Range Resources - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 was a strong execution quarter: adjusted diluted EPS of $0.96 vs consensus $0.93 and revenue of $0.85B vs consensus $0.78B; GAAP diluted EPS was $0.40 and GAAP total revenues and other income were $690.6M. The beat was driven by higher realized natural gas and NGL prices and disciplined costs, despite a $159M non-cash derivative mark-to-market loss. EPS/revenue consensus from S&P Global showed a beat in both metrics for Q1 2025; values retrieved from S&P Global.*
• Realized prices after hedges averaged $4.02/mcfe (gas $3.64/mcf; NGL $27.75/bbl; oil $61.72/bbl) with a NGL premium of +$1.05/bbl to Mont Belvieu and an improved gas basis differential of ($0.15)/mcf to NYMEX.
• Management raised full-year 2025 NGL differential guidance to MB +$0.25 to +$1.25 (from +$0.00 to +$1.25 previously); capital ($650–$690M), production (~2.2 Bcfe/d), and per-unit expense guidance were maintained.
• Capital allocation remained balanced: $183M free cash flow enabled $68M buybacks (1.83M shares at ~$36.97) and $22M dividends, while net debt fell by ~$42M to $1.36B; CFO reiterated the May 2025 bond maturity will be addressed with cash on hand and a small revolver draw.

What Went Well and What Went Wrong

What Went Well

• Higher realized pricing and NGL premium: “First quarter 2025 natural gas, NGLs and oil price realizations…averaged $4.02 per mcfe…pre-hedge NGL price…$27.79 per barrel, approximately $1.05 above Mont Belvieu”.
• Operational efficiency and record drilling: CEO highlighted “new program drilling record by averaging 5,961 feet per day” and consistent completions efficiency with an e-frac fleet, underpinning low capital intensity and repeatable well performance.
• Shareholder returns while de-leveraging: $68M buybacks, $22M dividends, and net debt reduced by ~$42M in the quarter; free cash flow was $183M supporting both returns and balance sheet strength.

What Went Wrong

• Derivative headwind: Q1 included a $159M mark-to-market derivative loss due to higher commodity prices, reducing GAAP profitability (GAAP diluted EPS $0.40).
• Unit cash costs up modestly YoY: total cash unit costs rose to $2.01/mcfe from $1.96/mcfe (+3%), primarily on transportation/gathering/processing/compression (TGPC) expenses; DD&A also increased slightly.
• Near-term production dip: management flagged Q2 production “slightly down” due to scheduled processing maintenance before rising in H2 2025, a potential near-term headwind to volumes.

Transcript

Operator (participant)

Welcome to Range Resources' Q1 2025 Financial Results 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 risk and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. After the speaker's remarks, there will be a question-and-answer period. At this time, I would like to turn the call over to Mr. Laith Sando, SVP, Investor Relations at Range Resources. Please go ahead, sir.

Laith Sando (SVP of Corporate Strategy and Investor Relations)

Thank you, Operator. Good morning, everyone, and thank you for joining Range's Q1 2025 earnings call. The speakers on today's call are Dennis Degner, Chief Executive Officer, and Mark Scucchi, Chief Financial Officer. Hope you've had a chance to review the press release and updated investor presentation that we've posted on our website. We may reference certain slides on the call this morning.

You'll also find our 10-Q on Range's website under the Investors tab, or you can access it using the SEC's EDGAR system. Please note 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. We've also posted supplemental tables on our website that include realized pricing details by product, along with calculations of EBITDA, cash margins, and other non-GAAP measures. With that, let me turn the call over to Dennis.

Dennis Degner (CEO and President)

Thanks, Laith, and thanks to all of you for joining the call today. In the Q1, Range executed on our plans safely and efficiently, delivering consistent well results and free cash flow with steady activity levels that support the longer-term outlook we communicated during our prior earnings call. Range's strong free cash flow also provided increased returns to shareholders during the quarter.

At the same time, Range further reduced debt while continuing to invest in the long-term development of our world-class asset with a two-rig and one-completion crew program. A key component of Range's strong Q1 financial results and our through-cycle profitability is Range's low capital intensity, which is anchored by Range's class-leading drilling and completion costs, shallow base decline, large blocky core inventory, and talented team. We believe this was on display once again in Q1, as it has been for the past several years.

Looking back on the quarter, all-in capital came in at $147 million for production of 2.2 BCF equivalent per day, as we turned to sales 130,000 lateral feet across 10 wells. Production during the quarter was aided once again by strong well performance and resilient field runtime despite winter weather conditions.

These consistent quarter-over-quarter results demonstrate the repeatable nature of our large contiguous acreage position, the benefit of returning to pad sites for ongoing development, and the team's dedication to enhancing field operating runtime. Looking forward, Range expects production to be slightly down in the Q2 as we undergo scheduled processing maintenance. Following Q2, we expect production to increase in the second half of the year, all in line with our previous guidance.

On the capital side, completion spending will step up over the next two quarters, which will drive the increased production in the second half of the year, as mentioned. This operational cadence places us squarely within our stated capital guidance for the year.

Consistent with our plans for the year, Range operated two horizontal rigs during the Q1, drilling approximately 250,000 lateral feet across 18 laterals. The steady activity level, combined with our prior investments in 2023 and 2024, adds to Range's drilled uncompleted inventory that we have discussed on prior calls. This places us right on track to exit 2025 with approximately 400,000 lateral feet of surplus inventory, which supports our three-year outlook. Diving further into operations, during the quarter, Range set a new program drilling record by averaging 5,961 feet per day.

This alone is an impressive achievement, but what is most impressive is the team's ability to deliver this level of efficiency while staying 98% within our very narrow geosteered landing target window. In completions, performance of the electric frac fleet continues to impress as well, and much like the drilling advancements, the completions team has kept pace by increasing the average number of stages per day.

