SEC Filings

10-K
RANGE RESOURCES CORP filed this Form 10-K on 02/22/2017
Entire Document
 

 

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 and will continue to vary from year to year depending on, among other things, our expectation of future commodity prices. Since year-end 2016, we have entered into additional natural gas and NGLs hedges for 2017 and 2018. Any payments due to counterparties under our derivative contracts should ultimately be funded by prices received from the sale of our production. Production receipts, however, often lag payments to the counterparties. Any interim cash needs are funded by borrowings under the bank credit facility. As of December 31, 2016, we have entered into derivative agreements covering 494.6 Bcfe for 2017 and 121.7 Bcfe for 2018, not including our basis swaps.

Net cash provided from operating activities in 2016 was $387.1 million compared to $691.4 million in 2015 and $974.4 million in 2014. The decrease in cash provided from operating activities from 2015 to 2016 reflects significantly lower realized prices (a decline of 28%), expenses related to the MRD Merger and costs related to the senior subordinated note exchange partially offset by an 11% increase in production and lower operating costs. The decrease in cash provided from operating activities from 2014 to 2015 reflects significantly lower realized prices (a decline of 34%) partially offset by a 20% increase in production and lower expenses. Net cash provided from operating activities is also affected by working capital changes or the timing of cash receipts and disbursements. Changes in working capital (as reflected in our consolidated statements of cash flows) for 2016 was a negative $106.4 million compared to a negative $9.1 million for 2015 and negative $10.8 million in 2014.

Disposal of assets in 2016 includes proceeds $78.6 million received from the sale of various Western Oklahoma properties which closed in May and July 2016 and $111.5 million of proceeds received from the sale of our non-operated interest in certain wells and gathering facilities in Northeast Pennsylvania which closed in March 2016. In 2015, $876.0 million of proceeds were received from the sale of our Virginia and West Virginia properties, before closing adjustments, which closed on December 30, 2015. In 2014, net proceeds received were related to the Conger Exchange, where we received $145.0 million in cash proceeds plus assets. For additional details related to our dispositions, see Note 3 to our consolidated financial statements.

Issuance of debt in 2015 includes the issuance of $750.0 million aggregate principal amount of 4.875% senior notes due 2025. For additional information, see Note 8 to our consolidated financial statements.

Issuance of common stock in 2014 includes the issuance of 4.56 million shares of common stock where we received proceeds of $396.6 million.

Additions to natural gas and oil properties are our most significant use of cash and cash equivalents. These cash outlays are associated with our drilling and completion capital budget program. In September 2016, we completed the MRD Merger which added natural gas and oil properties in North Louisiana. The following table shows capital expenditures by region and reconciles to additions to natural gas and oil properties as presented on our consolidated statement of cash flows for each of the last three years (in thousands):

 

 

2016

 

 

 

2015

 

 

 

2014

 

Appalachian

$

469,082

 

 

$

786,457

 

 

$

1,219,928

 

North Louisiana

 

62,348

 

 

 

 

 

 

 

Other

 

7,639

 

 

 

22,653

 

 

 

94,030

 

Total

 

539,069

 

 

 

809,110

 

 

 

1,313,958

 

Change in capital expenditure accrual for proved properties

 

(72,817

)

 

 

221,534

 

 

 

(113,539

)

Additions to natural gas and oil properties

$

466,252

 

 

$

1,030,644

 

 

$

1,200,419

 

 

Debt repayments in 2016 includes amounts paid to purchase some of the Memorial senior notes assumed in the MRD Merger. The year ended December 31, 2015 includes the redemption of $500.0 million of our outstanding 6.75% senior subordinated notes due 2020 compared to the redemption of $300.0 million of our outstanding 8.0% senior subordinated notes due 2019 in 2014. See Note 8 to our consolidated financial statement for additional information on debt repayments.

Liquidity and Capital Resources

Our main sources of liquidity and capital resources are internally generated cash flow from operating activities, a bank credit facility with uncommitted and committed availability, asset sales and access to the debt and equity capital markets. We must find new and develop existing reserves to maintain and grow our production and cash flows. We accomplish this primarily through successful drilling programs which require substantial capital expenditures. Lower prices for natural gas, NGLs and oil may reduce the amount of natural gas, NGLs and oil we can economically produce and can also affect the amount of cash flow available for capital expenditures and our ability to borrow or raise additional capital.

We currently believe that net cash generated from operating activities, unused committed borrowing capacity under our bank credit facility and proceeds from asset sales combined with our natural gas, NGLs and oil derivatives currently in place will be adequate to satisfy near-term financial obligations and liquidity needs. To the extent our capital requirements exceed our internally generated cash flow and proceeds from asset sales, borrowings under bank credit facility or debt or equity may be issued to fund these requirements. Long-term cash flows are subject to a number of variables including the level of production and prices as well as various economic conditions that have historically affected the natural gas and oil business. Over the past several years, natural gas

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