RRC - NYSE

Good day. Welcome to the Range Resources Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Statements made during this conference call that are not historical facts are forward-looking statements. Such statements are subject to risks and uncertainties, which could cause actual results to differ materially from those in the forward-looking statements. After the 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.

Thank you, operator. Good morning, everyone, and thank you for joining Range's Third Quarter 2025 Earnings Call. With me on the call today 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 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 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. As we report on the progress made during the third quarter and focus on the execution of the remainder of our 2025 program, the results remain consistent with what we've shared in prior cycles. During the quarter, Range executed on our plan safely and efficiently, delivering consistent well results, free cash flow, returns to shareholders and steady activity levels that support the growth plans we've previously communicated. All-in capital came in at $190 million, while generating production of 2.2 Bcf equivalent per day for the quarter. Year-to-date, we have invested $491 million in capital, putting us right on track with the previously improved guidance of $650 million to $680 million for the full year. Our year-to-date operational savings come from several differentiated aspects of our business, which include returning to pad sites for incremental development, utilization of existing infrastructure, extended reach horizontal development, and the team's dedication to continued operational improvements. I'll touch on a few of our operational highlights driving this in just a moment. As we look ahead, our previously announced growth plans will begin to gain visibility in Q4 as strong field level performance is expected to deliver production of approximately 2.3 Bcf equivalent per day in the quarter and growing towards 2.6 Bcf equivalent per day in 2027, an increase of approximately 20% from current levels. Importantly, Range's incremental production will be transported to known end markets as our depth and quality of inventory allowed Range to secure transportation capacity that was going underutilized by others. We believe our plans align well with increasing demand in the Midwest, Gulf Coast and global LNG markets in the years ahead, while having the flexibility to meet future in-basin demand as well. And lastly, we will add our planned 400 million cubic feet equivalent per day of growth very efficiently with relatively flat annual capital over the next 2 years and supported by investments in additional work-in-progress inventory since late 2023. This will keep Range's reinvestment rate at the low end of the peer group, allowing significant capital returns to shareholders while growing. Diving into the quarter. Consistent with prior quarters, Range operated two horizontal rigs, drilling approximately 262,000 lateral feet across 16 laterals, averaging 16,400 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 development plans through 2027. For completions, the team ended the third quarter completing just over 1,000 frac stages, utilizing a combination of our full-time electric fracturing fleet and a spot frac crew for a single pad in Northeast PA that we discussed during the prior call. Completion efficiencies for the third quarter were at nearly 10 frac stages per day across all operations. Supported by a strong KPI-driven focus, efficient logistics and a look back from prior pad executions, our Northeast PA operations continue to deliver incredibly efficient results and strong returns, utilizing existing infrastructure on our occasional return trips to the area. Cash operating expenses for the third quarter finished at $0.11 per Mcfe, firmly within our previously improved guidance for the year. The team continues to see efficiencies within the field, especially when focusing on multi-operational project scheduling to improve production downtime, reduce spending and maximizing field run time from the wellhead to the burner tip. Shifting over to marketing. The third quarter of 2025 was an exciting time for U.S. energy marketing as we saw the commissioning of new NGL export capacity, the ramp-up of recently commissioned LNG export capacity and strong interest in new natural gas supply for power generation within the Appalachia Basin. Highlighting some specifics, starting with natural gas. The U.S. exported record volumes of LNG in the third quarter as new capacity continued to be commercialized and international demand for clean, reliable American energy remains strong. Three additional LNG projects reached FID in the third quarter with additional projects recently sanctioned, bringing the year-to-date total to approximately 9 Bcf per day of incremental feed gas demand, making this a record-breaking year for FIDs in the U.S. Based on projects under construction, LNG feed gas demand is expected to exceed 30 Bcf per day by 2031, more than doubling the export capacity versus current levels. We are confident of the world's strong appetite for U.S. natural gas as long-term global gas demand is underpinned by rising incomes and population growth. Looking at in-basin opportunities, we continue to be encouraged by early phase activity in Pennsylvania toward gas-fired power generation data center projects. Numerous projects are progressing and the past few months have provided us with even more conviction that consensus estimates for approximately 2.5 Bcf per day of Northeastern demand potential from data centers by the end of the decade is becoming more real. We are continuing to make progress on the Fort Cherry joint venture project with Liberty and Imperial announced earlier this year. In addition, Range is in conversations with multiple other potential projects that could benefit from Range's asset location in Southwest PA, our pipe access across the U.S., our marketing acumen and importantly, our depth of high-quality inventory and financial strength that can support long-term supply agreements that end users are looking for. As we look forward, we believe there will be a clear call for Appalachia to play a key role in supplying U.S. markets with affordable, reliable natural gas supply. And we believe that expanding infrastructure from Appalachia and sourcing more power demand within Appalachia is the most effective way for America to fuel its long-term energy needs. We remain very constructive on the setup for natural gas with storage levels at or below average than last year in terms of days of supply. And as we move into 2026, a further 4 Bcf per day of LNG export capacity is expected to come online, leading to tightening gas market fundamentals. Turning to NGLs. Similar to our outlook for natural gas, we're encouraged by the fundamental setup for ethane and LPG. Ethane and propane are both expected to see substantial increases in export capacity out of the Gulf Coast into continuing stronger international demand, and we expect this to improve NGL pricing relative to WTI in the coming quarters. Specific to Range, our geographically advantaged access via exports to the European market continues to support a premium versus the Mont Belvieu index. We see continued strong demand for Northeastern U.S. LPG as Europe continues to secure long-term supply from reliable producers. During the quarter, Range once again leveraged its flexible transportation and marketing portfolio to respond to market dynamics and enhance margins. These optimization efforts for Range led to a strong seasonal natural gas price differential of minus $0.49 per Mcf versus the NYMEX index, coupled with a continued premium on our NGLs. And we have improved our full year guidance accordingly. The future of natural gas and NGLs is strong, with significant demand continuing to materialize 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 the optionality of the business. I'll now turn it over to Mark to discuss the financials.

