SEC Filings

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

Commodity Price Risk

We use commodity-based derivative contracts to manage exposures to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. At times, certain of our derivatives are swaps where we receive a fixed price for our production and pay market prices to the counterparty. Our derivatives program can also include collars, which establish a minimum floor price and a predetermined ceiling price. We have also entered into natural gas derivative instruments containing a fixed price swap and a sold option (referred to as a swaption in the table below). At September 30, 2018, our derivative program includes swaps, calls, collars and swaptions. The fair value of these contracts, represented by the estimated amount that would be realized upon immediate liquidation as of September 30, 2018, approximated a net unrealized pretax loss of $104.8 million. These contracts expire monthly through December 2020. At September 30, 2018, the following commodity derivative contracts were outstanding, excluding our basis swaps which are discussed below:

 

 

Period

 

Contract Type

 

Volume Hedged

 

 

Weighted

Average Hedge Price

 

Fair Market

Value

Natural Gas

  

 

  

 

  

 

 

 

(in thousands)

2018

 

Swaps

 

1,193,370 Mmbtu/day

 

 

$ 2.96

 

$

(8,430)

2019

 

Swaps

 

594,589 Mmbtu/day

 

 

$ 2.82

 

$

4,902

2018

 

Calls

 

70,000 Mmbtu/day

 

 

$ 3.10 (1)

 

$

(504)

2018

 

Swaptions

 

160,000 Mmbtu/day

 

 

$ 3.07 (2)

 

$

(4,900)

2019

 

Swaptions

 

298,014 Mmbtu/day

 

 

$ 2.86 (2)

 

$

8,681

2020

 

Swaptions

 

10,000 Mmbtu/day

 

 

$ 2.75 (2)

 

$

353

 

 

 

 

 

 

 

 

 

 

 

Crude Oil

  

 

  

 

  

 

 

 

 

 

2018

 

Swaps

 

8,500 bbls/day

 

 

$ 53.20

 

$

(15,163)

2019

 

Swaps

 

7,000 bbls/day

 

 

$ 55.26

 

$

(39,055)

2020

 

Swaps

 

1,500 bbls/day

 

 

$ 60.63

 

$

(3,205)

2019

 

Collars

 

1,000 bbls/day

 

 

$ 63.00 − $ 73.03

 

$

(717)

 

 

 

 

 

 

 

 

 

 

 

NGLs (C3-Propane)

  

 

  

 

  

 

 

 

 

 

2018

 

Swaps

 

11,668 bbls/day

 

 

$ 0.74/gallon

 

$

(16,767)

January – June 2019

 

Swaps

 

7,500 bbls/day

 

 

$ 0.92/gallon

 

$

(3,593)

2018

 

Collars

 

5,000 bbls/day

 

 

$ 0.95 − $ 1.04

 

$

(1,499)

January – March 2019

 

Collars

 

6,500 bbls/day

 

 

$ 0.92 − $ 1.02

 

$

(1,738)

 

 

 

 

 

 

 

 

 

 

 

NGLs (NC4-Normal Butane)

  

 

  

 

  

 

 

 

 

 

2018

 

Swaps

 

5,500 bbls/day

 

 

$ 0.91/gallon

 

$

(8,145)

January – March 2019

 

Swaps

 

2,250 bbls/day

 

 

$ 1.22/gallon

 

$

(78)

 

 

 

 

 

 

 

 

 

 

 

NGLs (C5-Natural Gasoline)

  

 

  

 

  

 

 

 

 

 

2018

 

Swaps

 

5,402 bbls/day

 

 

$ 1.24/gallon

 

$

(8,290)

2019

 

Swaps

 

2,178 bbls/day

 

 

$ 1.42/gallon

 

$

(6,647)

(1)

Weighted average deferred premium of $0.16.

(2)

Contains a combined derivative instrument consisting of a fixed price swap and a sold option to extend or double the volume. For October through December of 2018 we have swaps in place for 160,000 Mmbtu per day on which the counterparty can elect to extend the contract through December 2019 at a weighted average price of $3.07. We have swaps in place for 2019 for 185,000 Mmbtu/day on which the counterparty can elect to double the volume at a weighted average price of $2.89. We also have swaps in place for 2019 for 150,000 Mmbtu per day on which the counterparty can elect to extend the contract through December 2020 at a weighted average price of $2.81. For 2020, we have swaps in place for 10,000 Mmbtu/day on which the counterparty can elect to double the volume at a weighted average price of $2.75.

In the future, we expect our NGLs production to continue to increase. We believe NGLs prices are somewhat seasonal, particularly for propane. Therefore, the relationship of NGLs prices to NYMEX WTI (or West Texas Intermediate) will vary due to product components, seasonality and geographic supply and demand. We sell NGLs in several regional and international markets. If we are not able to sell or store NGLs, we may be required to curtail production or shift our drilling activities to dry gas areas.

Currently, the Appalachian region has limited local demand and infrastructure to accommodate ethane. We have previously announced agreements wherein we have contracted to either sell or transport ethane from our Marcellus Shale area, two of which began operations in late 2013. Our Mariner East transportation agreement and our terminal/storage arrangements at Sunoco’s Marcus Hook Industrial Complex facility near Philadelphia began ethane operations in early 2016. We cannot assure you that these facilities will remain available. If we are not able to sell ethane under at least one of these agreements, we may be required to curtail production or, as we have done in the past, purchase or divert natural gas to blend with our rich residue gas.  

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