Range Resources Corp Q1 FY2025 Earnings Call

Welcome to Range Resources First Quarter 2025 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. Statements made during this conference call that are not historical facts are forward-looking statements. Such statements are subject to risk and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. After the speakers' remarks, there will be a question-and-answer period. At this time, I would like to turn the call over to Mr. Laith Sando, SVP, Investor Relations at Range Resources. Please go ahead, sir.

Thank you, Operator. Good morning, everyone, and thank you for joining Range's first quarter 2025 earnings call. The speakers on today's call are Dennis Degner, Chief Executive Officer; and Mark Scucchi, Chief Financial Officer. Hopefully, you've had a chance to review the press release and updated investor presentation that we've posted on our website. We may reference certain slides on the call this morning. You also find our 10-Q on Range's website under the Investors tab or you can access it using the SEC's EDGAR system. Please note we'll be referencing certain non-GAAP measures on today's call. Our press release provides reconciliations of these to the most comparable GAAP figures. We've also posted supplemental tables on our website that include realized pricing details by product, along with calculations of EBITDAX, cash margins and other non-GAAP measures. With that, let me turn the call over to Dennis.

Thanks, Laith, and thanks to all of you for joining the call today. In the first quarter, Range executed on our plans safely and efficiently delivering consistent well results and free cash flow but steady activity levels that support the longer-term outlook we communicated during our prior earnings call. Range's strong free cash flow also provided increased returns to shareholders during the quarter. At the same time, Range further reduced debt, while continuing to invest in the long-term development of our world-class asset with a two rig and one completion crew program. A key component of Range's strong first quarter financial results and our through cycle profitability is Range's low capital intensity, which is anchored by Range's class leading drilling and completion costs, shallow base decline, large blocky core inventory and talented team. We believe this was on display once again in Q1, as it has been for the past several years. Looking back on the quarter, all-in capital came in at $147 million for production of 2.2 Bcf equivalent per day. As we turn to sales, 130,000 lateral feet across 10 wells. Production during the quarter was aided once again by strong well performance and resilient field runtime despite winter weather conditions. These consistent quarter-over-quarter results demonstrate the repeatable nature of our large contiguous acreage position, the benefit of returning to pad sites for ongoing development, and the team's dedication to enhancing field operating runtime. Looking forward, Range expects production to be slightly down in the second quarter as we undergo scheduled processing maintenance. Following Q2, we expect production to increase in the second half of the year, all in line with our previous guidance. On the capital side, completion spending will step up over the next two quarters, which will drive the increased production in the second half of the year as mentioned. And this operational cadence places us squarely within our stated capital guidance for the year. Consistent with our plans for the year, Range operated two horizontal rigs during the first quarter, drilling approximately 250,000 lateral feet across 18 laterals. This steady activity level, combined with our prior investments in 2023 and 2024, adds to Range's drilled uncompleted inventory that we have discussed on prior calls. This places us right on track to exit 2025 with approximately 400,000 lateral feet of surplus inventory, which supports our three-year outlook. Diving further into operations, during the quarter, Range set a new program drilling record by averaging 5,961 feet per day. This alone is an impressive achievement, but what is most impressive is the team's ability to deliver this level of efficiency while staying 98% within our very narrow geosteered landing target window. In completions, performance of the electric frac fleet continues to impress as well, and much like the drilling advancements, the completions team has kept pace by increasing the average number of stages per day. For context, if the team averages nine stages per day, similar to our 2024 results, that equates to completing approximately 650,000 lateral feet per year, which is more than what it takes to hold current production flat. This combined level of efficiency in drilling and completions lays the foundation for our three-year outlook and our ability to hold 2.2 Bcf equivalent per day flat in 2025, while also adding to inventory with just two drilling rigs and a single frac crew. So simply put, we're off to a great start this year. Lease operating expense finished at $0.13 per Mcfe for the first quarter while managing through winter conditions. The team continues to improve on winter operations field runtime through strong communication with our midstream partners, equipment optimization and enhanced maintenance. For context, over the past four years, this ongoing effort has driven a 13% improvement per year in winter runtime, further enhancing field level performance and contributing to the strong production performance in the first quarter. Before moving on to marketing, I'll briefly touch on service costs and availability. Recently, we entered into a two-year contract extension securing our existing electric hydraulic fracturing fleet, which will provide continuity of a safe efficient crew to support our stated operational plans. Given the vast majority of our spending is tied to domestically sourced goods and services or has been contractually secured for the remainder of the year, we are expecting very consistent well costs throughout 2025 and into 2026. And as mentioned already, Range's low capital intensity provides an additional level of stability in our full cycle cost versus other producers. Shifting over to marketing, during the first quarter of 2025, persistently strong export demand combined with cold weather in North America, resulted improved storage levels for both natural gas and NGLs. The combined demand resulted in a record 41 million barrel draw in propane inventory, driving the propane WTI ratio above 50% for the first three months of 2025. Similarly, natural gas inventories in the U.S. improved substantially throughout the winter, ending the season 4.3% below the five-year average and nearly 22% below last year, presenting an improved outlook going forward. As in prior quarters, Range leveraged our flexible sales and transport portfolio for both gas and liquids to optimize sales mix and generate incremental cash flow during Q1. As an example, Range timed its ethane production in the first quarter to take advantage of strong daily natural gas pricing, adding approximately $1 million in cash flow to the quarter. Looking at our NGL exports, Range's access to the East Coast makes it a preferred source for European NGL imports and gives it an advantage versus U.S. Gulf Coast terminals. At the same time, Range's waterborne export contracts contain either an outright price floor or a fixed premium versus Mont Belvieu. This has backstopped Range's consistent premium pricing relative to Mont Belvieu, which we saw again in the first quarter and expect going forward. And on a final note, Range is collaborating with Liberty Energy and Imperial Land Corporation to supply natural gas to a planned state-of-the-art power generation facility in Washington County, PA, directly adjacent to the heart of Range's Marcellus development and not far from where we drilled the Marcellus discovery well over 20 years ago. The proposed power facility is expected to serve as a catalyst for attracting data centers and/or industrial operations seeking long-term, reliable, efficient energy solutions utilizing Marcellus natural gas, which has an advantage in emissions profile versus other basins in the U.S. We continue to believe that sourcing future power demand near the highest quality, long duration natural gas assets in the world makes a lot of sense, and while this specific project is still early, we are glad to play a role alongside Liberty and Imperial to continue advancing future economic growth in Pennsylvania. With announcements like ours and many others, including Homer City, PA, we see this as a win for everyone in Appalachia and somewhat expect that research estimates for an additional 4 Bcf per day of incremental natural gas demand in the PJM market through 2030 could prove conservative. We believe the future of natural gas and NGLs is strong and the Range team remains focused on generating free cash flow while advancing our overall efficiencies and delivering repeatable well performance across our large contiguous inventory while helping meet future emerging demand just like we discussed today. I'll now turn it over to Mark to discuss the financials.

