RRC - NYSE

Welcome to the Range Resources Second Quarter 2025 Earnings Conference Call. Statements made during this conference call are not historical facts or 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 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, Senior 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 2025 Earnings Call. With me on the call today are Dennis Degner, Chief Executive 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 may reference certain slides on the call this morning. You will 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 EBITDAX, cash margins and other non-GAAP measures. With that, I'll turn the call over to Dennis.

Thanks, Laith , and thanks to all of you for joining the call today. Before Mark and I provide an update on Range's business, I'd like to start today's call by expressing our deepest sympathy to all of those impacted during the recent flooding in Texas. As we continue to gather information from this tragedy, we see just how close to home this has become for many of us at Range and for many of you on this call. Our hearts go out to the families and communities impacted during this time and know that we will keep you in our thoughts. As we shift over to Range's business, this year is off to a great start with another quarter of consistent well performance and efficiency gains driving strong free cash flow. Shareholder returns and building operational momentum to support Range's 3-year outlook. Range has previously announced growth plans of approximately 20% through 2027 have near-term line of sight to growing demand for natural gas and NGLs. At the same time, our plans are positioning Range to benefit from additional in-basin demand opportunities that are continuing to materialize. Just last week, in Pennsylvania, we joined the President, Senator McCormick, a bipartisan group of government officials and leaders from the largest tech, construction, financial and energy companies. In total, over $90 billion in new AI, power and infrastructure investments were announced, all in Pennsylvania. These projects represent the future, one that will require a substantial increase in regional electric demand, positioning Pennsylvania natural gas to be a cornerstone that will power the AI revolution. We believe Range is incredibly well positioned to support these initiatives, being one of the few producers in Appalachia with sufficient high-quality inventory to support the required long-term durable supply of natural gas. More near term, our consistent well results and countercyclical investments in drilled inventory over the last 18 months are allowing Range to very efficiently deliver a wedge of growth into this increasing demand. And importantly, we intend to deliver that growth while maintaining a disciplined reinvestment rate that allows for significant returns to shareholders at the same time. A key component of Range's business that allows growth and shareholder returns through cycles is Range's low capital intensity, which is anchored by our class-leading drilling and completion costs, shallow base decline, large blocky core inventory and talented team. And we believe this was on display once again during the quarter. Diving into Q2, 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've communicated. All-in capital came in at $154 million, while generating production of 2.2 Bcf equivalent per day as we turn to sales approximately 156,000 lateral feet across 12 wells. Year-to-date capital is tracking better than planned. Our year-to-date savings from efficiencies reflect the benefit of returning to pad sites for ongoing development and the team's dedication to continued improvement. I'll touch on a few of the operational highlights driving this in just a moment. We have invested approximately $300 million in development and land capital in the first half of the year versus our full year budget of $650 million to $690 million. As a result, we are lowering the high end of our capital guidance to $680 million without altering our planned operational activity. For production, we expect continued strong performance in the field will drive annual production above our prior guidance, with outperformance weighted towards the fourth quarter as we bring in a spot completion crew later this year to complete two pad sites. We are expecting production to be roughly flat in the third quarter at 2.2 Bcf equivalent per day and then stepping up to approximately 2.3 Bcf equivalent per day in the fourth quarter, demonstrating progress towards the planned growth we have discussed for 2026 and beyond and aligning with an expected steady improvement in natural gas fundamentals. Consistent with prior quarters, Range operated two horizontal rigs during the second quarter, drilling approximately 284,000 lateral feet across 20 laterals, averaging over 14,200 feet per well. This adds to Range's planned drilled uncompleted inventory and places us on track to exit 2025 with more than 400,000 lateral feet of growth-focused inventory, supporting our 3-year outlook. Building on the momentum from earlier this year, our operations team set new Range quarterly drilling and completions records. To start, our drilling team set another program record by averaging approximately 6,250 lateral feet per day. This achievement occurred while maintaining precision within an exceptionally narrow geosteered landing target window, underscoring Range's capability to drill our longest, fastest and most accurately placed wells to date. On the completion side, the team executed 812 frac stages, setting a new company record for the most stages pumped by a single crew in a quarter, a 7% increase over the previous record. To achieve this level of completion efficiencies clearly takes planning across multiple departments for water operations and logistics, and the team continues to impress, all while keeping lease operating expense at just $0.11 per mcfe for the quarter. This type of drilling and completions efficiency puts us in great shape for 2025, while also setting up the 3-year outlook we've communicated. I'd like to congratulate our team on the new milestones set during the quarter. Before moving on to marketing, I'll briefly touch on supply chain. The strength of Range's long-term service partnerships and the contractual agreements that are in place for the remainder of the year support the improved capital numbers I've highlighted. These agreements cover the majority of our 2025 spend, including drilling rigs, hydraulic fracturing services, proppant, tubular goods and diesel fuel. Looking towards 2026, Range is preparing to launch our annual RFP for services in the months ahead, seeking to secure go-forward service pricing. And while it is early to talk specifics on 2026, we expect Range will continue to be in a leading position on well cost and capital efficiency with the low required reinvestment rate that you've come to expect from us. Now turning to marketing and the macro. Natural gas inventory finished the quarter at approximately 3 Tcf, down 6% from the prior year and supported by record high LNG feedgas, which reached over 17 Bcf per day in the second quarter. From a combination of added U.S. LNG exports and pipeline expansions to Mexico, the U.S. natural gas market is expected to add 8.5 Bcf per day of new demand over the next 18 months, which we believe to be supportive of near-term natural gas fundamentals. For liquids, during the second quarter, we directed LPG barrels to the international export market in order to capitalize on continued favorable pricing dynamics. For context, Range's LPG export volumes are currently under contracts with international pricing upside or a fixed premium to the Mont Belvieu index. This structure enhances our ability to capture consistent premium pricing throughout the year and reinforces Range's competitive positioning. In addition, our advantaged East Coast export capability continues to differentiate Range as a preferred NGL supplier to European markets relative to U.S. Gulf Coast-based peers. Range's combined flexibility, reliability and responsiveness to market dynamics delivered solid results with a premium to the index of $0.61 per barrel. And accordingly, we have again improved the full year guidance for our expected NGL premium. Stepping back and looking at the broader landscape for liquids, U.S. NGL exports continue to outperform with U.S. waterborne ethane exports increasing by 5% to 475,000 barrels per day, while propane exports also increased by 5% to 1.8 million barrels per day versus the second quarter last year. Looking ahead, U.S. NGL exports are expected to ramp significantly as terminal capacity is expanding, some of which is starting up as we speak. U.S. ethane and LPG export capacity are expected to grow by approximately 425,000 barrels per day over the next 18 months, helping to support near-term fundamentals. Before handing over to Mark, I wanted to share highlights from our recent corporate sustainability report. We believe the natural gas produced in Pennsylvania offers both economic and environmental advantages. This year, we're proud to have achieved net zero for Range's combined Scope 1 and 2 greenhouse gas emissions, accomplished through a combination of direct emissions reductions and the use of verified carbon offsets. And this commitment can be seen in our 83% reduction in methane's emissions intensity over the last five years. In addition, we expanded our MIQ certification to cover all of our Pennsylvania assets and once again earned an A grade, the highest distinction available. We are proud of these accomplishments, and our team remains focused and motivated to continue our efforts as an industry leader. Now as much as ever, we believe the future of natural gas and NGLs is strong with significant demand coming in the near and medium term, both globally and within Appalachia. Range is poised to help meet this future demand while creating outsized value for shareholders with the strongest financial position in company history, a large contiguous inventory measured in decades and a proven track record of delivering through-cycle returns of capital while investing in the long-term success and optionality of the business. I'll now turn it over to Mark to discuss the financials.

