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Text: You will also find our 10-Q on Range's website under the Investors tab, or you can access it using the SEC's EDGAR system.
For additional information, we've posted supplemental tables on our website to assist in the calculation of EBITDAX, cash margins, and other non-GAAP measures.
The first quarter of 2021 saw Range made continued progress toward our key strategic objectives, improving margins through cost controls and thoughtful marketing, generating free cash flow, enhancing liquidity and extending our maturity profile, operating safely and efficiently, and ultimately positioning the company to return capital to shareholders as the most efficient natural gas and NGL producer in Appalachia.
I'll touch briefly on each of these before turning it over to Dennis and Mark to cover in more detail.
I'll start with unit costs and margin improvements.
Range's unit costs for the quarter were right on track and ahead of our expectations with G&A, LOE, exploration expense, and production taxes, coming in at the low end of our guidance and expectations.
Additionally, we reported a significant gain in our marketing activities for the quarter.
As expected, GP&T increased versus the prior quarter but was more than offset by the significant improvements we saw in NGL and natural gas realizations, resulting in the vast improvements to Range's margins.
In fact Range's unhedged realized price for the quarter was approximately $3.20 per mcfe, which was $0.51 above the NYMEX Henry Hub equivalent price of $2.69.
This premium to Henry Hub is a result of our diversified marketing portfolio and liquids production.
This liquids uplift improve margins and reduces Range's breakeven costs when compared to producing only dry gas.
In fact Range's pre-hedge margin improved by over $1 per mcfe in the first quarter when compared to the 2020 average.
Given the improved fundamental backdrop for natural gas liquids with approximately 65% of our activity in the liquids-rich window this year, Range is very well positioned to continue to benefit from this dynamic.
During the quarter, Range was also able to benefit from improved daily prices in the natural gas market, realizing a natural gas differentials that was $0.08 better than the midpoint of guidance only partially offset by higher transportation fuel costs, again benefiting margins and cash flow.
On the back with this improved pricing, Range generated $193 million in cash flow from operations before changes in working capital, and with capital spending, coming in at just $105 million for the quarter, Range generated solid free cash flow.
As shown on slide 14, we expect this to continue with significant growth in EBITDAX this year versus last.
When combined with absolute debt reduction, this organic free cash flow generation puts us well on our way toward our longer-term balance sheet targets.
Touching on the all-in capital investment of $105 million on the quarter, it's clear that the team's operational execution was superb.
And we continue to find ways to lower costs, once again leveraging our large contiguous acreage position to find ways to complete the operational plan with peer-leading capital efficiency.
After delivering on operational plans below budget for the last three years, Range remains on track to do the same for the fourth consecutive year in 2021.
The operational team safely delivered this capital-efficient plant with an eye toward our long-term environmental goals.
Range closed out 2020 with class-leading emissions intensity, reducing greenhouse gas emissions intensity and putting us right on track toward our 2025 goal of net-zero.
As we strive for this goal, it all starts with efficient operations that minimize our operating footprint and importantly, generates competitive returns.
We believe Range's peer-leading capital efficiency and maintenance capital are key differentiators among peers.
As we've discussed in the past, Range's large blocky acreage position affords us operational and financial efficiencies on multiple fronts including water recycling, infrastructure, rig mobilization, and equally optimization, just to name a few.
Dennis will cover a good example of how this combination of these benefits, benefit range from both an ongoing development and corporate return standpoint in addition to strengthening our environmental efforts.
When combining our low well costs, strong recoveries, and shallow base decline of under 20%, Range is operating at a high level of capital efficiency that provides a solid foundation for generating sustainable free cash flow, what further differentiate Range is our ability to deliver this level of efficiency for an extended period of time giving our multi-decade core inventory.
For some added context on our inventory, Range is turning to sales approximately 60 wells this year, but we have approximately 2,000 Marcellus locations with EURs that are greater than 2 Bcfe per 1,000 foot of lateral.
The average recovery of these wells is very similar to the wells Range has turned to sales for the last several years providing Range an unmatched runway of high-quality wells that's measured in decades.