Thanks, Dennis. Range has kicked off 2025 executing on a disciplined long-term plan designed to deliver value from Range's portfolio. As we discussed on our last call, our plan is not just focused on today, but given the economic resilience of our projects and the duration of our inventory, we are positioning Range for years to come. By executing thoughtfully today, we're laying the groundwork for efficient modest production growth to meet increasing gas demand. We're using the power of Range's high quality and long duration inventory to access new demand either by acquiring transportation, which enables Range to grow production and take market share in premium markets with materializing demand growth or by supporting the growth of in-basin demand within Appalachia. Through business cycles, we intend to generate free cash flow, prudently invest in the business and return capital to shareholders. Consistently accomplishing these goals requires the flexibility to adapt to market conditions. As shown during the first quarter, as in recent years, we did just that. When market dislocations occurred, we accelerated our share repurchases while at the same time prudently accumulating cash to repay debt. The results of the first quarter highlight the strength of Range's production mix and transportation portfolio. Range paid $22 million in dividends, invested $68 million in share repurchases at prices well below our view of long-term value and reduced net debt by $42 million while investing in operations. Those capital allocation decisions were made possible by $183 million in free cash flow, which was created while executing a strategic operational plan that stands in contrast to most industry peers with higher full cycle costs. Financial results rely on safe, efficient operations, and the Range team executed another successful quarter delivering planned production on budget. As a reminder, Range's 2025 plan differs from others in the industry in that our capital efficiency and low full cycle cost paired with advantaged marketing of our production, enables a low reinvestment rate while maintaining the ability to drive future growth from only two horizontal drilling rigs and a single frac crew. Critical in our assessment of growth potential is our ability to sustain a low full cycle cost structure, low reinvestment rate and durable high margins. On the year-end earnings call, when we announced a potential path through 2027, we estimated that Range can maintain 2.6 Bcfe per day of production for under $600 million of annual drilling and completion capital or approximately $0.60 per Mcfe. Simply put, the result of efficient production growth by Range is growth in future cash flow per share, which we expect to be augmented by a declining share count. You can think of Range's future potential growth in a modular fashion. Range can very efficiently add wedges of growth as the market calls for it. The additional wedge of production we are planning through 2027 can be held flat and generate substantial incremental free cash flow. As additional demand materializes either in basin or out of basin and peer inventory quality degrades, it is expected that Range can add additional wedges of production. As evidenced by our three-year outlook, this will very quickly generate greater free cash flow. The depth of Range's inventory and low stable base decline make this a unique opportunity to compound per share value over time. Range's business plan continues to be executed on what we believe is the largest highest quality core Appalachia inventory paired with the transport and sales portfolio delivering production across the U.S. and internationally, all supported by a strong financial foundation. We have the team, assets, and balance sheet to succeed through price cycles and we believe the Range business can and will continue to deliver significant value to investors. Dennis, back to you.

