The word “efficiencies” came up 11 times during Range Resources’ third-quarter earnings conference call, as executives emphasized that the company had executed on its expansion strategy while making the most of its resources.
“We successfully delivered on our operational plans safely with peer-leading efficiencies,” said Dennis Degner, CEO of Range Resources, a Fort Worth-based company with operations primarily in the Marcellus Shale with approximately 520,000 acres in Pennsylvania.
In its Oct. 25 earnings presentation, the company cited statistics from FactSet showing that this year Range capex averaged $0.76 per million cubic feet equivalent (Mcfe). Other companies in the Appalachian Basin averaged $1.01/Mcfe, while the national average was $1.36/Mcfe.
Degner said the company’s low-cost strategy “…allowed us to generate at healthy full-cycle margins despite a lower commodity price environment.”
Following a drop in commodity prices, Range saw a decline in third-quarter revenue year-over-year, bringing in $649 million compared third-quarter 2022 revenue of $1.1 billion. Still, the results beat market estimates for the quarter, according to analysis from Truist Securities.
Truist said the the company beat estimates for the third quarter on efficiencies and the timing of activity. Looking forward, the company also mentioned the potential to build several DUCs in the latter part of the fourth quarter or near the beginning of 2024. According to Truist, the move makes sense “given the contango in the gas strip” prices.
As gas prices remained low throughout the year, Range has drilled longer wells to consolidate some of its operations. In the third quarter, the company drilled two of the longest laterals in its Marcellus history, with both stretching farther than 21,000 ft.
As a result, the company was able to cut the number of turn-in lines; the number of wells in operation is 16% less than originally planned, Degner said.
“Given the flatter production profile of these long laterals, it sets us up well heading into early 2024 and to what we expect will be improved pricing,” he said. During the third quarter, the company produced on average 2.12 Bcfe per day, approximately 68% natural gas. Adding to the total was 6,386 bbl/d of oil and 105,957 bbl/d of NGL.
The price of natural gas has been largely flat in 2023. The spot price for MMBtu has not surpassed $3.75 since January, after hitting a high of $7.20 in December last year, according to Henry Hub. On Oct. 25, the price was $2.94.
Range Resources strategy will be to work towards a balanced program that generates production from liquids as well as gas.
“Prices will move; they will move erratically,” Degner said. “The shape of the [price] curve doesn’t necessarily impact us deciding to drill a 12,000 to a 15,000-foot lateral. Really, it comes back to, what’s the economics? What’s the space in the existing system?”
Ranger executives also expect another avenue of growth in the gas market as more coal power stations shut down and utilities shift gas-fired generation.