Thanks, Dennis. The first 9 months of 2025 have underscored the stability and profitability of Range's business. During this period, NYMEX natural gas prices averaged $3.39, while Range achieved an average realized price of $3.59 per unit of production, a $0.20 premium created by our diversified commodity mix and sales strategy. Strong pricing realizations, combined with low full cycle costs have provided Range the ability to continue progress along our 3-year growth plan while returning capital to shareholders. Year-to-date, we have repurchased $177 million in shares, paid dividends of nearly $65 million while reducing net debt $175 million since year-end. Each of these actions, reinforcing our commitment to delivering on our stated capital allocation priorities. While front month gas prices fluctuate, our business model sitting at top a high-quality resource base has consistently generated free cash flow, enabling capital allocation options of executing a market-driven, growth-oriented operational plan alongside current capital returns to investors. Range is proving the free cash flow resilience of its business and enhancing that resilience through targeted capital investment. The specific attributes of Range's business that provide a stable base and enable through-cycle investments and returns include a high-quality, long-duration inventory that enables a low reinvestment rate, a strong balance sheet to allow value capturing opportunistic investments, a diverse portfolio of natural gas and natural gas liquids transportation that links Range to customers in key U.S. and global markets, delivering roughly 90% of revenue from outside Appalachia. While building cost-effective DUC inventory to meet future demand, our opportunistic investments and returns in 2025 have grown from prior years in the form of share buybacks and dividends, given the strength of Range's balance sheet. In other words, while investing at a maintenance plus level, we are generating healthy free cash flow and diligently redeploying that capital to harvest value from Range's resource base. As the U.S. and global natural gas markets continue to integrate with commissioning of new LNG facilities alongside substantial domestic demand growth, primarily from electricity, we believe Range's long-life, low-cost inventory creates enormous option value to play an integral role as a key supplier. Our durable free cash flow evidenced through cycles in recent years, position Range to consistently deliver value to its shareholders. Dennis, back to you.

Thanks, Mark. Range's year-to-date results reflect a consistent theme: 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 a 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 will be coming from Jake Roberts at TPH & Co.

I wanted to spend some time on the work in progress inventory. Can you speak to what you think that 400,000-foot number looks like at the end of 2026? And if you could, I know it's early for 2026 discussions, but is there any consideration on timing of that drawdown we should be thinking about?