Thanks, Mark. Our 2025 program is off to a solid start and I believe the first quarter results communicated today showcase that Range's business is in the best place in company history, having de-risked a high-quality inventory measured in decades and translated that into a business capable of generating free cash flow through cycles. With that, let's open the line for questions.

Thank you, Mr. Degner. The question-and-answer session will now begin. Our first question comes from Jake Roberts with TPH&Co. Your line is open. Please go ahead.

Just wondering if you could expand on some of the drivers to reallocate the handful of wells between the target areas for this year.

You bet. Well, again, good morning, Jake. I think as we look at our program, I guess, if we were to look back over the last couple of years, there's always a small level of dynamics as you start to look at the operational cadence throughout the year and what wells start to move forward and what wells start to even move back. And I think last year is probably a good example, some of it driven by efficiencies and some of it also timing of just how we see the sequence of events throughout the balance of the year. So no secret sauce there other than we just see that the execution timing has worked out where it shifted a little bit and it's pushed the timing of one of our wells, like deep in the year that's on the liquid-rich side to something that will be executing over the balance of the year and then turn inline in the beginning of 2026. But as we've seen over the last few years, efficiencies continue to always show positive movement and we could even see some of that move into the end of 2025, just depending upon what efficiencies we see captured this year.

Great, thanks. My second question, and Dennis, I appreciate some of the color you gave and I know it's a bit of a moving target, but was hoping you could expand on how the geopolitical news, the tariffs, the reciprocal tariffs are being baked into some of your macro views. And I think most in focus is that LPG trade. And if I could tack just a little bit more on this all in question would be can you expand on some of those price points and premiums to Mont Belvieu, you mentioned.

You bet. Happy to. I think if I were to look back over the past several years, I feel like our industry and our business at Range has certainly been through cycles and it's something we reference every time we're together in person or in a quarter like today. But the business has still been incredibly resilient here at Range when you think about the quality of the asset base and again the duration of it. And so through all of the cycles that we've seen, we've still been able to be incredibly successful and accomplish a lot of the financial objectives that we've laid out and now met. As you start to take a deeper dive around the tariff perspective as an example, maybe more particular on the LPG side, we think a lot of this starts with our advantage from a word of diversity, how we set up our diversity for how we transport our products, but also how we the different pricing mechanisms that we use across the Board, whether it's LPG or whether it's ethane as an example. We think regardless of how the tariff dust settles here in the weeks or months ahead, we see demand remaining relatively strong. But we also see that the market will be incredibly efficient and start to redistribute those barrels to address global demand that still will be needing those LPG barrels or ethane barrels, regardless of what portion of the NGL component we're looking at. When you look at pricing for us and transport having access to markets or terminal out of the East Coast is really beneficial. We've talked about that a lot over the past several years and we think moments like this put it on full display. Our premium this past quarter was certainly strong, very consistent with what we saw in 2024. And it's part of the reason why you saw us improve the bottom end of our NGL guidance for the year. We would expect that to continue to look strong through the balance of this year. But there are some transportation advantages clearly for us out of the Northeast. We think that will continue to play a part as the barrels get redistributed pending what comes out of the tariffs. But as you look at LPG, I'll just say for Range specifically on where our barrels move, really 80% of our LPG gets out on waterborne export and all of it is going to Europe right now. So we really don't have a current exposure to the Chinese market at this particular time. But as we see things change, we would fully again expect the market to be efficient, redistribute those barrels, and we would expect our premium to continue to look strong on a relative basis as we move forward. So at the end of the day, we're as well-positioned I think that you could possibly be set up in moments like this and given all of the demand component that still is present and emerging PDH infrastructure, ethylene steam crackers that are in phases of commissioning, we just see demand continuing to look encouraging and strong as we move forward.

Great. Appreciate the time.

Thanks, Jake.

Thank you.

Thank you. And one moment, as we move on to our next question. Our next question comes from the line of Doug Leggate with Wolfe Research. Your line is open. Please go ahead.

