UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-12209

RANGE RESOURCES CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware		34-1312571
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)
100 Throckmorton Street, Suite 1200
Fort Worth, Texas		76102
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code

     Former Name, Former Address and Former Fiscal Year, if changed since last report: Not applicable

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yes o No þ

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer þ		Accelerated Filer o		Non-Accelerated Filer o		Smaller Reporting Company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     160,703,877 Common Shares were outstanding on April 25, 2011.

 

 

RANGE RESOURCES CORPORATION
FORM 10-Q
Quarter Ended March 31, 2011

     Unless the context otherwise indicates, all references in this report to “Range,” “we,” “us,” or “our” are to Range Resources Corporation and its wholly-owned subsidiaries and its ownership interests in equity method investees.

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Balance Sheets (Unaudited)			3
Consolidated Statements of Operations (Unaudited)			4
Consolidated Statements of Cash Flows (Unaudited)			5
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)			6
Selected Notes to Consolidated Financial Statements (Unaudited)			7
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk			33
ITEM 4. Controls and Procedures			34
PART II — OTHER INFORMATION
ITEM 1A. Risk Factors			36
ITEM 6. Exhibits			37
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I — FINANCIAL INFORMATION

ITEM 1.		Financial Statements

CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share data)

		March 31, 2011				December 31, 2010
Assets
Current assets:
Cash and cash equivalents		$	1,681			$	2,848
Accounts receivable, less allowance for doubtful accounts of $4,285 and $5,001			75,530				76,683
Unrealized derivative gain			62,286				123,255
Assets of discontinued operations			856,195				876,304
Inventory and other			18,605				21,352
Deferred tax asset			1,639				—
Total current assets			1,015,936				1,100,442
Equity method investments			142,353				155,105
Natural gas and oil properties, successful efforts method			5,669,791				5,390,391
Accumulated depletion and depreciation			(1,373,652	)			(1,306,378	)
			4,296,139				4,084,013
Transportation and field assets			121,274				134,980
Accumulated depreciation and amortization			(61,303	)			(60,931	)
			59,971				74,049
Other assets			100,848				84,977
Total assets		$	5,615,247			$	5,498,586
Liabilities
Current liabilities:
Accounts payable		$	245,446			$	289,109
Asset retirement obligations			4,020				4,020
Accrued liabilities			44,629				60,082
Deferred tax liability			—				11,848
Accrued interest			39,496				32,189
Unrealized derivative loss			593				352
Current liabilities of discontinued operations			16,288				32,962
Total current liabilities			350,472				430,562
Bank debt			480,000				274,000
Subordinated notes			1,686,816				1,686,536
Deferred tax liability			646,427				672,041
Unrealized derivative loss			30,242				13,412
Deferred compensation liability			169,278				134,488
Asset retirement obligations and other liabilities			66,168				59,885
Long-term liabilities of discontinued operations			2,226				3,901
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $1 par, 10,000,000 shares authorized, none issued and outstanding			—				—
Common stock, $0.01 par, 475,000,000 shares authorized, 160,668,296 issued at March 31, 2011 and 160,113,608 issued at December 31, 2010			1,607				1,601
Common stock held in treasury, 196,016 shares at March 31, 2011 and 204,556 shares at December 31, 2010			(7,190	)			(7,512	)
Additional paid-in capital			1,835,261				1,820,503
Retained earnings			310,246				341,699
Accumulated other comprehensive income			43,694				67,470
Total stockholders’ equity			2,183,618				2,223,761
Total liabilities and stockholders’ equity		$	5,615,247			$	5,498,586

See the accompanying notes.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

		Three Months Ended March 31,
		2011				2010
Revenues and other income
Natural gas, NGL and oil sales		$	226,881			$	187,673
Transportation and gathering			313				2,081
Derivative fair value (loss) income			(40,834	)			42,333
Gain on the sale of assets			139				67,913
Other			1,077				(1,575	)
Total revenues and other income			187,576				298,425
Costs and expenses
Direct operating			28,717				21,836
Production and ad valorem taxes			6,879				6,542
Exploration			27,187				14,139
Abandonment and impairment of unproved properties			16,537				6,551
General and administrative			33,959				28,170
Termination costs			—				7,938
Deferred compensation plan			30,630				(5,712	)
Interest expense			24,779				20,931
Depletion, depreciation and amortization			72,216				64,807
Impairment of proved properties			—				6,505
Total costs and expenses			240,904				171,707
(Loss) income from continuing operations before income taxes			(53,328	)			126,718
Income tax (benefit) expense
Current			—				—
Deferred			(19,897	)			49,012
Total income tax (benefit) expense			(19,897	)			49,012
(Loss) income from continuing operations			(33,431	)			77,706
Discontinued operations, net of taxes			8,398				(127	)
Net (loss) income		$	(25,033	)		$	77,579
(Loss) income per common share
Basic-(loss) income from continuing operations		$	(0.21	)		$	0.50
-discontinued operations			0.05				—
-net (loss) income		$	(0.16	)		$	0.50
Diluted-(loss) income from continuing operations		$	(0.21	)		$	0.48
-discontinued operations			0.05				—
-net (loss) income		$	(0.16	)		$	0.48
Dividends per common share		$	0.04			$	0.04
Weighted average common shares outstanding
Basic			157,545				156,393
Diluted			157,545				160,292

See the accompanying notes.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

		Three Months Ended March 31,
		2011				2010
Operating activities
Net (loss) income		$	(25,033	)		$	77,579
Adjustments to reconcile net cash provided from operating activities:
(Gain) loss from discontinued operations			(8,398	)			127
Loss from equity method investments, net of distributions			14,738				1,621
Deferred income tax (benefit) expense			(19,897	)			49,012
Depletion, depreciation, amortization and proved property impairment			72,216				71,312
Exploration dry hole costs			10				—
Mark-to-market loss (gain) on gas and oil derivatives not designated as hedges			40,036				(46,578	)
Abandonment and impairment of unproved properties			16,537				6,551
Unrealized derivative (gain) loss			(568	)			249
Allowance for bad debts			(688	)			—
Deferred and stock-based compensation			40,650				7,277
Amortization of deferred financing costs and other			(78	)			1,167
Gain on sale of assets			(139	)			(67,913	)
Changes in working capital:
Accounts receivable			1,689				8,111
Inventory and other			3,574				(700	)
Accounts payable			2,302				17,452
Accrued liabilities and other			(18,210	)			(8,998	)
Net cash provided from continuing operations			118,741				116,269
Net cash provided from discontinued operations			21,881				36,605
Net cash provided from operating activities			140,622				152,874
Investing activities
Additions to oil and gas properties			(250,766	)			(153,971	)
Additions to field service assets			(1,022	)			(6,355	)
Acreage and proved property purchases			(24,316	)			(19,849	)
Other assets			—				(45	)
Investing activities of discontinued operations			(8,219	)			(12,273	)
Proceeds from disposal of assets			15,197				301,648
Purchase of marketable securities held by the deferred compensation plan			(6,260	)			(3,690	)
Proceeds from the sales of marketable securities held by the deferred compensation plan			3,557				2,613
Net cash (used in) provided from investing activities			(271,829	)			108,078
Financing activities
Borrowing on credit facilities			372,826				148,000
Repayment on credit facilities			(166,826	)			(118,000	)
Dividends paid			(6,420	)			(6,373	)
Issuance of common stock			503				5,437
Debt issuance costs			(12,356	)			—
Change in cash overdrafts			(60,979	)			(5,162	)
Proceeds from the sales of common stock held by the deferred compensation plan			3,292				893
Net cash provided from financing activities			130,040				24,795
(Decrease) increase in cash and equivalents			(1,167	)			285,747
Cash and cash equivalents at beginning of period			2,848				767
Cash and cash equivalents at end of period		$	1,681			$	286,514