For context, if the team averages nine stages per day, similar to our 2024 results, that equates to completing approximately 650,000 lateral feet per year, which is more than what it takes to hold current production flat. This combined level of efficiency in drilling and completions lays the foundation for our three-year outlook and our ability to hold 2.2 BCF equivalent per day flat in 2025, while also adding to inventory with just two drilling rigs and a single frac crew. Simply put, we're off to a great start this year.

Lease operating expense finished at 13 cents per MCFE for the Q1 while managing through winter conditions. The team continues to improve on winter operations field runtime through strong communication with our midstream partners, equipment optimization, and enhanced maintenance. For context, over the past four years, this ongoing effort has driven a 13% improvement per year in winter runtime, further enhancing field-level performance and contributing to the strong production performance in the Q1.

Before moving on to marketing, I'll briefly touch on service costs and availability. Recently, we entered into a two-year contract extension securing our existing electric hydraulic fracturing fleet, which will provide continuity of a safe, efficient crew to support our stated operational plans.

Given the vast majority of our spending is tied to domestically sourced goods and services or has been contractually secured for the remainder of the year, we are expecting very consistent well costs throughout 2025 and into 2026. As mentioned already, Range's low capital intensity provides an additional level of stability in our full-cycle cost versus other producers.

Shifting over to marketing, during the Q1 of 2025, persistently strong export demand combined with cold weather in North America resulted in improved storage levels for both natural gas and NGLs. The combined demand resulted in a record 41 million barrel draw in propane inventory, driving the propane-WTI ratio above 50% for the first three months of 2025. Similarly, natural gas inventories in the U.S. improved substantially throughout the winter, ending the season 4.3% below the five-year average and nearly 22% below last year, presenting an improved outlook going forward.

As in prior quarters, Range leveraged our flexible sales and transport portfolio for both gas and liquids to optimize sales mix and generate incremental cash flow during Q1. As an example, Range timed its ethane production in the Q1 to take advantage of strong daily natural gas pricing, adding approximately $1 million in cash flow to the quarter.

Looking at our NGL exports, Range's access to the East Coast makes it a preferred source for European NGL imports and gives it an advantage versus U.S. Gulf Coast terminals. At the same time, Range's waterborne export contracts contain either an outright price floor or a fixed premium versus Mont Belvieu. This has backstopped Range's consistent premium pricing relative to Mont Belvieu, which we saw again in the Q1 and expect going forward.

On a final note, Range is collaborating with Liberty Energy and Imperial Land Corporation to supply natural gas to a planned state-of-the-art power generation facility in Washington County, PA, directly adjacent to the heart of Range's Marcellus development and not far from where we drilled the Marcellus discovery well over 20 years ago.

The proposed power facility is expected to serve as a catalyst for attracting data centers and/or industrial operations seeking long-term, reliable, efficient energy solutions utilizing Marcellus natural gas, which has an advantaged emissions profile versus other basins in the U.S. We continue to believe that sourcing future power demand near the highest quality long-duration natural gas assets in the world makes a lot of sense. While this specific project is still early, we are glad to play a role alongside Liberty and Imperial to continue advancing future growth in Pennsylvania.

With announcements like ours and many others, including Homer City, PA, we see this as a win for everyone in Appalachia and somewhat expect that research estimates for an additional 4 BCF per day of incremental natural gas demand in the PJM market through 2030 could prove conservative.

We believe the future of natural gas and NGLs is strong, and the Range team remains focused on generating free cash flow while advancing our overall efficiencies and delivering repeatable well performance across our large contiguous inventory while helping meet future emerging demand, just like we discussed today. I'll now turn it over to Mark to discuss the financials.

Mark Scucchi (EVP and CFO)

Thanks, Dennis. Range has kicked off 2025, executing on a disciplined long-term plan designed to deliver value from Range's portfolio. As we discussed on our last call, our plan is not just focused on today, but given the economic resilience of our projects and the duration of our inventory, we are positioning Range for years to come. By executing thoughtfully today, we're laying the groundwork for efficient, modest production growth to meet increasing gas demand.

We're using the power of Range's high-quality and long-duration inventory to access new demand, either by acquiring transportation, which enables Range to grow production and take market share in premium markets with materializing demand growth, or by supporting the growth of in-basin demand within Appalachia. Through business cycles, we intend to generate free cash flow, prudently invest in the business, and return capital to shareholders.

Consistently accomplishing these goals requires the flexibility to adapt to market conditions. As shown during the Q1, as in recent years, we did just that. When market dislocations occurred, we accelerated our share repurchases while at the same time prudently accumulating cash to repay debt. The results of the Q1 highlight the strength of Range's production mix and transportation portfolio. Range paid $22 million in dividends, invested $68 million in share repurchases at prices well below our view of long-term value, and reduced net debt by $42 million while investing in operations.

Those capital allocation decisions were made possible by $183 million in free cash flow, which was created while executing a strategic operational plan that stands in contrast to most industry peers with higher full-cycle costs. Financial results rely on safe, efficient operations, and the Range team executed another successful quarter, delivering planned production on budget.

As a reminder, Range's 2025 plan differs from others in the industry in that our capital efficiency and low full-cycle costs, paired with advantaged marketing of our production, enable a low reinvestment rate while maintaining the ability to drive future growth from only two horizontal drilling rigs and a single frac crew.

Critical in our assessment of growth potential is our ability to sustain a low full-cycle cost structure, low reinvestment rate, and durable high margins. On the year-end earnings call, when we announced a potential path through 2027, we estimated that Range can maintain 2.6 BCFE per day of production for under $600 million of annual drilling and completion capital, or approximately $0.60 per MCFE. Simply put, the result of efficient production growth by Range is growth in future cash flow per share, which we expect to be augmented by a declining share count.

