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):

July 26, 2016 (July 26, 2016)

 

RANGE RESOURCES CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

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

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

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

 

 

 

 

 

 

 

 

 

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ITEM 2.02 Results of Operations and Financial Condition

On July 26, 2016 Range Resources Corporation issued a press release announcing its second quarter 2016 results.  A copy of this press release is being furnished as an exhibit to this report on Form 8-K.

ITEM 9.01 Financial Statements and Exhibits

(d) Exhibits:

99.1 Press Release dated July 26, 2016

 

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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.

 

Date: July 26, 2016

 

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EXHIBIT INDEX

 

 

 

 

Exhibit 99.1

NEWS RELEASE

RANGE ANNOUNCES SECOND QUARTER 2016 RESULTS

FORT WORTH, TEXAS, JULY 26, 2016 RANGE RESOURCES CORPORATION (NYSE: RRC) today announced its second quarter financial results.  

Highlights –

Commenting, Jeff Ventura, the Company’s CEO said, “Range continues to perform at a high level operationally. Our Marcellus assets continue to deliver excellent results, as drilling and completion activities become more efficient, and recoveries are increasing as we drill longer laterals. We are encouraged by the recent improvement in commodity prices, particularly natural gas and natural gas liquids.  Range is well positioned to take advantage of an improving price environment with an industry-leading inventory of high-quality drilling opportunities, a diversified portfolio of transportation alternatives for our products, and an existing footprint of over 200 well pads in Appalachia.  The existing pad inventory will allow Range to reduce costs and increase efficiencies for future development and, importantly, speed the pace of development when warranted, as much of the required infrastructure is already in place.

The proposed merger with Memorial is on track, with closing estimated to occur late in the third quarter.  We look forward to integrating the Range and Memorial teams, combining two of the most prolific, high-quality natural gas plays in North America.”    

Financial Discussion

Except for generally accepted accounting principles (“GAAP”) reported amounts, specific expense categories exclude non-cash impairments, unrealized mark-to-market gain or loss on derivatives, non-cash stock compensation and other items shown separately on the attached tables.  “Unit costs” as used in this release are composed of direct operating, transportation, gathering and compression, production and ad valorem taxes, general and administrative, interest and depletion, depreciation and amortization costs divided by production.  See “Non-GAAP Financial Measures” for a definition of each of the non-GAAP financial measures and the tables that reconcile each of the non-GAAP measures to their most directly comparable GAAP financial measure.

Asset Sales

On May 20, 2016, Range closed on the sale of approximately 9,200 net acres with net production of 5 Mmcfe per day from 200 wells located in central Oklahoma for $77.7 million.  Following the closing of this sale, the Company owns approximately 19,000 net acres in central Oklahoma.  The retained acreage, which is primarily held by production, is in the northern extension of the STACK play and includes Osage and other reservoir targets.  Drilling activity has increased near the area and the Company is monitoring industry activity.

Second Quarter 2016

GAAP revenues for the second quarter 2016 totaled $102 million (a 58% decrease compared to second quarter 2015).  GAAP net cash provided from operating activities including changes in working capital was $82 million (a 48% decrease as compared to second quarter 2015) and GAAP earnings were a loss of $225 million ($1.35 loss per diluted share) versus a loss of $119 million ($0.71 per diluted share) in the prior-year quarter.  Second quarter

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2016 included a $163 million derivative loss due to increased commodity prices, compared to a $35 million loss in 2015 and deferred compensation plan expense of $26 million, due to the increase in Range’s stock price during the quarter, compared to a $7 million gain in the prior-year quarter.  

Non-GAAP revenues for second quarter 2016 totaled $363 million (a 10% decrease compared to second quarter 2015), cash flow from operations before changes in working capital, a non-GAAP measure, was $93 million compared to $161 million in second quarter 2015.  Adjusted net income comparable to analysts’ estimates, a non-GAAP measure, was a loss of $23 million ($0.14 loss per diluted share) for the second quarter 2016 compared to earnings of $2.2 million ($0.01 per diluted share) in the prior-year quarter.  The Company’s total unit costs decreased by $0.24 per mcfe, or 8%, compared to the prior-year quarter, as shown below:

^(a) Totals may not add due to rounding.