See the accompanying notes.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in thousands)

		Three Months Ended March 31,
		2011				2010
Net (loss) income		$	(25,033	)		$	77,579
Other comprehensive (loss) income:
Realized gain on hedge derivative contract settlements reclassified into earnings from other comprehensive income, net of taxes			(23,889	)			(753	)
Change in unrealized deferred hedging gains (losses), net of taxes			113				52,582
Total comprehensive (loss) income		$	(48,809	)		$	129,408

See the accompanying notes.

RANGE RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(1) ORGANIZATION AND NATURE OF BUSINESS

     We are a Fort Worth, Texas-based independent natural gas and oil company engaged in the exploration, development and acquisition of natural gas and oil properties, mostly in the Appalachia and the Southwest regions of the United States. Our objective is to build stockholder value through consistent growth in reserves and production on a cost-efficient basis. Range Resources Corporation is a Delaware corporation with our common stock listed and traded on the New York Stock Exchange under the symbol “RRC.”

(2) BASIS OF PRESENTATION

     These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Range Resources Corporation 2010 Annual Report on Form 10-K filed on March 1, 2011. These consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for fair presentation of the results for the periods presented. All adjustments are of a normal recurring nature unless disclosed otherwise. These consolidated financial statements, including selected notes, have been prepared in accordance with the applicable rules of the Securities and Exchange Commission (“SEC”) and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements.

     In February 2011, we entered into an agreement to sell our Barnett Shale assets. Accordingly, we have classified the assets and liabilities as discontinued operations in the accompanying consolidated balance sheets along with the historic results of operations of our Barnett Shale operations as discontinued operations, net of tax, in the accompanying consolidated statements of operations. See also Note 4 and 5.

(3) NEW ACCOUNTING STANDARDS

     There have been no developments to recently issued accounting standards, including the expected dates of adoption and estimated effects on our consolidated financial statements, from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010.

(4) DISPOSITIONS

2011 Asset Sales

     In February 2011, we entered into an agreement to sell our Barnett Shale natural gas properties in North Central Texas for a price of $900.0 million, which also includes the assumption of certain derivative contracts by the buyer and is subject to normal post closing adjustments. The completion of the sale is dependent upon customary prospective buyer due diligence procedures. We expect to complete the sale by the end of April 2011. As of March 31, 2011, we have classified these assets and liabilities held for sale as discontinued operations. As of February 28, 2011, the carrying value of the asset group, which excludes the derivative contracts to be sold, was approximately $827.9 million. As indicated in Note 2, our Barnett operations are presented as discontinued operations.

2010 Asset Sales

     In February 2010, we entered into an agreement to sell our tight gas sand properties in Ohio. We closed approximately 90% of the sale in March 2010 and closed the remainder in June 2010. Proceeds received in first quarter 2010 were approximately $300.0 million and we recorded a gain of $67.0 million in continuing operations. The agreement had an effective date of January 1, 2010, and consequently operating net revenues after January 1, 2010 were a downward adjustment to the selling price. The proceeds we received were placed in a like-kind exchange account and in June 2010, we used a portion of the proceeds to purchase proved and unproved natural gas properties in Virginia. In September 2010, the like-kind exchange account was closed and the balance of these proceeds ($135.0 million) was used to repay amounts outstanding under our bank credit facility.

(5) DISCONTINUED OPERATIONS

     The following table presents the components of our Barnett operations as discontinued operations for the three months ended March 31, 2011 and 2010 (in thousands):

		Three Months Ended March 31,
		2011				2010
Revenues and other income
Natural gas, NGL and oil sales		$	42,257			$	49,087
Transportation and gathering			5				12
Gain on the sale of assets			—				955
Other			4				—
Total revenues and other income			42,266				50,054
Costs and expenses
Direct operating			8,277				9,204
Production and ad valorem taxes			1,066				1,528
Exploration			32				496
Abandonment and impairment of unproved properties			—				5,856
Interest expense (a)			11,076				9,356
Depletion, depreciation and amortization			8,880				23,819
Total costs and expenses			29,331				50,259
Income (loss) from discontinued operations before income taxes			12,935				(205	)
Income tax expense (benefit)
Current			—				—
Deferred			4,537				(78	)
Total income tax expense (benefit)			4,537				(78	)
Net income (loss) from discontinued operations		$	8,398			$	(127	)
Production:
Natural gas (mcf)			8,885,498				9,378,392
NGLs (bbls)			158,843				207,662
Crude oil (bbls)			6,988				9,577
Total (mcfe) (b)			9,880,483				10,681,826

     The carrying values of our Barnett operations are included in discontinued operations in the accompanying consolidated balance sheets which is comprised of the following (in thousands):

		March 31,				December 31,
		2011				2010
Composition of assets of discontinued operations:
Natural gas and oil properties, net		$	827,172			$	838,044
Transportation and field assets, net			666				684
Accounts receivable			28,276				29,300
Unrealized derivative gain			—				8,195
Inventory and other			81				81
Total assets of discontinued operations		$	856,195			$	876,304

		March 31,				December 31,
		2011				2010
Composition of liabilities of discontinued operations:
Account payable		$	9,514			$	23,366
Accrued liabilities			6,774				9,596
Total current liabilities of discontinued operations		$	16,288			$	32,962
Asset retirement obligations		$	2,025			$	1,980
Other liabilities			201				1,921
Total long-term liabilities of discontinued operations		$	2,226			$	3,901

(6) INCOME TAXES

     Income tax (benefit) expense from continuing operations was as follows (in thousands):

		Three Months Ended
		March 31,
		2011				2010
Income tax (benefit) expense		$	(19,897	)		$	49,012
Effective tax rate			37.3	%			38.7	%

     We compute our quarterly taxes under the effective tax rate method based on applying an anticipated annual effective rate to our year-to-date income, except for discrete items. Income taxes for discrete items are computed and recorded in the period that the specific transaction occurs. For the three months ended March 31, 2011 and 2010, our overall effective tax rate on pre-tax income from operations was different than the statutory rate of 35% due primarily to state income taxes, valuation allowances and other permanent differences.

