Welcome to the Range Resources Second Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. Statements made during this conference call that are not historical facts are forward-looking statements. Such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. After the speakers remarks there will be a question and answer period. At this time, I would like to turn the call over to Mr. Laith Sando, Vice President, Investor Relations at Range Resources. Please go ahead, sir.

Thank you, Operator. Good morning, everyone, and thank you for joining Range's second quarter earnings call. Speakers on today's call are Jeff Ventura, Chief Executive Officer; Dennis Degner, Chief Operating Officer and Mark Scucchi, Chief Financial Officer. Hopefully, you've had a chance to review the press release and updated investor presentation that we've posted on our website. We also filed our 10-Q with the SEC yesterday. It's available on our website under the investors tab or you can access it using the SEC's EDGAR system. Please note that we'll be referencing certain non-GAAP measures on today's call. Our press release provides reconciliations of these to the most comparable GAAP figures. 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. With that, let me turn the call over to Jeff.

Thanks, Laith, and thanks to everyone for joining us on this morning's call. In the first half of 2019 Range delivered on key strategic initiatives generating organic free cash flow, reducing absolute debt, improving our cost structure and efficiently executing our 2019 operational plan safely and within budget. I'm proud of the team's efforts day-in and day-out to make this happened. The industry is clearly in the middle of challenging times with natural gas and NGL prices lower on seasonal weakness and energy equity struggle to find investor interest. Against this difficult backdrop we remained focused on the things that will drive long-term shareholder value and we remain committed to positioning Range for success through the commodity cycles. In fact, I believe the company is in a better position today that at any time in our past in terms of our ability to not only withstand low prices, but to thrive when the commodity turns in our favor. With Range start creating where it is that might seem counter intuitive. But let me walk you through why I believe that Range is so – positioned so well currently coupled with some of the things we're doing to further improve on our competitiveness which Mark and Dennis will elaborate on. First, we've reduced absolute debt in the last nine months by approximately $1 billion following the recent sale of a 2% overwriting royalties on the Southwest Pennsylvania acreage. This latest sale improves interest expense by $30 million per year has a minimal to well economics, significantly derisk the balance sheet and highlight the substantial value that we have on our assets that has not being reflected in today's equity market. Second, Range has capture almost the half million acreage in the core of Marcellus. This acreage position is largely held by…

Thank you, Jeff. Consistent with our prior call, our operating teams have continued with their strong start to the year with production on track and capital spending in line with our 2019 plan. The second quarter capital spending came in at approximately 25% of the total capital budget, but first half of the year spending totaling 55% of the 2019 capital plan, both as projected. This is consistent with our plan outlined earlier in the year with activity frontloaded resulting in a lower capital spend in the second half of the year while generating a significant production increase in Q4. Production for the second quarter came in at 2.287 Bcf equivalent per day, slightly above our production guide for the quarter. This was achieved despite some headwinds associated with unplanned weather and field upsets in the Southwest Pennsylvania liquids gathering and processing systems. Exceptional well performance in both the dry gas and liquids-rich portions of the field for wells turned in line throughout the first and second quarters helped underpinned the production results captured in Q2. The second quarter resulted in us turning in line 18 wells across both divisions. In Appalachia, we turned to sales 16 wells on four pads focusing on liquids-rich acreage, with the well evenly split between the wet and super rich areas of our acreage. In the dry gas portion of the field we continue to see exceptional performance from wells that were brought online in the first quarter. As an example, one of the recent dry gas pads has produced over 100 million cubic feet per day for more than four months from seven wells from an average lateral length of 13,800 feet. We often talk about the strong gas rates in this area and this pad is no different. Having produced over 50…

Thank you, Dennis. Despite the second quarter being challenging from a commodity price perspective, Range executed on its operating and financial strategy, efficiently managed the business, remained free cash flow positive year to-date and continued efforts to enhance margin to prudent cost management initiatives. In summary, financial results, mid-year 2019 are in line with the key principles of our business. First, operate a self funding cash flow generating business. Second, enhanced margins and profitability through both price and the cost management, and third, but equally important, improves the balance sheet through monetization of assets. With operations tracking plan results, Range has generated year to-date cash flow from operations of $446 million, compared to capital spending of $413 million, resulting in free cash flow of $33 million before dividends. As discussed last year, we made the transition to free cash midyear 2018. We've continued that trend and expect to generate free cash flow for the full year 2019. Range's ability to generate free cash flow even in a low price environment is underpinned by its capital efficiency and cost structure. Continuous efforts on optimizing cost have yielded and will continue to yield enhanced profitability and resiliency. For the second quarter we delivered our near term plans with unit cost better than guidance. The quarter over quarter improvement of $0.05 per unit and $0.10 per unit compared to fourth quarter last year are the result of efficiency across the board led by improvement in the gathering, processing and transport line item. To frame this significant improvement, recall that Range guided to a $0.30 improvement over the course of the five-year outlook, whereas in six months we've achieved one-third of that goal. I'll spend a minute walking through each expense line item and our expectation for each. Gathering, processing and transport expense was…

Operator, let's open it up for Q&A.