Thanks, Dennis. With the first half of 2025 behind us, the year is unfolding as a success, both operationally and financially. Our 2025 operational plan is focused on disciplined development of our asset while capturing additional future value from growing demand. This plan was designed to deliver both value from future growth and to deliver returns to shareholders today. So let's dive right into what Range has already delivered to stakeholders in 2025. In the second quarter, we repurchased $53 million in shares, bringing the first half of the year total to $120 million. We paid $21 million in dividends in the quarter, bringing year-to-date total to $43 million. We also repaid maturing senior notes totaling $606 million using cash on hand and a modest [indiscernible]. In aggregate, this brings year-to-date enterprise value returned to equity holders to $646 million, roughly 7% of Range's market cap in just the first 2 quarters. These numbers are in the financials. So why am I calling them out now? It's because they warrant attention. These are tangible results delivered to shareholders, and they are results indicative of where Range can take the business as natural gas prices respond to rising domestic and international demand. With a strong balance sheet, less than 1x levered, Range's ability to return capital and pursue investments in the business is not deferred by balance sheet needs, but are being carefully evaluated and opportunistically executed. In other words, Range is delivering on the industry's promise of future returns today while still investing for tomorrow. Financial results rely on safe, efficient operations, and the Range team executed another successful quarter, delivering planned production on budget. In fact, drilling and completions activity and well performance are trending better than planned, such that we have improved our capital budget and production guidance for the year. This improved guidance continues to support our multiyear plan of capturing growing demand. Recall that this year's budget includes incremental investments enabling carefully staged growth through 2027 with capital at less than $700 million per year and achieving production of 2.6 Bcfe per day. Further, we estimated that Range can maintain 2.6 Bcfe per day of production for less than $600 million of annual drilling and completion capital or approximately $0.60 per Mcfe. Simply put, the goal of efficient production growth, which we expect to be augmented by a declining share count is growth in cash flow per share. Let's put this cash flow in perspective. Forward natural gas prices for the next couple of years are above $4, closer to the marginal cost of supply. So let's use a likely conservative $3.75 natural gas price over the 3-year period through 2027. Free cash flow should total in excess of $2 billion, equal to nearly 1/4 of Range's current market cap. Alternatively, cash flow in this scenario could repay all debt and still acquire a significant percentage of Range's shares outstanding. The objective is simple: drive per share value through the compounding effects of prudently growing the business while reducing share count. This goal is underpinned by a strong balance sheet that allows optionality in capital returns and reinvestment. Combine this with the long duration of our inventory, and we believe the Range story represents a unique value. Given the level of Range's expected cash flow generation, and changes to tax rules within recently passed legislation, it's worth a quick update on how the effective tax rate unfolds over the next few years. We anticipate Range becoming a full cash taxpayer one year later than before, due to updated depreciation and R&D expense rules. As a result, we expect the effective cash tax rate for 2025 will be in the low single digit. 2026 will likely be mid-single digits. 2027 should be high single digits and in 2028, full cash taxpayer with rate in the mid- to high teens. These estimates are a significant improvement from prior estimates of after-tax cash flow through 2027. Moving from Range specific matters to the broader market backdrop, recently announced large-scale power and AI or other data center supply deals, both in and out of basin speak to the fundamental tailwinds to the gas macro and the potential for incremental value creation through pricing and marketing. These deals should serve to improve pricing dynamics for all producers over time. However, the companies that will benefit the most are those with the ability to offer counterparties the scale to sign large supply agreements, the inventory quality and duration to deliver gas through cycles and over the long term, the infrastructure to reach numerous outlets, the creativity to structure win-win deals and the execution track record to attract high-quality partners. Long-term surety of supply is once again front of mind in the global gas market with domestic infrastructure investments needing to be paired with dependable supply. Range is among a small group of companies well positioned to provide the markets required surety supply long-term. That position should allow us to capitalize on our strategic advantages and ultimately produce positively differentiated margins, greater free cash flow and superior shareholder returns. In summary, Range is in a strong position to continue capitalizing on strategic advantages across several key areas, maintaining superior full-cycle margins through operational efficiency, delivering strong capital returns to shareholders, and exploring new business opportunities that position us for long-term growth in the evolving energy market. As the natural gas market continues to evolve, Range will remain nimble, responsive to market signals, and focused on creating sustainable value for our shareholders. We're excited about the opportunities ahead and remain confident that our strategy will continue to deliver superior financial and operational performance. Dennis, back to you.

