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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported):

November 4, 2003

RANGE RESOURCES CORPORATION
(
Exact name of registrant as specified in its charter)

         
Delaware   0-9592   34-1312571

 
 
(State or other jurisdiction of
incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)
     
777 Main Street, Suite 800    
Ft. Worth, Texas   76102

 
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (817) 870-2601

(Former name or former address, if changed since last report): Not applicable

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TABLE OF CONTENTS

ITEM 9. Regulation FD Disclosure.
ITEM 7. Financial Statements and Exhibits.
SIGNATURES
EXHIBIT INDEX
EX-99.1 Press Release


Table of Contents

ITEM 9. Regulation FD Disclosure.

     On November 4, 2003, Range Resources Corporation issued a press release announcing its third quarter of 2003 results. A copy of the press release is being furnished as an exhibit to this report on Form 8-K.

ITEM 7. Financial Statements and Exhibits.

     (c)  Exhibits:

             
      99.1     Press Release dated November 4, 2003

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Table of Contents

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

         
    RANGE RESOURCES CORPORATION
         
    By:   /s/ ROGER S. MANNY
       
        Roger S. Manny
Chief Financial Officer

Date: November 5, 2003

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Table of Contents

EXHIBIT INDEX

     
Exhibit Number   Description

 
99.1   Press Release dated November 4, 2003

4

exv99w1
 

NEWS RELEASE

RANGE PRODUCTION AND EARNINGS RISE

FORT WORTH, TEXAS, NOVEMBER 4, 2003...RANGE RESOURCES CORPORATION (NYSE: RRC) today reported third quarter results. Revenues in the quarter totaled $76.2 million, a 48% increase from the prior-year period. Cash flow from operations before changes in working capital rose 20% to $35.6 million as pretax income jumped 168% to $25.8 million. Net income totaled $16.7 million ($0.29 per share fully diluted), a 71% rise. During the period, drilling success led to rising production, debt fell to less than 50% of capitalization and the senior management team was completed.

The quarter’s financial results were significantly impacted by certain items, including an $18.6 million gain on debt retirement and a $2.4 million expense on the redemption of subordinated notes. Excluding such items, pretax income would have been $9.2 million, a 15% increase from the prior-year period. Net income would have been $6.0 million. In 2003, taxes are being recorded at a 35% rate due to increased profitability. In the prior year, tax benefits were recorded. (See table below for calculation of these non-GAAP measures.)

Production in the quarter rose 5.2% to an average of 159 Mmcfe per day, comprised of 120 Mmcf and 6,526 barrels. The growth was achieved through the ongoing exploitation of an extensive development drilling inventory and several meaningful discoveries. Wellhead prices, after hedging, averaged $3.81 per mcfe, a 10% increase. Gas prices rose 9% to $3.81 per mcf, as oil prices increased 8% to $23.76 per barrel. Hedging decreased realized prices by $0.94 per mcf and $3.66 a barrel.

Expenses in the period increased at a slower rate than revenues. Direct operating costs fell on a per unit basis to $0.55 per Mcfe from $0.61 in the prior period but rose $604,000 due to higher production taxes. Exploration expense increased $1.8 million principally due to additional seismic costs. General and administrative expenses rose $266,000 as a result of higher personnel costs and professional fees. Interest expense fell $516,000 due to lower outstanding debt. Depletion, depreciation and amortization expense increased $978,000 due to higher volumes. Accretion expense on asset retirement obligations totaled $1.2 million for the quarter, reflecting the impact of an accounting rule imposed in 2003. IPF expenses decreased $230,000 due to lower interest and administrative expenses. The provision for income taxes increased to $9.0 million, reflecting a full 35% rate and sharply higher pretax income. While increasing profitability now requires a full tax provision, no material cash taxes are expected to be paid in the foreseeable future.