Second quarter 2016 natural gas, NGLs and oil price realizations (including the impact of cash-settled hedges and derivative settlements which correspond to analysts’ estimates) averaged $2.50 per mcfe, a 19% decrease from the prior-year quarter.  Additional detail on commodity price realizations can be found in the Supplemental Tables provided on the Company’s website.

Capital Expenditures

Second quarter 2016 drilling expenditures of $120 million funded the drilling of 28 (26 net) wells.  A 100% success rate was achieved.  In addition, during the quarter, $3.5 million was incurred on acreage purchases, $6.4 million on exploration expense, and $0.2 million on gas gathering systems.  Range is on target with its $495 million capital budget for 2016.  The Company expects to average three rigs running for the second half of 2016.

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Operational Discussion

Range has updated its investor presentation with second quarter financial and operational results.  Please see www.rangeresources.com under the Investors tab, “Company Presentations” area, for the presentation entitled, “Company Presentation – July 26, 2016.”

Marcellus Shale

Production for the second quarter averaged 1,379 net Mmcfe per day, a 16% increase over the prior-year quarter.  The Southern Marcellus Shale Division averaged 1,192 net Mmcfe per day during the quarter, a 24% increase over the prior-year quarter.  The Northern Marcellus Shale Division averaged 188 net Mmcf per day during the quarter, a 19% decrease over the prior-year quarter.

The table below summarizes second quarter activity and the number of wells expected to be turned to sales for the remainder of 2016:

The Southern Marcellus Shale Division continues to drill and complete outstanding wells, with impressive EUR’s on both a total and normalized basis, with costs being driven lower.  The examples below represent recent wells brought on line that continue to perform well.

Operational efficiency gains continued in the second quarter.  The division completed 1,067 stages, averaging over 7.8 stages per day per crew, which is a 23% improvement compared to the prior-year quarter.  Also, Range drilled 6% more lateral feet per day per rig, with a 27% reduction in drilling cost per lateral foot, when compared to the prior-year quarter.  Capital costs for surface facilities and equipment in 2016 are expected to be 23% lower than 2015 as a result of design improvements, reduced labor and equipment costs, plus redeployment of existing equipment.  Logistical improvements in water handling have resulted in annual savings of over $18 million. These and other efficiencies have driven Range’s normalized (per 1,000 feet of lateral) well costs, including surface facility costs, to among the lowest of other Marcellus peers, as shown in the latest Company presentation.

 

Range’s current inventory of lightly drilled well pads now stands at over 200 pads with infrastructure in place that will significantly shorten cycle time.  In addition, Range has now obtained permits for drilling 42 of the potential laterals on several of these pads.

 

With surface facilities construction complete, Range has recently brought on line its third dry gas Utica well in southwest Pennsylvania and is currently conducting flow tests.  Early data continues to indicate this well is more productive compared to the Company’s first two Utica wells, and was drilled and completed with lower cost.  While results from the Company’s dry Utica wells are encouraging, Range will continue to monitor results from its three wells, plus wells from other operators in the area, while focusing capital on its prolific Marcellus acreage

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position that has been de-risked by thousands of wells, some with up to 10 years of production history.  Range has approximately 400,000 acres in southwest Pennsylvania which it considers prospective for Utica development.

Marcellus Shale Marketing and Transportation

Range continues to add capacity to markets outside of Appalachia.  The Company will add 150,000 mcf per day of firm capacity on the Spectra Gulf Markets project, expected to be in-service during the fourth quarter of this year, and an additional 300,000 mcf per day on the Columbia Leach/Rayne Express project, expected to be in-service by the end of 2017.  Both of these projects take Range gas to the Gulf Coast, where demand is increasing, resulting in an expected improvement in natural gas price realizations.    With Mariner East now fully operational, Range is marketing propane globally out of Marcus Hook and realizing prices above Mont Belvieu.  In addition, Range recently signed new condensate sales agreements which will improve condensate prices in the second half of 2016.  With these marketing arrangements in place, we anticipate improved realized prices for all products.