This is not the case for many of our peers, which we believe positions Range as well as any upstream company to benefit from improving commodity price environment over the medium and long-term.
Before turning it over to Dennis and Mark, I'll just reiterate that Range remains committed to sustainable free cash flow.
Over time, we believe Range will stand out among peers as a result of our low sustaining capital, competitive cost structure, marketing strategies, and importantly our multi-decade core inventory life, which will be an increasing competitive advantage in the years to come as other operators exhaust their core inventories.
We will continue to focus on safe, efficient, and environmentally sound operations, prudent capital allocation, and generating sustainable returns to shareholders.
Importantly, these are all reflected in our updated compensation metrics that can be found in our most recent proxy statement.
Over to you, Dennis.
When we communicated the operational details for our 2021 program, our framework was built around improving both operational and capital efficiencies, enhancing margins, all while striving to further improve our environmental and safety performance.
As we look at our first quarter results, our operating teams are off to a strong start delivering on our objectives for the year, beginning with Q1 production above our communicated guidance and capital spending in line with our 2021 plan.
First quarter capital spending came in at $105 million or approximately 25% of our 2021 program budget.
As we discussed on the prior call, our capital spending program is front-end loaded for the year and is a consistent approach with previous years.
As we look forward, our second quarter capital spending is expected to be approximately one-third of the annual budget for the year, mainly driven by activity timing for completions and turn in lines shifting to Q2.
The reduced capital investments in the second half of 2021 are aligned with our activity cadence reducing to one drilling rig and one frac crew during the third and fourth quarters.
Our first quarter production level of 2.08 Bcf equivalent per day was a direct result of recent strong well results combined with exceptional field run time for the quarter due in large part to the near flawless winter operations planning and execution by our production operations team.
Underpinning our first quarter production including turning to sales, 16 wells spread across are dry, wet, and super-rich acreage.
Our Q1 turn-in lines consisted of an average horizontal length in excess of 11,500 feet and added just under 200,000 producing lateral feet to Range's Appalachia assets.
During the fourth quarter of last year, through the first quarter of 2021, our activity shifted toward wells located across our processable gas footprint.
The results of these turn-in lines increased Range's average oil production to a level exceeding 8,000 barrels per day in Q1 and, has increased overall liquids production in similar levels seen during the first half of 2020.
This level of wet production contribution is expected to continue through the end of this year with second quarter production projected at approximately 2.1 Bcfe per day.
This will position us to achieve our 2021 maintenance target of 2.15 Bcfe per day through additional margin enhancing liquids production while spending $425 million or less.
Shifting to our operational highlights.
During the first quarter, 15 wells were drilled across our dry, wet, and super-rich footprint.
Four of these wells are in the top 20 lateral links for Range's Marcellus program history with all four exceeding 17,800 feet.
Drilling efficiencies continued with nearly three-quarters of the new wells drilled on pads with existing production, coupled with a 5% increase in daily lateral footage drilled compared to 2020.
On the completion side, 16 wells were completed during the quarter.
Overall, the team completed just under 1,200 frac stages while setting a first quarter winter operations efficiency record by averaging over eight frac stages per day.
This efficiency level exceeds Range's previous best first quarter in winter operations record by 14%.
The water operations team built upon prior water recycling successes by utilizing nearly 2 million barrels of third-party produced water, a first quarter record and as a result, reduced overall completion costs for the quarter by more than $4.5 million.
Despite cold weather conditions and heavy snowfalls, the team produced some of our best operational results in our program to date.
All while keeping safety and environmental performance at the forefront.
Lease operating expense for the first quarter was consistent with our prior year's Appalachia level and remained low at $0.09 per Mcfe.
Achieving this LOE level is in large part due to a well-coordinated proactive winter operations plan with the objective of minimizing weather-related production impacts and associated costs.
These efforts generated a field runtime that exceeded 99% with a weather-related production impact of less than 0.5 million cubic feet per day for the quarter, a remarkable achievement.