Good morning. Thanks for taking my questions. Good morning, guys. Dennis, one for you and one for Mark if I may. Dennis, my one for you is I guess you were recently in the field with Doug Burgum and it's kind of a regional macro question. You've talked a lot about new potential in-basin demand, data centers and so on. So I'm just wondering if you can kind of frame what your thoughts are on regional basis, regional pricing, and whether you ever think constitution after your discussions with Secretary Burgum could actually come to fruition again. And I've got a follow-up for Mark, please.

Good morning, Doug. If I take a step back regarding the basis, we've definitely seen the benefits of takeaway in the basin. It's been around $0.80 and has fluctuated between $0.30 and $0.80 since MVP started operations about a year ago, which will be in June. The incremental components are clearly making an impact. Considering the in-basin demand that's emerging, announcements like the one for Homer City, PA, are quite promising. Additionally, with the development opportunities tied to Liberty and Imperial Land, as we've mentioned earlier, these projects align well with the reliability requirements that infrastructure needs and the long-duration quality assets that can offer low-emission supply for these facilities moving forward. The Liberty project, for instance, can potentially scale up to about 450 megawatts. The supply involved there is very modular and sits right on our producing footprint, capable of using between 90,000 to 100 million cubic feet of gas daily. There's further potential for expansion, given that the groundwork covers around 870 acres, which presents a substantial development opportunity for attracting future businesses in the region. Regarding your question on how this impacts basis, we believe it will strengthen over time, particularly considering the possible limitation of pipeline infrastructure from the area. The Constitution project is certainly a hot topic right now, and Secretary Burgum and others are interested in understanding what infrastructure the industry requires to accommodate the upcoming demand, whether it’s industrial, residential, or capacity expansion for the grid. While it's difficult to have a clear view on the Constitution project today, the ongoing open season for the Boardwalk project suggests there’s a growing need for energy and that companies like Range could play a role in supplying that energy in the future. This could lead to a demand-driven environment in those discussions.

New York needs to cooperate, but thank you for the information. Mark, I have a question for you regarding the three-year outlook you provided. I'm trying to comprehend what the $600 million and 2.6 Bcf a day means for the long-term. You have flexibility, but specifically, when you reach the 2.6 level, will you continue building DUCs at that time, or does the $600 million indicate a period of adjustment where you're no longer increasing inventory? I understand this is three years out, but I want to grasp how we should consider the sustainability of the 2.6 level and the $600 million in sustaining capital.

Sure. Good morning, Doug. I think at a high level, as we mentioned during the scripted portion of our opening remarks, the way we think about growth is still preserving those fundamental aspects of the Range business that make it unique and so powerful and so durable. That is a low full cycle reinvestment rate in the low call on cash flow, basically. So as we've laid out in the materials holding that 2.6 Bcfe per day at $570 million in DNC $570 million to $600 million, that is a maintenance level. What it means is that Range could shift back to a maintenance mode for whatever time period that's appropriate and generate substantial cash flow. While at the same time, we can be responsive to market demand. So the point being is I tried to describe it in a modular fashion. We can add growth as it's called for in basin without changes in the decline rate to the business, the production decline rate. We can do it without changing our full cycle cost structure. Growth can just generate incremental cash flow. That is the objective without altering the risk profile of the business. So as we think about it, that is just meant to show what we're preserving that annuity type business is still there. A growth just is a step up. You can think about it as a one-time event, but you can do that as many times as the market dictates that's a prudent reinvestment for the company and step it up or in-basin demand be it Liberty, be it Homer City and similar in-basin projects, or using capacity that goes underutilized by others in the basin. So Range is a value business, it's a growth business, it's an annuity, and it can adapt and be all of those things at the same time.

Appreciate the answers, guys. Thanks so much.

Thank you.

Thank you. And one moment for our next question. Our next question comes from the line of Roger Read with Wells Fargo Securities. Your line is open. Please go ahead.

Yes, thank you. Good morning.

Good morning, Roger.

Maybe your last comment there on Homer City, if you could kind of expand on what exactly are we looking at their timing, expansion possibilities over time, all of that good stuff.

You bet. Good morning, Roger. At this point, it's still a bit early to fully determine how everything will materialize. However, we do know that the project is progressing. There is significant potential due to the brownfield aspect of repurposing that facility. Based on the information available, it seems they are targeting a timeframe a couple of years out, likely around 2027, which is an advantage of using a brownfield site. Additionally, the supply for that facility will also need to develop further. We're hearing from local trade unions about the potential for employing individuals from Appalachia to help construct the facility, which is quite exciting. All of these factors point positively towards generating power and energy in the area, allowing companies like Range and others to get involved. So far, the outlook is very encouraging.

