Range Resources Corporation (NYSE:RRC) Q1 2019 Earnings Conference Call Transcript
Apr 23, 2019 • 09:00 am ET
Jeffrey L. Ventura
through the remainder of 2019 and beyond, translating our high-quality asset base into meaningful free cash flow generation, while further accelerating our financial targets through asset sales. We believe this will narrow the disconnect we see between our share price and the intrinsic value of our assets.
That disconnect is, in part, demonstrated by our year-end 2018 proved reserves value in strip pricing net of debt, which is over $24 per share and does not account for the large high-quality inventory of core Marcellus wells that will remain beyond the five years of development included in proved reserves. Accelerating our financial targets remains a top priority.
For evidence of management and the Board's commitment to the balance sheet improvement, you can reference the 2019 compensation incentives in the proxy that we filed earlier this month. The 2019 targets for both debt reduction and leverage improvement reflect our focus on derisking the balance sheet in the near-term.
Like we've talked about for the last few quarters, Range just completed what we called our commissioning phase of the Marcellus, which now positions us to deliver free cash flow and improve returns going forward.
We have the vast flock of acreage position that's largely held by production. This allows for highly efficient development of our assets with the ability to drill long laterals, utilize existing pads and infrastructure, and effectively source and recycle water. These efficiencies are evidenced in our peer-leading F&B cost and low maintenance capital requirements.
Our processing and transportation capacity is right-size for our production, while providing diversified market access for our various products. We see opportunities to improve margins going forward by marketing incremental production in basin, thereby limiting additional transportation expense and supplying growing Southwest Appalachia demand for both natural gas and NGLs.
And given the massive infrastructure build out that's occurred in the Marcellus and Utica over the last 10 years, we expect will be ample takeaway to other markets allowing us to optimize sales without incremental commitments or take advantage of the narrow Southwest PA basis in several years.
Importantly, we're not pressured to grow in order to meet current transportation agreements or satisfy the competing interests of the midstream affiliate. This provides Range with the flexibility to develop a capital program going forward, that optimally balances an efficient development cadence, free cash flow generation, and unit cost improvement.
Range's ability to generate sustainable free cash flow in current strip prices is underpinned by our high-quality assets, which drive our low corporate base decline and low maintenance capital requirements. Range's base decline entering 2019 was below 20%. This relatively flat base decline supports low D&C maintenance capital of only $525 million and differentiates Range versus peers.
When we look at the dollars it takes to add or replace an Mcf of production, we couple that analysis with the underlying base decline, we see Range as the only producer in Southwest Appalachia capable of generating free cash flow and modest exit average growth in 2019, as true