Thank you, Mr. Ventura. The question and answer session will begin now. [Operator Instructions] Your first question comes from the line of Kashy Harrison with Simmons Energy.

Good morning everyone. Good morning everyone and thanks for taking my questions. So I know it's early to talk about 2020. But I was wondering if you could share some color on how we should think about capital allocation in a 250 environment?

At a high level let me just say we have a lot of flexibility and very low maintenance capital. But Mark, let me talk a little bit more about our framework and thought process.

Sure. I think the key principle that we've laid out in the strategy section upfront in the company presentation is the fact that our capital allocation process starts with free cash flow as a priority. So, given ranges pure leading decline rate, low maintenance CapEx number. And the fact that we have tremendous latitude nearly every option is on the table as we chart the path through at the end of 2020. We have no drilling obligations. Our infrastructure is fully utilized. So with that we can be responsive to prices, adjust the capital spending appropriately and as we gain a little bit greater visibility into 2020 as this year unfolds we can design the most suitable program, again being responsive to both gas and NGL prices.

Got you. So, spending down year-over-year. Got it. And so -- and then the other question I had, there were some there was some commentary earlier in the call on just the – just a lot of discussion on reducing cash cost to drive sustainable improvements in free cash flow generation moving forward. I was wondering if you could just share some thoughts on consolidation as a whole in the -- your thoughts on consolidation as whole in the Appalachian Basin. And whether there could in fact be opportunities to expand free cash flow potential through mergers of equals and reductions in headcount and so forth? Thank you.

Yes. We'll just – I'll start with range. And then try to actually answer your question at hand. But – yes, I think we're in a good position. We have -- when you look at range we have strong inventory, but then you got to look at the specifics of each company. So, we have I think one of the lowest corporate decline rates really even in the basin which puts us in a good position, very low maintenance capital. We're capable of generating free cash flow now versus our peers in the south. We can generate free cash flow and get a little bit of growth. Most of our peers or all of our peers in the southwest part of the basis aren't doing that. With Midstream commitments that we have are full. When you look at our costs in drilling complete they're the lowest in the entire basin. In fact, lot of the peers are striving to hit a lot of costs. So -- and we think we can drive those down through technology and probably through a softening service costs environment or acreages HPP and so on. So, I think we've got a great path forward. Everybody talks about consolidation in the basin and theoretically some of those things could make sense. But I think we'll stay disciplined in terms of the path that we're on. But from a theoretical point of view you could argue some of that could make sense.

Got it. That's it from me. Thank you.

Thank you.

Thank you. And your next question is from the line of Arun Jayaram with JPMorgan.

Yes. Good morning. I wanted to get your thoughts on if Range decided to move into maintenance mode in 2020, call it from a 2.4 Bcf a day fourth quarter kind of exit rate. What type of capital rig activity tools would you need to keep, call it that fourth quarter run rate flat from an overall production basis?

Sure, Arun. This is Mark. I'll start with that and then we can each come in from an operational perspective and so forth. So the D&C maintenance CapEx that we had guided for 2018 fourth quarter from 2017, the $525 add in let's call it $50 million or so in land. If you roll that forward to our exit rate, the number as you guided to and thing starting from a higher rate and holding that flat, you're probably in the low $600 million range for D&C maintenance CapEx from fourth quarter 2019 to fourth quarter 2020. But keep in mind that since you're holding the high point from 2019 through calendar 2020 that's actually generating call it mid single digit type growth on an annual -- on an annualized basis.

That's helpful. And any just thoughts on rig activity or tools to do that?

Yes. This is Dennis. We we've taken a strong look throughout the balance of the year at what it would take especially as we looked at early on the five-year outlook. And the program that we have in place now you know one of the focus is how do we maintain our leading operational efficiencies and keep driving down our cost structure. And we feel like we're able to do that with the current rig activity that we have in place in Southwest PA with a couple of rigs and also a frac crew or two. It will be focused on making sure that we keep water handling those efficiencies and as we've talked about the water sharing value harvested. So we feel like we -- it's going to be more in line with what we actually have as we finish out the second half the year.

Great. Appreciate that commentary. My next question; you guys have guided to a 5% decline in your unit cost structure between the second quarter and the fourth quarter. Assuming you do go to maintenance mode next year just as a case or scenario, Mark what your thoughts on your cash cost structure in 2020? I do believe some of your Terryville MVCs do roll off next year. But just directionally how do you think your per unit costs would trend into 2020?

Yes. I think that's a good and a very important question. So, the cost trend both on a per unit basis and in certain contract [Indiscernible] do decline into next year. As you point out there is a processing capacity agreement where our MVC rolls off early in 2020 with a fairly substantial reduction in cost there. Again for utilization of the capacity that came online at the end of 2018 further optimization to the extent there is growth that being sold in basin. Again further drives down the unit costs on a GP&T. basis. I would couple that with the trend line you've seen in absolute reductions on LOE, which has been extremely efficient in handling water and found opportunities there. Our G&A savings that we've achieved so far this year, many of the additional initiatives have not materialized because we're waiting for contracts that are not being renewed to roll off over the remaining months of this year. So the benefits of those will really materialize in 2020. So setting growth aside for a moment, we think that we can continue to achieve meaningful improvements in the unit cost structure. I would also add to that that there's some additional savings on the gathering, processing specifically transport side as ME 2 comes online next year. Currently, some barrels are being wailed which is more expensive. So once ME 2 comes online we'll still be able to reach exports and reduce that absolute spend.