(7) (LOSS) INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE

     Basic income or loss from continuing operations per share is computed as (i) income or loss from continuing operations (ii) less income allocable to participating securities (iii) divided by weighted average basic shares outstanding. Diluted income or loss from continuing operations per share is computed as (i) basic income or loss from continuing operations attributable to common shareholders (ii) plus diluted adjustments to income allocable to participating securities (iii) divided by weighted average diluted shares outstanding. The following table sets forth a reconciliation of income (loss) from continuing operations to basic income (loss) from continuing operations attributable to common shareholders and to diluted income (loss) from continuing operations attributable to common shareholders and a reconciliation of basic weighted average common shares outstanding to diluted weighted average common shares outstanding (in thousands except per share amounts):

		Three Months Ended
		March 31,
		2011				2010
Numerator:
(Loss) income from continuing operations		$	(33,431	)		$	77,706
Less: Basic income allocable to participating securities (a)			—				—
Basic (loss) income from continuing operations attributable to common shareholders			(33,431	)			77,706
Diluted adjustments to income allocable to participating securities (a)			—				—
Diluted (loss) income from continuing operations attributable to common shareholders		$	(33,431	)		$	77,706
Denominator:
Weighted average common shares outstanding — basic			157,545				156,393
Effect of dilutive securities:
Employee stock options, SARs, restricted stock units and stock held in the deferred compensation plan			—				3,899
Weighted average common shares — diluted			157,545				160,292
(Loss) income from continuing operations per common share:
Basic — net (loss) income		$	(0.21	)		$	0.50
Diluted — net (loss) income		$	(0.21	)		$	0.48

     The weighted average common shares — basic for the three months ended March 31, 2011 excludes 2.9 million shares of restricted stock compared to 2.7 million shares of restricted stock excluded at March 31, 2010 which are held in our deferred compensation plans (although all restricted stock is issued and outstanding upon grant). Due to our loss from continuing operations for the three months ended March 31, 2011, we excluded all outstanding stock options, stock appreciation rights (“SARs”) and restricted stock from computations of diluted net income per share because the effect would have been anti-dilutive to the computations. SARs of 1.1 million for the three months ended March 31, 2010 were outstanding but not included in the computations of diluted income from continuing operations per share because the grant prices of the SARs were greater than the average market price of the common shares.

(8) SUSPENDED EXPLORATORY WELL COSTS

     The following table reflects the changes in capitalized exploratory well costs for the three months ended March 31, 2011 and the year ended December 31, 2010 (in thousands):

		March 31,				December 31,
		2011				2010
Beginning balance at January 1		$	23,908			$	19,052
Additions to capitalized exploratory well costs pending the determination of proved reserves			15,329				28,897
Reclassifications based on determination of proved reserves			(11,619	)			(24,041	)
Capitalized exploratory well costs charged to expense			—				—
Balance at end of period			27,618				23,908
Less exploratory well costs that have been capitalized for a period of one year or less			(22,388	)			(13,181	)
Capitalized exploratory well costs that have been capitalized for a period greater than one year		$	5,230			$	10,727
Number of projects that have exploratory well costs that have been capitalized for a period greater than one year			3				4

     As of March 31, 2011 the $5.2 million of capitalized exploratory well costs that have been capitalized for more than one year, all are Marcellus Shale wells and are waiting on the completion of pipelines. The following provides an aging of capitalized exploratory well costs that have been suspended for more than one year as of March 31, 2011 (in thousands):

		Total				2011				2010				2009				2008
Capitalized exploratory well costs that have been capitalized for more than one year		$	5,230			$	252			$	334			$	3,065			$	1,579

(9) INDEBTEDNESS

     We had the following debt outstanding as of the dates shown below (in thousands) (bank debt interest rate at March 31, 2011 is shown parenthetically). No interest expense was capitalized during the three months ended March 31, 2011 and 2010.

		March 31,				December 31,
		2011				2010
Bank debt (1.9%)		$	480,000			$	274,000
Subordinated debt:
6.375% Senior Subordinated Notes due 2015			150,000				150,000
7.5% Senior Subordinated Notes due 2016, net of discount			249,695				249,683
7.5% Senior Subordinated Notes due 2017			250,000				250,000
7.25% Senior Subordinated Notes due 2018			250,000				250,000
8.0% Senior Subordinated Notes due 2019, net of discount			287,121				286,853
6.75% Senior Subordinated Notes due 2020			500,000				500,000
Total debt		$	2,166,816			$	1,960,536

Bank Debt

     In February 2011, we entered into an amended and restated revolving bank facility, which we refer to as our bank debt or our bank credit facility, which is secured by substantially all of our assets. Our new borrowing base was set without our Barnett shale assets, which are presented as held for sale at March 31, 2011. The bank credit facility provides for an initial commitment equal to the lesser of the facility amount or the borrowing base. On March 31, 2011, the borrowing base was $2.0 billion and our facility amount was $1.5 billion. The bank credit facility provides for a borrowing base subject to redeterminations semi-annually and for event-driven unscheduled redeterminations. Our current bank group is comprised of twenty-seven commercial banks, with no one bank holding more than 7% of the total facility. The facility amount may be increased up to the borrowing base amount with twenty days notice, subject to payment of a mutually acceptable commitment fee to those banks agreeing to participate in the facility amount increase. At March 31, 2011, the outstanding balance under the bank credit facility was $480.0 million and we had $8.3 million of undrawn letters of credit leaving $1.0 billion of borrowing capacity available under the facility amount. The loan matures in February 2016. Borrowing under the bank credit facility can either be the Alternate Base Rate (as defined) plus a spread ranging from 0.50% to 1.50% or LIBOR borrowings at the Adjusted LIBO Rate (as defined) plus a spread ranging from 1.50% to 2.50%. The applicable spread is dependent upon borrowings relative to the borrowing base. We may elect, from time to time, to convert all or any part of our LIBOR loans to base rate loans or to convert all or any part of the base rate loans to LIBOR loans. The weighted average interest rate on the bank credit facility was 2.3% for the three months ended March 31, 2011 compared to 2.1% for the three months ended March 31, 2010. A commitment fee is paid on the undrawn balance based on an annual rate of between 0.375% and 0.50%. At March 31, 2011, the commitment fee was 0.375% and the interest rate margin was 1.5% on our LIBOR loans and 0.5% on our base rate loans.