You can think of Range's future potential growth in a modular fashion. Range can very efficiently add wedges of growth as the market calls for it. The additional wedge of production we are planning through 2027 can be held flat and generate substantial incremental free cash flow. As additional demand materializes, either in basin or out of basin, and pure inventory quality degrades, it is expected that Range can add additional wedges of production.

As evidenced by our three-year outlook, this will very quickly generate greater free cash flow. The depth of Range's inventory and low, stable base decline make this a unique opportunity to compound per share value over time.

Range's business plan continues to be executed on what we believe is the largest, highest-quality core Appalachia inventory, paired with a transport and sales portfolio delivering production across the U.S. and internationally, all supported by a strong financial foundation. We have the team, assets, and balance sheet to succeed through price cycles, and we believe the Range business can and will continue to deliver significant value to investors. Dennis, back to you.

Dennis Degner (CEO and President)

Thanks, Mark. Our 2025 program is off to a solid start, and I believe the Q1 results communicated today showcase that Range's business is in the best place in company history, having de-risked a high-quality inventory measured in decades and translated that into a business capable of generating free cash flow through cycles. With that, let's open the line for questions.

Operator (participant)

Thank you, Mr. Degner. The question and answer session will now begin. If you would like to ask a question, please indicate by pressing the star key, then 11. If you are on a speakerphone, please pick up your handset before asking your question. If you would like to withdraw your question, please press star 11 again. Once again, please press star 11 to ask a question. One moment for our first question. Our first question is going to come from the line of Jacob Roberts with TPH & Co. Your line is open. Please go ahead.

Jake Roberts (Director in Research Division)

Good morning.

Laith Sando (SVP of Corporate Strategy and Investor Relations)

Morning, Jake.

Jake Roberts (Director in Research Division)

Just wondering if you could expand on some of the drivers to reallocate the handful of wells between the target areas for this year.

Dennis Degner (CEO and President)

You bet. Again, good morning, Jake. I think as we look at our program, I guess if we were to look back over the last couple of years, there's always a small level of dynamics as you start to look at the operational cadence throughout the year and what wells start to move forward and what wells start to even move back. I think last year is probably a good example, some of it driven by efficiencies and some of it also timing of just how we see the sequence of events throughout the balance of the year.

No secret sauce there other than we just see that the execution timing has worked out where it's shifted a little bit and it's pushed the timing of one of our TILs like deep in the year that's on the liquid-rich side to something that'll be executing over the balance of the year and then turn in line in the beginning of 2026. As we've seen over the last few years, efficiencies continue to always show positive movement, and we could even see some of that move into the end of 2025, just depending upon what efficiencies we see captured this year.

Jake Roberts (Director in Research Division)

Great. Thanks. My second question, and Dennis, I appreciate some of the color you gave, and I know it's a bit of a moving target, but was hoping you could expand on how the geopolitical news, the tariffs, the reciprocal tariffs are being baked into some of your macro views. I think most in focus is that LPG trade. If I could tack just a little bit more onto this long question would be, can you expand on some of those price floors and premiums to Mont Belvieu you mentioned?

Dennis Degner (CEO and President)

You bet. Happy to. I think if I were to look back over the past several years, I feel like our industry and our business at Range has certainly been through cycles, and it's something we reference every time we're together in person or in a quarter like today. The business has still been incredibly resilient here at Range when you think about the quality of the asset base and, again, the duration of it. Through all of the cycles that we've seen, we've still been able to be incredibly successful and accomplish a lot of the financial objectives that we've laid out and now met.

As you start to take a deeper dive around the tariff perspective as an example, maybe more particular on LPG side, we think a lot of this starts with our advantage from a word of diversity, how we've set up our diversity for how we transport our products, but also how the different pricing mechanisms that we use across the board, whether it's LPG or whether it's ethane as an example.

We think regardless of how the tariff dust settles here in the weeks or months ahead, we see demand remaining relatively strong. We also see that the market will be incredibly efficient and start to redistribute those barrels to address global demand that still will be needing those LPG barrels or ethane barrels regardless of what portion of the NGL component we're looking at.

When you look at pricing for us and transport, having access to markets, our terminal out of the East Coast is really beneficial. We've talked about that a lot over the past several years, and we think moments like this put it on full display.

Our premium this past quarter was certainly strong, very consistent with what we saw in 2024, and it's part of the reason why you saw us improve the bottom end of our NGL guidance for the year. We would expect that to continue to look strong through the balance of this year. There are some transportation advantages clearly for us out of the Northeast. We think that will continue to play a part as the barrels get redistributed pending what comes out of the tariffs.

As you look at LPG, I'll just say for Range specifically on where our barrels move, really 80% of our LPG gets out on a waterborne export, and all of it is going to Europe right now. We really don't have a current exposure to the Chinese market at this particular time. As we see things change, we would fully again expect the market to be efficient, redistribute those barrels, and we would expect our premium to continue to look strong on a relative basis as we move forward.

At the end of the day, we're as well positioned, I think, as you could possibly be set up in moments like this. Given all of the demand component that still is present and emerging, PDH infrastructure, ethylene steam crackers that are in phases of commissioning, we just see demand continuing to look encouraging and strong as we move forward.

Jake Roberts (Director in Research Division)

Great. Appreciate the time.

Dennis Degner (CEO and President)

Thanks, Jake.

Operator (participant)

Thank you. One moment as we move on to our next question. Our next question comes from the line of Doug Leggate with Wolfe Research. Your line is open. Please go ahead.