Guidance

Production per day Guidance

Production for the entire 2016 year remains at the high-end of previous guidance to average 1,410 to 1,420 Mmcfe per day after all announced asset sales.  Production for the third quarter of 2016 is expected to be approximately 1,430 Mmcfe per day with 32% to 35% liquids.

Third Quarter 2016 Expense Guidance

2016 Annual Differential Guidance

Based on current market pricing indications, Range would expect to average the following pre-hedge differentials for its 2016 production.

Hedging Status

Range hedges portions of its expected future production volumes to increase the predictability of cash flow.  Range currently has over 80% of its expected third and fourth quarter 2016 natural gas production hedged at a weighted average floor price of $3.22 per mcf.  Range has over 30% of its expected 2017 gas production hedged at an average floor price of $2.94.  Similarly, Range has hedged approximately 70% of its third and fourth quarter 2016 projected crude oil production at a floor price of $58.40 and approximately 60% of its composite NGL production.  Please see Range’s detailed hedging schedule posted at the end of the financial tables below and on its website at www.rangeresources.com.  

 

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Range has hedged Marcellus and other basis differentials covering 64,125,000 Mmbtu per day for July 2016 through December 2017.  The fair value of the basis hedges based upon future strip prices as of June 30, 2016 was a loss of $3.8 million.

Range has also hedged the premium spread between the Mont Belvieu propane index and the respective European and Asian propane market indexes on approximately 30% of anticipated LPG sales through December 2017.  The fair value of these hedges based upon future strip prices as of June 30, 2016 was a gain of $4.0 million.

Conference Call and Webcast Information

A conference call to review the financial results is scheduled on Wednesday, July 27 at 9:00 a.m. ET. To participate in the call, please dial 877-407-0778 and ask for the Range Resources second quarter 2016 financial results conference call. A replay of the call will be available through August 27. To access the phone replay dial 877-660-6853. The conference ID is 13639393. A simultaneous webcast of the call may be accessed at www.rangeresources.com. The webcast will be archived for replay on the Company's website until August 27.

Non-GAAP Financial Measures

Adjusted net income or loss comparable to analysts’ estimates as set forth in this release represents income or loss before income taxes adjusted for certain non-cash items (detailed in the accompanying table) less income taxes.  We believe adjusted net income comparable to analysts’ estimates is calculated on the same basis as analysts’ estimates and that many investors use this published research in making investment decisions and evaluating operational trends of the Company and its performance relative to other oil and gas producing companies.  Diluted earnings per share (adjusted) as set forth in this release represents adjusted net income comparable to analysts’ estimates on a diluted per share basis.  A table is included which reconciles income or loss to adjusted net income (loss) comparable to analysts’ estimates and diluted earnings per share (adjusted).  On its website, the Company provides additional comparative information on prior periods along with non-GAAP revenue disclosures.  

Cash flow from operations before changes in working capital (sometimes referred to as “adjusted cash flow”) as defined in this release represents net cash provided from operating activities before changes in working capital and exploration expense adjusted for certain non-cash compensation items.  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 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 operating activities, investing, or financing activities as an indicator of cash flows, or as a measure of liquidity.  A table is included which reconciles Net cash from operating activities 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 for cash flow, cash margins and non-GAAP earnings as used in this release.

The cash prices realized for oil and natural gas production including the amounts realized on cash-settled derivatives and net of transportation, gathering and compression expense is a critical component in the Company’s performance tracked by investors and professional research analysts in valuing, comparing, rating and providing investment recommendations and forecasts of companies in the oil and gas exploration and production industry.  In turn, many investors use this published research in making investment decisions.  Due to the GAAP disclosures of various derivative transactions and third-party transportation, gathering and compression expense, such information is now reported in various lines of the statement of operations.  The Company believes that it is important to furnish a table reflecting the details of the various components of each statement of operations line to better inform the reader of the details of each amount and provide a summary of the realized cash-settled amounts and third-party transportation, gathering and compression expense which historically were reported as natural gas, NGLs and oil sales.  This information is intended to bridge the gap between various readers’ understanding and fully disclose the information needed.