Looking at the operational successes and milestones achieved during the first quarter, involves a focused, continuous improvement approach, and it's anchored by four key areas.
Range's water recycling program, long lateral development, utilization of existing infrastructure, and lastly optimize the use of drilling and completions equipment.
Each of these are key drivers in delivering on our operational and capital efficiency and our integrated part of achieving our ESG or more specifically our environmental objectives.
We often touch on the benefits each of these bring to our program ranging from a reduction in operating costs, efficiency gains, minimizing our environmental footprint, and reductions in emissions.
Today, I'd like to take a moment and walk through how these four strategies are being implemented by our operations and support teams along with the positive impacts.
I'll use three of the wells that were turned to sales in the first quarter as an example.
These three wells were drilled on an existing surface location with producing wells that were originally developed and turn to sales in 2013.
The average lateral length of the original wells was just over 3,000 feet per well.
In stark contrast, the average lateral length of the new wells is nearly 16,000 feet per well, more than 5 times longer.
No additional earth disturbance was needed for 5 times the acreage development and no additional production, gathering, and processing infrastructure was required to add these new wells.
To put this into perspective, Range has close to 250 developed pads in Southwest PA and as of today, we've returned 84 of these locations to drill additional wells.
Additional wells are planned for these same pad sites along with the approximate other two-thirds of Range's pads that we've yet to return to for added activity.
Simply put, we're only scratching the surface of this opportunity.
The three new wells were completed late last year, utilizing our contracted electric fracturing fleet which displaced 470,000 gallons of diesel fuel.
This reduced our cost by approximately $300,000 per well along with large reductions and associated emissions.
40% of the water used to complete these new wells was recycled water from Range's producing wells along with third-party water, sourced from our water sharing process.
The balance of the water was pumped from our water pipeline network, which was installed nearly a decade ago, further reducing emissions associated with truck traffic by more than 13, 400 truck trips.
The average initial production of these wells exceeded 44 million cubic feet equivalent per day including more than 9,700 barrels per day of combined condensate and natural gas liquids per well, placing them in the top tier of wells in our Marcellus program history.
This is just one of many examples we could share from our development during the past several years with results such as this.
These efforts have underpinned our operational efficiency gains and give us confidence in the durability around keeping our drilling complete cost below $600 per foot, all while achieving our environmental goals and producing best-in-class wells.
These benefits highlight the importance and value of having a high- quality contiguous acreage position and forward-thinking technical team.
Before moving on to marketing, I'd like to touch on Range's environmental and safety performance.
To further reduce production facility emissions, in 2020, Range transitioned to a quarterly leak detection program doubling the number of inspections conducted.
As a result of this increased inspection frequency, an additional 7,400 metric tons of CO2 equivalent emissions was removed from our program, resulting in a 67% reduction for those related components.
This effort along with the continued advancements in our production facility design and utilization of an electric frac fleet has resulted in further reductions in Range's reported emissions, reaching a new low CO2 equivalent level.
This level of performance is competitive with any natural gas play in North America and puts Range in an enviable position globally.
Consistent with our environmental results, Range's safety performance saw similar improvements delivering an over 30% improvement in recordable incidents for the quarter, which was the best Q1 performance versus the prior five years.
Switching to marketing, Range's NGL and condensate business benefited from a strong first quarter.
Market prices improved across the board and our advantaged portfolio of contracts enabled Range to capture premium pricing and a pre-hedge NGL realization in Q1, that was the highest level since late 2018.
The primary driver for improved pricing across both NGLs and condensate was strong demand in a market that saw decreased supply.
Preliminary results for US propane and butane or LPG reveal that Q1 2021 domestic demand was 13% higher year-on-year while supply decreased by 4%.
Similarly, condensate supply in the Northeast is estimated to have decreased by 15% to 20% year-on-year.
As a result of these improved fundamentals, the market average NGL barrel price improved significantly during the quarter.
At $24.83 per barrel, Range's Mont Belvieu equivalent barrel was at 38% over the prior quarter and 83% compared to the first quarter of 2020.