Douglas Leggate (Senior Managing Director and Senior Research Analyst)

Good morning. Thanks for taking my questions. Morning, guys. Dennis, one for you and one for Mark, if I may. Dennis, my one for you is I guess you were recently in the field with Doug Burgum, and it's kind of a regional macro question. You've talked a lot about new potential in-basin demand data centers and so on. I am just wondering if you can kind of frame what your thoughts are on regional basis, regional pricing, and whether you ever think constitution after your discussions with Secretary Burgum could actually come to fruition again. I have got a follow-up for Mark, please.

Dennis Degner (CEO and President)

You bet. Good morning, Doug. I think if I take a step back on basis, I mean, we certainly have seen the benefits of what takeaway has done for in-basin basis. I mean, it's around 80 cents. We've seen it fluctuate between 30-80 cents ever since MVP has been put into service about a year ago. I guess it'll be in June now. I think we see the benefit of what it looks like when you start to add those incremental components. When you think about in-basin demand, though, that further emerges, I think the announcements like Homer City, PA are really encouraging on top of the Liberty and Imperial Land development announcement that Range is a part of.

As you've heard us say this morning, it just makes a lot of sense for those kind of opportunities to emerge and develop when you think about the alignment between the five nines of reliability that those pieces of infrastructure and entities are looking for, and also just long-duration quality assets that can deliver low-emission supply to power these facilities on the go forward.

The Liberty project, as an example, has the ability to be scalable up to around 450 megawatts—I'm sorry, megawatts. When you think about the supply that could go into that, it's very modular. It's right on top of our producing footprint, and it has the ability to consume somewhere around 90,000 to as much as 100 million a day in gas consumption. Again, with the ability to further expand more once you start to lay that groundwork, footprint there is around 870 acres. You're talking about the ability to really have a larger development opportunity as you start to attract future businesses into that area.

Back to your question about what does this do to basis, we would think this would further strengthen it over the course of time, especially as you think about maybe a lack of pipeline infrastructure that could further develop out of the area. Constitution certainly seems like a hot topic these days, and Secretary Burgum is very interested, along with others, on what infrastructure industry needs to meet further demand that is out there and coming our way, whether it's industrial, residential, further expanding the grid, bolstering it.

Is hard to see line of sight on a project like Constitution today, but as you start to see the open season that is in place right now for the Boardwalk project, we think those are all positive signs that are pointing to there is a need for more energy, and there is a need for how companies like Range and others could participate in supplying that energy in the future. It could be that it is a demand-pull type environment that is a part of that conversation.

Douglas Leggate (Senior Managing Director and Senior Research Analyst)

Yeah. I guess New York needs to cooperate, but thank you for the color. Mark, my question for you is, obviously, you've given us a three-year look. I'm trying to understand what that $600 million, 2.6 BCF a day means for the long term. Obviously, you've got optionality, but I'm thinking specifically about when you get to the 2.6, do you continue to build at that point, or is the $600 million a kind of adjusting time that you're no longer building inventory at that stage? I know it's three years out, but I'm just trying to understand how we should think about the longevity of 2.6 and $600 million of sustaining capital.

Mark Scucchi (EVP and CFO)

Sure. Good morning, Doug. I think at a high level, as we mentioned during the scripted portion of our opening remarks, the way we think about growth is still preserving those fundamental aspects of the Range business that make it unique and so powerful and so durable.

That is the low full-cycle reinvestment rate and the low call on cash flow, basically. As we've laid out in the materials, holding that 2.6 BCFE per day at $570 million in D&C, $570-$600 million, that is a maintenance level. What it means is that Range could shift back to a maintenance mode for whatever time period that's appropriate and generate substantial cash flow, while at the same time, we could be responsive to market demand. The point being is I tried to describe it in a modular fashion. We can add growth as it's called for in-basin without changes in the decline rate to the business, the production decline rate.

We can do it without changing our full-cycle cost structure. Growth can just generate incremental cash flow. That is the objective without altering the risk profile of the business. As we think about it, that is just meant to show what we're preserving, that annuity-type business is still there. Growth just is a step up. You can think about it as a one-time event, but you can do that as many times as the market dictates.

That's a prudent reinvestment for the company and step it up for in-basin demand, be it Liberty, be it Homer City, and similar in-basin projects, or using capacity that goes underutilized by others in the basin. Range is a value business. It's a growth business. It's an annuity. It can adapt and be all of those things at the same time.

Douglas Leggate (Senior Managing Director and Senior Research Analyst)

Appreciate the answers, guys. Thanks so much.

Mark Scucchi (EVP and CFO)

Thank you.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Roger Read with Wells Fargo Securities. Your line is open. Please go ahead.

Roger Read (Senior Energy Analyst)

Yeah. Thank you. Good morning.

Jake Roberts (Director in Research Division)

Morning, Doug.

Roger Read (Senior Energy Analyst)

Maybe your last comment there on Homer City, if you could kind of expand on what exactly are we looking at there, timing, expansion possibilities over time, all of that good stuff.

Mark Scucchi (EVP and CFO)

You bet. Good morning, Roger. I think at this point, there's still, I'll just say it's a little early on what that's going to fully materialize to look like. What we do know is that the project is moving forward. There's a lot of opportunity there just given the brownfield nature of repurposing that particular facility timelines.

Your information is probably about as good as ours at this point in time, but it looks like they're targeting a couple of years out, so sometime in 2027. The benefit of being able to utilize a brownfield facility. Of course, supply into that facility is still going to have to further materialize. You're seeing voices from local trade unions talk about the ability to put folks from Appalachia to work in helping construct that facility. That brings us a lot of excitement as well, all pointing in the right direction of that generating power and energy in the area that companies like Range and others could participate in. Very encouraging from what we're seeing so far.

Roger Read (Senior Energy Analyst)

Yeah. It feels like in-basin development's a lot better than trying to depend on another state to allow a pipeline anyway. My follow-up question goes back to some of the intro discussions about using the e-fracs, the 660,000 feet that you would assuming the same level of performance in 2025 as you achieved or had delivered in 2024.