The Company discloses in this release the detailed components of many of the single-line items shown in the GAAP financial statements included in the Company’s Quarterly Report on Form 10-Q.  The Company believes

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that it is important to furnish this detail of the various components comprising each line of the Statements of Operations to better inform the reader of the details of each amount, the changes between periods and the effect on its financial results.

RANGE RESOURCES CORPORATION (NYSE: RRC) is a leading independent oil and natural gas producer with operations focused in stacked-pay projects in the Appalachian Basin. The Company is headquartered in Fort Worth, Texas.  More information about Range can be found at www.rangeresources.com.

MEMORIAL RESOURCE DEVELOPMENT CORP. (NASDAQ: MRD) is an independent natural gas and oil company engaged in the acquisition, exploration and development of natural gas and oil properties in North Louisiana. For more information about MRD, please visit MRD’s website at www.memorialrd.com.

Important Additional Information

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This communication is being made in respect of the proposed merger transaction involving Range and MRD.

In connection with the proposed transaction, Range has filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 (333-211994) on June 13, 2016, as amended by Amendment No. 1 thereto as filed with the SEC on July 14, 2016, that includes a joint proxy statement of Range and MRD and also constitutes a prospectus of Range. Each of Range and MRD also plan to file other relevant documents with the SEC regarding the proposed transactions. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended. The definitive joint proxy statement/prospectus(es) for Range and/or MRD will be mailed to shareholders of Range and/or MRD, as applicable.

BEFORE MAKING ANY VOTING OR INVESTMENT DECISIONS, INVESTORS AND SECURITY HOLDERS OF RANGE AND/OR MRD ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors and security holders may obtain free copies of the joint proxy statement/prospectus, any amendments or supplements thereto and other documents containing important information about Range and MRD, once such documents are filed with the SEC, through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by Range will be available free of charge on Range’s website at http://www.rangeresources.com/ under the heading “Investors” or by contacting Range’s Investor Relations Department by email at lsando@rangeresources.com, damend@rangeresources.com, mfreeman@rangeresources.com, or by phone at 817-869-4267. Copies of the documents filed with the SEC by MRD will be available free of charge on MRD’s website at http://www.memorialrd.com under the heading “Investor Relations” or by phone at 713-588-8339.

Participants in the Solicitation

Range, MRD and certain of their respective directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of MRD is set forth in its proxy statement for its 2016 annual meeting of shareholders, which was filed with the SEC on April 1, 2016. Information about the directors and executive officers of Range is set forth in its proxy statement for its 2016 annual meeting of stockholders, which was filed with the SEC on April 8, 2016. These documents can be obtained free of charge from the sources indicated above.

Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available. Investors should read the joint proxy

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statement/prospectus carefully before making any voting or investment decisions. Investors may obtain free copies of these documents from Range or MRD using the sources indicated above.

