Range Resources Corporation — FY2022 Form 10-K Summary
Business Context and Reporting Period
Range Resources is an independent U.S. natural gas, NGL, crude oil and condensate producer focused primarily on the Marcellus Shale in Pennsylvania. The filing reports the fiscal year ended December 31, 2022, with comparisons to 2021 and 2020. The company operates as one reportable segment.
- Year-end proved reserves: 18.1 Tcfe, approximately 65% natural gas, 33% NGLs and 2% oil and condensate.
- Approximately 60% of reserves were proved developed; reserve life was approximately 22 years based on fourth-quarter 2022 production.
- 2022 production was 539.4 Bcf of natural gas, 36.4 million barrels of NGLs and 2.7 million barrels of oil and condensate, or 774.1 Bcfe.
- Average daily production was 2.12 Bcfe, compared with 2.13 Bcfe in 2021.
Financial and Operating Metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Natural gas, NGL and oil sales | $4.911 billion | $3.215 billion | Up 53% |
| Total revenues and other income | $4.147 billion | $2.930 billion | Up 42% |
| Derivative fair-value loss | $1.189 billion | $650.2 million | Loss increased $538.3 million |
| Net income | $1.183 billion | $411.8 million | Up 187% |
| Diluted earnings per share | $4.69 | $1.61 | Up 191% |
| Cash flow from operations | $1.865 billion | $792.9 million | Up 135% |
| Capital expenditures and acreage purchases | $488.1 million | $417.4 million | Higher year over year |
| Total debt, principal amount | $1.869 billion | $2.950 billion | Down $1.081 billion |
| Debt to capitalization | 39.0% | 58.4% | Improved |
Average realized price before derivative settlements and third-party transportation costs increased 53% to $6.34 per Mcfe. Including derivative settlements and transportation costs, the average realized price increased 65% to $3.17 per Mcfe from $1.92 per Mcfe. The filing does not provide a single clearly defined GAAP operating margin; reported profitability was materially affected by derivative mark-to-market losses, transportation costs and other unusual items.
Material Changes Versus the Prior Comparable Period
- Higher commodity prices drove a $1.696 billion increase in natural gas, NGL and oil sales, despite essentially flat production.
- Net income increased to $1.183 billion from $411.8 million, while cash flow from operations increased by $1.072 billion.
- Derivative cash settlements were a net payment of $1.190 billion, compared with a $520.0 million payment in 2021. The year-end net derivative liability was $138.6 million.
- Range issued $500.0 million of 4.75% senior notes due 2030 and redeemed $850.0 million of 9.25% senior notes due 2026, contributing to a $69.5 million loss on early debt extinguishment.
- The company repaid or retired its 2022 and 2023 senior notes and ended the year with no scheduled debt maturity in 2023. Its next significant maturity is $750.0 million due in 2025.
- Range repurchased 14.0 million shares for $399.7 million and paid $38.6 million of dividends after reinstating quarterly dividends in the third quarter.
- Direct operating expense increased 12% to $84.3 million, while general and administrative expense was essentially flat at $168.1 million. DD&A declined to $353.4 million from $364.6 million.
- Exit costs increased to $70.3 million from $21.7 million, primarily due to a $24.8 million unfavorable adjustment and accretion related to retained North Louisiana transportation, gathering and processing obligations.
- Proved reserves increased 2% to 18.1 Tcfe. Additions of 1.7 Tcfe and positive revisions were partly offset by production and the reclassification of 1.4 Tcfe of reserves to unproved because certain wells were deferred beyond the five-year development horizon.
Liquidity, Debt and Capital Resources
- At December 31, 2022, cash was $207,000 and available committed borrowing capacity was approximately $1.2 billion.
- The revolving credit facility has a $4.0 billion maximum facility size, a $3.0 billion borrowing base, $1.5 billion of lender commitments and a maturity date of April 14, 2027.
- Outstanding borrowings under the facility were $19.0 million, with $307.4 million of undrawn letters of credit.
- Range was in compliance with its debt covenants at year-end, including the required EBITDAX and current-ratio tests.
- Contractual obligations totaled approximately $8.7 billion, including $6.5 billion of transportation and gathering commitments and $390.6 million of retained North Louisiana divestiture obligations.
Guidance, Outlook, Risks and Unusual Items
- Management expects 2023 capital expenditures of $570 million to $615 million, including $540 million to $565 million for drilling. The program is expected to produce volumes similar to 2022 and to be funded with operating cash flow.
- Management expects 2023 DD&A of approximately $0.45 per Mcfe and plans to operate an average of two horizontal rigs.
- Commodity prices are expected to remain volatile. Management cited lower early-2023 natural gas futures prices following a mild winter, infrastructure constraints, the Russia-Ukraine conflict, recession risk, monetary policy and energy-transition policies.
- Cost inflation and supply-chain constraints affecting steel, fuel, labor and services are expected to continue.
- Range uses swaps, collars and three-way collars to hedge a portion of production through 2024. Hedging limits upside participation and exposes the company to counterparty, basis and production-volume risks.
- Operations are concentrated in Pennsylvania, increasing exposure to regional transportation, processing, permitting, regulatory, water-management and community risks.
- Hydraulic fracturing, methane and emissions rules, climate-related initiatives, potential litigation and evolving Pennsylvania regulation could increase costs or restrict development.
- The company targets net-zero Scope 1 and Scope 2 greenhouse-gas emissions by year-end 2025, but acknowledges that operational, capital, technology and carbon-offset constraints could prevent achievement.
- Legal proceedings and environmental notices arise in the ordinary course. Management does not currently expect pending matters to have a material effect, but environmental fines or penalties could individually or collectively exceed $250,000.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. The critical audit matter involved reserve estimates underlying DD&A.
Most Important Facts for Investors to Verify
- Whether commodity prices and realized prices support the planned 2023 capital program and similar production levels.
- The magnitude and timing of derivative settlements, hedge prices and the effect of hedging on future cash flow.
- Availability under the credit facility and the spring 2023 borrowing-base redetermination.
- Capacity to fund the $750 million 2025 debt maturity while continuing share repurchases and dividends.
- The economics and timing of the $6.5 billion of transportation and gathering commitments, including potential deficiency payments.
- Changes in proved reserves, particularly the 1.4 Tcfe reclassified to unproved and the company’s ability to return those locations to the five-year development plan.
- Progress toward the 2025 emissions target and the potential cost of federal and Pennsylvania environmental regulations.
- The assumptions supporting the $390.6 million North Louisiana retained-obligation liability and the possibility of future increases.
- The filing’s reserve PV-10 and standardized measure, which increased substantially with commodity prices and should not be treated as market value or a forecast of realized cash flows.