Yes. I'll try and help provide some color on what '26 looks like. As you start to kind of think about from a capital, I'll start there at a high level. Capital is going to look really similar in 2026 to what you've seen us executing here in the program here for 2025. The difference is -- between the 2 years is an allocation of the capital that will then start to lean more heavily on the completion of the DUC inventory that's been building over the last couple of years and through 2025 and our ability to start to work through that, coupled with some timing of some infrastructure that will come online that I'll touch on here in maybe just a moment. So maybe more simply put, where you've seen us have two drilling rigs over the last couple of years, we've talked about that as being kind of a maintenance plus kind of a program. So over 3 years, we will have added 400,000 lateral feet and roughly that translates into around 30 wells. So I'll put some context around the last 3 years between '23, '24 and '25 from that perspective. Then when you start to shift into 2026, and that's also with one completion crew. So that maintenance plus inventory that gets built is clearly more than one frac crew can consume. For '26, we'll take that drilling activity down throughout the balance of the year. We'll still maintain at least one rig for the balance of the year, and there will be portions of the year where there may be a little bit more activity, but the completions activity will go on an uptick. So you'll see a single frac crew for portions of the year. And then instead of like what you've seen in '24 and '25, where there's been a spot crew to complete maybe one or two pad sites, you'll see some continuous activity with a second crew that then starts to work through that inventory. So what does it look like at the end of 2026? We're still kind of working through the refinement of those numbers, and we'll have some better guidance for you on what that lateral inventory looks like. They expect it to be a very linear utilization trend over the balance of '26 and '27. That also translates into the production that we've talked about where roughly we'll be at 2.4 Bcf a day, then going to 2.6 by 2027. So it will be a fairly ratable increase over the balance of that time. There'll be portion of '26 where you'll see production at a high level of utilization into the existing infrastructure before we get to the midyear point, and then you see another increase with Harmon Creek III processing and some also gathering support there. So a lot to unpack with what I've shared with you this morning. But ultimately, the 2026 program is going to have a fairly linear trend of that utilization of inventory over 2026 and into 2027.

Great. That's really helpful. And staying on the same topic, as we think about that shift or the balance perhaps of B versus C capital here in 2026. You guys have spoken a lot about returning to pad sites and things like that as drivers of efficiencies over the past quarters and years. I'm wondering if you've already spoken that you see capital is similar, but I'm wondering if there's anything we could be thinking about maybe on the OpEx side of things that as we progress through the drawdown of this inventory that might move the needle in either direction on some of those line items?

When I think about the breakout of, let's just say, capital and operating expenses, we're from a -- I'll just say, you've come to see us really remain at a very low level from a cash operating expense basis. So from an LOE perspective, we've typically run somewhere between $0.10 to $0.12 depending upon seasonality and winter influence. I wouldn't expect that to move a whole lot because we're already starting from a really, really low base. There's always an opportunity for a little more improvement there. And then as you point to returning to pad sites with existing infrastructure, that is something that we factor in year-in and year-out from a perspective of it represents roughly about half of our activity on a year-in and year-out basis. You can expect to see that fluctuate a little bit. But again, I would say, all in all, what you're seeing in our historical efficiency gains on completion and the drilling side drilling, as you've heard us say, our fastest and longest laterals, all while staying within greater than 90% within a tight target window. We would expect that momentum to continue into '26 and '27. So we're refining those goals right now as we speak on what that could look like for '26. So we'll have more to share at the February call, but I would expect us to continue to be on that leading edge of what cost per foot looks like with our ability to move back to these pad sites, drill really long laterals and continue to be very efficient with our operating capital.

[Operator Instructions] Our next question will be coming from Kalei Akamine of Bank of America.

I wanted to follow up on 2026 as well. So this year, you're pretty much on track with your plans, and that's great because it's effectively year 1 of 3 as you think about that ramp through 2027. But as you continue here, given your strong execution this year, where do you see upside to your plan? Is there opportunity to outperform on the capital or volume side in the next couple of years?

Yes. Good question. Thanks for joining us, Kalei. When I think about '26 and '27, we really think we have, I'll just say, opportunities to perform. It's really what you've seen us talk about in many, many cycles, and that is the efficiencies from an operations perspective in the field. And what we've seen and the ability to drill long laterals. I'll just say we drilled against some of our fastest wells and again staying in a tight target. Our completion efficiencies continue to show improvement there. So I think that's a way that you could see some potential upside in the numbers. And then I think the other part, when I think about '26 and '27 is infrastructure utilization that comes online with our midstream partners like MPLX. They've really done a good job working closely with us, and they've demonstrated the ability to remain on schedule and also move pretty quickly to commissioning of that infrastructure. So I would say field run time performance, especially as it pertains to new infrastructure and then our ongoing operational efficiencies.

