Management for Range Resources Corp. said hedging strategically and capturing more favorable liquids prices would help navigate the volatile natural gas market as the exploration and production firm holds production steady through the end of the year.
Fort Worth, TX-based Range produced 2.15 Bcfe/d in 2Q2024, compared with 2.08 Bcfe/d the same quarter in 2023.
CFO Mark Scucchi said plans are to maintain steady production through the remainder of the year, “with the flexibility to adapt to near-term commodity prices and resulting economics.”
At the same time, the company’s long-term business would be positioned for eventual growth as demand increases from domestic and international customers, Scucchi said during the second quarter earnings call.
Range expects its hedging program to help provide flexibility and navigate fluctuations in commodity prices.
CEO Denis Degner, who shared the microphone with Scucchi, said future LNG demand and increased power burns could position the market for “improving natural gas pricing going forward.
“...Even in the presence of relatively high natural gas storage levels and the current commodity prices,” Range plans to run two drilling rigs and one hydraulic fracturing crew through the end of the year.
Production for the second half of 2024 is expected to average about 2.2 Bcfe/d, slightly higher than previously stated guidance of 2.12-2.16 Bcfe/d.
Conversely, the No. 1 natural gas producer, EQT Corp., plans to continue curtailing Appalachian volumes in light of surplus storage levels.
Henry Hub natural gas prices sank to an average $1.24/MMBtu in March, according to NGI’s Daily Historical Data. The national benchmark averaged $2.05 through the second quarter.
Range currently has about 55% of second half 2024 natural gas hedged with an average floor price of $3.70/Mcf, as a buffer against price volatility. In 2025, about 35% is hedged with an average floor price of $3.90, “providing Range a stable base to consistently generate free cash flow through market cycles,” Scucchi said.
“This is about managing risk in the business prudently, while not hedging away the upside in the cash flow. So to that end, the philosophy is to try to cover fixed costs to maintain steady operations,” Scucchi said. The 2025 book was designed to do that. Prices locked in were based on the fundamentals as Range sees them unfolding over the next 12-18 months.
The projected start of liquefied natural gas export projects are “clearly a focus in the headline,” Scucchi said. There are five LNG export projects under construction along the Gulf Coast that could boost U.S. export capacity from 14 Bcf/d to nearly 25 Bcf/d by the end of this decade.
He noted that some facilities may be delayed. As those opportunities become reality later this year and early next year, the hedges are front-end loaded in the first half of 2025.
“We can provide some downside protection while retaining positive exposure to improved gas prices in the first half of the year,” Scucchi said.
[In the Eye of the Storm: North American LNG project developers continue to grapple with the Biden administration's pause on non-FTA permits. Has the pause given impetus to other projects? How are Mexico LNG projects advancing? Tune in to hear from LNG industry analyst Sergio Chapa in the latest episode of NGI's Hub & Flow.]
Range operates primarily in the Marcellus Shale, which boasts prolific windows of liquids-rich gas. Second quarter natural gas liquids (NGL) were about 30% of production, down from 32% in the first quarter 2024 because propane cargoes were delayed into early July.
The Appalachian Basin pure play said its liquids revenue provided an uplift to natural gas prices in the second quarter, with NGL price realizations providing a substantial premium relative to Henry Hub natural gas.
Range fetched an average price, including the impact of basis hedging, of $1.47 for natural gas in 2Q2024 compared with $2.47 a year earlier. Pre-hedged NGL prices were $24.35/bbl versus a realized NGL price of $21.51 in 2Q2023.
“Liquid production is back up to 32% today near recent highs reflecting increased focus on liquids rich activity the first half of the year,” Degner said.
Net income was $28 million (12 cents/share) during 2Q2024, compared with profits of $30 million (12 cents) in the year-ago period.
