FORT WORTH, Texas--(BUSINESS WIRE)--RANGE RESOURCES CORPORATION (NYSE: RRC) today announced its second quarter 2012 production results, preliminary realized prices and an update on its hedging status. On an equivalent basis, production volumes exceeded guidance with second quarter production averaging 719.3 Mmcfe net per day, a 42% increase over the prior-year quarter and 10% greater than the first quarter 2012. Adjusting production for the sale of the Barnett properties in the prior year, production would have increased 51% year-over-year. The record production was driven by the continued success of the Company’s drilling program. Production was 80% natural gas, 14% natural gas liquids (NGLs) and 6% crude oil. Year-over-year oil production increased 23%, NGL production rose 20%, while natural gas production increased 48%. Natural gas volumes exceeded guidance by 6.7 Mmcf per day (1%), oil volumes were 846 barrels per day (14%) over guidance while NGL volumes were 1,241 barrels per day (7%) less than guidance. Oil and NGLs volumes varied from the amounts anticipated for the quarter due to the timing of when certain wells were brought on production. In the second half of 2012, oil and NGL production is anticipated to rise at an increasing rate due to a heavy emphasis on planned drilling in the liquids-rich portion of the Marcellus and the horizontal Mississippian oil play.
The Company also announced that its preliminary second quarter 2012 commodity price realizations (including the impact of cash-settled hedges and derivative settlements which would correspond to analysts’ estimates) averaged $4.74 per mcfe before deduction of third-party transportation, gathering and compression fees. This compares to $6.43 per mcfe for the prior year quarter and $5.19 for the first quarter of 2012. Preliminary second quarter average production and realized prices for each commodity were: natural gas – 574.7 Mmcf per day ($3.66 per mcf), natural gas liquids – 17,259 barrels per day ($42.30 per barrel) and crude oil – 6,846 barrels per day ($84.31).
Commenting on the announcement, Jeff Ventura, Range’s President and CEO, said, “The 42% increase in production reflects excellent performance by our operating, midstream and marketing teams. As a result, we are well on track to achieve our 2012 production growth target of 30% to 35%. Importantly, our oil and NGL production is ramping up as we continue to shift capital to liquids-rich projects. Our focus on reducing unit costs continues to bear fruit and capital expenditures are within our original budget. Given the positive results in the first half of the year, coupled with our outstanding hedge position, we are well-positioned for the second half of the year.”
Hedging Status
Range hedges portions of its expected future production volumes to increase the predictability of its cash flow and to help maintain a strong financial position. At June 30, 2012, Range had approximately 80% of its expected 2012 natural gas production hedged at a weighted average floor of $4.18 per mcf. Similarly, Range has hedged or committed approximately 80% of its projected crude oil production at a floor of $91.19 and approximately 60% of its composite NGL production for 2012 at above current market prices. During the second quarter, Range realized approximately $90 million in hedging gains. As of June 30, 2012, Range had future hedging gains of approximately $340 million with roughly half to be recognized in the second half of 2012, roughly 45% in 2013 and 5% in 2014. Please see Range’s detailed hedging schedule posted on its website.
Over the past several months the light end of the NGL barrel, propane (C3) and ethane (C2), have experienced a weakness in prices. Propane prices are soft due to mild winter demand for a product which is primarily used as a consumer heating fuel. Ethane demand and prices have been weak due in part to crackers being down for maintenance and expansion projected to handle an additional 150,000 barrels per day of future ethane capacity at the same time that supplies have increased. Weakness in these two products has caused a weakening in the correlation of NGL prices to WTI. As a result, our hedges using natural gasoline (C5) as a proxy, which largely tracks the movement in WTI, while still strongly in-the-money, have become less effective in our view as a hedge for the entire NGL barrel. In order to more effectively hedge its NGL production, Range is currently using natural gasoline (C5) and propane (C3) as proxy hedges for the heavy and light portions of the NGL composite barrel to better correlate the market relationship between our hedges and our production. We believe this approach has allowed us to help stabilize our NGL prices without the additional cost of hedging each NGL barrel component.
RANGE RESOURCES CORPORATION (NYSE: RRC) is a leading independent oil and natural gas producer with operations focused in Appalachia and the southwest region of the United States. The Company pursues an organic growth strategy targeting high return, low-cost projects within its large inventory of low risk, development drilling opportunities. The Company is headquartered in Fort Worth, Texas. More information about Range can be found at http://www.rangeresources.com/ and http://www.myrangeresources.com/.
Except for historical information, statements made in this release such as projected production targets, realized prices subject to audit review, expected reduced unit costs, expected capital expenditures and expected mark-to-market amounts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on assumptions and estimates that management believes are reasonable based on currently available information; however, management’s assumptions and Range’s future performance are subject to a wide range of business risks and uncertainties and there is no assurance that these goals and projections can or will be met. Any number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, the volatility of oil and gas prices, the results of our hedging transactions, the costs and results of drilling and operations, the timing of production, mechanical and other inherent risks associated with oil and gas production, weather, the availability of drilling equipment, changes in interest rates, litigation, uncertainties about reserve estimates and environmental risks. Range undertakes no obligation to publicly update or revise any forward-looking statements. Further information on risks and uncertainties is available in Range’s filings with the Securities and Exchange Commission (“SEC”), which are incorporated by reference. Investors are urged to consider closely the disclosure in our most recent Annual Report on Form 10-K, available from our website at www.rangeresources.com or by written request to 100 Throckmorton Street, Suite 1200, Fort Worth, Texas 76102. You can also obtain this Form 10-K by calling the SEC at 1-800-SEC-0330.