SEC Filings

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

internally generated cash flow and proceeds from asset sales, debt or equity securities 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 oil and natural gas business. A material decline in natural gas, NGLs and oil prices or a reduction in production and reserves would reduce our ability to fund capital expenditures, meet financial obligations and operate profitably. We establish a capital budget at the beginning of each calendar year and review it during the course of the year, taking into account various factors including the commodity price environment. Our 2018 capital budget is currently $941.2 million.

Commodity prices have remained volatile but have improved during 2018 compared to fourth quarter 2017. We have adjusted and must continue to adjust our business through efficiencies and cost reductions to compete in the current price environment which also requires reductions in overall debt levels over time. We plan to continue to work towards profitable growth within cash flows. We would expect to monitor the market and look for opportunities to refinance or reduce debt based on market conditions. We believe we are well-positioned to manage the challenges presented in a low commodity price environment and that we can endure continued volatility in current and future commodity prices by:

 

exercising discipline in our capital program with the expectation of funding our capital expenditures with operating cash flow and, if required, with borrowings under our bank credit facility;

 

 

continuing to optimize our drilling, completion and operational efficiencies; and

 

 

continuing to manage price risk by hedging our production volumes.

 

Credit Arrangements

As of September 30, 2018, we maintained a revolving credit facility with a borrowing base of $3.0 billion and aggregate lender commitments of $2.0 billion, which we refer to as our bank credit facility. The bank credit facility, during a non-investment grade period, is secured by substantially all of our assets and has a maturity date of April 13, 2023. See Note 9 to our unaudited consolidated financial statements for additional information regarding our bank debt. Availability under the bank credit facility is subject to a borrowing base set by the lenders annually with an option to set more often in certain circumstances. Availability under the bank credit facility, during an investment grade period, is limited to aggregate lender commitments. As of September 30, 2018, the outstanding balance under our credit facility was $1.3 billion. Additionally, we had $281.4 million of undrawn letters of credit leaving $452.6 million of committed borrowing capacity available under the facility at the end of third quarter 2018, with an additional $1.0 billion in borrowing base capacity for potential increases in lender commitments.

Our bank credit facility imposes limitations on the payment of dividends and other restricted payments (as defined under our bank credit facility). The bank credit facility also contains customary covenants relating to debt incurrence, liens, investments and financial ratios. We were in compliance with all covenants at September 30, 2018. See Note 9 to our unaudited consolidated financial statements for additional information regarding our bank debt.

Cash Dividend Payments

On August 31, 2018, our Board of Directors declared a dividend of two cents per share ($5.0 million) on our outstanding common stock, which was paid on September 28, 2018 to stockholders of record at the close of business on September 14, 2018. The amount of future dividends is subject to discretionary declaration by the Board of Directors and primarily depends on earnings, capital expenditures, debt covenants and various other factors.

Cash Contractual Obligations

Our contractual obligations include long-term debt, operating leases, derivative obligations, asset retirement obligations and transportation, processing and gathering commitments. As of September 30, 2018, we do not have any capital leases. As of September 30, 2018, we do not have any significant off-balance sheet debt or other such unrecorded obligations and we have not guaranteed any debt of any unrelated party. As of September 30, 2018, we had a total of $281.4 million of undrawn letters of credit under our bank credit facility.

Since December 31, 2017, there have been no material changes to our contractual obligations other than a $55.0 million increase in our outstanding bank credit facility balance, a new pipeline brought into service in Pennsylvania and pricing changes for current contracts. Our contractual obligations for firm transportation and gathering contracts increased by approximately $2.4 billion over the next twenty years related to these changes.

Interest Rates

At September 30, 2018, we had approximately $4.2 billion of debt outstanding. Of this amount, $2.9 billion bore interest at fixed rates averaging 5.2%. Bank debt totaling $1.3 billion bears interest at floating rates, which was 3.9% at September 30, 2018. The 30-day LIBOR Rate on September 30, 2018 was approximately 2.3%. A 1% increase in short-term interest rates on the floating-rate debt outstanding on September 30, 2018 would cost us approximately $12.7 million in additional annual interest expense.

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