During the third quarter, several material financing transactions were completed. In July, $100 million of ten year 7-3/8% senior subordinated notes were issued. Part of the proceeds was used to retire the remaining $68.8 million of 8-3/4% senior subordinated notes and to repurchase $9.9 million of other debt at a discount. The remainder was used to reduce bank debt. A one-time charge of $2.4 million was incurred in retiring the 8-3/4% notes. In September, $79.5 million of Trust Preferred was extinguished in exchange for $50 million of 5.9% convertible perpetual preferred stock and $10.2 million of cash. The Company recognized a gain on the retirement of $18.6 million ($12.1 million after-tax) in the third quarter. These transactions reduced ongoing financing cost by $4 million per year and extended the average maturity of the Company’s debt. At September 30, debt totaled $280 million, down $88 million since year-end. In the same period, stockholders’ equity increased $77 million due to the issuance of the $50 million of 5.9% preferred stock and $30.8 million of net income offset by $3.8 million of other items. At September 30, the Company’s debt to capitalization ratio had been reduced to 49.7%.

In the third quarter, the Company spent $28 million out of its $105 million 2003 capital budget. The expenditures funded the drilling of 105 (53.2 net) wells of which six (3.9 net) proved unproductive. During the first nine months of the year, 265 (147.8 net) wells were drilled at a cost of $77 million of which eleven (7.9 net) were dry. By September 30, 219 (121.0 net) of these wells had been placed on production, with the remaining wells being in various stages of completion or waiting on pipeline connection. During the quarter, $1.6 million was also spent on acquisitions, bringing the total for the

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first three quarters to $8.0 million. Drilling activity in the fourth quarter will remain high, with 12 rigs running currently.

Drilling drove the 5.2% increase in production during the period. Two Canyon Sand wells in Sterling and Sutton counties were drilled to 6,700 feet and one Wolfcamp well in Glasscock County was drilled to 8,400 feet. These three wells are currently producing a total of 5.9 (2.8 net) Mmcfe a day. A previously drilled well was recompleted in the upper Strawn for 2.1 (1.6 net) Mmcfe per day. In the Texas Panhandle and western Oklahoma, three wells were drilled to the Morrow formation at approximately 9,000 feet. One was turned to production during the quarter at 1.5 (1.0 net) Mmcfe a day. Since September 30, the two remaining wells were turned on at a combined 4.2 (2.3 net) Mmcfe a day. Casing has been set to test two additional Panhandle wells, which should be completed shortly. In South Louisiana, the Villejoin #1 was completed as a successful offset to a discovery drilled late last year and is currently producing 12.2 (3.9 net) Mmcfe per day. In Appalachia, 76 (59.0 net) wells were successfully drilled in the third quarter.

Commenting, John H. Pinkerton, the Company’s President, noted, “The quarter was highlighted by three major events: the continuing success of our drilling program and rising production, the decline of our debt to capitalization to below 50% and the appointment of Roger Manny as Chief Financial Officer to complete our new management team. With a strong balance sheet, a revitalized management and a lower cost structure, we have significantly enhanced our ability to profitably grow through the drill bit while pursuing complementary acquisitions.”

The Company will host a conference call on Wednesday, November 5 at 2:00 p.m. ET to review its results. To participate, please dial 877-207-5526 about 5-10 minutes prior to the start of the call and ask for the Range Resources Third Quarter Conference Call. A simultaneous webcast of the call may be accessed over the Internet at www.rangeresources.com or www.vcall.com. The webcast will be archived for replay on the Company’s website for 60 days. A replay of the call will be available through November 12 at 800-642-1687. The conference ID is 3660107.

Non-GAAP Financial Measures:

Third quarter 2003 earnings include derivative ineffective hedging gains of $1.1 million, non-cash deferred compensation expense of $898,000, amortization of interest rate swap gains of $157,000, a $18.6 million gain on retirement of securities and a call premium and amortization write off of $2.4 million. Adjusting for the after-tax effect of these items, the Company’s earnings would have been $6.0 million in the third quarter 2003 or $0.11 per share ($0.10 per diluted share). If similar items were excluded, third quarter 2002 earnings would have been $8.2 million or $0.15 per share ($0.15 per diluted share). (See reconciliation of non-GAAP earnings in the table below.) The Company believes results excluding these items are more comparable to estimates provided by security analysts and, therefore, are useful in evaluating operational trends of the Company and its performance relative to other oil and gas producing companies. In addition, with the adoption effective January 1, 2003 of the new accounting rule regarding asset retirement obligations, the Company provided $1.2 million of accretion expense in the third quarter or $764,000 after tax ($0.01 per share) which was not similarly provided in the prior period.