Since we've continually seen improvements in productivity and efficiency, I was just curious, is that the budget, or is that just to be illustrative of what's going on? In other words, I would generally assume you'll do better in 2025 than 2024. If that's the case, then what does that imply for either reducing the amount of frac needs or building sort of resiliency within your production, potential upside for 2026, 2027 as we think about it?

Dennis Degner (CEO and President)

Yeah. Good question, Roger. I'll use the last couple of years as a proxy and start maybe on the efficiency side and end on the capital. When we think about the efficiencies the team's been able to capture, I think over the last couple of years, the result has generated the possibility of pulling a whole pad of completions out of the beginning of one year into the very end of the one you're executing.

That meaning there's always that opportunity through those efficiencies to further see the queue of wells continue to come your direction. When you're running a lean single-frac crew type operation, you want to capture those kind of opportunities, as you said, to kind of think about how you would then shape your production profile.

I think that's part of the reason why you've seen a shallowing also of our production as it's flattened over the course of time when we've talked about it being maintenance versus maybe a little bit more of a sine wave type character maybe three, four years ago. The budget is the budget. We think we can execute this program this year and in future years for $650 million-$700 million with that single frac crew.

As we start to then think about improvements in efficiencies or utilization of that incremental turn-in-line footage or drilled uncompleted footage that we're generating through the drilling rig side, you really start to see an allocation of the capital head the other direction more focused to the completion side. Again, building upon those efficiencies, we'll factor that into our capital guide going forward. Again, we believe we can do this for that $650 million-$700 million. Simply put, we've got good options. The team continues to execute. It really feels like it sets us up for how we think about that radical production growth in 2026 and 2027.

Roger Read (Senior Energy Analyst)

Appreciate the explanation. I'll turn it back.

Dennis Degner (CEO and President)

Thanks, Roger.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Kevin MacCurdy with Pickering Energy Partners. Your line is open. Please go ahead.

Kevin MacCurdy (Managing Director)

Hey, good morning. My question is on M&A. There was a little bit of M&A recently in Central PA, not too far from your footprint. I'm just curious if any of the dynaMikes we've seen in the gas market with higher prices and the data center potential, has any of that changed your view on M&A and consolidation in Appalachia or even outside the basin? Just one question for me. Thanks.

Mark Scucchi (EVP and CFO)

Sure. I'll kick this one off, and then Dennis will address it. I think the shortest answer to your question is our view on M&A really hasn't changed. The fundamental dynaMikes, the framework that we are applying is really rooted in the quality and duration of our inventory.

As we've said in the past, given the very high quality, long life of our inventory, to fold something in that's of equal quality that can compete for capital day one, be additive, make Range bigger but better, there's a very short list of opportunities, certainly at a price that would make sense to fold in and change the company for the better. Simplistically, growth for growth's sake, we don't see that as a primary driving factor.

Range has the scale to obtain services at the most competitive levels, both in terms of price and quality, as well as access to pipelines, infrastructure, as well as our long-term customer contracts and our customer roster both domestically and internationally. The hurdle for M&A is it's a pretty high bar for Range. In the absolute, at the highest level for the industry, we think this has certainly been beneficial for the economic capital allocations and investment decisions overall for the industry.

We are happy to see that. We certainly study the dynaMikes in-basin, which brings me to the second part of your question about looking outside of basin. Range's expertise is in the Appalachian Basin. It's in the Marcellus in and around our footprint. That's where we maintain our focus technically. It's in and around the basin. Obviously, from a business perspective, we look across the U.S. and internationally since 90% of our revenue is outside the basin. From an operational standpoint, our focus is in-basin.

Kevin MacCurdy (Managing Director)

Great. Thank you, guys.

Mark Scucchi (EVP and CFO)

Thank you.

Operator (participant)

Thank you. One moment for our next question. Our next question is going to come from the line of Kalei Akamine with Bank of America. Your line is open. Please go ahead.

Kalei Akamine (Analyst)

Hey. Good morning, guys. This question is on the near-term gas macro. We're noticing that our pricing has definitely declined over the last several weeks, and that's correlated with a lot of assets in this market. Some guys are trying to figure out how much is financial versus maybe a true fundamental move. I'll also note that East and Midwest markets have also come down. I guess the question is, can you kind of characterize the move that you're seeing in hub and how you see basis performing over the next several months?

Dennis Degner (CEO and President)

Yeah. I'll start off this morning here. I think when you start to kind of attack the financial versus the fundamentals, if you will, it looks like the fundamentals are still intact from what we see. I think when you look at activity levels that I'll back up to January. I think one of the thoughts was with pricing in 2026 and 2027, you'd start to see an increase in activity in other basins that just really hasn't happened. You've seen Plaquemines as an example. The LNG offtake there has ramped up quicker. Clearly, I know that all of you are close to that story, but that's ramped up quicker than projections had forecast.

By the time you start to think about just power demand, storage levels that became renormalized over the winter months here, we are now at a within the five-year average or a slight deficit to that level. It really sets up an outlook this fall where you could see some tightness in storage levels because the supply just has not really come online, if you will, to help backfill that void.

Lastly, just given where the outlook is maybe for the Permian producers, there could be some pressure there to change the forecast and outlook of what kind of activity levels are taking place. It certainly feels like the fundamentals in our mind are still there for some tightness in storage levels by the time you get to the fall season, provides a really constructive setup as you start to get into 2026 and 2027.

We think it aligns with emerging demand and also what our three-year outlook has been constructed around. In the event that you see some dynaMikes in the real aspects of this and demand changes a little bit, it's no different than the place Range has been for the past four years.