For my second question, I want to see if you guys could opine on the NGL macro. You had a couple of interesting slides in your deck last night, showing maybe some green shoots on both the propane and the ethane side. So maybe I can simply see the floor and maybe you can tell us what you're seeing in that market for 2026?

Yes. I'll start here, and if we need to take a deeper dive and others may jump in. But ultimately, when we start to take a look at the macro for NGLs, we're as optimistic on that front as we are really from an at gas perspective. And I know you've heard us really dive into the nat gas side a number of times. And really, it starts with the really 2 components: one, the demand growth side. There continues to be increasing run rates on previously commissioned infrastructure. And then, of course, on the LPG side, you've got another 700,000 barrels per day of demand growth by year-end 2026. So the demand side, we feel like is still continuing to show really good strength. And by the end of the decade, it looks like at least from what we can see in tally, it's a total of 1.4 million barrels per day of incremental demand. So that really, in our mind, points to a strong call on LPG demand growth and really a supply pool that's going to be important out of the U.S. So how do you get it there? Well, there's been a lot of export capacity expansions that have been in progress of either being constructed in process of being commissioned, and we'll also see an increase in their run rate over the balance of the next months ahead. So we're excited about the ability to see, I'll just say, the Lower 48 move the barrels, the demand growth side continuing to materialize. And we really think for Range, as an example, our ability to have access to East Coast export capacity continues to be a differentiator for us. And so that will be not only in the next -- as we think about the next 12 to 24 months. But really, as we're thinking about that 1.4 million in growth demand by the end of the decade as well. Ethane, a little bit different story, but it's very similar, more export capacity growth and also more demand growth as you're starting to, in a lot of ways, see in the next -- by the year-end 2026, there's roughly another 400,000 barrels of growth there and by the end of the decade, an incremental 260,000 on top of that. So again, continuing to show good positive signs for demand growth and also the ability to export those barrels. And some of the counterparties that are actually representing that demand growth for counterparties that we currently do business with today. So we know that there are good calls coming in for how we could potentially participate in that growth in the future, if needed and warranted. And we think that's exciting for Range.

On the demand side, do you see that demand on the export side pulling volumes out of the Rockies and driving ethane to natural gas parity in 2026?

I don't think -- I guess at a high level, I don't know that I see that, that is -- there's a need for that. I'll let Alan kind of jump in that runs our marketing effort.

Yes, I'd say what we see going forward with that demand is that you're going to be pulling -- recovering as much ethane as you can out of the Permian, Mid-Continent, it's going to be pulling out of Appalachia as well. So we see the ethane spread to natural gas actually improving. In fact, month of September was interesting. We set an all-time record in terms of exports. It was over 600,000 barrels per day of ethane exports, supported by some of the new infrastructure that Dennis was talking about. And with that, we saw the spread between ethane and natural gas improved as a result of that demand pull. So with the ethane exports pretty much doubling by the end of next year with the capacity of export. And that's -- you've got new crackers that are starting up in Europe as well as in Asia as well as in China. And then you've actually got roughly 130,000 barrels per day of new demand domestically that will be starting up late '26, early 2027. All that combined leads us to believe that ethane fundamentals are going to get stronger, inventories are going to come down, day supply is going to come down and the price will improve relative to natural gas.

And our next question will be coming from Michael Scialla of Stephens.

Want to see if I get an update on your conversations you've been having for supply agreements and -- are those limited to Pennsylvania? Or are you discussing anything outside the state and any of those with end users or more like the Imperial type of conversations that you've been having so far?

Michael, I'll jump in here. I think in a lot of ways, our update is going to feel similar to what we shared at the July call, and it's still a very dynamic space. So I'll kind of start there where Alan and the team have seen a number of inbound phone calls and engagements with household names. I think that a lot of us on the call would know as end users for potential facility. I think right now, it's that phase of trying to look at site selection, where is the best location to put one of these facilities to have, I'll just say, access to long-term supply. And so that's part of the reason why we think we've been on the front end of many of these conversations. Again, inventory is playing a huge role in this conversation and also the diversification of gathering and regional transport that would allow our ability to help supply one of these facilities, again, with long-term reliable supply. I think it's still narrowing down on like in Liberty and Imperial as an example. We're seeing a lot of positive movement there in narrowing down to a final couple of potential end users. So it's hard to see at this point in time what that announcement time frame could look like, but know that, that's being actively worked really hard. I think once you see at that point, an end user truly get defined, then we'll be able to move forward with more party conversations around what a pricing structure could look like, both from a term and framework standpoint of whether it's tied to something that's a normal index? Or is it something that's got a floor and ceiling type structure that allows us to have some long-term support and then also provide some upside protection for those other end users striking that right balance. So more to come on this. We look forward to sharing more details as we get closer to announcement type time frames, but know that it is a very dynamic and busy space and Alan and the team at Range has been very active in a lot of that space.

