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Range Resources keeps H2 2021 gas production target steady in continued capital discipline

Highlights

Some H2 gas production hedged around $2.77-$2.79

Focus on debt reduction, increasing returns and efficiency

Appalachia producer Range Resources Corporation will maintain gas production near current levels going into the second half of 2021, the company told analysts July 27, focusing instead on debt reduction and improving efficiency.

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The company intends to adhere to a 2.15 Bcfe/d production goal for the remainder of 2021, largely in line with its second quarter average of 2.10 Bcfe/d.

"Range remains committed to disciplined capital spending and generating sustainable free cash flow," Range CEO Jeffrey Ventura said in a written statement published July 26.

Capital discipline

Debt reduction was a central theme of Range Resource's July 27 second-quarter earnings call. The company's short-term incentive structure has been accordingly amended to prioritize return on capital, with production and reserve growth per debt-adjusted share removed from the annual targets.

As part of the capital discipline push, the company has hedged 75% of its expected natural gas and condensates production for the second half of 2021, according to a July 26 financial release, at $2.77/MMBtu for the third quarter and $2.79/MMBtu in the fourth.

EGTS, South's remainder-of-2021 balance (August – December) is around $3.01/MMBtu, according to the latest Platts Analytics M2MS forward curve data. Much of the forward curve's strength is carried by the November and December contracts though, which were most recently at $3.235/MMBtu and $3.494/MMBtu, respectively.

Regional storage levels continue to lag, exacerbating winter supply concerns and supporting a stronger winter strip. East storage currently sits at 618 Bcf, down 9.1% from the region's 5-year average, according to the US Energy Information Administration's most recent weekly storage report.

NGL sales

Ventura highlighted the importance of its natural gas liquids sales to the company's balance sheet during the call, attributing "vast improvements in Range's margins and cash flow" to higher NGL prices.

Approximately two-thirds of Range Resources' acreage and production are in super-rich or wet gas plays, with liquids accounting for around 31% of its second-quarter production volumes.

"This pricing uplift from liquids reduces Range's breakeven natural gas price and improves margins when compared to producing only dry gas," Ventura said.

ESG as efficiency driver

Executives also emphasized Range Resources' environmental initiatives, positioning the company's focus on responsible water and land management as improving operational efficiency and lowering overall costs.

"We believe that producers who can most efficiently deliver these products to end markets from a cost and emissions perspective will be the most successful," Ventura said.

The company's water management initiative, which recycled all of Range's produced water and utilized around 1 million gallons of third-party produced water, led to a $1.6 million reduction in completion costs during the second quarter, Dennis Degner, Range Resources Senior Vice President, said in the call.

Range Resources has established a net-zero direct emissions target for 2025. An initial step towards potentially monetizing lower emissions gas production was taken in mid-June, when the company signed an agreement with continuous monitoring company, Project Canary, to certify some Marcellus gas production as responsibly sourced. A buyer has already been found for Range Resources' certified RSG, with a June 15 press release identifying it as a European multinational energy utility.