Thanks, Mark. The first half of the year results for Range reflect a consistent theme communicated earlier this year and throughout prior quarters. Strong operational performance against our stated multiyear plan. Consistent free cash flow generation and prudent allocation of that cash flow, balancing returns of capital, balance sheet strength and the optimal development of our world-class asset base. You've heard us state this before, but we continue to believe the results communicated today showcase that Range's business is in the best place in company history, having derisked the high-quality inventory measured in decades and translated that into a business capable of generating significant free cash flow through cycles. With that, let's open the line for questions.

[Operator Instructions] And our first question comes from Doug Leggate with Wolfe Research.

So Dennis, obviously, a lot of news in your backyard regarding supply agreements. And you've been very vocal about the potential market opportunity. So far, I think you were actually the first to talk about it. But so far, Range hasn't participated. So I wonder if you could offer any line of sight on where you stand on supply deals? And I guess, address perhaps what we're hearing back at least is the biggest worry of the regional market, which is the market gets oversupplied because everyone adds production and ends up killing the regional basis. How do you think about managing the cadence of supply agreements versus adding production? And I've got a quick follow-up, please.

You're right. We were one of the first to make an announcement during this past spring with our relationship and commitment to supply fuel gas into power generation between Imperial Land Development and also Imperial. Understanding from conversations that we've had ongoing with them is that there's been a significant amount of interest for subscribing to that end use that will come out of that facility development. So certainly a very dynamic space right now when you -- as you point out, look at all the announcements made just within the past week or two. So we would expect that to continue to mature and for an end user to step into that commitment that we communicated again this past spring. From a supply standpoint, we think there's the ability for that facility to grow even beyond what's been communicated in prior releases. But for at least as it stands today, we feel pretty confident that something is going to come together here in the near term, that we can talk further about. As I take a step back and think about two things: one, the broader picture of last week and the $90 billion in commitments that have been announced and the 1.5 Bcf a day that others will supply at least here from those announcements, it still represents a really large opportunity set. And I think by the time you get to the end of the decade, it's starting to narrow in on something that's closer to 4 Bcf to 5 Bcf per day opportunity for a lot of the producers in the region. And so when I think about who can supply that gas, it really points pretty heavily toward a producer like Range. And I think it starts with really a couple of components. One, we hear from the end users how important it is to address the 99.999% of reliability. And that comes with not only the inventory quality but the ability to execute on what you say you're going to do. And I hope that both from your lens and from others that are on this call, each quarter rate has just demonstrated a good quality, consistent ability to execute, meet expectations, in many cases, beat from an efficiency standpoint and deliver the supply. Inventory quality has clearly always been a cornerstone of our story as well. And I think that goes without saying when you look at our ability to meet production expectations and guidance again year-over-year. And then lastly, when you look at the diversification of our marketing portfolio and how we can move gas regionally, let's just say, not necessarily always out of basin, but our ability to tap into outlets regionally we think that, that also supports that 99.999% of reliability. So in our mind, it makes a lot of sense to connect with an organization like Range to help supply that future demand. And then I think lastly, we think inventory exhaustion is going to play a part. And we've talked about resource exhaustion in prior discussions with many of you. But ultimately, we think that's going to play a part as you start to get to the end of this decade and get closer to it when you see these power forecasts continuing to ramp up and get stronger and stronger. So when you ask the question about oversupply in the basin, I think ultimately, it's going to come down to the inventory quality, the ability for others to produce into that capacity and it starts to get challenged with other names other than probably Range and a couple of others.