Yes. It feels like in basin development, it's a lot better than trying to depend on another state to allow a pipeline anyway. My follow-up question goes back to some of the intro discussions about using the e-frac, the 660,000 feet that you would assuming the same level of performance in 2025, as you achieved or had delivered in 2024. But since we've continually seen improvements in productivity and efficiency, I was just curious, is that the budget or is that just to be illustrative of what's going on? In other words, I would generally assume you'll do better in 2025 than 2024. And if that's the case, then what does that imply for either reducing the amount of frac needs or building sort of resiliency within your production potential upside for 2026, 2027 as we think about it.

Yes, good question, Roger. I'll use the last couple of years as a proxy. Start maybe on the efficiency side and end on the capital. But when we think about the efficiencies the team's been able to capture, I think over the last couple of years, the result has generated the possibility of pulling a whole pad of completions out of the beginning of one year into the very end of the one year executing. So that meaning there's always that opportunity through those efficiencies to further see the queue of wells continue to come your direction. And when you're running a lean single base, single frac crew type operation, you want to capture those kind of opportunities, as you said, to kind of think about how you would then shape your production profile. I think that's part of the reason why you've seen a shallowing also of our production as it's flattened over the course of time when we talked about it being maintenance versus maybe a little bit more of a sine wave type character, maybe three, four years ago. The budget is the budget. So we think we can execute this program this year and in future years for $650 million to $700 million with that single frac crew. As we start to then think about improvements in efficiencies or utilization of that incremental turn in line footage or DUC footage that we're generating through the drilling rig side, you really start to see an allocation of the capital head the other direction more focused to the completion side. Again building upon those efficiencies, we'll factor that in to our capital guide going forward. But again, we believe we can do this for that $650 million to $700 million. So simply put, we've got good options. The team continues to execute. It really feels like it sets us up for how we think about that ratable production growth in 2026 and 2027.

Appreciate the explanation. I'll turn it back.

Thanks, Roger.

Thank you. One moment for our next question. Our next question comes from the line of Kevin MacCurdy with Pickering Energy Partners. Your line is open. Please go ahead.

Hey, good morning. My question is on M&A. There was a little bit of M&A recently in Central PA not too far from your footprint. I'm just curious if any of the dynamics we've seen in the gas market with higher prices and the data center potential. Has any of that changed your view on M&A and consolidation in Appalachian or even outside the basin? And just one question for me, thanks.

Sure. I'll kick this one off and have Dennis, I'll both address it. I think the shortest answer to your question is our view on M&A really hasn't changed the fundamental dynamics; the framework that we are applying is really rooted in the quality and duration of our inventory. So as we said in the past, given the very high quality long life of our inventory to fold something in that's of equal quality that can compete for capital day one, the additive make Range bigger but better is there's a very short list of opportunities, certainly at a price that would make sense to fold in and change the company for the better. Simplistically, growth for growth's sake. We don't see that as a primary driving factor. Range has the scale to obtain services at the most competitive levels both in terms of price and quality, as well as access to pipelines, infrastructure as well as our long-term customer contracts and our customer roster both domestically and internationally. So the hurdle for M&A is a pretty high bar for Range. Now in the absolute at the highest level for the industry, we think this has certainly been beneficial for the economic capital allocations and investment decisions overall for the industry. So we're happy to see that. We certainly study the dynamics in basin, which brings me to the second part of your question about looking outside of basin. Range's expertise is in the Appalachian Basin, is in the Marcellus in and around our footprint and that's where we maintain our focus technically is in and around the basin. Obviously from a business perspective we look across the U.S. and internationally since 90% of our revenue is outside the basin. But from an operational standpoint our focus is in basin.

Great. Thank you, guys.

Thank you.

Thank you. And one moment, for our next question. Our next question is going to come from the line of Kalei Akamine with Bank of America. Your line is open. Please go ahead.

This question is on the near-term gas macro. So we're noticing that hub pricing has definitely declined over the last several weeks. That's correlated with a lot of assets in this market. And some guys are trying to figure out how much is financial versus maybe a true fundamental move. And I'll also note that East and West or East and Midwest markets have also come down. So I guess the question is, can you kind of characterize the move that you're seeing in hub and how you see basis performing over the next several months?