Debt Covenants

     Our bank credit facility contains negative covenants that limit our ability, among other things, to pay cash dividends, incur additional indebtedness, sell assets, enter into certain hedging contracts, change the nature of our business or operations, merge, consolidate, or make investments. In addition, we are required to maintain a ratio of debt to EBITDAX (as defined in the credit agreement) of no greater than 4.25 to 1.0 and a current ratio (as defined in the credit agreement) of no less than 1.0 to 1.0. We were in compliance with our covenants under the bank credit facility at March 31, 2011.

     The indentures governing our senior subordinated notes contain various restrictive covenants that are substantially identical to each other and may limit our ability to, among other things, pay cash dividends, incur additional indebtedness, sell assets, enter into transactions with affiliates or change the nature of our business. At March 31, 2011, we were in compliance with these covenants.

(10) ASSET RETIREMENT OBLIGATIONS

     Our asset retirement obligations primarily represent the estimated present value of the amount we will incur to plug, abandon and remediate our producing properties at the end of their productive lives. Significant inputs used in determining such obligations include estimates of plugging and abandonment costs, estimated future inflation rates and well life. A reconciliation of our liability for plugging, abandonment and remediation costs for the three months ended March 31, 2011 is as follows (in thousands):

		Three Months
		Ended
		March 31,
		2011
Beginning of period		$	62,673
Liabilities incurred			699
Liabilities settled			(622	)
Liabilities reclassified to discontinued operations			(2,025	)
Accretion expense — continuing operations			1,193
Accretion expense — discontinued operations			45
Change in estimate			1,584
End of period		$	63,547

     Accretion expense is recognized as a component of depreciation, depletion and amortization expense on our consolidated statements of operations.

(11) CAPITAL STOCK

     We have authorized capital stock of 485 million shares, which includes 475 million shares of common stock and 10 million shares of preferred stock. The following is a summary of changes in the number of common shares outstanding since the beginning of 2010:

		Three Months				Year
		Ended				Ended
		March 31,				December 31,
		2011				2010
Beginning balance			159,909,052				158,118,937
Stock options/SARs exercised			439,558				991,988
Restricted stock grants			115,130				405,127
Treasury shares issued			8,540				12,771
Shares issued for acreage purchases			—				380,229
Ending balance			160,472,280				159,909,052

Treasury Stock

     The Board of Directors has approved up to $10.0 million of repurchases of common stock based on market conditions and opportunities and on March 31, 2011, we have $6.8 million remaining under this authorization.

(12) DERIVATIVE ACTIVITIES

     We use commodity—based derivative contracts to manage exposure to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. We do not utilize complex derivatives such as swaptions, knockouts or extendable swaps. We typically utilize commodity swap, collar or call option contracts to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget and expenditure plans. Historically, our derivative activities have consisted of collars and fixed price swaps. At March 31, 2011, we had open swap contracts covering 25.6 Bcf of natural gas at prices averaging $5.00 per mcf and 1.5 million barrels of NGLs at prices averaging $101.88 per barrel. At March 31, 2011, we had collars covering 195.3 Bcf of natural gas at weighted average floor and cap prices of $5.42 to $6.27 per mcf and 0.7 million barrels of oil at weighted average floor and cap prices of $70.00 to $80.00 per barrel. At March 31, 2011, we also had sold call options for 3.2 million barrels of oil at a weighted average price of $82.66. In first quarter 2011, we entered into NGL derivative swap contracts for the natural gasoline (or C5) component of natural gas liquids. The fair value of these commodity derivatives, represented by the estimated amount that would be realized upon termination, based on a comparison of the contract prices and a reference price, generally New York Mercantile Exchange (“NYMEX”), on March 31, 2011, was a net unrealized pre-tax gain of $31.4 million. These contracts expire monthly through December 2013.

     The following table sets forth our derivative volumes and average hedge prices as of March 31, 2011:

						Average
Period		Contract Type		Volume Hedged		Hedge Price
Natural Gas
2012		Swaps		70,192 Mmbtu/day		$5.00
2011		Collars		418,236 Mmbtu/day		$5.52-$6.45
2012		Collars		119,641 Mmbtu/day		$5.50-$6.25
2013		Collars		100,000 Mmbtu/day		$5.00-$5.73
Crude Oil
2012		Collars		2,000 bbls/day		$70.00-$80.00
2011		Call options		5,500 bbls/day		$80.00
2012		Call options		4,700 bbls/day		$85.00
NGLs
2011		Swaps		2,676 bbls/day		$102.80
2012		Swaps		2,000 bbls/day		$100.96

     Every derivative instrument is recorded on the accompanying balance sheets as either an asset or a liability measured at its fair value. Fair value is generally determined based on the difference between the fixed contract price and the underlying market price at the determination date. Changes in the fair value of derivatives that qualify for hedge accounting are recorded as a component of accumulated other comprehensive income (“AOCI”) in the stockholders’ equity section of the accompanying consolidated balance sheets, which is later transferred to natural gas, NGL and oil sales when the underlying physical transaction occurs and the hedging contract is settled. Amounts included in AOCI at March 31, 2011 and December 31, 2010 relate solely to our commodity derivative activities. As of March 31, 2011, an unrealized pre-tax derivative gain of $69.9 million was recorded in AOCI. This gain is expected to be reclassified into earnings as a $68.6 million gain in 2011, a $4.3 million gain in 2012 and a $2.9 million loss in 2013. The actual reclassification to earnings will be based on market prices at the contract settlement date.

     For those derivative instruments that qualify for hedge accounting, settled transaction gains and losses are determined monthly, and are included as increases or decreases to natural gas, NGL and oil sales in the period the hedged production is sold. Natural gas, NGL and oil sales include $29.6 million of gains in the three months ended March 31, 2011 compared to gains of $1.2 million in the same period of 2010 related to settled hedging transactions. Any ineffectiveness associated with these hedge derivatives is included in derivative fair value income (loss) in the accompanying consolidated statements of operations. The ineffective portion is calculated as the difference between the change in fair value of the derivative and the estimated change in future cash flows from the item hedged. The three months ended March 31, 2011 includes ineffective gains (unrealized and realized) of $1.5 million compared to losses of $606,000 in the same period of 2010.