Great. Thanks a lot.

Your next question is from the line of Ron Mills with Johnson Rice.

Good morning. Question for you, Mark, on NGL pricing in the top that you have a couple of really good sides in terms of how the macro is improving in terms of days of storage and if you look at your realizations relative to a Mont Belvieu barrel, they've improved significantly over the past six to nine months. I wonder if you could just provide a little bit more color on your outlook for NGLs? And how do you how do you think that translates into in terms of timing and in relative pricing improvement?

Yes, Ron, this is Dennis. I'm going to pitch this over to Alan. I think he's going to have some good color on just how we view the downfield vision of NGL pricing and where things are headed.

Hey, Ron. This is Alan Engberg, head of our liquids business. I can give you a whole kind of dissertation on NGLs. I'll try to keep it brief. And just to say that, yes, the second quarter prices were challenging. But overall fundamentals are actually improving as we speak and we're kind of cautiously optimistic and encouraged by some of what we're seeing during the second quarter. But if we look at let's say propane as a proxy for the NGL barrel, going into the second half of this year we see things, let's say, we ended the second quarter in particular in the Northeast with stocks that were lower year on year. In fact, there were roughly on a four-week moving average basis using the EIA pad 1 data. At the end of the second quarter we were 7% under last year, and as of the most recent EIA posting again on the four-week moving average basis roughly 8% under last year. So the Northeast is actually tightening. If we take a broader look at the overall U.S. fundamentals, they're also improving. In fact, we started off from a high level at the end of the first quarter and start to build season probably 25% higher than where we were a year ago. But during the second quarter especially May and June we started to work that off. In fact, June in particular we saw inventories actually decreased by roughly 5 million barrels year-on-year. So for those reasons we're going into the third quarter now with fundamentals that are actually starting to improve. In particular we're looking at an addition to export capacity, that's going to be coming up during the third quarter. That's enterprise's terminal where they're adding 175,000 barrels per day. And that's going to free up…

He is out of queue now.

Okay.

We are nearing the end of today's conference call and we will go to David Deckelbaum of Cowen for our final question.

Thanks for putting me in at the end, guys. Appreciate the time.

Thank you.

I just had had two questions. One, congratulations on the recent overriding royalty interest sale. It took about a half to turn out your leverage. What other meaningful opportunities have you identified? And can we expect similar types of impacts with within the efforts going forward. And would you be willing or do you have the capacity to do similar transactions now?

Yes. This is Mark. I'll start off. So given the sheer depth of inventory of projects the scale of our footprint, the time horizon we're talking about in terms of developing that, there are extremely high quality projects that we believe can find a good bid in the market today. We are focused on as I mentioned during my scripted portion accelerating the value of some of that through the divestiture processes. We have a number of processes underway. I'm reluctant to get into specifics on any one, but suffice it to say we are actively working multiple meaningful projects and would eagerly look forward to announcing those. But we are keenly interested in monetizing some of that materially improving and altering the capital structure and capturing some of the value of it from the depth of this inventory.

Would that include other potential overriding royalty interest packages?

I would say we've got a very open mind. I mean you could see the value in the bid for those that we've achieved in three transactions raising $900 million. So there's clearly a bid for that type of asset. So we would keep that in mind.

Okay. I guess I just recall the last time you guys were asked about this. I think you had said that you would be willing to do up to 2% this year. I guess, can you remind us why that was the upper limit. And you know what might exist beyond that?

As we laid out the guidelines what we were starting with was roughly an 83% NRI. And as guideposts we said that we think that being around 80% would still be an advantageous position for range to be in relative to average enterprise of peers. And it's clearly not a material detriment to the returns of the wealth. So, that's not a hard and fast number. It was guidepost that we were indicating that even after divestiture of a few points we would still be in a very strong position. And I think that sitting at 80% today I think we find ourselves in still a very good position.

Yes, I agree. My last question is just if you might. Could you give us any specific dollar color on the savings you'll experience next year in the following year from some of the MVCs rolling off, I guess just as a total dollar amount to the company?

What I'll do is actually point you to the old disclosures on the North Louisiana assets. If you can look back at the MVC processing committed, it's not material to Range's overall costs, but in terms of the individual contracts. But I'll point you back to the last 10k the [Indiscernible] would've filed. They broke down the individual contracts, the capacity and the timeline and you can calculate what the roll off is.

Okay. Appreciate the time guys.

Thank you.

Thank you. And this does conclude today's question and answer session. I'd like to turn the call back over to Mr. Ventura for his closing remarks.

I just want to thank everybody for participating on today's call and feel free to follow up with our IR team with additional questions. Thank you.

Thank you for participating in today's conference. You may now disconnect at this time.