Yes. I'll begin this morning by saying that when we examine the financial aspects alongside the fundamentals, it appears that the fundamentals remain solid based on our observations. If we reflect on activity levels since January, there was an expectation that pricing in 2026 and 2027 would lead to increased activity in other basins, which has not materialized. For instance, the LNG off-take in Plaquemines has accelerated more quickly than our initial projections anticipated. Additionally, power demand storage levels have normalized over the winter months, and we are currently at or slightly below the five-year average. This situation creates potential tightness in storage as supply has not sufficiently addressed this gap. Moreover, there might be pressure on Permian producers that could alter the forecasts and outlook regarding activity levels. Overall, we believe the fundamentals still indicate potential tightness in storage as we approach the fall, setting up a favorable environment for 2026 and 2027. This aligns with our emerging demand outlook and the framework we've developed for the next three years. However, if demand dynamics shift, it could present challenges similar to those Range has faced over the past four years. With our lower reinvestment rate and ability to export our NGLs, we see this as a beneficial combination that keeps us aligned with the financial targets Mark has discussed quarterly. In conclusion, we believe the fundamentals still support our views, and we need a bit of patience to gain more clarity on the situation.

That's great. That's very helpful, Dennis. This next one is maybe more housekeeping. There's a bond that's maturing in May $600 million. While markets have been quite volatile recently, what are your latest thoughts on addressing that maturity?

I think it's going to be pretty simple. We'll just use cash on hand and a small draw on the revolver can take care of that, and we can evaluate any refinancing needs later in the year. The trend on our debt's been a good one. You can expect us to continue to balance our allocation of cash flow between returns of capital shareholders and continuing to optimize the balance sheet just on an opportunistic basis. But cash and revolver draw will take care of it.

Thanks, Mark. Appreciate it.

Thank you.

Thank you. One moment for our next question. Our next question is going to come from the line of Michael Scialla with Stephens. Your line is open. Please go ahead.

Good morning, guys. I wanted to ask a little bit more on the in-basin demand and data centers. Dennis, you mentioned with Homer City that getting repurposed, that there'd be some infrastructure needed to I guess get gas there, got me thinking, could you discuss what kind of infrastructure might be needed for any of these data centers if they do get built? And do you see that as a risk?

Yes. Good morning, Mike. I'll start here and if we need to go further, I may pass over to Alan for some additional insights. It appears that projects like Homer City, as well as discussions around the Liberty and Imperial Land development, are being constructed near brownfield locations or close to existing infrastructure that can be utilized. From a scoping perspective, we are looking at regional gathering jumper lines that will connect to a diverse pipeline network, ensuring a reliable gas supply for power generation at these facilities. The locations are also advantageous. For instance, the Imperial facility is positioned right on top of our producing assets, allowing a significant portion of production to flow through the gathering system. This setup would only require a short jumper line, a matter of single-digit miles, rather than long-distance transport. Proximity will play a crucial role in this discussion, making infrastructure needs less demanding for getting gas to these facilities and focusing more on general construction at the sites themselves.

So not something that you view as significant regulatory risk getting approval for some of these kind of things to get built?

Well, good question. And I guess I would take a step back and maybe address regulatory risk from a different angle. I think there's a real willingness from the state to support these kind of projects. Clearly, there's been language around the importance of growing the economy from the state level, the importance of adding incremental jobs. We think those are all positive signs. And again, if you look back to the summer of 2024 when the last state budget was approved, as a portion of that budget, there was $400 million earmarked for what's called the Site Act to support site identification, readiness and preparation to, in our mind, truncate at the time frame when an industrial application is going to move into the region to help get it erected and in service. So we think those are all positive signs that there will be regulatory support in order to put these facilities into service. So yes, we're really optimistic that this is going to be a positive movement in the basin.

Thanks, guys. Appreciate the detail.

You bet. Thanks, Mike.

Thank you. One moment for our next question. Our next question comes from the line of John Annis with Texas Capital. Your line is open. Please go ahead.

Good morning, everyone, and thank you for taking my questions. A couple of calls ago, you mentioned that it was still early to observe trends from the compression and gathering expansions that were implemented last year. Can you share any updated insights on the benefits you are experiencing from optimizing your gathering and compression infrastructure?

Yes, good morning, John. I'll keep this at a high level because there are a few ways to discuss compression and infrastructure optimization. One aspect is when you examine assets that you're genuinely optimizing for gathering system pressure. Last year, this likely resulted in about a 20% uplift in comparison to the overall production for the year. Depending on timing, this might have been slightly less, but we considered it a very strong and stable production profile in that segment of our asset base. The majority of what we've discussed is related to system expansion and added capacity and flexibility, which enables us to leverage various parts of our field. This is what you can expect in terms of infrastructure enhancements moving forward. Our long lateral development allows us to use this infrastructure efficiently, exceeding 90% not only today but also for the next several years. The projects we will discuss in the future will primarily focus on system expansions as part of that optimization, likely placing less emphasis on merely reducing system line pressures.

Great color. For my follow-up, you mentioned you just recontracted your e-fleet, but I wanted to ask how you view a potential slowdown in oil-directed activity potentially occurring to the benefit of you and others in Appalachia just in terms of service costs.