     Through March 31, 2011, we have elected to designate our commodity derivative instruments that qualify for hedge accounting as cash flow hedges. To designate a derivative as a cash flow hedge, we document at the hedge’s inception our assessment that the derivative will be highly effective in offsetting expected changes in cash flows from the item hedged. This assessment, which is updated at least quarterly, is generally based on the most recent relevant historical correlation between the derivative and the item hedged. The ineffective portion of the hedge is calculated as the difference between the change in fair value of the derivative and the estimated change in cash flows from the item hedged. If, during the derivative’s term, we determine the hedge is no longer highly effective, hedge accounting is prospectively discontinued and any remaining unrealized gains or losses, based on the effective portion of the derivative at that date, are reclassified to earnings as natural gas, NGL and oil sales when the underlying transaction occurs. If it is determined that the designated hedge transaction is not probable to occur, any unrealized gains or losses are recognized immediately in derivative fair value income (loss) in the accompanying consolidated statements of operations. During the first three months of 2011 or 2010 there were no gains or losses recorded due to the discontinuance of hedge accounting treatment for these derivatives.

     Some of our derivatives do not qualify for hedge accounting or are not designated as a hedge but provide an economic hedge of our exposure to commodity price risk associated with anticipated future natural gas and oil production. These contracts are accounted for using the mark-to-market accounting method. We recognize all unrealized and realized gains and losses related to these contracts in derivative fair value (loss) income in the accompanying consolidated statements of operations (for additional information see table below).

Derivative Fair Value (Loss) Income

     The following table presents information about the components of derivative fair value (loss) income in the three months ended March 31, 2011 and 2010 (in thousands):

		Three Months Ended
		March 31,
		2011				2010
Hedge ineffectiveness — realized		$	946			$	(357	)
— unrealized			568				(249	)
Change in fair value of derivatives that do not qualify for hedge accounting(a)			(40,036	)			46,578
Realized loss on settlements — gas(a) (b)			(394	)			(3,639	)
Realized loss on settlements — oil (a) (b)			(1,918	)			—
Derivative fair value (loss) income		$	(40,834	)		$	42,333

     The combined fair value of derivatives included in the accompanying consolidated balance sheets as of March 31, 2011 and December 31, 2010 is summarized below (in thousands). We conduct commodity derivative activities with nine financial institutions, all of which are secured lenders in our bank credit facility. We believe all of these institutions are acceptable credit risks. At times, such risks may be concentrated with certain counterparties. The credit worthiness of our counterparties is subject to periodic review. In our accompanying consolidated balance sheets, derivative assets and liabilities are netted where derivatives with both gain and loss positions are held by a single counterparty.

		March 31,				December 31,
		2011				2010
Derivative assets:
Natural gas — collars		$	122,843			$	163,354
— swaps			(524	)			—
Crude oil — collars			(5,172	)			—
— call options			(53,799	)			(31,904	)
NGL — swaps			(1,062	)			—
		$	62,286			$	131,450
Derivative liabilities:
Natural gas — collars		$	18,015			$	27,032
— basis swaps			—				(352	)
— swaps			(881	)			—
Crude oil — collars			(14,866	)			(12,051	)
— call options			(32,301	)			(28,393	)
NGL — swaps			(802	)			—
		$	(30,835	)		$	(13,764	)

     The table below provides data about the fair value of our derivative contracts. Derivative assets and liabilities shown below are presented as gross assets and liabilities, without regard to master netting arrangements, which are considered in the presentation of derivative assets and liabilities in our accompanying consolidated balance sheets (in thousands):

		March 31, 2011												December 31, 2010
		Assets				(Liabilities)								Assets				(Liabilities)
		Carrying				Carrying				Net Carrying				Carrying				Carrying				Net Carrying
		Value				Value				Value				Value				Value				Value
Derivatives that qualify for cash flow hedge accounting:
Swaps (1)		$	—			$	(1,405	)		$	(1,405	)		$	—			$	—			$	—
Collars(1)			136,578				(3,390	)			133,188				173,128				—				173,128
		$	136,578			$	(4,795	)		$	131,783			$	173,128			$	—			$	173,128
Derivatives that do not qualify for hedge accounting:
Swaps (1)		$	—			$	(1,864	)		$	(1,864	)		$	—			$	—			$	—
Collars(1)			7,844				(20,211	)			(12,367	)			17,259				(12,052	)			5,207
Call options(1)			—				(86,101	)			(86,101	)			—				(60,297	)			(60,297	)
Basis swaps(1)			—				—				—				—				(352	)			(352	)
		$	7,844			$	(108,176	)		$	(100,332	)		$	17,259			$	(72,701	)		$	(55,442	)

     The effects of our cash flow hedges (or those derivatives that qualify for hedge accounting) on accumulated other comprehensive income (loss) included in the accompanying consolidated balance sheets are summarized below (in thousands):

		Three Months Ended March 31,
										Realized Gain
		Change in Hedge								Reclassified from AOCI
		Derivative Fair Value								into Revenue (a)
		2011				2010				2011				2010
Swaps		$	(2,540	)		$	—			$	—			$	—
Collars			(387	)			84,811				38,223				1,215
Income taxes			3,040				(32,229	)			(14,334	)			(462	)
		$	113			$	52,582			$	23,889			$	753

     The effects of our non-hedge derivatives (or those derivatives that do not qualify for hedge accounting) and the ineffective portion of our hedge derivatives included in the accompanying consolidated statements of operations are summarized below (in thousands):

		Three Months Ended March 31,
		Gain (Loss) Recognized in								Gain Recognized in Income								Derivative Fair Value
		Income (Non-hedge Derivatives)								(Ineffective Portion)								(Loss) Income
		2011				2010				2011				2010				2011				2010
Swaps		$	(1,864	)		$	—			$	—			$	—			$	(1,864	)		$	—
Collars			(7,586	)			46,956				1,514				(606	)			(6,072	)			46,350
Call options			(32,855	)			—				—				—				(32,855	)			—
Basis swaps			(43	)			(4,017	)			—				—				(43	)			(4,017	)
Total		$	(42,348	)		$	42,939			$	1,514			$	(606	)		$	(40,834	)		$	42,333

(13) FAIR VALUE MEASUREMENTS

     Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three approaches for measuring the fair value of assets and liabilities: the market approach, the income approach and the cost approach, each of which includes multiple valuation techniques. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to measure fair value by converting future amounts, such as cash flows or earnings, into a single present value amount using current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace the service capacity of an asset. This is often referred to as current replacement cost. The cost approach assumes that the fair value would not exceed what it would cost a market participant to acquire or construct a substitute asset of comparable utility, adjusted for obsolescence.