And Dennis, all those are pretty much inside of Pennsylvania at this point? Or are you looking outside of Pennsylvania at all?

Yes. I would say the focus has been primarily within our producing region directly. But we also have seen, as you would imagine, with many of these potential offtake users, the willingness to talk about expansions. Expansions could both be there in the existing footprint that they would be planning on, and it could be outside the area. So again, given the transport that we have and the areas of the U.S. that it gets to and reaches, we've got some durability there once we start to put a framework in place that supports, I guess, again, that 5 9s of reliability, strong labor pool, all of the things that make the Pennsylvania region or Pittsburgh region a really advantaged area. We could see this starting to shift into other areas of their -- and regions of their business, again, given our transport diversification.

Got you. And I want to -- my second one to ask about capacity out of the basin. You mentioned you picked up some FTE that became available. With that 3-year plan, does that require you to take on any additional takeaway? Or are you set there? And -- you mentioned MPLX keeping up with you. Any other infrastructure that needs to be put in place for you to execute on that 3-year plan?

So as it stands today, I'll start with the MPLX question. The infrastructure that we've disclosed and that capacity -- those capacity additions that we've disclosed over the balance of the last year that is what is needed to deliver on our 3-year plan. So we're -- I'll use your word, we're set. Now it's just moving forward with construction and also commissioning of that infrastructure. So we're feeling really good about the time lines that we've communicated the production profile. And again, MPLX's history of demonstrating they can execute and direct these facilities. The transport is also complementary to our growth profile. Nothing else is needed at this point to deliver on that. And as you've heard us say a number of times, Michael, we can really be patient once we start to look beyond 2027 and either look to supply, create more growth that's thoughtful to address demand that's in basin or if there's other transport that becomes available because it's underutilized, we can be thoughtful about do we take on more transport or not. So we love the optionality and the patients factor that we can execute because of the inventory that we have.

And our next question will be coming from Arun Jayaram of JPMorgan Securities LLC.

Dennis, I was wondering if you could provide maybe a little bit more details on what's going on with Liberty and the Imperial Land kind of project in Washington County?

You bet. Arun, thanks for joining us. I tried to touch on this a little bit here just a few minutes ago. But I think at the end of the day, we're seeing that the conversations are very fruitful. We're seeing that the counterparties are getting down to our partners in this JV are getting down to what I would say is a lightning bonus round of the final few end users that could utilize the facility there and that footprint, along with thoughts around how they would expand in the future. So really difficult to date to nail down a time frame on when we think an announcement could further materialize. But ultimately, we think that it's going to take a few months to still kind of grind through these details. But the good news is it's a great location where Imperial has their surface development opportunity. And I think to maybe shed a small piece of light on the seriousness of this project, we've heard us talk about in prior meetings about the sites project at the state level and the regulatory climate, the governor's willingness to really put some dollars to work to help support some of these projects going from, we'll say, concept into reality. And this year, over the last several weeks, you saw Liberty announced that they were one of the early on and initial recipients of some of those funds to help support this project. And so we think that's a great sign, not just from a, we'll call it, conceptual planning phase, but also the state's willingness to support this as well. And ultimately, our supply of gas being right under the footprint of this particular site is just really ideal. So we think this is going to translate into expansion into other projects as well because of all the complementary components we've talked about, but it's a very busy space. I'll just say this, Alan and the team continue to have a number of conversations and helping support this along. So we're awfully optimistic.

Yes. We cover Liberty and they were pretty optimistic, Dennis, about inking some power deals relatively soon. So it would make sense. Maybe one question for you guys on what you're seeing in the global LPG market. Right now, we're seeing an environment where Far East propane and butane prices are below what we're seeing in Europe in the U.S. So I was wondering if you could maybe give us some thoughts on how you see the international LPG market trending next year? Obviously, and perhaps implications of a Trump the kind of trade deal, which could happen in the next few days or so and thoughts could that be something that opens back up U.S. exports to China?