We feel like the lower reinvestment rate of our asset base, coupled with how we see the dynaMikes of the other markets, our ability to export our NGLs, that all is a good complement to how we see still staying on track with the financial objectives you've heard Mark talk and walk through on a quarter-by-quarter basis. It does feel like the fundamentals are still there in our mind. There's some patience here to see this start to further get clarity.

Kalei Akamine (Analyst)

That's great. That's very helpful, Dennis. Thank you. This next one is maybe more housekeeping. There is a bond that's maturing in May, $600 million. Bond markets have been quite volatile recently. What are your latest thoughts on addressing that maturity?

Mark Scucchi (EVP and CFO)

I think it's going to be pretty simple. We'll just use cash on hand, and a small draw on the revolver can take care of that. We can evaluate any refinancing needs later in the year. The trend in our debt's been a good one. You can expect us to continue to balance our allocation of cash flow between returns of capital shareholders and continuing to optimize the balance sheet just on an opportunistic basis. Cash and a revolver draw will take care of it.

Kalei Akamine (Analyst)

Thanks, Mark. Appreciate it.

Mark Scucchi (EVP and CFO)

Thank you.

Operator (participant)

Thank you. One moment for our next question. Our next question is going to come from the lineMichael Scialla with Stephens. Your line is open. Please go ahead.

Michael Scialla (Managing Director)

Good morning, guys. I wanted to ask a little bit more on the in-basin demand and data centers. Dennis, you mentioned with Homer City that getting repurposed, that there'd be some infrastructure needed to, I guess, get gas there. It got me thinking. Could you discuss what kind of infrastructure might be needed for any of these data centers if they do get built? And do you see that as a risk?

Dennis Degner (CEO and President)

Yeah. Good morning, Mike. I'll kind of start here. If we need to go further, I may punt over to Alan for some additional color. I think what we're seeing from projects like Homer City and also conversations around the Liberty and Imperial Land development, both of those, it appears that these sites are being built near either on a brownfield location or near or close proximity to existing infrastructure that you can tie into.

What we're seeing is, from a scoping perspective, short, we'll just say regional gathering jumper lines that would get you from a pipeline network, a diverse pipeline network at that, to provide that source reliability into those facilities for power generation. The locations of these is what's also making them really ideal. If you think about the Imperial facility as an example, that's going to be right on top of our producing assets where essentially we've got the 2 BCF equivalent of production that's flowing through a lot of that gathering system.

Not 100% flows in that area, but a large portion has access to that, would have access to that facility. It would just simply require a short jumper line. We're talking about single-digit miles, not long-distance haul, if you will. Proximity is going to be key and beneficial in this conversation. I think infrastructure is going to be more limited on the needs to get gas to those facilities and probably just more general construction on the site themselves.

Michael Scialla (Managing Director)

Is that something that you view as a significant regulatory risk in getting approval for some of these kind of things to get built?

Dennis Degner (CEO and President)

Good question. I guess I would take a step back and maybe address regulatory risk from a different angle. I think there's a real willingness from the state to support these kind of projects. Clearly, there's been language around the importance of growing the economy from the state level, the importance of adding incremental jobs. We think those are all positive signs.

Again, if you look back to the summer of 2024 when the last state budget was approved, as a portion of that budget, there was $400 million earmarked for what's called a SITES Act to support site identification, readiness, and preparation to, in our mind, truncate the timeframe when an industrial application is going to move into the region to help get it erected and in service. We think those are all positive signs that there will be regulatory support in order to put these facilities into service. Yeah, we're really optimistic that this is going to be a positive movement in the basin.

Michael Scialla (Managing Director)

Thanks, Dennis. Appreciate the detail.

Dennis Degner (CEO and President)

You bet. Thanks, Mike.

Operator (participant)

Thank you. One moment as we move to our next question. Our next question comes from the line of John Ennis with Texas Capital. Your line is open. Please go ahead.

John Ennis (Vice President and Equity Research Analyst)

Hey. Good morning, guys. Thanks for taking my questions. For my first one, a couple of calls ago, you noted that it was a little early to see trends from compression and gathering expansions that went into effect last year. Could you provide some updated thoughts on the benefits you're seeing from the optimization of gathering and compression infrastructure?

Dennis Degner (CEO and President)

Yeah. Good morning, John. I'll leave this pretty high level because I think there's a couple of ways to talk about compression and infrastructure optimization. One is when you're looking at assets that you're truly optimizing that gathering system pressure, which we had some of that last year, that probably was somewhere in the neighborhood of a 20% kind of uplift to the year compared to the overall production ads for the year.

Depending upon time of year, it was a little bit less, but we saw that as really good, stable, flat production profile generation in that portion of our asset base. The other bulk of it, as you've heard us talk about, is really tied to system expansion and incremental capacity and flexibility that allows us to utilize the wet portions of our field. That's what you would see in line with infrastructure ads going forward.

We utilize, with our long lateral development, it allows us to utilize that infrastructure at a high, high level in excess of 90%, not only today, but really for the go forward for the next several years. The projects you're going to hear us talk about more going forward will be more in line with more system expansions as part of that optimization and probably less about the lowering of just system line pressures.

John Ennis (Vice President and Equity Research Analyst)

Great color. For my follow-up, you mentioned you just recontracted your , but I wanted to ask how you view a potential slowdown in oil-directed activity potentially occurring to the benefit of you and others in Appalachia just in terms of service costs.

Mark Scucchi (EVP and CFO)

I think when you we had contracted this e-fleet to start at the beginning of last year. Though it's difficult to say you're "at the bottom of the market," it certainly felt like we were nearing a portion that was at the base of the trough. We feel like securing this equipment was helpful for the next few years, and it maintains a good consistent cost structure for us going forward. It's efficient. We've had some of our strongest efficiencies and safe performance out of this particular fleet. We think it checks a lot of the boxes.