I appreciate the answer. There's a lot of moving parts. And obviously, it's still early days. But yes, we're -- the 30-year inventory you talk about is going to differentiate for sure. And it really gets to my follow-on question, which is when, if at all, does Range start thinking about adding capital? And if I could frame the question a little bit, Mark pointed out $2 billion of free cash flow over the next three years. Well, if I average that and annuitize it simply put, you get your market cap. So as opposed to thinking about it, $2 billion is x percent of your market cap, annuitizing that run rate is your market cap on a DCF basis. So growth needs to be part of the story. And I guess my question is, when do you think or do you need to add activity to support longer-term growth beyond the two rig one frac you have currently? I'll leave it there, please.

Doug, maybe I'll kick that off just from the financial conceptual aspect of valuation and how we're thinking about that cash flow and then how to translate that into per share value. And I think that's the key. I kind of touched on that during the opening comments. You're right, the number over the next couple of years in this illustrative example we gave $3.75 type prices well over $2 billion, something really closer to $2.5 billion cumulative free cash flow over a 3-year period. But I think the key point there is that's talking just in the absolute for the corporation. The use of that cash flow and the growth in that cash flow is the point you're making, how we drive and monetize that 30 years of inventory. But I think the other piece of it is what really matters is the per share price and per share value. So as we're shrinking the share count and buying back in shares and driving growth, you're getting a twisting effect, a compounding effect of the value. So to your point, absolutely, run an annuity evaluation model just at that $2 billion, $2.5 billion, you get something equal to today, except that both of those variables are moving and improving for shareholders. So as we think about what that translates into beyond the 3-year plan we've given, and really, it ties into the first question you asked to Dennis as well about oversupply. Growth is being driven based on the call on supply, on the call on gas. Something we've said for a couple of years is growth will come when it's appropriate, at least for Range. And when we have clear line of sight deliverability to that incremental demand. With Range's inventory, we can and will fully expect to deliver to both in-basin demand growth, be it power, be it data centers, be it industrial, as well as through our long-haul transport that we have today, potentially more we can do it through transport that we can take on that others are having to give up. We can sell to customers through their transport just as we do today. So the story about growth, and I want to be careful on how I frame that, in that the industry, I believe -- I can't speak for all of it, but we can read between lines and read commentary of our peers. I think everyone is being appropriate and economically sensitive in terms of how and when to bring on supply in response to demand. So to come back full circle. I think the risk of in-basin oversupply is mitigated by the fact that we're all focused on these discussions with specific projects and trying to match the cadence of our build- outs with that call on supply. And in terms of valuation for Range, as we think about how to maximize that and accelerate that value into our shares, it's seizing that growth as these opportunities become available to us, attractive growth opportunities with line of sight deliverability of the gas combined with our deploying that significant free cash flow back into shrinking share count is a twisting effect where the valuation per share and the market cap far exceeds what the annuity valuation would indicate today.

I appreciate the answer, Mark, and I would add that $3.75 is hopefully a conservative number.

Our next question comes from Scott Hanold with RBC.

If I could ask maybe a similar kind of question in a different way. When you think about the potential of 4 Bcf to 5 Bcf a day of in- basin demand over the next several years that could come online. And thinking that Range has got a plan to grow to 2.6 Bcf a day by 2027, what -- I guess, what is your logistical capacity, reasonable logistical capacity, not theoretical, but like how much of that 4 Bcf to 5 Bcf a day, do you think you can contribute? Could Range be say, 1 Bcf a day of that? Or could you be as much as 2 Bcf a day. And this is more so thinking over a longer-range time frame, say, just starting around 5 to 10 years.

Scott, I'll try and address that question. I think I'll start with what we've communicated on this 3-year outlook. And I think it's kind of a starter kit of what the business is capable of to grow 20%. So roughly, we're adding 400 million a day over the next -- really, if you think about it, the balance of the next 2 to 3 years. And so I think that's a good snapshot of what we can generate using almost a maintenance level type staff and rig activity in a single frac crew with some spot activity that's sprinkled in throughout the next 24 months. So when you ask what -- how much could we participate in, I think really the -- it's a little bit endless for us because of the inventory and our ability to absorb additional incremental activity within the current program as it sets. We can be nimble because of our ability to move back to pad sites with existing infrastructure for utilization for those ongoing development phases. And so for us, it's really a function of having that line of sight to where that demand is going to take shape and how we could then participate in it. So I hate to be -- I hate to give you a vague answer, but I think we can participate in this space at a very, very large volume because of the team inventory and our ability to be efficient with the utilization of our equipment.

So is it unreasonable to think over the next, say, decade plus, you guys have the ability or capability or maybe even position to, say, double your current production base?

I think that is very much an art of the possible. And again, I think it goes back to what you've seen from the current team and also the infrastructure that we have in inventory. So absolutely, that could be a scenario that could exist.

Okay. And as my follow-up question, I think Mark kind of inferred in some of his opening comments that some of these new counterparts with various power projects and data center projects have more of a bent of looking for partners with surety of supply and inventory, which obviously you all and as you have noted, a couple of others only have that ability. Is there anything else as you think if there are three, maybe four companies in Appalachia that can actually provide some of these longer-term supply contracts outside of just quality of and depth of inventory, what else are they looking for, right? How competitive is the pricing? And what kind of pricing dynamics are they looking for? And how do you look at the pricing dynamics as well?