Arun, this is Alan Engberg. I head up the marketing piece at Range. So I'll take a stab at your question. We're -- overall, as Dennis mentioned earlier, we're pretty optimistic on the setup for going into next year. There's obviously been a lot of volatility and a lot of back and forth in terms of international dynamics on the political front, and we can't -- we can't predict what's going to happen there. Recent news this morning, this week has been positive. I think we're going to get to a good place. But in the meantime, I think it's important to note that from, let's say, an ethane side, exports are up year-on-year despite all the turbulence. And from an LPG standpoint, September year-to-date, exports are actually up, not up that much, but it's a few percentage points. When we look forward, going into just this year, next year, as Dennis had mentioned earlier, we see 700,000 barrels a day of LPG demand growth. And just to get into a little bit more granularity, that's 23 new PDH units that are still coming up and granted those are primarily in China. But it's also 127,000 barrels a day for LPG demand going into ethylene steam crackers. And then we've always got that res/com piece, which is pretty inelastic and is growing at around 2% to 2.5% a year. So you add all that up, and that is good strong demand. And if we look back just over the past year, 1.5 years out of the U.S., there's actually been constraints from an export capacity standpoint. We've been bumping up against the limit. And what we're going through right now is major export capacity expansions. So we're adding between now and the end of the decade, 42% to the U.S. export capacity for LPG. And in numbers, it's a big number. It's just under 1 million barrels per day of new capacity. We're confident, again, looking at the demand that we see set up for the rest of this decade being 1.4 million to 1.5 million barrels per day that export capacity is going to be well utilized. And as a result of that, as we mentioned in a prior call, we've taken on additional export capacity out of a new terminal in the Northeast, the Repauno terminal we'll have access to that probably starting late '26, early 2027. So overall, that lends itself to just, I think, strong demand pull on U.S. NGLs, ethane and LPG and for LPG in particular, we see propane relative to crude continuing to gain strength as we go through the period. Right now, we're at about 45%. That's higher than where we were last year at this time. Long-term averages have been around 60%. I think that's within the realm of possibility. So good overall for Range.

And our next question will be coming from Doug Leggate of Wolfe Research.

Gosh, there's a lot of moving parts in these supply agreements. So I wonder if I could take 2 pieces of them. The first is the prognosis for your realizations, whether you want to benchmark it, I look at it as a percentage of benchmark or in-basin discounts, whatever. What's kind of in my mind is you guys have got a lot of takeaway, obviously, out of the basin. But there's also, I think, a growing concern perhaps that the 2 lowest cost areas of the country are going to be the primary sources of supply for a lot of the onshore stuff specifically the Permian and the Marcellus. So I guess my question for you is, as you look to your growth story, how do you see your basis changing? My follow-up is specifically for Mark. Some of your peers have suggested that Range hasn't had any very large long-term supply agreement signed yet because you're not investment grade. And my question to you is your balance sheet is pretty pristine at this point. What's the holdup? What's it going to take for you guys for the credit indices to move you to investment grade?