     The fair value accounting standards do not prescribe which valuation technique should be used when measuring fair value and does not prioritize among the techniques. These standards establish a fair value hierarchy that prioritizes the inputs used in applying the various valuation techniques. Inputs broadly refer to the assumptions that market participants use to make pricing decisions, including assumptions about risk. Level 1 inputs are given the highest priority in the fair value hierarchy while Level 3 inputs are given the lowest priority. The three levels of the fair value hierarchy are as follows:

	•		Level 1 — Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
	•		Level 2 — Observable market-based inputs or unobservable inputs that are corroborated by market data. These are inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
	•		Level 3 — Unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management’s best estimate of fair value.

     Valuation techniques that maximize the use of observable inputs are favored. Assets and liabilities are classified in their entirety based on the lowest priority level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities within the levels of the fair value hierarchy.

Fair Values-Recurring

     We use a market approach for our fair value measurements and endeavor to use the best information available. Accordingly, valuation techniques that maximize the use of observable impacts are favored. The following presents the fair value hierarchy table for assets and liabilities measured at fair value, on a recurring basis (in thousands):

		Fair Value Measurements at March 31, 2011 Using:
		Quoted Prices in				Significant								Total
		Active Markets				Other				Significant				Carrying
		for Identical				Observable				Unobservable				Value as of
		Assets				Inputs				Inputs				March 31,
		(Level 1)				(Level 2)				(Level 3)				2011
Trading securities held in our deferred compensation plans		$	52,682			$	—			$	—			$	52,682
Derivatives — swaps			—				(3,269	)			—				(3,269	)
— collars			—				120,821				—				120,821
— call options			—				(86,101	)			—				(86,101	)

     Our trading securities in Level 1 are exchange-traded and measured at fair value with a market approach using March 31, 2011 market values. Derivatives in Level 2 are measured at fair value with a market approach using third-party pricing services, which have been corroborated with data from active markets or broker quotes.

     Our trading securities held in the deferred compensation plan are accounted for using the mark-to-market accounting method and are included in other assets in our accompanying consolidated balance sheets. We elected to adopt the fair value option to simplify our accounting for the investments in our deferred compensation plan. Interest, dividends and mark-to-market gains/losses are included in deferred compensation plan expense in our consolidated statements of operations. For the three months ended March 31, 2011, interest and dividends were $35,000 and mark-to-market was a gain of $1.3 million. For the three months ended March 31, 2010, interest and dividends were $32,000 and mark-to-market was a gain of $596,000. For additional information on the accounting for our deferred compensation plan, see Note 14.

Fair Values-Nonrecurring

     We review our long-lived assets to be held and used, including proved natural gas and oil properties, whenever events or circumstances indicate the carrying value of those assets may not be recoverable. Several long-lived assets held for use were evaluated for impairment during 2010 due to reductions in estimated reserves and natural gas prices. The fair value of our onshore Gulf Coast assets in 2010 was measured using an income approach based upon internal estimates of future production levels, prices, drilling and operating costs and discount rates, which are Level 3 inputs. Our projected undiscounted cash flows associated with these assets was less than their carrying value and therefore, we recorded an impairment of $6.5 million in 2010 related to our onshore Gulf Coast proved properties.

     The following table presents the value of these assets measured at fair value on a nonrecurring basis (in thousands):

		Three Months Ended March 31,
		2011								2010
										Fair
		Fair Value				Impairment				Value				Impairment
Natural gas and oil properties		$	—			$	—			$	16,075			$	6,505

Fair Values-Reported

     The following table presents the carrying amounts and the fair values of our financial instruments as of March 31, 2011 and December 31, 2010 (in thousands):

		March 31, 2011								December 31, 2010
		Carrying				Fair				Carrying				Fair
		Value				Value				Value				Value
Assets:
Commodity swaps, collars, call options and basis swaps		$	62,286			$	62,286			$	131,450			$	131,450
Marketable securities(a)			52,682				52,682				47,794				47,794
Liabilities:
Commodity swaps, collars, call options and basis swaps			(30,835	)			(30,835	)			(13,764	)			(13,764	)
Bank credit facility (b)			(480,000	)			(480,000	)			(274,000	)			(274,000	)
6.375% senior subordinated notes due 2015 (b)			(150,000	)			(153,000	)			(150,000	)			(153,000	)
7.5% senior subordinated notes due 2016 (b)			(249,695	)			(259,375	)			(249,683	)			(259,375	)
7.5% senior subordinated notes due 2017 (b)			(250,000	)			(266,250	)			(250,000	)			(263,438	)
7.25% senior subordinated notes due 2018 (b)			(250,000	)			(267,500	)			(250,000	)			(263,750	)
8.0% senior subordinated notes due 2019 (b)			(287,121	)			(330,750	)			(286,853	)			(326,625	)
6.75% senior subordinated notes due 2020 (b)			(500,000	)			(532,500	)			(500,000	)			(515,625	)

Concentration of Credit Risk

     Most of our receivables are from a diverse group of companies, including major energy companies, pipeline companies, local distribution companies, financial institutions and end-users in various industries. Letters of credit or other appropriate security are obtained as deemed necessary to limit risk of loss. Our allowance for uncollectible receivables was $4.3 million at March 31, 2011 and $5.0 million at December 31, 2010. Commodity-based contracts expose us to the credit risk of nonperformance by the counterparty to the contracts. As of March 31, 2011, these contracts consist of swaps, collars and call options. This exposure is diversified among major investment grade financial institutions and we have master netting agreements with the counterparties that provide for offsetting payables against receivables from separate derivative contracts. Our derivative counterparties include nine financial institutions, all of which are secured lenders in our bank credit facility. Our natural gas and oil properties provide collateral under our credit facility and our derivative exposure. None of our derivative contracts have margin requirements or collateral provisions that would require funding prior to the scheduled cash settlement date.

(14) EMPLOYEE BENEFIT AND EQUITY PLANS

     We have two active equity-based stock plans. Under these plans, incentive and non-qualified stock options, SARs, restricted stock, restricted stock units, phantom stock and various other awards may be issued to employees and directors pursuant to decisions of the Compensation Committee, which is made up of non-employee, independent directors from the Board of Directors. All awards granted have been issued at prevailing market prices at the time of the grant. Information with respect to stock option/SARs activity is summarized below:

						Weighted
						Average
						Exercise
		Shares				Price
Outstanding at December 31, 2010			6,461,839			$	37.20
Granted			317,451				49.18
Exercised			(1,169,831	)			26.63
Expired/forfeited			(147,375	)			55.94
Outstanding at March 31, 2011			5,462,084			$	39.65

     The weighted average fair value of a SAR to purchase one share of common stock granted during 2011 was $17.60. The fair value of each SAR granted during 2011 was estimated as of the date of grant using the Black-Scholes-Merton option-pricing model based on the following average assumptions: risk-free interest rate of 1.7%; dividend yield of 0.3%; expected volatility of 47% and an expected life of 3.6 years. Of the 5.5 million stock option/SARs outstanding at March 31, 2011, 671,000 are stock options and 4.8 million are SARs.