When you think about an e-fleet, there's really been a high, high level of utilization of those equipment or those-fleets. Essentially, e-fleets are running around 100% utilization. Fleet availability would most likely come through your more traditional conventional fleets, which we have used from time to time when we look at utilizing a spot crew and what's most available and economic for the program.

We'd rule that out as providing some conversation for future service costs. I think on the drilling rig side, I mean, we throw around the term as an industry super-spec rig, but that also has some optionality and flexibility around it, whether it's super-spec for the Permian versus the Haynesville versus us. The reality is, we've all coalesced to a very similar rig configuration. I think it's created an environment where you've also seen similar pricing structures, if you will.

We think service providers have aligned closely with the operators in the respective basins that are efficient to do what they say they're going to do. That is one of the reasons why you've seen our cost structure be as low as it has been over the past few years. We'll continue to be sensitive to what changes occur through our purchasing and supply chain efforts. If there's an opportunity to further secure cost savings, we'll absolutely be on the front of that discussion.

John Ennis (Vice President and Equity Research Analyst)

Thanks, guys.

Mark Scucchi (EVP and CFO)

Thank you, John.

Operator (participant)

Thank you. One moment for our next question. Our next question is going to come from the line of Paul Diamond with Citi. Your line is open. Please go ahead.

Paul Diamond (Equity Research Analyst)

Thank you. Good morning, all. Thanks for taking the call. Just a quick one, just digging down a bit more on the Liberty Alliance. Do you guys see any further concrete opportunities being discussed out there? I guess kind of just trying to get an idea of the scope of the entire opportunity set beyond this that already having been announced.

Dennis Degner (CEO and President)

Yeah. Good morning, Paul. Short answer is yes. Leading up to the Liberty and Imperial Land development announcement, and now even, I'll just say post that announcement, there's been a number of ongoing conversations and really inbound phone calls to Range around how we could participate in other projects just like this.

Of course, you've heard us say this, but we think it really ties back to not only the quality of our asset base, but really the duration of our inventory that could support a facility like this. We realize that these are multi-decade financial decisions that these other entities are making. It makes a lot of sense to be able to connect with a company like Range being on the low emissions end of the emissions profile as well. We have had a number of conversations.

I think it's still kind of in the early category of what else will further materialize. We think there's an opportunity for, as you see, other coal retirements, further brownfield site utilization in the future, looking for areas of concentration where you've got access to things like water, ingress and egress, diversity in the pipeline network. We think all of that lends itself to looking at Southwest PA and Appalachia.

More conversations are being had. We'll see what further materializes. Again, as we think about the long-term outlook, 80% of our gas gets out of basin. As you've heard Mark touch on, 90% of our revenue comes from outside the basin as well. We feel like we're set up in a very well-diverse takeaway environment, both from product and transport. If further in-basin demand materializes, which we think it's very likely, we're poised and ready to participate when needed.

Paul Diamond (Equity Research Analyst)

Makes perfect sense. Appreciate the clarity. Just one quick follow-up. You talked about, obviously, a moving target, but with inflationary pressures, potentially post-contract, potentially rolling back in in 2026. I guess, is that purely on steel and piping or tubing? Or where would you see kind of the first entry there, if it were, to come back and say Q1, Q2 next year?

Dennis Degner (CEO and President)

If you were to look at tubular goods as an example, we've always worked really closely with our service providers on that side in the mills to secure tubular goods for our program ahead of time when we find really opportunistic moments in the market.

I would expect that to be similar as we look forward. As you think about this year, we've got somewhere in the neighborhood of about 80% of our tubular goods secured for the program, an approximate number, of course, but very much covered our basis for the year, if you will. I think on an annual basis, you'll see us work through a service RFP. We do it every fall. We align it with our activity level, how we're thinking about number of rigs, number of frac crews, spot crew availability.

All of that will roll up into an annual fall process that will then align with 2026 rigs as well. When there is alignment and opportunity for us to continue to secure good, safe, efficient services and materials for 2026, and sometimes even beyond, we will certainly look to do so. We would expect early this fall process to generate a lot of visibility on what changes in service costs could exist or materials.

Paul Diamond (Equity Research Analyst)

Understood. Appreciate the time. We'll leave it there.

Dennis Degner (CEO and President)

Yeah. Thank you.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from the line of Neil Mehta with Goldman Sachs. Your line is open. Please go ahead.

Neel Mehta (VP)

Yeah. Good morning, team. First question is just really around the hedging strategy. How do you think about the way you're going to approach 2026? Do you want to be opportunistic, or do you want to take a more radical strategy? We've seen a lot of volatility around the 2026 price points. Your thoughts around hedging gas there?

Mark Scucchi (EVP and CFO)

Sure. This is Mark. Good morning, Neil. I think philosophically, I'll reiterate what our strategy has been and what we're able and desiring to do. The strategy, given how strong the balance sheet is today, is really to cover fixed costs and preserve that optionality of being able to step in, returns of capital or otherwise, to be opportunistic and protect the balance sheet, protect the margins.

To do that, what you've seen us be able to do is to scale back on some of the hedging. What you've seen us do for the balance of this year, we're around 35% hedged. The 2026 program is about 15% hedged. There's some swaptions that they're all executed. You're at about 25%. You've got better than a $4 floor on that. What we are striving to do is get an attractive price on a low percentage of the production to preserve what we see as still a tight market in the second half of this year and into 2026.

We are just not seeing the activity levels that would meet the demand that is under construction being commissioned right now. On a go forward basis, I would expect that from Range, you can expect similar behavior. We will try to structure hedges to provide just enough insurance to protect from the downside, preserve optionality, preserve the balance sheet while retaining as much of the upside from the commodity prices as we possibly can.

