SEC Filings

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

Income tax expense (benefit) was an expense of $24.1 million in third quarter 2018 compared to benefit of $72.0 million in third quarter 2017. For third quarter 2018, the effective tax rate was 33.2% compared to 36.1% in 2017. Income tax expense was $38.3 million in first nine months 2018 compared to $98.1 million in the same period of 2017. For first nine months 2018, the effective tax rate was 68.1% compared to 46.7% in first nine months 2017. The 2018 and 2017 effective tax rates were different than the statutory tax rate due to state income taxes (including adjustments to state income tax valuation allowances), equity compensation and other discrete tax items which are detailed below. We expect our effective tax rate to be approximately 24% for the remainder of 2018, before any discrete tax items (dollars in thousands).

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

2018

 

 

2017

 

 

2018

 

2017

 

Total income (loss) before income taxes

$

72,676

 

 

$

(199,692

)

 

$

56,236

 

$

210,015

 

U.S. federal statutory rate

 

21

%

 

 

35

%

 

 

21

%

 

35

%

Total tax expense (benefit) at statutory rate

 

15,262

 

 

 

(69,892

)

 

 

11,810

 

 

73,505

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

State and local income taxes, net of federal benefit

 

2,691

 

 

 

(6,537

)

 

 

3,439

 

 

6,591

 

Non-deductible executive compensation

 

48

 

 

 

296

 

 

 

601

 

 

436

 

Equity compensation

 

6

 

 

 

56

 

 

 

2,146

 

 

4,808

 

Change in valuation allowances:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal net operating loss carryforwards & other

 

 

 

 

69

 

 

 

 

 

3,487

 

State net operating loss carryforwards & other

 

5,558

 

 

 

4,286

 

 

 

19,194

 

 

10,498

 

Rabbi trust and other

 

100

 

 

 

(508

)

 

 

1,499

 

 

(1,561

)

Permanent differences and other

 

472

 

 

 

238

 

 

 

(394

)

 

290

 

Total expense (benefit) for income taxes

$

24,137

 

 

$

(71,992

)

 

$

38,295

 

$

98,054

 

Effective tax rate

 

33.2

%

 

 

36.1

%

 

 

68.1

%

 

46.7

%

Forward-Looking Statements

Certain sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations include forward-looking statements concerning trends or events potentially affecting our business. These statements contain words such as “anticipates,” “believes,” “expects,” “targets,” “plans,” “projects,” “could,” “may,” “should,” “would” or similar words indicating that future outcomes are uncertain. In accordance with “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, these statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, which could cause future outcomes to differ materially from those set forth in the forward-looking statements. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our current forecasts for our existing operations and do not include the potential impact of any future events. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. For additional risk factors affecting our business, see Item 1A. Risk Factors as set forth in our Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on February 28, 2018.

Management’s Discussion and Analysis of Financial Condition, Capital Resources and Liquidity

Cash Flow

Cash flows from operations are primarily affected by production volumes and commodity prices, net of the effects of settlements of our derivatives. Our cash flows from operations are also impacted by changes in working capital. We generally maintain low cash and cash equivalent balances because we use available funds to reduce our bank debt. Short-term liquidity needs are satisfied by borrowings under our bank credit facility. Because of this, and because our principal source of operating cash flows (proved reserves to be produced in the following year) cannot be reported as working capital, we often have low or negative working capital. From time to time, we enter into various 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 varied and will continue to vary from year to year depending on, among other things, our expectation of future commodity prices. 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. As of September 30, 2018, we have entered into derivative agreements covering 148.1 Bcfe for the remainder of 2018, 356.2 Bcfe for 2019 and 7.0 Bcfe for 2020, not including our basis swaps.

42