Propane prices led the way, increasing nearly 60% versus the prior quarter and 140% versus Q1 of 2020.
Additionally Range's premium to a Mont Belvieu equivalent barrel increased by approximately $1.50 per barrel versus the prior quarter as Range realizes this highest premium to Mont Belvieu in the company's history.
Looking forward, we see propane and butane market prices continuing to post strong year-on-year gains as storage balances of these NGLs are much tighter relative to last year.
This past winter, propane posted its largest seasonal withdrawal and well over a decade, leaving the end of March propane stocks at a 33% deficit to last year and a 17% deficit to the five-year average.
Given the strong international demand that we are seeing with new chemical capacity coming online and recovering global economies, we believe it will be challenging for propane to replenish US stocks to a comfortable level by fall.
As a result, we expect propane prices to transact at levels at or above 60% of WTI crude this fall and the upcoming winter.
On the commercial side, beginning April 1st, Range entered into a set of new and diverse LPG export-related contracts.
These contracts will add flexibility, reduce cost and further enhance realized propane and butane prices continuing Range's momentum of achieving strong price premiums, relative to the market.
Finally, we continue to optimize Range's condensate sales portfolio by adding flexibility, improving margins, and assuring product placement.
As this year progresses and optimization continues via a diverse set of counterparties, we expect that our condensate differentials to WTI will continue to improve, further benefiting our liquids area development plan discussed earlier in the call.
On the natural gas side, cold weather during mid-Q1 equated to the third coldest February, when looking at the past 10 years.
And despite milder conditions in both January and March, Q1 gas weighted heating degree days finished slightly above the five-year average.
Through utilization of our diverse transportation portfolio, Q1 resulted in a differential of $0.14 under NYMEX, including basis hedging.
Looking ahead, we see potential for additional positive improvements for natural gas pricing, given that a high percentage of operators are targeting maintenance production levels this year, coupled with year-over-year improvements in storage, the fundamentals point toward an undersupplied natural gas market.
Within this constructive outlook for natural gas, Range is on track with its differential guidance of $0.30 to $0.40 for the year.
As we close out our operations and marketing updates, the first quarter results clearly reflect our operations are off to a strong start for the year with the team further building on our operational and capital efficiency performance, all while delivering on our environmental and safety objectives.
Consistent delivery on stated objectives, that is Range's fundamental strategy.
And as you've heard from Jeff and Dennis something the team successfully executed during the first quarter; efficient operations delivering production, efficient drilling and completions activity with capital spending trending in line to better than budget, combined with margin enhancing expense management, all resulted in significant free cash flow.
Our ultimate goal is to repeat this quarter in and quarter out.
Results for the first quarter reflect the benefits of reliable operations, productive wells, and diversity in sales points for natural gas, natural gas liquids, and condensate.
Cash flow from operations before working capital was $193 million compared to $105 million in capital spending.
Significant improvements in free cash flow compared to past periods were driven by a 50% improvement in pre-hedge realized prices per unit of production versus the prior-year period, which reached $3.20 per mcfe in the first quarter.
This realized price per unit is $0.51 above NYMEX Henry Hub, driven by improved natural gas basis and importantly further enhanced by a 77% increase in NGL price per barrel, which reached $26.35 pre-hedge.
Realized NGL price on Mmcfe [Phonetic] basis equates to $4.39 per mcfe and condensate realizations equate to $8.17 per mcfe.
Hence the realized premium to Henry Hub.
Additionally, Range's NGL prices exceeded a Mont Belvieu NGL barrel by $1.52 due to our unique portfolio of domestic and international sales contracts.
Margin enhancing focus on unit cost is a constant state of mind for Range.
Lease operating expenses declined over 40% year-over-year to $0.09 per unit on the back of consistent, efficient, Marcellus operations, despite the winter weather and the divestiture of higher-cost assets.
Cash G&A expenses declined to $28 million or $0.15 per unit in the first quarter.