Cash flow from operations before changes in working capital represents net cash provided by operations before changes in working capital adjusted for certain non-cash compensation items and the cash call premium and amortization write off of $2.4 million. Cash flow from operations before changes in working capital is widely accepted by the investment community as a financial indicator of an oil and gas company’s ability to generate cash to internally fund exploration and development activities and to service debt. Cash flow from operations before changes in working capital is also useful because it is

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widely used by professional research analysts in valuing, comparing, rating and providing investment recommendations of companies in the oil and gas exploration and production industry. In turn, many investors use this published research in making investment decisions. Cash flow from operations before changes in working capital is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operations, investing, or financing activities as an indicator of cash flows, or as a measure of liquidity. A table is included which reconciles net cash provided by operations to Cash flow from operations before changes in working capital as used in this release. On its website, the Company provides additional comparative information on prior periods.

RANGE RESOURCES CORPORATION (NYSE: RRC) is an independent oil and gas company operating in the Permian, Midcontinent, Appalachian and Gulf Coast regions of the United States.

2003-26

         
Contact:   Rodney Waller, Senior Vice President    
    Karen Giles    
    (817) 870-2601    
    www.rangeresources.com    

Except for historical information, statements made in this release, including those relating to future earnings, capital expenditures, production, expenses, and reserve replacement targets are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on assumptions and estimates that management believes are reasonable based on currently available information; however, management’s assumptions and the Company’s future performance are subject to a wide range of business risks and uncertainties and there is no assurance that these goals and projections can or will be met. Any number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, the volatility of oil and gas prices, the costs and results of drilling and operations, the timing of production, mechanical and other inherent risks associated with oil and gas production, weather, the availability of drilling equipment, changes in interest rates, litigation, uncertainties about reserve estimates, and environmental risks. The Company undertakes no obligation to publicly update or revise any forward-looking statements. Further information on risks and uncertainties is available in the Company’s filings with the Securities and Exchange Commission, which are incorporated by reference.

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RANGE RESOURCES CORPORATION

                                                         
STATEMENTS OF INCOME                                                
(In thousands, except per share data)                                                
(Unaudited)   Three Months Ended September 30,   Nine Months Ended September 30,
   
 
    2003   2002           2003   2002        
   
 
         
 
       
Revenues
                                               
 
Oil and gas sales
  $ 55,723     $ 48,112             $ 165,326     $ 141,021          
 
Transportation and processing
    841       1,037               2,808       2,735          
 
IPF
    297       1,313               1,264       3,476          
 
Gain on retirement of securities
    18,572       1,050               18,712       3,080          
 
Ineffective hedging gain (loss) (a)
    1,093       (419 )             (178 )     (2,581 )        
 
Interest and other (a)
    (370 )     294               (84 )     (788 )        
 
   
     
             
     
         
 
    76,156       51,387       48 %     187,848       146,943       28 %
 
   
     
             
     
         
Expenses
                                               
 
Direct operating
    11,120       10,516               36,792       29,658          
 
IPF expenses
    578       808               1,764       4,758          
 
Exploration
    3,633       1,814               8,773       9,257          
 
General and administrative
    4,595       4,329               13,457       12,212          
 
Non-cash deferred compensation adjustment (b)
    898       (1,249 )             2,195       71          
 
Interest
    5,329       5,845               16,048       17,476          
 
Call premium and unamortized offering costs (c)
    2,376                     2,376                
 
Debt conversion expense
                        465                
 
Accretion expense (d)
    1,175                     3,446                
 
Depletion, depreciation and amortization
    20,694       19,716               60,666       57,120          
 
   
     
             
     
         
 
    50,398       41,779       21 %     145,982       130,552       12 %
 
   
     
             
     
