Range Announces Sharply Higher Third Quarter Results

Business Wire, Oct 22, 2008

FORT WORTH, Texas -- RANGE RESOURCES CORPORATION (NYSE: RRC) today announced third quarter results. Range reported its 23rd consecutive quarter of sequential production growth as production for the third quarter averaged 388 Mmcfe per day, a 19% increase over the prior year. The increase was driven by exceptional drilling results across the Company's core properties, which more than offset hurricane-related curtailments. Oil and gas sales, including cash-settled derivatives, a non-GAAP measure, reached $322 million, a 38% increase over the prior year. Cash flow from operations before changes in working capital, a non-GAAP measure, rose 37% to $227 million. Net income increased 384% to $285 million. The reported net income of $285 million included non-cash revenues of $299 million for the mark-to-market accounting on commodity derivatives, $7 million of non-cash stock expense and a $38 million mark-to-market gain in the deferred compensation plan. Adjusting for these and other items, net income comparable to analyst estimates was $80 million, or diluted earnings per share of $0.51, 21% greater than the prior year and $0.02 above analysts' estimates (see the accompanying tables reconciling these non-GAAP measures).

Commenting on the announcement, John Pinkerton, Range's Chairman and CEO, said, "Overcoming the impact of the hurricanes, our operations teams did a tremendous job driving up production to achieve our 23rd consecutive quarter of sequential production growth. We continue to be on track to achieve our 19% production growth target for the year and break through the 400 Mmcfe per day benchmark sometime later this year. Our diversified portfolio of quality drilling projects and our highly focused operating teams continue to be the keys to our success. Importantly, we continue to make solid progress with our emerging plays, building infrastructure, drilling successful delineation wells and increasing our acreage positions. With the announcement earlier today that the first phase of the Marcellus pipeline and gas processing facilities are now operational, we will begin to ramp up production from our Marcellus Shale play. The Marcellus Shale play will enhance our reserve and production efficiency, while further lowering our cost structure. Looking to 2009, we are extremely well positioned to add substantial shareholder value in a low commodity price environment. Our attractive hedge position coupled with the premium prices we receive for the Appalachian production will help combat low prices. Our long reserve life, low cost structure and deep drilling inventory allows us to replace production with roughly one-third of cash flow, leaving the remaining two-thirds of our cash flow to grow reserves and production. Financially, we have maintained a simple capital structure and a strong liquidity position. As a result, we will not have to rely on the capital markets or acquisitions to continue to execute our plan and extend our track record of consistent, double-digit growth."

For the quarter, production totaled 388 Mmcfe per day, comprised of 316 Mmcf per day of gas (81%) and 12,012 barrels per day of oil and liquids. Wellhead prices, including cash-settled derivatives, averaged $9.02 per mcfe, a 16% increase over the prior-year period. The average gas price was $8.62 per mcf, a 20% increase, and the average oil price rose 5% to $67.40 a barrel.

Direct operating expenses, excluding stock-based compensation for the quarter were $1.00 per mcfe, $0.08 per mcfe higher than the prior-year quarter but $0.05 less than the second quarter of 2008. Exploration expense in the third quarter totaled $18 million, up from $5 million in the prior-year quarter due primarily to seismic expenditures during the quarter of $14 million. General and administrative expenses were $0.54 per mcfe, an increase of $0.09 from the prior-year quarter and $0.05 higher than the second quarter of 2008 due to higher personnel costs, in particular, those incurred in anticipation of the ramp up of Marcellus Shale drilling and production and bad-debt expense. Interest expense rose to $25 million compared to $20 million in the prior-year quarter, due to higher debt outstanding and the refinancing of floating bank debt to longer term fixed rate debt. Depreciation, depletion and amortization rose to $2.27 per mcfe, versus $1.90 in the prior-year quarter due to higher depletion rates and valuation adjustments to the Company's growing leasehold inventory.

Third quarter development and exploration expenditures totaled $242 million, funding the drilling of 158 (118 net) wells and 6 (5 net) recompletions. A 99% success rate was achieved with 157 (117 net) wells productive. In the first nine months, 417 (308 net) newly drilled wells had been placed on production, with 102 (84 net) in various stages of completion or waiting on pipeline connection. In addition, $367 million was spent on acreage and $7 million on expanding gas gathering systems. Drilling activity in the fourth quarter has 23 rigs currently running.