The decline results primarily from lower compensation costs of a leaner organization, coupled with targeted value-focused spending on IT, data services, safety, environmental, and other essential areas.
Cash interest expense was roughly $55 million.
Higher interest expense is the result of our most recent refinancing activity, which dramatically and positively reshaped the debt maturity profile of the company and enhanced liquidity.
Gathering, processing, and transportation expense increased, but it is important to keep in mind that this is a positive byproduct of strong NGL prices that resulted in significantly higher NGL margins.
Recall that Range's processing costs are the percent of proceeds contracts such that we pay a percentage of NGL revenues as the fee.
Consequently, a fraction of the material higher prices received for NGLs is paid as higher processing cost in that quarter.
For perspective, an increase of $1 per NGL barrel equates to approximately $0.01 per mcfe and cost.
This structure is unique to range in the Appalachian Basin and is a right way risk arrangement that has led to reduce costs for several quarters of lower prices and now continues to drive material margin expansion.
As a result of rising NGL prices in recent months, GP&T expense in 2021 is trending toward the high end of guidance.
However, this is more than offset by expected higher NGL revenue, forecasted at current strip pricing relative to earlier this year.
Turning to the balance sheet, Range has diligently and successfully managed the debt profile, such that liability management projects reduced bond maturities through 2024 by almost $1.2 billion while at the same time improving liquidity to nearly $2 billion.
During the first quarter, we issued new bonds due 2029 in the amount of $600 million, which combined with the reaffirmation of our facilities, $3 billion borrowing base and $2.4 billion in commitments provide substantial liquidity and a strong evidence of what we believe is durable asset value.
Cash flows are expected to retire debt maturities in coming years and are backstopped by ample liquidity.
During the first quarter, we called in $63 million in near-term maturities of senior and senior subordinated notes closing on the redemption in early April.
There has been substantial improvement in the debt markets, and it's evident in the trading levels of Range's bonds that both access to and cost of capital has improved.
Future debt retirement is expected to be funded primarily by organic free cash flow.
We will be cost-conscious in effectively managing debt retirement, while also being mindful of any potential refinancing risk of debt maturities.
Being opportunistic in bond redemptions, this prices in early redemption options become economic on a risk-adjusted basis.
Liability management over the last two years has as expected temporarily increased interest expense, however, this avoided much higher cost forms of capital that would have diluted shareholder ownership and participation, and what we see is a steadily improving natural gas and natural gas liquids business.
While we're proud of the steps taken to date, further improving our balance sheet remains a principal objective.
As can be seen in the recently filed proxy, leverage metrics have been incorporated into long-term compensation criteria with the target of 1.5 times debt to EBITDA were better.
Shareholder value creation through the generation of free cash flow and its prudent redeployment is our focus.
To be clear, we believe this is an achievable goal.
At current commodity prices by the end of 2022, Range's leverage is approaching target levels.
On the topic of hedging, we have a glide path or common range in which we add positions over the course of the year.
Within that path, we intentionally moved at a deliberate pace during 2020, as we added 2021 hedge positions.
We plan to follow similar principles this year in adding hedges for 2022 and beyond.
By that I mean, we'll seek to balance the twin goals of prudently derisking cash flows while not hedging away the improved supply demand balance into backward dated price curves.
Our strategic actions over the last three years have been focused on reducing risk while maintaining and enhancing the intrinsic value of the asset base.
We believe Range holds the largest portfolio of quality inventory in Appalachia.
Exposure to that inventory on a per-share basis has been preserved and enhanced by our actions.
We believe steps taken represent material progress in positioning Range as a more resilient business and as evidenced by first quarter results primed to participate in improved market dynamics.
Jeff, back to you.
Operator, we'll be happy to answer questions.

user
compname reports q1 adjusted non-gaap earnings per share of $0.30.
production for full-year 2021 is expected to average about 2.15 bcfe per day, with about 30% attributed to liquids production.
q1 adjusted non-gaap earnings per share $0.30.
range's 2021 all-in capital budget is $425 million.

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