         
Pretax income
    25,758       9,608       168 %     41,866       16,391       155 %
Income taxes (benefit)
                                               
 
Current
    6       23               4       68          
 
Deferred
    9,015       363               15,571       (4,550 )        
 
   
     
             
     
         
 
    9,021       386               15,575       (4,482 )        
 
   
     
             
     
         
Income before accounting change
    16,737       9,222       81 %     26,291       20,873       26 %
Cumulative effect of accounting change, net of tax
                        4,491                
 
   
     
             
     
         
Net income
    16,737       9,222       81 %     30,782       20,873       47 %
Preferred stock dividends
    (65 )                   (65 )              
 
   
     
             
     
         
Net income available to common shareholders
  $ 16,672     $ 9,222       81 %   $ 30,717     $ 20,873       47 %
 
   
     
             
     
         
Earnings per common share
                                               
       
Before accounting change
                                               
       
— basic
  $ 0.31     $ 0.17       82 %   $ 0.49     $ 0.39       26 %
 
   
     
             
     
         
       
— diluted
  $ 0.29     $ 0.17       71 %   $ 0.47     $ 0.38       24 %
 
   
     
             
     
         
   
After accounting change
                                               
       
— basic
  $ 0.31     $ 0.17       82 %   $ 0.57     $ 0.39       46 %
 
   
     
             
     
         
       
— diluted
  $ 0.29     $ 0.17       71 %   $ 0.55     $ 0.38       45 %
 
   
     
             
     
         
Weighted average shares outstanding, as reported
                                               
     
Basic
    54,415       53,448       2 %     54,151       52,924       2 %
 
   
     
             
     
         
     
Diluted
    61,091       55,088       11 %     56,241       54,434       3 %
 
   
     
             
     
         

  (a)   Included in Other revenues in 10-Q.
 
  (b)   Included in General and administrative expenses in 10-Q. It is based upon increases (decreases) in Company’s stock price between periods.
 
  (c)   Due to redeeming the 8.75% notes and included in Interest expense in 10-Q.
 
  (d)   Applicable to the new accounting rule adopted on January 1, 2003 regarding asset retirement obligations.

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RANGE RESOURCES CORPORATION

OPERATING HIGHLIGHTS

                                                     
        Three Months Ended September 30,   Nine Months Ended September 30,
       
 
        2003   2002           2003   2002        
       
 
         
 
       
Average Daily Production
                                               
 
Oil (bbl)
    5,526       5,096       8 %     5,589       4,999       12 %
 
Natural gas liquids (bbl)
    1,000       1,186       -16 %     1,056       1,125       -6 %
 
Gas (mcf)
    120,005       113,555       6 %     117,284       113,627       3 %
 
Equivalents (mcfe) (a)
    159,162       151,246       5 %     157,155       150,367       5 %
Prices Realized
                                               
 
Oil (bbl)
  $ 23.76     $ 22.05       8 %   $ 23.51     $ 22.32       5 %
 
Natural gas liquids (bbl)
  $ 17.64     $ 13.49       31 %   $ 18.76     $ 12.39       51 %
 
Gas (mcf)
  $ 3.81     $ 3.48       9 %   $ 3.87     $ 3.44       13 %
 
Equivalents (mcfe) (a)
  $ 3.81     $ 3.46       10 %   $ 3.85     $ 3.44       12 %
Operating Costs per mcfe
                                               
 
Field expenses
  $ 0.52     $ 0.57       -9 %   $ 0.59     $ 0.53       11 %
 
Workovers
    0.03       0.04       -25 %     0.04       0.04       0 %
 
Production/ad valorem taxes
    0.21       0.15       40 %     0.23       0.15       53 %
 
   
     
             
     
         
   
Total Operating Costs
  $ 0.76     $ 0.76       0 %   $ 0.86     $ 0.72       19 %
 
   
     
             
     
         

     (a)  Oil and natural gas liquids are converted to gas equivalents on a basis of six mcf per barrel.

