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Range Resources' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Stocks in this article: RRC

I want to highlight the great job that Roger and his team did on the recent $600 million bond offering, which resulted in the lowest interest rate ever by BB-rated company in any industry. We issued the notes at a fixed rate of 5% for 10.5 years.

Most importantly, in today's environment of low natural gas pricing and high oil price, all of Range's key projects generate attractive rates of return. 75% of our 2012 capital is going into liquids-rich projects, almost all of which is wet or super-rich Marcellus or the horizontal Mississippian oil play. The rates of return on these projects range from about 70% to 100% at strip pricing. Almost all of the remaining drilling capital is going into the Northeast Marcellus, with a rate of return is in the mid-20% to low 30%. We'll be decreasing our rig count in the Northeast to roughly 1 rig by the end of this year and refocus more of our capital into the higher-return areas.

Historically, it was important to be in the core part of a particular play. Given the disparity in oil and natural gas prices, it's now not only important to be in the core part, but you've got to be in the wet core. Also, not all the plays are created equal. Some plays don't have wet cores or wet areas at all. Other plays do, but are higher cost and lower return. Fortunately, Range has a huge acreage position in the wet part of the core at one of the best rate of return place in the U.S., which is the southwest part of the Marcellus.

We also have a large position in what we believe is the core of the horizontal Mississippian oil play in Oklahoma and Southern Kansas. This is one of the highest rate of return plays in the U.S. Plus, we have tremendous upside in the super-rich and wet Upper Devonian, wet Utica and the Cline Shale oil play.

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