Doug, it's Mark. I'll start with both parts of those questions, and no doubt Dennis will all chime in as well. So as we think about the supply agreements, I'd like to pull back and kind of highlight a couple of comments that Dennis and Alan have both made so far. And as we look at even this morning's call and the amount of time spent appropriately on the hot topics of the day, which is data center and in-basin demand and so forth. I think it's important to put that in context of Range's overall current portfolio and our marketing strategy. For everyone newer to the Range story, it's important to remember that 90% of our revenue essentially comes from outside the basin, half of our gas goes to the Gulf Coast, 30% goes to the Midwest. We've already entered into and completed 2 long-term 5-year plus deals with Japanese utilities, LNG exports out of the Gulf Coast. We've already done multiple 15-year-plus term deals with petrochemical partners, be the Canadian and European. These use pricing structures that could be NYMEX-linked. It could be Northwest European naphtha-linked. It could be ARA or FEI-linked depending on the liquids components. So international marketing, term deals, deals of size, deals of duration, spread across the U.S. and global markets with long-term customers is nothing new to Range. So as we look at these deals and negotiate with customers for in-basin demand, be it industrial, be it data centers, be it power with traditional customers like utilities, it's the same mindset. What is going to bring Range the best margin over the long haul? What is the best visible demand, durable demand that underpins growth and profitability for Range, as we highlighted in our scripted comments earlier. So realizations, pricing, that's clearly our priority. And while we may not have announced the first deals out there, the quality of discussions and the number of discussions that are ongoing in our marketing team are very encouraging, be it with the Liberty, Imperial joint marketing effort or be it our other discussions and project initiatives that we have underway. So these -- as we evaluate these deals, it comes back to what is additive to our portfolio. They will clearly be positive additions, and we'll get there when the right deal comes along. So as it relates to sources of supply, you're commenting on the lowest cost versus of supply, whether we want to talk in the Lower 48, whether we're talking to Haynesville, whether we're talking to Permian, quite frankly, the market needs all of it. And at the end of the day, if you fast forward just a couple of years and you look closer to 2030, well, by '28, we should be at -- by 2028, we should be at '28 Bcf exports be gas into LNG and quite a bit higher than that by 2030. So where is it all going to come from? And how does the U.S. managed cost of supply, specifically domestically for the consumer. Quite frankly, you need additional supply out of Appalachia and out of Southwest Pennsylvania. So that will happen. You're already seeing a lot of discussion around infrastructure, expansions and demand pull. The dynamic is shifting. You've already seen now on some recent announcements of who's subscribing to midstream capacity, and we also do that demand pull because of the recognized need for low-cost, long-duration gas in Southwest Pennsylvania. So bringing that all the way back to Range and your question of why haven't we announced a deal and does investment grade have anything to do with the current state of announced deals? I'd say as best as we understand it has absolutely nothing to do with it. Our credit rating has not come up at a single conversation with customers. Our leverage is below that of investment-grade peers and our bonds trade at investment-grade levels. As I mentioned earlier, we've already done long-term deals, multiple 5-year deals with Japanese utilities, international deals and 15-year term deals with international petchems. So again, marketing for us is about maybe getting the best deal, not necessarily the fastest deal.

Yes, Doug, real quick. I'll just maybe close out with a couple of comments on basis and the view there. I mean, look, if you look at where base has really landed every since MVP came into service and you see now the conversation about growing demand, really, we see some durability in where basis is as it stands today. We've got in-basin. Our view is that there's roughly 5 to 8 Bcf a day of incremental demand that's going to materialize by the end of the decade. You've heard Mark and I touched on this a few different times I'd realize. But as we think about the go forward in our mind, really the demand is outstripping the supply. From a standpoint of you need to have infrastructure, it's going to play a huge part and we think at the end of the day, without incremental infrastructure this could be -- I'll just say, you could continue to see demand outstrip supply and further adding some strength to basis. However, we also know there is a willingness to -- with this current administration and at the same level to look at how you can support this in-basin demand growth. We think that balances out over the course of time. And again, what we're seeing at this $0.70 type level is something that's got durability, you could start to see some further strengthening in the future. That will remain to be seen, though.

Guys, I appreciate the detailed answer. I wonder if I could just take it back, Mark, very quickly to the second part of my question. What do you think is going to take for the credit agencies to move you to investment grade, even if it's not an issue clearly from what you've said, but still, your balance sheet is better than most of your peers and you're still sub-investment-grade. Is that a scale issue? Or what do you think is behind that?

Yes. I think if you look at the publications from the rating agencies over the last several years, they have worked to keep up the evolution of the industry and their targets have moved somewhat. And you've touched on it, scale, just sheer production side several years ago was a focus for them. If you look at their most recent commentary, basically, we're checking all the boxes. I think with the growth plan we've already laid out there just organically. We should be checking all the boxes in the not-too-distant future. I'm not going to try to predict exactly when it may or may not happen, what I'll say is it will be a good byproduct of the quality of our assets, our breakevens, our full cycle or recycle ratios and so forth. So when we clear that hurdle in investment grade, I think we can clear that bar quite high and it will just come naturally from our operations and growth and production that we've laid out. So there's no -- there's nothing that's an encumbrance or a specific issue for them. So said differently, it will be a nice to have, but I don't think it's a need to have for marketing or other purposes.

Great stuff, guys. I'm sure we'll get into this, and then I'll have more detail in a few weeks. Appreciate it.

And our next question will be coming from Paul Diamond of Citi.

Just wanted to quickly touch on your kind of thoughts on a couple of issues across the market. So curtailments and production modulation have seen this additional chatter as of late with some of your peers choosing that avenue to kind of address pricing volatilities. I guess how should we think about Range's kind of overall strategy towards that type of modulation or whether it's plus or minus or curtailments or is it more a steady state?