Maybe I'll start this one off. It's a good question, and it's frankly just a touch early to give too many details before all of these contracts are nailed down the details of pricing term and so forth. But you've touched on all the key elements. Surety supply is, number one. Dennis mentioned it a minute ago. These data centers and whether it's data centers or a power plant or an industrial plant with on-site generation. I mean it's 99.999% reliability is what they want. So you got to have the inventory. And for Range, these types of contracts are nothing new. We have 15-plus year term deals with various customers. What is unique to Range is our experience in structuring deals that may be in-basins plus. But we've also structured deals that can work and capture value for both sides putting collars around pricing, identifying the risk factors. So think creatively, as we mentioned. If you think about what Range wants, if we're going to commit to a 15-year deal, we're in essence saying that, look, we're going to hold that portion of our production flat. So we're, in essence, committing to capital to maintain that production over a 15-year period. So what are we being paid to give up that option value for redeployment of that capital elsewhere. So you would certainly expect some downside protection. So maybe it's a hub-type protection, natural gas price protection. Now conversely, we're sensitive to what our customers will need. These need to be win-win deals for them to be truly successful as we've experienced in our prior deals. So what is their risk factor? Well, their risk factor is prices blow out and go too high. So they might want a ceiling. But what is their ceiling. It's their alternate feedstock. It's that in the petchem industry? Is it naphtha? Is it something else? Well, in this case, it's electricity prices. So you get creative and put something like a hub floor and a smart spread ceiling. There's a variety of things under discussion. And this is not just the one or two names that have been in the public arena so far. There are a host of potential customers being discussed and different structures in different terms. So what I'd say is these are 20-plus year type investments for those developers and for those data centers and ranges in a variety of these conversations to make sure we get the best deal that works over time for us and for them.

Our next question comes from Jacob Roberts with TPH & Company.

Is there any possibility or would there be any benefit to going ahead and completing some of the lateral footage you guys are accumulating and delaying turning to sales. Just trying to think about the possibility that another spot crew could come in and maybe prepare the setup for 2026 in a way that you could respond to pricing a little bit faster?

Yes. Good question, Jake. And I would tell you, one of those spot crews is actually operating as we speak. So maybe in some regards, we're thinking very similarly at this phase of our program. So we're executing one of them as we speak. The other one is going to be a little bit later this year. Some of this activity lines up with our midstream expansions that we have set to commission in the end of Q3, beginning of Q4. And as you heard us say in the prepared remarks today, we think that timing really lines up well with good efficient operations and that supply coming into the market when we start to see the fundamentals further improve going into this winter season. So we think we've got the right timing there. And hopefully, everything will come together as expected.

Great. As a follow-up, the demand and the assumed growth in your backyard is exciting and certainly capturing the day today, but wondering how you think about that opportunity set locally versus the potential that you and some of the other Appalachia players maybe needed to backstop Gulf Coast demand, given some inventory exhaustion we may see in other basins. Is there any interest in looking south at new pipeline opportunities or similar?

Yes. I think there's -- when you start to take a step back, I think really, it comes down to where do we see the strongest margins present themselves. And so when you look at what's supporting a piece of our 3-year outlook that we communicated earlier this year, it is with utilization of some additional long-haul transport that we picked up that gets to the Midwest and also to the Gulf Coast. So we feel like even though there's a lot of discussions, as you point out, around in-basin demand, the Gulf Coast market is still going to need supply going forward. And given the conversations around resource question marks and inventory exhaustion in the future in places like the Haynesville, we think this plays well as you start to think about Range's ability to not only participate in the current transport that we've been able to acquire, but also other transport that will become available because it's going underutilized. As you think about new projects, clearly, I think I saw a list the other day from some internal work where there's 14 roughly projects that we're aware of that are either brownfield expansions or greenfield projects that are under evaluation that could get gas to places like the Northeast and add additional supply to the Southeast and also to the Gulf. We're going to be patient when it comes to those projects and make sure that we understand what that netback looks like for Range versus, again, the demand growth that's going to take place in the basin. But as you've heard us say on today's call and others, the inventory backstop for us is just really allowing us that flexibility to think about how we could participate in the growing demand term. And as you've heard Mark touch on even what kind of pricing structures would exist, not only for the AI type discussions, but also for future Gulf Coast opportunities as well. So I think you can expect to see a diverse portfolio from us like you've seen in the past, where we're trying to get to premium markets and also support our best netbacks.

Our next question comes from Kevin MacCurdy with Pickering Energy Partners.

2Q CapEx came in well below expectations, and it looks like net lateral footage was up pretty materially quarter-over-quarter. Any comments on what the main driver of executing on those lower well costs are? Is there anything particular on the drilling or the completion side? Or maybe any comments on deflation you're seeing in the market?