I believe we contracted this e-fleet to begin at the start of last year. While it's challenging to definitively say we've reached the bottom of the market, it certainly felt like we were approaching a low point. Securing this equipment will be beneficial for the next few years and helps us maintain a consistent cost structure moving forward. It's efficient, and we've achieved some of our best efficiencies and safe performance from this fleet. We feel it meets many of our requirements. When considering the e-fleet, there's been extremely high utilization, approaching 100%. Therefore, fleet availability will likely come from our traditional conventional fleets, which we have used occasionally when we seek the most available and cost-effective options for our programs. We won’t dismiss the possibility of that impacting future service costs. On the drilling rig side, we often refer to super-spec rigs, which have some flexibility based on regions like the Permian or Haynesville. The truth is that we've all converged to similar rig configurations, leading to comparable pricing structures. This alignment between service providers and operators in various basins has contributed to our low cost structure in recent years. We will remain attentive to changes in our purchasing and supply chain processes, and if opportunities arise for additional cost savings, we will certainly pursue those discussions.

Thanks, guys.

Thank you, John.

Thank you. One moment for our next question. Our next question is going to come from the line of Paul Diamond with Citi. Your line is open. Please go ahead.

Thank you. Good morning, guys. Thanks for taking the call. Just a quick one, just digging down a bit more on Liberty Alliance. Do you guys see any further concrete opportunities being discussed out there? I guess kind of just trying to get an idea of the scope of the entire opportunity set beyond this that having been announced?

Yes. Good morning, Paul. Short answer is yes. Leading up to the Liberty and Imperial Land development announcement and now even I'll just say, post that announcement, there's been a number of ongoing conversations and we're really inbound phone calls to Range around how we could participate in other projects just like this. And of course, you've heard us say this, but we think it really ties back to not only the quality of our asset base, but really the duration of our inventory that could support a facility like this. We realized that these are multi-decade financial decisions that these other entities are making. And so it makes a lot of sense to be able to connect with a company like Range being on the low emissions into the emissions profile as well. So we have had a number of conversations. I think it's still kind of in the early category of what else will further materialize. But we think there's an opportunity for, as you see other coal retirements for the brownfield site utilization in the future, looking for areas of concentration where you've got access to things like water ingress and egress, diversity in the pipeline network. We think all of that lends itself to looking at Southwest PA and Appalachia. So more conversations are being had. We'll see what further materializes. But again, as we think about the long-term outlook, 80% of our gas gets out of basin. And as you've heard Mark touch on 90% of our revenue comes from outside the basin as well. So we feel like we're set up in a very well diverse takeaway environment, both from product and transport and a further in-basin demand materializes, which we think is very likely, we're poised and ready to participate if needed.

Makes perfect sense. Appreciate the clarity. Just one quick follow-up. You talked about obviously, a moving target, but with inflationary pressures potentially post contract potentially rolling back in 2026. I guess, is that purely on like steel and piping or tubing or where would you see the kind of the first entry there if it were to come back and say Q1, Q2 next year?

If we take tubular goods as an example, we have consistently collaborated closely with our service providers in the mills to ensure we secure tubular goods for our program in advance, especially during favorable market conditions. Looking ahead, I anticipate a similar approach. Currently, we have approximately 80% of our tubular goods secured for the program this year, which gives us solid coverage. Annually, we conduct a service request for proposal process every fall, aligning it with our activity levels, including the number of rigs and frac crews available. This annual fall process will also consider rigs for 2026. When opportunities arise that allow us to secure effective and efficient services and materials for 2026 and beyond, we will pursue them. However, we expect this fall process to provide significant insight into potential changes in service costs for materials.

Understood. Appreciate the time. I'll get back.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Neil Mehta with Goldman Sachs. Your line is open. Please go ahead.

Yes. Good morning, team. First question is just really around the hedging strategy and how do you think about the way you're going to approach 2026? And do you want to be opportunistic? Or do you want to take a more ratable strategy? And we've seen a lot of volatility around the 2026 price points, your thoughts around hedge and gas there.

Sure. This is Mark. Good morning, Neil. I think philosophically, I'll reiterate what our strategy has been and what we're able and desiring to do. And the strategy, given how strong the balance sheet is today is really to cover fixed costs and preserve that optionality of being able to step in, in terms of capital or otherwise to be opportunistic and just and protect balance protect margins. So to do that, what you've seen us be able to do is to scale back on some of the hedging. What you've seen us do for the balance of this year; we're around 35% hedged; the 2026 programs, about 15% hedged. There's some swaptions if they're all executed, you're at about 25%, but you've got better than a $4 floor on that. So what we are striving to do is get an attractive price on a low percentage of the production to preserve what we see is still a tight market in the second half of this year and into 2026. We're just not seeing the activity levels that would meet the demand that's under construction and being commissioned right now. So on a go-forward basis; I would expect that Range, you can expect similar behavior. We'll try to structure hedges to provide just enough insurance to protect from the downside, preserve optionality, preserve the balance sheet while retaining as much of the upside from the commodity prices as we possibly can.