Cautionary Statement Regarding Forward-Looking Statements

This communication contains certain “forward-looking statements” within the meaning of federal securities laws, including within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that are not limited to historical facts, but reflect Range’s and MRD’s current beliefs, expectations or intentions regarding future events. Words such as “may,” “will,” “could,” “should,” “expect,” ““plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” and similar expressions are intended to identify such forward-looking statements. The statements in this press release that are not historical statements, including statements regarding the expected timetable for completing the proposed transaction, benefits and synergies of the proposed transaction, costs and other anticipated financial impacts of the proposed transaction; the combined company’s plans, objectives, future opportunities for the combined company and products, future financial performance and operating results and any other statements regarding Range’s and MRD’s future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts, are forward-looking statements within the meaning of the federal securities laws. Furthermore, the statements relating to the proposed transaction are subject to numerous risks and uncertainties, many of which are beyond Range’s or MRD’s control, which could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: failure to obtain the required votes of Range’s or MRD’s shareholders; the timing to consummate the proposed transaction; satisfaction of the conditions to closing of the proposed transaction may not be satisfied or that the closing of the proposed transaction otherwise does not occur; the risk that a regulatory approval that may be required for the proposed transaction is not obtained or is obtained subject to conditions that are not anticipated; the diversion of management time on transaction-related issues; the ultimate timing, outcome and results of integrating the operations of Range and MRD; the effects of the business combination of Range and MRD, including the combined company’s future financial condition, results of operations, strategy and plans; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the proposed transaction; expected synergies and other benefits from the proposed transaction and the ability of Range to realize such synergies and other benefits; expectations regarding regulatory approval of the transaction; results of litigation, settlements and investigations; and actions by third parties, including governmental agencies; changes in the demand for or price of oil and/or natural gas can be significantly impacted by weakness in the worldwide economy; consequences of audits and investigations by government agencies and legislative bodies and related publicity and potential adverse proceedings by such agencies; compliance with environmental laws; changes in government regulations and regulatory requirements, particularly those related to oil and natural gas exploration; compliance with laws related to income taxes and assumptions regarding the generation of future taxable income; weather-related issues; changes in capital spending by customers; delays or failures by customers to make payments owed to us; impairment of oil and natural gas properties; structural changes in the oil and natural gas industry; and maintaining a highly skilled workforce. Range’s and MRD’s respective reports on Form 10-K for the year ended December 31, 2015, Form 10-Q for the quarter ended March 31, 2016 and June 30, 2016, recent Current Reports on Form 8-K, and other SEC filings, including the registration statement on Form S-4, as amended, that includes a joint proxy statement of Range and MRD and constitutes a prospectus of Range, discuss some of the important risk factors identified that may affect these factors and Range’s and MRD’s respective business, results of operations and financial condition. Range and MRD undertake no obligation to revise or update publicly any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

 

2016-12

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SOURCE:  Range Resources Corporation

Investor Contacts:

Laith Sando, Vice President – Investor Relations

817-869-4267

lsando@rangeresources.com

David Amend, Investor Relations Manager

817-869-4266

damend@rangeresources.com

Michael Freeman, Senior Financial Analyst

817-869-4264

mfreeman@rangeresources.com

Media Contact:

Matt Pitzarella, Director of Corporate Communications

724-873-3224

mpitzarella@rangeresources.com

www.rangeresources.com

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RANGE RESOURCES CORPORATION

(a) See separate natural gas, NGLs and oil sales information table.

(b) Included in Brokered natural gas, marketing and other revenues in the 10-Q.

(c) Costs associated with stock compensation and restricted stock amortization, which have been reflected in the categories associated

          with the direct personnel costs, which are combined with the cash costs in the 10-Q.

(d) Reflects the change in market value of the vested Company stock held in the deferred compensation plan.

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RANGE RESOURCES CORPORATION

 

 

 

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RANGE RESOURCES CORPORATION

 

 

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RANGE RESOURCES CORPORATION

 

(a) Represents volumes sold regardless of when produced.

(b) Oil and NGLs are converted at the rate of one barrel equals six mcfe based upon the approximate relative energy content of oil to natural gas, which is not necessarily indicative of the relationship of oil and natural gas prices.

(c) Excluding third party transportation, gathering and compression costs.

(d) Net of transportation, gathering and compression costs.

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RANGE RESOURCES CORPORATION

 

 

(a)  Deferred taxes are estimated to be approximately 38%.

NM = Not meaningful

    

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RANGE RESOURCES CORPORATION

 

HEDGING POSITION AS OF JULY 13, 2016

(Unaudited) –

 

NOTE:  SEE WEBSITE FOR OTHER SUPPLEMENTAL INFORMATION FOR THE PERIODS

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