RANGE RESOURCES CORPORATION (NYSE: RRC) today announced that it has set its 2013 capital spending budget at $1.3 billion. The capital budget includes approximately $1.1 billion for drilling and recompletions, $100 million for leasehold and renewals, $75 million for pipelines and facilities and $25 million for seismic. Approximately 85% of the budget will be targeted toward liquids-rich and oil projects predominately in the Marcellus Shale and Horizontal Mississippian plays. The 2013 capital budget is approximately $300 million less than the expected 2012 capital expenditures, reflecting a $200 million decrease in dry gas drilling and a $100 million reduction in expected leasehold expenditures. Range projects that the 2013 capital budget will generate 20% – 25% year-over-year production growth in 2013. In 2013, Range will be focusing on its Marcellus liquids-rich area and its Horizontal Mississippian play. These projects have the highest estimated rates of return in the Company’s portfolio. Range has a combined acreage position in these two areas of approximately 500,000 acres providing a multi-year growth platform. The reduction in dry gas drilling will take place primarily in northeastern Pennsylvania where the Company will reduce its activity from four to five rigs in 2012 to one rig in 2013. In addition to generating strong rates of return, Range anticipates that its 2013 capital program will continue to drive solid double digit per share growth, debt adjusted, in both production and reserves. Range expects to post its third consecutive year of double digit per share production growth and its eighth consecutive year of double digit per share reserves growth in 2013. The projected growth for 2013 is expected to be accomplished at an average all-in finding and development cost of $1.00 per mcfe or less, similar to previous years. Range currently plans to fund the 2013 capital budget from operating cash flow, proceeds from asset sales and its available liquidity under the Company’s bank credit facility. Range has engaged Bank of America Merrill Lynch to market certain of its Permian Basin properties in southeast New Mexico and West Texas. The data room is scheduled to open in early January. The properties to be marketed are currently producing approximately 18 Mmcfe per day with 30% being oil and NGLs. Assuming completion of the asset sales and based on current strip prices, the Company’s total debt to EBITDAX leverage ratio is expected to strengthen from the anticipated 3.3x ratio at year-end 2012 to 2.9x or below during 2013.
Commenting on its 2013 capital budget, Jeff Ventura, the Company’s President and CEO, said, “Our 2013 capital program is designed to deliver outstanding results. The 2013 program is expected to deliver 20% – 25% production growth while strengthening our balance sheet. We have the flexibility to shift capital from dry gas drilling to our liquids-rich plays which generate exceptional returns for our shareholders. In addition, we expect to achieve double digit per share growth in production and reserves while continuing to focus on reducing expenses in our already low cost structure. As we finish up 2012 and look forward to 2013, Range is very well positioned as our high quality portfolio of low cost drilling projects covering over two million acres of leasehold should generate attractive returns for our shareholders for many years to come.”Non-GAAP Financial Measures Range has referred to a “total debt to EBITDAX ratio” in this release to measure relative leverage of the Company. This ratio is calculated by dividing last twelve months EBITDAX into the sum of the Company’s bank debt and subordinated notes shown on the consolidated balance sheets. The ratio is expressed in the number of annual EBITDAX amounts required to equal the outstanding debt amount, where the “X” refers to coverage “times.” EBITDAX is defined as earnings before interest, income taxes, depletion, depreciation and amortization and exploration expense. EBITDAX used by the Company for this calculation is found in “Supplemental Tables” posted for each respective quarter on its website under the tab “Investor Relations.” We believe that the presentation of the total debt to EBITDAX ratio is relevant to our investors because it presents a relative leverage metric which is commonly used by investors and the debt rating agencies to evaluate a company’s ability to service its current debt and/or take on more debt.
Range has used in this release a commonly used metric in the investment community to measure our ability to establish a long-term trend of adding reserves at a reasonable cost – finding and development cost per mcfe. It is important to economically find and develop new reserves that will offset produced volumes and provide for future production given the inherent decline of hydrocarbon reserves as they are produced. We believe the ability to develop a competitive advantage over other natural gas and oil companies is dependent on adding reserves in our core areas at lower costs than our competition.Finding and development cost per unit is a non-GAAP metric used in the exploration and production industry by companies, investors and analysts. The calculations presented by the Company are based on costs incurred excluding asset retirement obligations and divided by proved reserve additions (extensions, discoveries and additions shown in the summary of changes in proved reserves table) adjusted for the changes in proved reserves for performance revisions and/or price revisions as stated in each instance in the release. This calculation does not include the future development costs required for the development of proved undeveloped reserves. The SEC method of computing finding costs contains additional cost components and, therefore, based on that methodology, results in a higher number. A reconciliation of the two methods for prior years is shown on our website at www.rangeresources.com. RANGE RESOURCES CORPORATION (NYSE: RRC) is a leading independent oil and natural gas producer with operations focused in Appalachia and the southwest region of the United States. The Company pursues an organic growth strategy targeting high return, low-cost projects within its large inventory of low risk, development drilling opportunities. The Company is headquartered in Fort Worth, Texas. More information about Range can be found at www.rangeresources.com and www.myrangeresources.com. Except for historical information, statements made in this release such as expected rates of return, estimated ultimate recovery volumes, expected high returns, expected low-costs, expected per share growth, expected geological results, expected de-risking of the play, expected future spacing units, expected future decline rates, expected infrastructure availability, expected improvement in well performance, expected greater capital efficiency, expected addition of future value for shareholders, expected amount of future capital spending, expected timing, methods utilized and number of rigs related to drilling operations and expected timing of infrastructure improvements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on assumptions and estimates that management believes are reasonable based on currently available information; however, management’s assumptions and Range’s future performance are subject to a wide range of business risks and uncertainties and there is no assurance that these goals and projections can or will be met. Any number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, the volatility of oil and gas prices, the results of hedging transactions, the costs and results of drilling and operations, the timing of production, mechanical and other inherent risks associated with oil and gas production, weather, the availability of drilling equipment, changes in interest rates, litigation, uncertainties about reserve estimates and environmental risks. Range undertakes no obligation to publicly update or revise any forward-looking statements. Estimated ultimate recovery, or “EUR,” refers to our management’s internal estimates of per well hydrocarbon quantities that may be potentially recovered from a hypothetical future well completed as a producer in the area. These quantities do not necessarily constitute or represent reserves within the meaning of the Society of Petroleum Engineer’s Petroleum Resource Management System or the SEC’s oil and natural gas disclosure rules. Our management estimated these ultimate recoveries based on our previous operating experience in the given area and publicly available information relating to the operations of producers who are conducting operating in these areas. Actual quantities that may be ultimately recovered from Range's interests may differ substantially. Factors affecting ultimate recovery include the scope of Range's drilling program, which will be directly affected by the availability of capital, drilling and production costs, commodity prices, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals, field spacing rules, recoveries of gas in place, length of horizontal laterals, actual drilling results, including geological and mechanical factors affecting recovery rates and other factors. Estimates of ultimate recoveries may change significantly as development of our resource plays provides additional data. In addition, our production forecasts and expectations for future periods are dependent upon many assumptions, including estimates of production decline rates from existing wells and the undertaking and outcome of future drilling activity, which may be affected by significant commodity price declines or drilling cost increases. Further information on risks and uncertainties is available in Range’s filings with the Securities and Exchange Commission (“SEC”), which are incorporated by reference. Investors are urged to consider closely the disclosure in our most recent Annual Report on Form 10-K, available from our website at www.rangeresources.com or by written request to 100 Throckmorton Street, Suite 1200, Fort Worth, Texas 76102. You can also obtain this Form 10-K by calling the SEC at 1-800-SEC-0330.