Kevin, I think our conversation around capital for Q2 really starts with some of the efficiencies you heard us touch on in the prepared remarks. Our drilling team just continues to really hit a home run here. By drilling 6,250 feet on average in the lateral during the quarter, those are just some of our most capital-efficient wells that we're seeing come through the numbers, if you will. That gets us on to the next pad sites more efficiently and quicker. And so ultimately, I would tell you that some of our capital savings really comes at the back of that. We were really efficient with water Logistics also during Q2, supplying those 800 frac stages that the team pumped. And so that means lower LOE, but also lower cost as we then feed that water into the operating side itself. So very much a -- if you look over the past couple of years, you've just seen kind of a quarter-over-quarter and year-over-year incremental improvement. Some of it's on the back of process, some of it's on the back of also infrastructure and changes in the equipment that we use on location. But our capital coming in the way it has so far has really been on the back of just good quality efficient operations. And part of the reason why you saw us pull down the upper end of our guidance for the year.

I appreciate the further detail on that. And as a follow-up, with all this talk about potential gas growth in the future, do you have a view on the local NGLs market's ability to absorb additional production or would you consider growing with lower BTU inventory?

Yes. I'll start here. I think we see good line of sight on what the NGL market looks like. And really, it's going to start with a balance of both local and international exposure. Part of the reason why you saw us take on some incremental capacity on the East Coast through the Repauno terminal, everything is on track there as expected to support our 2026 and 2027 NGL growth profile. But as you've seen in the past, we also remain pretty focused on the ability to toggle those barrels and sometimes even split the various components apart where we see the greatest demand take place. So you've seen in some quarters, as an example, we may have sold greater than 80% of our propane into a waterborne export market, and we may keep some of the butane here in the Lower 48 or in regional markets. We can do that based upon rail and other pipe exposure optionality that we have. So we feel like we've got good visibility in what that future demand looks like. And as you start to look globally, there's a lot of infrastructure that's being built out both on the LPG and on the propane and also on the ethane side both from a dock capacity export standpoint, some of which is commissioning now, but also just future PDH ethylene steam crackers infrastructure over the next 18 to 24 months. So we feel like we've got good line of sight into what that growing demand looks like, and we feel like there's a constructive view for NGLs going forward as we grow the business.

Our next question comes from Neil Mehta with Goldman Sachs.

I just wanted to follow up on the U.S. production numbers. I think there's no doubt there's going to be tremendous amount of demand over the long term, but there's been an investor debate around some of the scraps that we've seen here over the last couple of weeks with production kind of queuing up over 107 on some of the third parties. So I'd be just curious have you been surprised relative to your own modeling about U.S. production? And do you think that there will be price elasticity if near-term gas prices rise to the downturn?

I would say there's been very few surprises for us as we think about the supply for the year. We anticipated a fairly -- we'll just say flat and stable production response from the deferred deals from last year. I think we expected that to be flat based upon some of the infrastructure being at a high level of utilization. And then eventually, you'd see a decline off of that. We've been going through midstream maintenance season across the industry. And so when you look at whether it's LNG infrastructure or other pipes, compression and other downstream short-term impacts, we're starting to come out of that now at this point in time, all at the same time that we're at the doorstep of seeing Phase II of Plaquemines get commissioned and also start to see ramp up further of Corpus Christi Stage 3 and then later this year, pending further updates, Golden Pass starts to see some feed gas start to go through that facility. So we think there's a lot of reason to believe that we could end the year that somewhere similar or a little bit north of where we're at from a U.S. production standpoint, let's just say, 107 Bcf a day. That wouldn't surprise us at all internally on how we view where activity has been. But again, when you start to look at the dynamics, that's about 4 Bcf a day roughly year-over-year increase in production at that point. We're also going to see about 4 Bcf to 5 Bcf a day in incremental demand take shape between LNG and other aspects. And so exports to Mexico, and that doesn't include Shell Canada. So we feel like there's a balance here that's playing out that's different than just focusing maybe on a storage number and level alone. But if we end up at 3.8 Tcf to 3.9 Tcf, let's just say this fall, that roughly turns out to be about 39 to 40 days from a days of supply standpoint, and that's a good couple of days below where we were last year at that same time. And it's below the 5-year average. So we feel like this all still sets up really well as we kind of start to, as an industry, shift our eyes away from a storage level alone and think more about the demand and days of supply coverage.

That's great color. And as a follow-up, just your perspective on hedging, the '26 has stayed pretty well bid even as the front has come off. And so just your thoughts on continuing to layer in hedges to protect downside while still leaving enough open to capture the upside.

Neil, I'll kick that one off. I think what you have seen, the modest changes in our hedge book this past quarter is consistent with the philosophy and the business objective we described over the last number of years is really primarily to cover fixed costs and hang on to as much upside as we can because the fundamentals in our mind, are not fully baked into the forward curve. It's just not liquid enough. There's not enough trading activity and in fundamental counterparties active for it to be truly linked up. So what you saw was some modest additions just finishing off the '25 book. You just added some colors which raised floor price on our book and raised the ceiling to capture more upside. So modest additions fine-tuning there. So you looked into '26 and '27 same thing, execution around the same guidelines, same philosophy we described over the last several years. And again, increasing the ceiling. For example, '26, the ceiling on that percentage of production of the hedge went up by 30-some cents. So we're trying to hedge enough just enough insurance, if you will, while hanging on to as much upside as possible given what we continue to believe is the re-rating of the forward curve of gas prices with a marginal cost of supply that from those players in that basin in the Haynesville is between $4 and $5. So we think there's still room for the forward curve to hook up with that as these LNG facilities are brought online. So said differently, the hedge books for '26 and '27 are basically where we want them, and we don't need to do anything else.