Equity Awards-Restricted Stock Units

     Beginning in first quarter 2011, the compensation committee began granting restricted stock units under our equity-based stock plans. These restricted stock units vest over a three-year period. All awards granted have been issued at prevailing market prices at the time of grant and the vesting of these shares is based upon an employee’s continued employment with us. Net shares will be issued to employees as the restricted stock units vest. A summary of the outstanding restricted stock unit awards at March 31, 2011 is presented below:

						Weighted
						Average
						Grant Date
		Shares				Fair Value
Outstanding at December 31, 2010			—			$	—
Granted			297,349				49.18
Exercised			(1,054	)			49.18
Expired/forfeited			(2,555	)			49.18
Outstanding at March 31, 2011			293,740			$	49.18

Liability Awards-Restricted Stock

     These restricted stock shares are placed into our deferred compensation plan when granted. During the first three months of 2011, 130,000 shares of restricted stock (or non-vested shares) were issued to certain employees at an average price of $49.14 with a three-year vesting period. In the first three months of 2010, we issued 172,000 shares of restricted stock as compensation to employees at an average price of $46.45 with a three-year vesting period. All restricted stock awards held in our deferred compensation plans are classified as a liability award and remeasured at fair value each reporting period. This mark-to-market is included in deferred compensation plan expense in our accompanying consolidated statements of operations (see additional discussion below). All awards granted have been issued at prevailing market prices at the time of the grant and the vesting of these shares is based upon an employee’s continued employment with us.

     A summary of the status of our non-vested restricted stock outstanding at March 31, 2011 is presented below:

						Weighted
						Average Grant Date
		Shares				Fair Value
Non-vested restricted stock outstanding at December 31, 2010			582,751			$	44.81
Granted			129,602				49.14
Vested			(101,300	)			46.47
Forfeited			(4,268	)			40.63
Non-vested restricted stock outstanding at March 31, 2011			606,785			$	45.48

Deferred Compensation Plan

     Our deferred compensation plan gives directors, officers and key employees the ability to defer all or a portion of their salaries and bonuses and invest such amounts in Range common stock or make other investments at the individual’s discretion. The assets of the plan are held in a grantor trust, which we refer to as the Rabbi Trust, and are therefore available to satisfy the claims of our creditors in the event of bankruptcy. Our stock granted and held in the Rabbi Trust is treated as a liability award as employees are allowed to take withdrawals either in cash or in Range stock. The liability associated with the vested portion of the stock is adjusted to fair value each reporting period by a charge or credit to deferred compensation plan expense on our consolidated statements of operations. The assets of the Rabbi Trust, other than Range common stock, are invested in marketable securities and reported at market value in other assets in the accompanying consolidated balance sheets. Changes in the market value of the marketable securities are charged or credited to deferred compensation plan expense each quarter. The deferred compensation liability included in our consolidated balance sheets reflects the vested market value of the marketable securities and Range common stock held in the Rabbi Trust. We recorded non-cash, mark-to-market expense related to our deferred compensation plan of $30.6 million in the three months ended March 31, 2011 compared to income of $5.7 million in the same period of 2010.

(15) SUPPLEMENTAL CASH FLOW INFORMATION

		Three Months Ended
		March 31,
		2011				2010
		(in thousands)
Non-cash investing and financing activities included:
Asset retirement costs capitalized, net		$	2,284			$	376
Unproved property purchased with stock(a)		$	—			$	20,000
Net cash provided from operating activities included:
Interest paid		$	24,240			$	15,625
Income taxes paid (refunded)		$	300			$	(1,684	)

(16) COMMITMENTS AND CONTINGENCIES

Litigation

     We are involved in various legal actions and claims arising in the ordinary course of our business. While the outcome of these lawsuits cannot be predicted with certainty, we do not expect these matters to have a material adverse effect on our financial position, cash flows or results of operations.

     During the first quarter 2011, we entered into additional transportation agreement in Appalachia which total approximately $100.0 million over the next seven years.

(17) CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION^(a)

		March 31,				December 31,
		2011				2010
		(in thousands)
Natural gas and oil properties:
Properties subject to depletion		$	5,023,170			$	4,742,248
Unproved properties			646,621				648,143
Total			5,669,791				5,390,391
Accumulated depreciation, depletion and amortization			(1,373,652	)			(1,306,378	)
Net capitalized costs		$	4,296,139			$	4,084,013

(18) COSTS INCURRED FOR PROPERTY ACQUISITIONS, EXPLORATION AND DEVELOPMENT^(a)

		Three Months				Year
		Ended				Ended
		March 31,				December 31,
		2011				2010
		(in thousands)
Acquisitions:
Unproved leasehold		$	—			$	3,697
Proved properties			—				130,767
Asset retirement obligations			—				556
Acreage purchases			18,816				166,677
Development			237,954				784,153
Exploration:
Drilling			29,441				50,737
Expense			25,890				56,879
Stock-based compensation expense			1,329				4,209
Gas gathering facilities:
Development			5,610				20,726
Subtotal			319,040				1,218,401
Asset retirement obligations			2,284				(6,523	)
Total costs incurred		$	321,324			$	1,211,878

(19) OFFICE CLOSING AND EXIT ACTIVITIES

     In February 2010, we entered into an agreement to sell our natural gas properties in Ohio. We closed approximately 90% of the sale in March 2010 and closed the remainder of the sale in June 2010. The first quarter 2010 includes $5.1 million accrued severance costs, which is reflected in termination costs in the accompanying consolidated statements of operations. As part of their severance agreement, our Ohio employees’ vesting of SARs and restricted stock grants was accelerated, increasing termination costs for stock compensation expense in first quarter 2010 by approximately $2.8 million.