That's really helpful and consistent. The balance sheet is in good shape, team. So just your perspective on return of capital. We've seen a lot of volatility around the stock in the last month, for example, does it make sense to be opportunistic and think about shrinking the share count here at some point? Or do you still want to maintain that fortress balance sheet to withstand the volatility?

Yes, I believe we can achieve both objectives. In the first quarter, we bought back 1.8 million shares, bringing our total to 28.6 million shares repurchased. Our first quarter buyback exceeded the total for all of last year. This reflects our successful execution of the strategic program we've outlined over the past couple of years. With a stronger balance sheet, we have increased flexibility to respond to market dislocations, particularly given the current volatility in the macro financial markets where there is a tendency to sell off. Range is actively repurchasing shares and investing in production and locations, which enhances our reserves and total resource potential per share. We see this as a highly valuable investment based on our share price. Therefore, you can expect us to continue managing cash flow, with an inclination towards returning capital while meeting our balance sheet goals.

Okay. That's really helpful. Thanks, guys.

Thank you.

Thank you. We are nearing the end of today's conference, and we are going to take one more question. Our last question is going to come from the line of David Deckelbaum with TD Cowen. Your line is open. Please go ahead.

Good morning, gents. Thanks for the time today. I just wanted to revisit some of the strategy, as you all think about the build-out of in-basin demand. You highlighted earlier, right, 20% of your gas is in basin, 80% leaves. So when we think about you looking at projects where you might be signing off-take, how do you think about balancing the exposure that you would have to in-basin demand or in basin pricing with those current 20% volumes versus being incentivized to redirect volumes that are leaving the basin to stay in as it relates to potential contracts with projects that might be consuming significant amounts of natural gas?

Yes, good morning, David. As we reflect on two decades ago, we mentioned the discovery well in the Marcellus. In those early years, Range began to engage in transport, initially in smaller modular packages in brownfield projects that connected to the Gulf and other areas in the Lower 48. Over time, these transport packages can expire. We hold favorable rights to renew these transport arrangements if we choose to keep them for the long term, which provides us with good flexibility. When considering the time it takes to identify a site for a data center or manufacturing facility, we currently have enough gas to supply energy for such projects, and we can consider whether we should pursue additional growth opportunities in the future. We need to decide whether to maintain our transport options or let them expire and reallocate more gas into a dedicated long-term pricing framework that might alter our approach to hedging, as Mark discussed earlier. There are many opportunities available, and instead of allowing pipelines to be underutilized, we believe we can manage this strategically. There are multiple ways for our operations to succeed.

I appreciate that. And perhaps just as a follow-up, you all highlight a number of upside cases, I think, on Slide 20 for in-basin demand related to gas power, coal plant retirements, et cetera. As you think about these through 2030, what is your view on the likelihood of the timing of these projects? And if it's sort of the 2028 to 2030 time frame, when do you think that we would see at least from Range, the largest cluster of announcements around this potential agreements to address some of that demand? Or is this still a very iterative process that's likely going to be a multi-year approach?

I think there’s a good balance here. We have clear visibility on several items, particularly regarding coal retirements, which we understand well. We expect to see around 1 to 1.8 billion in retirements by 2030, with a significant portion occurring in the next 12 to 24 months. When considering AI, data centers, Homer City, and the Liberty project, these are aiming for a 2027 timeline. Other projects, especially those in advantageous locations, may follow a similar schedule, potentially extending further out. By the end of this period, we believe our outlook may be conservative, but it remains realistic, similar to past communications. Additionally, in terms of transportation, we anticipate further expansion of MVP and some brownfield opportunities through interconnect and compression expansions, potentially adding between half a billion to a billion. We have strong confidence in these numbers and believe that significant developments could occur within the next 2 to 5 years. So, we feel optimistic about the clarity of this situation.

Appreciate the time, guys.

Thank you.

Thank you. This concludes today's question-and-answer session, and I'd like to turn the call back over to Mr. Degner for his closing remarks.

I'd just like to thank everyone for joining us on the call this morning. We look forward to talking about our Q2 results this summer in July. If you've got any follow-up questions, please follow-up with our Investor Relations team. We look forward to connecting with a lot of you on the road here in the months ahead. Thank you.

Thank you for participating in today's conference. You may now disconnect. Everyone, have a great day.