Our next question comes from Roger Read with Wells Fargo Securities.

It seems like a lot of it's been covered. Maybe get a little bit granular here. Just you all talk about lateral feet as an indicator of expectations where we'll be at the end of the year. Just curious, as you look into the, call it, the first half of '26, second half of '26, how we should think about that lateral foot need, call it, the backlog you need in order to hit some of the growth targets you've laid out? And then the industry has been in such a, call it, almost a stasis mode, right, just maintaining production. You're going to shift here to growth, how do you think about managing that with your service providers and maintaining your efficiency or even continuing to improve it as we've seen. Maybe what are the challenges in delivering on that? Kind of two questions in one, and I won't ask any follow-up, I promise.

That's okay. I think when we start to think about lateral feet requirements for 2026, we've really been quietly building that over the past 24 months and through the balance of this year. Part of that was getting to a place of having some visibility to what the setup could look like. We've been running an efficient 2-rig program with one frac crew. And really, those two drilling rigs have generated a little more inventory than that one frac crew could consume. And so now here we are looking at 2026 with the ability to start utilizing more of that inventory, which should be in excess of 400,000 lateral feet as we think about '26 and '27. So next year, you should see a similar capital requirement that we've communicated up to this point. and you should see the dollars get allocated more heavily on a percentage basis towards the completion side to start working through that inventory, all while a single -- maybe 1 to 1.5 drilling rigs is continuing to kick out some inventory for then 2027 as well. So we feel like there's the right kind of setup. We keep it very efficient. And then by the time you get to the end of that profile, we feel like we can hold production flat, as you heard Mark touch on today, roughly 2.6 Bcf a day with a similar type activity set. But depending upon what materializes, we can also consider some incremental growth beyond that if that's what's required and what the market is calling for. From a service company standpoint, ultimately, we feel like we've got the right service partners in place, really quality service partners. Many of them have been with us for a number of years, dating back to when we drilled some of the early on discovery and delineation wells. So we feel like there's good stability there and we have the ability to ramp into this space instead of using, let's say, a partial crew on the frac side, it's something more like six months or maybe instead of having a partial year with a given top hole rig, maybe it's a full year. So we have that ability to work with them, communicate. We do what we say we're going to do. We think that pays off really well because there's business certainty on their end to then plan around how we're thinking about executing for the next several years. So all in all, we've seen really good partnerships across the board. And I think that's why you see the efficiencies that you do that come out of our program quarter-over-quarter.

Our next question comes from David Deckelbaum with TD Cowen.

Dennis and Mark, I wanted to follow up on just the conversation just for context now that you're effectively below your long-term debt targets and you kind of laid out there the t $3.75 sort of case over the next several years. How do you think about like the split of returning capital to shareholders while also thinking about investing in the business? And are there portions of the business that we should expect you to look more deeply at particularly as you think about trying to satisfy in-basin demand, whether it's more organic leasehold opportunities and extending lateral feet or if you're looking at perhaps other sorts of infrastructure investments or maybe things that we might not be thinking about?

David, I think you've touched on a lot of the things we've mentioned over the last number of quarters. And as you've seen us evolve and ebb and flow in how we're returning capital, how we're allocating the cash flow this business is generating. So you're right, we are very comfortably within the target debt zone. First, I guess, let me touch on that debt target guidance, that net debt of $1 billion to $1.5 billion. Let's think about that when it was established a number of years ago, we described it as through a cycle. And I would think about an appropriate balance sheet and the changes in the balance sheet over a cycle. So you're going to continue to [ de-lever ] the strongest point of the cycle to build your dry powder such that you can be opportunistic at those points in time when you can create on those value. So we continue to have a strong balance sheet. But you've seen us in the first two quarters that it is a year more than double what we did in share repurchases from last year and slowly grow the dividend this year. So as we said in prior calls, the stronger the balance sheet was the greater the flexibility we had in returns of capital. And another piece of that return of capital program that we laid out at the beginning was we're shying away from a purely formulated approach. We think that creates a very pro cyclical type program where you're buying when maybe prices have run on you, and there's better allocations of that capital back into the program or paying down debt or other uses. So just as an example, the way the program was executed this past quarter, our average share price on repurchase shares was roughly $36 -- $36.37. So well below the average price during the quarter. If you look program to date, we bought back some 31 million shares at an average price of $21 per share. So as we look ahead, we want to retain that optionality of buying in the shares. But fundamentally, Range is a natural gas, natural gas liquids production company. So maintaining efficient production, focusing on operational efficiency, focusing on these value-added contracts and capturing that disproportionate market share of this demand as it comes in, enabled by our transportation portfolio and depth of inventory is how we think about that going forward. Now what other things might we invest in along the way. Don't expect us to stray too far from what our core mission and core objective is. So that's investing, focusing operations in the Appalachian Basin, where our operational within geologic expertise live and the marketing team's expertise lies in moving gas and liquids out of the basin and internationally. So might it be carrying some of the costs are investing in some of our compression to improve production, might it be building some lateral lines, modest investments in midstream. You can see those, I think, as one-off service participation going forward. But again, it will be focused on developing and maximizing the value of our inventory and our production going forward. I think as you think further down the line, might we buy in some royalties, I think, on our properties. I think that's an option as well. But fundamentally, the way we view these types of options is we come back to what are we buying for you, the shareholder in terms of cash flow per share, resource and production per share, future resource potential per share. So whether that's buying and rank shares you're acquiring them that way or through some other means, that's what we're focused on is the per share value.