BALANCE SHEETS
(In thousands)

                       
          September 30,   December 31,
          2003   2002
         
 
          (Unaudited)        
Assets
               
 
Current assets
  $ 48,646     $ 37,354  
 
Current deferred tax asset
    14,956        
 
IPF receivables
    9,695       18,351  
 
Oil and gas properties
    640,808       564,406  
 
Transportation and field assets
    17,781       18,072  
 
Unrealized hedging gain and other
    4,663       20,301  
 
 
   
     
 
 
  $ 736,549     $ 658,484  
 
 
   
     
 
Liabilities and Stockholders’ Equity
               
 
Current liabilities
  $ 44,486     $ 41,171  
 
Current asset retirement obligation
    8,335        
 
Current unrealized hedging loss
    31,849       26,035  
 
Senior debt
    94,300       115,800  
 
Nonrecourse debt of subsidiary
    71,500       76,500  
 
Subordinated notes
    112,656       90,901  
 
Trust preferred
    1,411       84,840  
 
 
   
     
 
   
Total long-term debt
    279,867       368,041  
 
 
   
     
 
 
Deferred taxes
    12,918        
 
Unrealized hedging loss
    15,783       9,079  
 
Deferred compensation liability
    12,732       8,049  
 
Long-term asset retirement obligation
    47,507        
 
Stockholders’ equity
    320,644       233,573  
 
Stock in deferred compensation plan
    (8,675 )     (6,313 )
 
Other comprehensive loss
    (28,897 )     (21,151 )
 
 
   
     
 
     
Total stockholder’s equity
    283,072       206,109  
 
 
   
     
 
 
  $ 736,549     $ 658,484  
 
 
   
     
 

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RANGE RESOURCES CORPORATION

                                       
CASH FLOWS FROM OPERATIONS                                
(Unaudited, in thousands)   Three Months Ended   Nine Months Ended
    September 30,   September 30,
   
 
    2003   2002   2003   2002
   
 
 
 
Net income
  $ 16,737     $ 9,222     $ 30,782     $ 20,873  
Adjustments to reconcile net income to net cash provided by operations:
                               
 
Cumulative effect of change in accounting principle, net
                (4,491 )      
 
Deferred income tax expense (benefit)
    9,015       363       15,571       (4,550 )
 
Depletion, depreciation and amortization
    21,869       19,716       64,112       57,120  
 
Exploration expense
    3,633       1,814       8,773       9,257  
 
Write-down of marketable securities
                      1,220  
 
Unrealized hedging (gains) losses
    (1,250 )     681       (62 )     2,771  
 
Adjustment to IPF valuation allowance
    401       251       1,109       2,818  
 
Amortization of deferred issuance costs and discount
    606       259       1,052       670  
 
Gain on retirement of securities
    (19,152 )     (1,052 )     (19,292 )     (3,107 )
 
Debt conversion expense
                465        
 
Deferred compensation adjustment
    997       (1,199 )     2,593       1,677  
 
(Gain) loss on sale of assets
    275       (266 )     118       (292 )
 
Changes in working capital:
                               
   
Accounts receivable
    2,494       2,502       (10,363 )     (1,009 )
   
Inventory and other
    (2,471 )     (1,922 )     (1,688 )     (1,366 )
   
Accounts payable
    3,112       2,278       3,647       3,724  
   
Accrued liabilities
    (256 )     2,286       1,180       (1,416 )
 
   
     
     
     
 
   
Net changes in working capital
    2,879       5,144       (7,224 )     (67 )
 
   
     
     
     
 
     
Net cash provided by operations
  $ 36,010     $ 34,933     $ 93,506     $ 88,390  
 
   
     
     
     
 
                                   
RECONCILIATION OF CASH FLOWS                                
(In thousands, except per share data)   Three Months Ended   Nine Months Ended
    September 30,   September 30,
   
 
    2003   2002   2003   2002
   
 
 
 
Net cash provided by operations
  $ 36,010     $ 34,933     $ 93,506     $ 88,390  
 
Net change in working capital
    (2,879 )     (5,144 )     7,224       67  
 
Call premium on 8.75% notes
    2,006             2,006        
 
Non-cash compensation adjustments and other
    481       (49 )     182       (1,580 )
 
