith
43
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: July 24, 2023
RANGE RESOURCES CORPORATION |
||
|
|
|
By: |
|
/s/ MARK S. SCUCCHI |
|
|
Mark S. Scucchi |
|
|
Executive Vice President and |
Date: July 24, 2023
RANGE RESOURCES CORPORATION |
||
|
|
|
By: |
|
/s/ DORI A. GINN |
|
|
Dori A. Ginn |
|
|
Senior Vice President – Controller and |
44
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Dennis L. Degner, certify that:
Date: July 24, 2023 |
|
/s/ DENNIS L. DEGNER |
|
|
Dennis L. Degner |
|
|
Chief Executive Officer and President |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Mark S. Scucchi, certify that:
Date: July 24, 2023 |
|
/s/ Mark S. Scucchi |
|
|
Mark S. Scucchi |
|
|
Executive Vice President and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER AND PRESIDENT
OF RANGE RESOURCES CORPORATION
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the period ending June 30, 2023 and filed with the Securities and Exchange Commission on the date hereof (the “Report”) and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Dennis L. Degner, Chief Executive Officer and President of Range Resources Corporation (the “Company”), hereby certify that, to my knowledge:
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
By: |
|
/s/ DENNIS L. DEGNER |
|
|
Dennis L. Degner |
|
|
July 24, 2023 |
Exhibit 32.2
CERTIFICATION OF
CHIEF FINANCIAL OFFICER
OF RANGE RESOURCES CORPORATION
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the period ending June 30, 2023 and filed with the Securities and Exchange Commission on the date hereof (the “Report”) and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Mark S. Scucchi, Executive Vice President - Chief Financial Officer of Range Resources Corporation (the “Company”), hereby certify that, to my knowledge:
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
By: |
|
/s/ MARK S. SCUCCHI |
|
|
Mark S. Scucchi |
|
|
July 24, 2023 |