Appreciate it, Mark. And then maybe just as a follow-up, Dennis, you talked about looking to announce perhaps an opportunity near term on a data center project. I guess, as you think about those terms, versus perhaps just remaining exposed to in-basin pricing and potentially capturing some of that upside volatility I guess, do you feel like the incentive is enough at this point for you to look to sign some of those supply agreements? And why do you necessarily feel that you have to be involved on the data center supply side?

Yes. I think there's going to be lots of opportunities. And I think when you look at what we already have from a production that stays regional and in basin, I mean, essentially 20% of our nat gas volumes are going to stay regionally and marketed on a seasonal annual basis anyway. So we feel like we can participate in both, we'll just say, the regional volatility but also take on -- as you've heard us say, this project is going to represent somewhere between 90 million and 100 million a day in production. So again, a small percentage versus the greater opportunity set of our production versus also what's in basin, we feel like we can do both. But it's going to come down to the pricing structure that I'll just say, the hypotheticals and thoughts that Mark walked through earlier where we're providing some strength in how we think about our netbacks. Also, it could be that we're providing some thoughts around an upside exposure for them as well. They can also trickle down into how we think differently about hedging in the future as well with some surety around some of these pricing structures. So we think we can do both, quite honestly.

We are nearing the end of today's conference. We will go to Phillip Jungwirth of BMO for our final question.

Coming out of the Pennsylvania Energy Innovation Summit last week, can you speak to the discussion or level of optimism around federal permit reform just as it relates to the third-party pipeline or in-basin projects, in-basin demand projects. And how meaningful some of the changes in the big beautiful bill could be here. You're also welcome to touch on any local and state dynamics in that also.

Yes. I think clearly, permit reform, and you've probably heard me say this in prior conversations that we've had, but I think permit reform just really has to play an important role in how we think about the future. And really, it's a bigger discussion than really just natural gas and NGL production. It really goes all the way to how you think about getting support for not only building and expanding the grid as it stands today, but bolstering it as well. How do you basically get right away? How do you stretch wires, how do you further electrify what we do, which, again, a lot of this AI conversation is, that's what the underpin -- what's underpinning this conversation. And then the feed gas that we, as a company, could then provide into generating that power source for a lot of what the future opportunities look like. So in our mind, there's a fair amount of optimism around permit reform taking shape. Even a year ago, you actually saw some bipartisan support between Senator [ Manchin ] out of West Virginia and Barrasso out of Wyoming to have we'll just say some language that was being constructed even then. And if you think about a year ago, we were all going through a phase of campaign fatigue and trying to understand what the new administration could look like or if there would be a change. So all that to be said, I think there was support a year ago. There's now growing support now. I think it all plays well for Appalachia and the result of quite a volume of optimism last week at the conference. And I think locally, to maybe top off your question, even the governor was present and we were really pleased to see Governor Shapiro's support for the energy, the role of energy is going to play in adding jobs, economic development and also playing a role in this AI build-out going forward. And ultimately, we would expect both from his messaging and what we've seen in conversations with the Governor's office ongoing support for this permit reform to help truncate the time frame to get these projects from -- we'll just say, from the dream factor to actually being commissioned. So we're optimistic.

Great. And then I did also want to get your updated thoughts on the propane markets. We have seen inventories build here over the past two months. Wondering if you could talk through the moving pieces here? And how do you see the market and exports shaping up into year-end?

Yes. I'll touch on this briefly as we kind of wrap up here today, but we still are really optimistic about the propane market. I think if you look at exports over the over the last quarter. I mean, we've averaged as an industry, 1.8 million barrels per day. That's up 5% versus the same time a year ago. And you've continued to see barrels flow even at that level despite some of the noise around tariffs and trade wars, as an example. Infrastructure is being commissioned as we speak, to expand dock capacity out of the Gulf. We've all been looking, I guess, as a sector at congestion in the Gulf Coast market, less impactful to Range because of our exposure to East Coast terminals out of Marcus Hook Philadelphia, but clearly, congestion has played a role. And I think you're seeing that probably translate into some of the numbers now that we're seeing from a stock level standpoint. But from the stock's perspective, we're really above where we were last year. So it's very comparable. And I think ultimately, we would expect with further build-out of that dock capacity, but also in 2026 you're seeing infrastructure on the demand side get added to that total 700,000 barrels a day. If you assume a similar 80% utilization rate that the U.S. has participated in roughly in the past, that would be a call on another 500,000 barrels a day. So as we kind of get into the back half of this year, again, as you heard me say, you get out of midstream infrastructure build-outs, but also maintenance season. I think you start to see improvements in some of the stock levels and especially as you get into 2026 with this further build-out of demand infrastructure.

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

I'd like to thank everybody, as always, for joining us on the call today and having another great conversation with us. If you have any questions, please don't hesitate to follow up with our Investor Relations team. We look forward to seeing you at upcoming meetings and on the road during the fall and talking again in October at our next call. Thanks, everyone.