   
     
     
     
 
Cash flow from operations before changes in working capital, non-GAAP measure
  $ 35,618     $ 29,740     $ 102,918     $ 86,877  
 
   
     
     
     
 

ADJUSTED WEIGHTED AVERAGE SHARES OUTSTANDING

                                   
      Three Months Ended   Nine Months Ended
      September 30,   September 30,
     
 
      2003   2002   2003   2002
     
 
 
 
Basic:
                               
Weighted average shares outstanding
    56,022       54,765       55,636       54,101  
Stock held by deferred compensation plan
    (1,607 )     (1,316 )     (1,485 )     (1,177 )
 
   
     
     
     
 
 
Adjusted basic
    54,415       53,449       54,151       52,924  
 
   
     
     
     
 
Dilutive:
                               
Weighted average shares outstanding
    56,022       54,765       55,636       54,101  
Dilutive stock options under treasury method
    517       323       433       333  
Dilutive effect of 6% debentures (dilutive when EPS over $0.19 per qtr)
    1,023                    
Dilutive effect of 5.75% trust preferred (dilutive when EPS over $0.22 per qtr)
    3,017                    
Dilutive effect of 5.9% preferred (dilutive when EPS over $0.12 per qtr)
    512             172        
 
   
     
     
     
 
 
Adjusted dilutive
    61,091       55,088       56,241       54,434  
 
   
     
     
     
 

10


 

RANGE RESOURCES CORPORATION

RECONCILATION OF NET INCOME BEFORE ACCOUNTING CHANGE
AS REPORTED TO NET INCOME BEFORE ACCOUNTING CHANGE
EXCLUDING CERTAIN ITEMS – NON-GAAP MEASURE

                                     
        Three Months Ended   Nine Months Ended
        September 30,   September 30,
       
 
        2003   2002   2003   2002
       
 
 
 
Pretax income as reported
    25,758       9,608       41,866       16,391  
Adjustment for certain items
                               
   
Gain on retirement of securities
    (18,572 )     (1,050 )     (18,712 )     (3,080 )
   
Call premium and unamortized offering costs on 8.75% notes
    2,376             2,376        
   
Ineffective commodity hedging (gain) loss
    (1,093 )     419       178       2,581  
   
Amortization of ineffective interest hedges (gain) loss
    (157 )     262       (240 )     190  
   
Deferred compensation adjustment
    898       (1,249 )     2,195       71  
   
Debt conversion expense
                465        
 
   
     
     
     
 
Pretax income as adjusted
    9,210       7,990       28,128       16,153  
Income taxes (benefit) adjusted
                               
   
Current
    6       23       4       68  
   
Deferred
    3,224       (203 )     10,762       (4,633 )
 
   
     
     
     
 
Net income before accounting change excluding certain items, a non-GAAP measure
  $ 5,981     $ 8,170     $ 17,362     $ 20,718  
 
   
     
     
     
 
Non-GAAP earnings per share before accounting change
                               
 
Basic
  $ 0.11     $ 0.15     $ 0.32     $ 0.39  
 
   
     
     
     
 
 
Diluted
  $ 0.10     $ 0.15     $ 0.31     $ 0.38  
 
   
     
     
     
 
                                         
HEDGING POSITION                                
As of November 4, 2003   Gas   Oil

 
 
                                         
            Volume   Average   Volume   Average
            Hedged   Hedge   Hedged   Hedged
            (MMBtu/d)   Prices   (Bbl/d)   Prices
           
 
 
 
4th Qtr 2003
  Swaps     95,929     $ 4.06       4,114     $ 25.03  
Calendar 2004
  Swaps     89,440     $ 4.05       2,378     $ 24.99  
Calendar 2004
  Collars     1,475     $ 4.50 - $5.47       2,128     $ 24.23 - $28.39  
Calendar 2005
  Swaps     48,945     $ 4.19       791     $ 24.79  
Calendar 2005
  Collars     8,123     $ 4.05 - $5.98       250     $ 24.00 - $26.70  
Calendar 2006
  Swaps     1,644     $ 4.80              

11