Range Resources Interview with Jeff Ventura at The Oil & Gas Conference20

Good morning.

Oh, it's been several years now. I'd say at least 10. I'm not sure exactly when, but for a long time. I've known Greg for a long time and it's a great conference and I'm really glad to be part of it.

Yeah, it's been a lot of fun. Range had the discovery well and by that I mean the first commercial well in the Marcellus. People had tried to unlock it before, but in October of 2004, a little more than 10 years ago, we completed the Renz No. 1 and really that kicked off the Marcellus Shale play. And Range at the time was a small company, you know, small stock, and to think we kicked off what now is the premier gas field in North America and ultimately I think one of the largest in the world, it's been a blessing to be part of that.

Yeah, you know we're in a commodity business. So size and scale are critical. So you want to be size, scale, and quality. So we're in the highest quality gas play with the Marcellus and according to the Wood Mackenzie study, we're the lowest cost producer. So in a commodity business you want to be lowest cost to be able to survive down cycles like we're in now and be able to get better returns when prices supply and demand equalize. The other thing is we have not just low cost but we have the largest scale according to Wood Mackenzie. So we have the largest footprint which means and there's a lot of good things that come from having a large footprint. It enables if you have a good technical team, which we have, it enables them to do the same thing over and over again to drive capital efficiencies and operating efficiencies. Having a large footprint allows for changes in technology that we'll be able there to capture those changes in technology. And of course, it enables you to get through down cycles and to have a big inventory going into an upcycle. So size, scale, high quality is where we want to be. And that's what the Wood Mackenzie data shows.

Yeah, I think you know we have some slides on our website when you map hydrocarbon in place for the Marcellus and Upper Devonian and Utica and then you add them together. The one area where you can stack all three areas is literally down in southwest Pennsylvania and literally in Washington County. So having we believe you know that's where you maximize hydrocarbon in place. Those wells that you referred to speaks to the quality but I think even more important is when you look at our EUR per thousand feet in the Marcellus coupled with the cost per thousand feet to get them it's really the tops in the southwest part of the play and amongst the best in the entire play. Plus being in the southwest has an advantage in that there's better historical infrastructure down there. Plus you have the advantage of dry versus wet. So we believe that is the sweet spot.

Well, it's been a blessing and it's been fun and really that's you know, other than blessing, it's been I've worked with a great group of people to be able to achieve that and it's kind of fun. I grew up right outside of Pittsburgh. So, the Renz No. 1 Discovery Well was literally, you know, it's probably a 40-minute drive from where I grew up. So, even though I've worked literally at times all over the world, it's great to see the largest discovery I've ever been part of to be right there in, you know, home where I grew up.

Yeah, those are really important. So, it's not important to just have the resource, but it's the price that you get for your product in the net. So, those projects are very important for us. Spectra Uniontown to Gas City started up about two weeks ago with phase one and literally the final phase is in about around September 1st. So in two weeks away that'll take about 200 million per day of our gas or about 25% of our gas production from the local M2 market to the Midwest. And the significance right now is that's about a 75 cent to a dollar uplift in pricing. So that's really important particularly in today's world. So it takes a big portion of our gas to better pricing. We've hedged and locked in a big part of that. And then Mariner East is very important or Mariner East one in particular that we're on and this is a project that's been in the making for a long time. We have the lion share of that project. We have 20,000 barrels per day of propane which is about 80% of the capacity and 20,000 barrels of ethane. So we had 40,000 barrels per day. We're the only producer that has firm transportation on the project and we have the lion share of it. What it'll do is allow us to export ethane to Europe. So we'll be the first company to really export ethane out of the United States. Our partners are that's going to pick it up FOB Marcus Hook or Philadelphia. That's important. We're currently exporting ethane to Canada on Mariner West. The other thing Mariner East does for us is on propane. It'll fix the transportation cost to a much more favorable level and it allow us the ability to either sell propane into the northeast markets when the time's right or to export propane as well. So again when you add that when you look at that project and you combine it with our other projects in terms of natural gas liquids once Mariner East one is up and running it's about a $90 million per year uplift for us and that should be in the fourth quarter. So, we get a big uplift on the gas side from Spectra Uniontown to Gas City and then a big uplift on the ethane and propane side off of Mariner East one.

Yeah, it's important for us and I think it's important for the industry and of course job creation and all those types of things.

Yeah. Exports again are important and the US will begin exporting natural gas or LNG by ship later this year. Cheniere's first project is on time. That's important and then that will ramp up with time. Range has signed and announced about 200 million per day of contracts. So I expect that'll increase with time but it's really important for the industry. When you look at natural gas there's a lot of natural gas demand coming. LNG exports you know should be on the order of 10 billion cubic feet per day starting with Cheniere and ramping each and every year. We're exporting gas to Mexico currently as an industry. Power generation is really shifting from coal to natural gas and I think a lot of the new build power generation will be natural gas. And then industrial use and ultimately transportation even if it's through electric vehicles I think a lot of that electricity will be from gas. So we see about 20 BCF per day of incremental natural gas demand by 2020. And I think demand actually will surprise to the upside because it's a cleaner better fuel. And Range going back to the Wood Mackenzie study having a large resource base in the premier play I think that combination of demand coming with the position we have I think we'll be in a good position looking forward.

Yeah, I think well I think the key is it's not going to necessarily I think what it'll do is the increased demand will just firm prices up. You know, we'll see what prices do with time. I think they'll move up from where they are today. We've got so much gas. I think you know that they may move up into can pick a price whether it's a $3.80 to $4.20 range $4 plus or minus but to move gas price from where it is today to $3.80 to $4 and you know in a year or two and then I think as the infrastructure gets built out in the Appalachian basin the differential in the basin will narrow so we'll get Range will receive kind of a double up. I think natural gas prices will move up with increasing demand and the basis will narrow which will both be positive for us coupled with our increased pricing on the natural gas liquids projects.

Yeah. Range, another part of our strategy is to be consistent hedgers. So we have a little more than 50% of our gas hedged next year at a floor of $3.42 which is a good price, good hedge price and also it's a high hedge amount relative to most of our peers.

Yeah. And I really believe that. You know, it's the people that I work with. It's the people that have helped guide me through my career. The good Lord, you know, blessing me in that whole piece and it's just I'm grateful to be part of it. So, it's fun to achieve that, but really that award goes to many many people other than I was just the person that picked it up, but it was great fun to do it. I will say that.

Absolutely. I wholeheartedly believe in that.

Well I think you know Intercom, Greg Barnett has done a great job year after year making the conference better. The one-on-ones get better every year and the attendance goes up every year. The quality of the interviews and the media events. So, it's really to me has become a premier conference and I definitely enjoy coming. I've known Greg for a long time. I always enjoy seeing him and very importantly, we have kids and grandkids in the area. So, it's a great excuse to come in a weekend early and get to spend a little extra time with them and you get the wonderful weather because Texas has had some pretty hot days.

Thank you.

Thank you.