SEC Filings

10-Q
RANGE RESOURCES CORP filed this Form 10-Q on 10/23/2018
Entire Document
 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview of Our Business

We are a Fort Worth, Texas-based independent natural gas, natural gas liquids (“NGLs”) and oil company engaged in the exploration, development and acquisition of natural gas and crude oil properties primarily in the Appalachian and North Louisiana regions of the United States. We operate in one segment and have a single company-wide management team that administers all properties as a whole rather than by discrete operating segments. We track only basic operational data by area. We do not maintain complete separate financial statement information by area. We measure financial performance as a single enterprise and not on a geographical or an area-by-area basis.

Our overarching business objective is to build stockholder value through returns-focused growth, on a per share debt-adjusted basis, of both reserves and production on a cost-efficient basis. Our strategy to achieve our business objective is to increase reserves and production through consistent internally generated drilling projects occasionally coupled with complementary acquisitions and divestitures of non-core assets. Our revenues, profitability and future growth depend substantially on prevailing prices for natural gas, NGLs, crude oil and condensate (“crude oil” or “oil”) and on our ability to economically find, develop, acquire, produce and market natural gas, NGLs and crude oil reserves. The price risk on a portion of our production is mitigated using commodity derivative contracts. However, these derivative contracts are limited in duration. Prices for natural gas, NGLs and oil fluctuate widely and affect:

 

revenues, profitability and cash flow;

 

the quantity of natural gas, NGLs and oil we can economically produce;

 

the quantity of natural gas, NGLs and oil shown as proved reserves;

 

the amount of cash flows available for capital expenditures; and

 

our ability to borrow and raise additional capital.

We prepare our financial statements in conformity with U.S. GAAP which requires us to make estimates and assumptions that affect our reported results of operations and the amount of our reported assets, liabilities and proved natural gas, NGLs and oil reserves. We use the successful efforts method of accounting for our natural gas, NGLs and oil activities.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the preceding consolidated financial statements and notes in Item 1.

Market Conditions

Prices for our products significantly impact our revenue, net income and cash flow. Natural gas, NGLs and oil are commodities and prices for these commodities are inherently volatile. The following table lists related benchmarks for natural gas, oil and NGLs for the three months and the nine months ended September 30, 2018 and 2017:

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

2018

 

 

2017

 

 

Change

 

 

%

 

 

2018

 

2017

 

Change

 

%

 

Benchmarks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average NYMEX prices (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas (per mcf)

$

2.91

 

 

$

3.00

 

 

$

(0.09

)

 

(3

%)

 

$

2.90

 

$

3.15

 

$

(0.25

)

(8

%)

Oil (per bbl)

 

69.49

 

 

 

48.14

 

 

 

21.35

 

 

44

%

 

 

66.78

 

 

49.35

 

 

17.43

 

35

%

Mont Belvieu NGLs composite (per gallon) (b)

 

0.79

 

 

 

0.56

 

 

 

0.23

 

 

41

%

 

 

0.69

 

 

0.53

 

 

0.16

 

30

%

(a)

Based on weighted average of bid week prompt month prices on the New York Mercantile Exchange (“NYMEX”).

(b)

Based on our estimated NGLs product composition per barrel.

Our price realizations may differ from the benchmarks for many reasons, including quality, location or production being sold at different indices.

Consolidated Results of Operations

Overview of Third Quarter 2018 Results

Our financial results are significantly impacted by commodity prices. For third quarter 2018, we experienced an increase in revenue from the sale of natural gas, NGLs and oil due to a 4% increase in net realized prices (average prices including all derivative settlements and third party transportation costs paid by us) and 14% higher production volumes when compared to the same quarter of

30