Neel Mehta (VP)

Yeah. That's really helpful and consistent. The balance sheet's in good shape, team. Just your perspective on return of capital. We've seen a lot of volatility around the stock in the last month, for example. Does it make sense to be opportunistic and think about shrinking the share count here at some point? Do you still want to maintain that fortress balance sheet to withstand the volatility?

Mark Scucchi (EVP and CFO)

Yeah. I think we can do both. In the Q1, we pulled in 1.8 million shares. In total, Range has pulled in 28.6 million shares. What we did in the Q1 was more than we did in all of last year. I think you can see us execute on the high-level description of the program that we've laid out over the last couple of years. We have greater optionality as the balance sheet has gotten stronger.

We can continue to lean in as we see dislocations, like we've seen choppiness in the macro financial markets as the market has gone into a risk-off mode and selling everything. Range buying back shares, Range buying back production, buying back locations per share, approved reserves, and total resource potential per share at our share price is an incredibly valuable investment in our assessment. Expect us to continue to balance the use of cash flow, but you can see it tilting towards the returns of capital, while still accomplishing balance sheet objectives.

Neel Mehta (VP)

Okay. That's really helpful. Thanks, guys.

Mark Scucchi (EVP and CFO)

Thank you.

Operator (participant)

Thank you. We are nearing the end of today's conference, and we are going to take one more question. Our last question is going to come from the line of David Deckelbaum with TD Cowen. Your line is open. Please go ahead.

David Deckelbaum (Managing Director, Senior Analyst in Sustainability and Energy Transition)

Morning, gents. Thanks for the time today. I just wanted to revisit some of the strategy as you all think about the buildout of in-basin demand. You highlighted earlier, right, 20% of your gas is in-basin, 80% leaves. When we think about you looking at projects where you might be signing offtake, how do you think about balancing the exposure that you would have to in-basin demand or in-basin pricing with those current 20% volumes versus being incentivized to redirect volumes that are leaving the basin to stay in as it relates to potential contracts with projects that might be consuming significant amounts of natural gas?

Dennis Degner (CEO and President)

Yeah. Good question. Good morning, David. As we start to think about 20 years ago, we referenced the discovery well and the Marcellus. What occurred also in those first several years was Range starting to subscribe to transport, as you would imagine, in smaller modular packages at that time that were in brownfield pipes that were getting to the Gulf and other parts of the Lower 48.

Those packages, over the course of time, will have the ability to expire. We've got advantaged rights to basically renew those particular pieces of transport if we still want to keep those longer term. So we feel like it's setting us up for good optionality. When you think about the timeframe that it will take in order to identify a location for, let's just say, a data center or a manufacturing facility to go into play, we not only would have the gas to help supply energy for one of those today with that 20% that you're pointing out, but we can start to think strategically about, is there another thoughtful wedge of growth in the future? We want to maintain that transport.

Or do we want to let that transport expire in the future and then take more of that gas and put it into a dedicated long-term price structure that, in some ways, might change the way we think about hedging, which you've heard Mark walk through this morning. A lot of options we think that could present themselves. Instead of having to think about letting pipes go underutilized, we think we could time this out in an appropriate fashion. There's a lot of ways for Range to win.

David Deckelbaum (Managing Director, Senior Analyst in Sustainability and Energy Transition)

I appreciate that. Perhaps just as a follow-up, you all highlight a number of upside cases, I think, on slide 20 for in-basin demand related to gas power, coal plant retirements, etc. As you think about these through 2030, what is your view on the likelihood or timing of these projects? If it is sort of the 2028 to 2023 timeframe, when do you think that we would see, at least from Range, the largest cluster of announcements around potential agreements to address some of that demand? Or is this still a very iterative process that is likely going to be a multi-year approach?

Mark Scucchi (EVP and CFO)

I think, David, somewhere in the middle. I think there's line of sight on some of on several of the items here where there's some, I'll just say, some definition to timelines. Coal retirements is a good example where those retirement timelines, I think, are well understood. We've got roughly the almost 1 to 1.8 of retirements by 2030. Reality is there's a significant portion of that that's going to be within the next 12 to 24 months. Again, we think those are pretty well understood.

When you start to think about AI data centers, Homer City, the Liberty Project, those are both targeting a 2027-type timeframe. Projects that follow, again, if they have an advantage location, much like we're seeing, could be supported through the SITES Act with the state, you could see those have a similar timeline, maybe even a little bit farther out.

By the time you get to the end of this timeframe, we think this is, in a lot of ways, it could be conservative, but it's also a very realistic outlook, much like other numbers you've seen us communicate in the past. Of course, from a takeaway transport standpoint, I think part of this is what you see is the further expansion of MVP. I think there's line of sight there as well.

Then you're starting to see some brownfield expansion opportunities through, we'll just say, construction of expansions of interconnects to compression where that could actually add somewhere between a half and a B and a B. There's, I'll say, good confidence in what these numbers represent. I think you're seeing what could happen pretty easily within the next two to five years. We think there's really good line of sight here, David.

David Deckelbaum (Managing Director, Senior Analyst in Sustainability and Energy Transition)

Appreciate the time, guys.

Mark Scucchi (EVP and CFO)

Thank you.

Operator (participant)

Thank you. This concludes today's question and answer session. I would like to turn the call back over to Mr. Degner for his closing remarks.

Dennis Degner (CEO and President)

I'd just like to thank everyone for joining us on the call this morning. We look forward to talking about our Q2 results this summer in July. If you've got any follow-up questions, please follow up with our investor relations team. We look forward to connecting with a lot of you on the road here in the months ahead. Thank you.

Operator (participant)

Thank you for participating in today's conference. You may now disconnect. Everyone, have a great day.