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Range Resources' CEO Discusses Q4 2011 Results - Earnings Call Transcript

In 2012, our organic growth target is expected to be 30% to 35% versus the past 9 years of less than 12%. Since 95% of our capital is planned to be directed into the Marcellus Shale and horizontal Mississippian plays, the growth should also come with higher returns and lower costs than before.

Given our large acreage position in these plays, we'll have the opportunity to do this for years to come. Even at current strip pricing, all of our projects generate good to excellent rates of return. The rate of return in the liquids-rich portion of the Marcellus and horizontal Mississippian plays range from 73% to 99%. The rate of return in the dry gas drilling in the Marcellus Shale ranges from 27% to 32%. Even in our dry gas fields in Virginia, the rate of return of the wells that we had originally considered ranges from 20% to 27%. However, given that this acreage is either all held by production or we own the minerals, we're limiting the capital allocation for Virginia development to $30 million in favor of higher rate of return projects.

For 2012, we're projecting 30% to 35% growth based on a $1.6 billion capital program, which is roughly flat spending from 2011. Approximately 75% of this capital will be directed into liquids-rich areas, primarily in the super-rich and wet Marcellus, and horizontal Mississippian oil play. For 2013, assuming that gas prices continue to stay relatively low and oil prices remain high, we can contain capital spending to a level which does not increase our leverage above year-end 2012 levels.

Given the current strip pricing, we believe the company can grow between 15% to 20% in 2013 using just our internally generated cash flow, if we choose to do so. In this scenario, 85% to 90% of our capital would be directed into our super-rich wet oil plays. We can do this and still retain substantially all the key acreage that we want in the Marcellus and other plays. What puts us in a different category than most companies is that we're positioned to grow at 15% to 20% within cash flow for years to come and retain the ability to significantly ramp up when it's prudent to do so, based on either recovery of natural gas prices or significantly enhanced drilling results. Also, all of our investments are in the best or some of the best plays in the U.S.

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