     The following table details our exit activities, which are included in accrued liabilities in the accompanying consolidated balance sheets as of March 31, 2011 and December 31, 2010 (in thousands):

		Three Months				Year
		Ended				Ended
		March 31,				December 31,
		2011				2010
		(in thousands)
Balance at beginning of period		$	1,092			$	1,568
Accrued one-time termination costs			—				5,138
Office lease			—				514
Payments			(323	)			(6,128	)
Balance at end of period		$	769			$	1,092

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following discussion is intended to assist you in understanding our business and results of operations together with our present financial condition. 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 typically contain words such as “anticipates,” “believes,” “estimates,” “expects,” “targets,” “plans,” “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 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 as and 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 forecasts for our existing operations and do not include the potential impact of any future acquisitions. For additional risk factors affecting our business, see Item 1A. Risk Factors as filed with our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 1, 2011.

Critical Accounting Estimates and Policies

     The preparation of financial statements in accordance with generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the respective reporting periods. Actual results could differ from the estimates and assumptions used. These policies and estimates are described in our Annual Report on Form 10-K for the year ended December 31, 2010. We have identified the following critical accounting policies and estimates used in the preparation of our financial statements: accounting for natural gas, NGL and oil revenue, natural gas and oil properties, stock-based compensation, derivative financial instruments, asset retirement obligations and deferred income taxes.

Market Conditions

     Prices for various quantities of natural gas, natural gas liquids (“NGLs”) and oil that we produce significantly impact our revenues and cash flows. Commodity prices have been volatile in recent years. The following table lists average New York Mercantile Exchange (“NYMEX”) prices for natural gas and oil for the three months ended March 31, 2011 and 2010.

		Three Months Ended
		March 31,
		2011				2010
Average NYMEX prices(a)
Natural gas (per mcf)		$	4.12			$	5.37
Oil (per bbl)		$	94.67			$	78.82

Consolidated Results of Operations

Overview

     We are an independent natural gas and oil company engaged in the exploration, development and acquisition of natural gas and oil properties, mostly in the Appalachia and Southwest regions of the United States. Our objective is to build stockholder value through consistent growth in reserves and production on a cost-efficient basis. Our strategy to achieve our objective is to increase reserves and production through internally generated drilling projects occasionally coupled with complementary acquisitions. Our revenues, profitability and future growth depend substantially on prevailing prices for natural gas and oil and on our ability to economically find, develop, acquire and produce natural gas and oil reserves. We use the successful efforts method of accounting for our natural gas, NGLs and oil activities. Our corporate headquarters is located in Fort Worth, Texas.

     Discontinued operations consists of our Barnett Shale properties which are reported as discontinued operations as of March 31, 2011. Unless otherwise indicated, the information included herein relates to our continuing operations.

     During the first three months of 2011, we achieved the following financial and operating results:

	•		recorded our 33rd consecutive quarter of sequential production growth;
	•		achieved 26% year-over-year production growth;
	•		daily production now exceeds 435.0 mmcfe per day;
	•		natural gas, NGL and oil sales increased 21% from first quarter 2010;
	•		reduced our DD&A rate 12% from first quarter 2010;
	•		year-over-year direct operating expense per mcfe increased 4% while production and ad valorem tax expense per mcfe declined 14% and general and administrative expense per mcfe declined 3%;
	•		entered into additional commodity derivative contracts for 2011, 2012 and 2013; and
	•		renewed our bank credit facility, with a borrowing base of $2.0 billion.

     Total revenues decreased $110.8 million, or 37% for first quarter 2011 over the same period of 2010. The decrease includes a $39.2 million increase in natural gas, NGL and oil sales offset by a decrease in derivative fair value income (loss) of $83.2 million and a lower gain on sale of assets of $67.8 million. Natural gas, NGL and oil sales vary due to changes in volumes of production sold and realized commodity prices. Realized prices declined from the same period of the prior year, which was more than offset by an increase in production, including a 81% increase in NGL production primarily due to increased liquids-rich production in our Appalachia area. For first quarter 2011, production increased 26% from the same period of the prior year while realized prices (including all derivative settlements) declined 3%. We believe natural gas, NGL and oil prices will remain volatile and will be affected by, among other things, weather, the U.S. and worldwide economy, new regulations, new technology, and the level of oil and gas production in North America and worldwide. Although we have entered into derivative contracts covering a portion of our production volumes for 2011, 2012 and 2013, a sustained lower price environment would result in lower realized prices for unprotected volumes and reduce the prices we can enter into derivative contracts for additional volumes in the future.

Natural Gas, NGL and Oil Sales Production and Realized Price Calculation

     Our natural gas, NGL and oil sales vary from quarter to quarter as a result of changes in realized commodity prices and volumes of production sold. Hedges included in natural gas, NGL and oil sales reflect settlements on those derivatives that qualify for hedge accounting. Cash settlements of derivative contracts that are not accounted for as hedges are included in derivative fair value (loss) income in the accompanying consolidated statements of operations. The following table summarizes the primary components of natural gas, NGL and oil sales for the three months ended March 31, 2011 and 2010 (in thousands):

		Three Months Ended
		March 31,
		2011				2010				Change				%
Gas wellhead		$	106,283			$	123,270			$	(16,987	)			(14	%)
Gas hedges realized			29,616				1,215				28,401				2,338	%
Total gas sales			135,899				124,485				11,414				9	%
NGL			54,475				28,024				26,451				94	%
Oil wellhead			36,507				35,164				1,343				4	%
Oil hedges realized			—				—				—				—	%
Total oil sales			36,507				35,164				1,343				4	%
Combined wellhead			197,265				186,458				10,807				6	%
Combined hedges realized			29,616				1,215				28,401				2,338	%
Total natural gas, NGL and oil sales		$	226,881			$	187,673			$	39,208				21	%

     Our production continues to grow through continued drilling success as we place new wells into production, partially offset by the natural decline of our wells and asset sales. For first quarter 2011, total production volumes, when compared to the same period of the prior year, increased 40% in our Appalachia area and remained the same in our Southwest area. For first quarter 2011, NGL production increased 81% from the same period of the prior year primarily due to increased liquids-rich gas production in our Appalachia area along with an increase in processing capacity in the region. Our production for the three months ended March 31, 2011 and 2010 is shown below:

		Three Months Ended
		March 31,
		2011				2010				Change				%
Production(a):
Natural gas (mcf)			29,805,523				24,372,167				5,433,356				22	%
NGLs (bbls)			1,131,565				623,474				508,091				81	%
Crude oil (bbls)			436,132				505,101				(68,969	)			(14	%)
Total (mcfe)(b)			39,211,706				31,143,617				8,068,089				26	%
Average daily production(a):
Natural gas (mcf)			331,172				270,802				60,370				22	%
NGLs (bbls)			12,573				6,927				5,646				81	%
Crude oil (bbls)			4,846				5,612				(766	)			(14	%)
Total (mcfe)(b)			435,686				346,040				89,646				26	%