Yes. Paul, thanks for joining us. If you were to look back over the balance of, let's just say, the past 3 to 5 years, I think what you would see is a couple of different strategies that Range has deployed. And one has been, we have actually looked at shut-in economics and we've curtailed some production when we felt like pricing warranted. And there was also a supportive reduction in cost associated with that production restriction or shut-in that we basically deployed several years ago. The other strategy you've seen us utilize is what you saw last year. And to some degree, what you've seen in this year's numbers as well, where last year, you saw us reshape the program where we had more of our liquids-rich activity and turn in lines in the first 6 to 9 months of the year, you saw us push our dry gas TILs deeper into the year, as you started to see fundamentals improve for the winter season. You see a little of that as well this year in 2025. If you look at the first half of the year, much of our focus has been more on the liquids rich side of our business. But again, that's on the being supported by the NGL uplift that you've come to see with that NYMEX plus type realization type impact that we see really becomes a force multiplier in our cash flow in our numbers that we report. And now what you've seen is us again, shape this year's program where the dry gas TILs are going into the second half of the year. Now balance of those went in, in Q3, but they were deep enough in Q3. You're really going to see more of the production effects show up in our Q4 numbers, which again, I know we touched upon in our prepared remarks today as we start to look at finishing the quarter and the year really strong here. So I would say we have looked at some shut-ins. We've done those over the years past. That's been more a little bit on a limited basis. What you have seen us do is think about shaping of our program where we think pricing signals would warrant the timing of that production to turn to sales. Q3 for us this year was business as usual. And so again, because of that shaping effort that we put in play, we feel like we were able to continue to execute, turn those wells in line and then get ready for the upcoming improving pricing markers, which we're already starting to see signs of that.

And Paul, just to emphasize a couple of things that Dennis said, I think there's 2 key points and differentiating factors of Range's business that makes that calculus of curtailments will be different than our peers. First, 80% of our gas leaves the basin. So the curtailments of dry gas in basin that would have otherwise been sold at in-basin pricing. That math is different than our math when it's going out of basin to stronger markets. Second, as Dennis said, the NGL uplift. You can see it in our realized price year-to-date, Range's realized prices is $0.20 greater than Henry Hub. So our dynamic of marketing sales outlets combined with the mix of production, changes that calculus for us. So we certainly are very mindful and do the math just as Dennis said, but it's just the factors in that equation are somewhat different and give us a great setup.

Understood. Makes perfect sense. And just one quick modeling follow-up. So keeping with the narrative of the 400,000 and excess inventory by year-end works out to 30 or so wells in linear fashion over the next subsequent 2 years. Is the right way to think about that, like true linearity. You have 4 wells, a little under 4 wells per quarter and kind of tranching out and then just building that into the TIL count or should there be more, I guess, seasonality or any other lumpy issues?

Yes. Good question. I'm only chuckling at the lumpy comment because I think ultimately, when you start to go from the model to reality, there will be some dynamics. And one, we tried to touch on a little bit earlier, but that is with some of the new processing and gathering infrastructure goes into service towards the midpoint of 2026. So activity-wise, when you think about activity cadence and you think about capital, it will be a really consistent program of execution and then when you start to see that next step in production, it will be more toward the midpoint when you see that Harmon Creek processing bolt-on start to go into service. So activity wise, you're going to see the utilization of that inventory look pretty linear. What you're going to see on the production side is some slight increase and then you're going to see, as you would expect a step-up when you see the next wave of Harmon Creek processing come into place. But it's going to be influenced by the infrastructure expansions that we've announced and how they come into service in the balance of '26. But think about '26 and '27 is a fairly linear utilization of that inventory.

And our next question will be coming from Greta Drefke of Goldman Sachs.

I just first wanted to start on the fact that given you are now well within your target net debt range, how are you evaluating allocation of free cash flow between share repurchases, further debt reduction or book marketing cash for potential other investment opportunities?

Greta, I'll take that one. So as we think about future allocation of capital and how we will elect to reinvest in the business, I think we can first look back at historical trends in what we have said we will do and what's borne out in the numbers. So first, the priority a number of years ago is deleveraging to your point, we're quite comfortably within the target range. And as you think about the cycles in the business, you can likely expect us to fluctuate and delever at some point in a particularly strong point of the cycle. You could expect some further deleveraging. And then another point in the cycle, we think about how best to use that balance sheet to create outsized value and opportunistic times. So again, to look backwards as perhaps an analog. In 2022, prices ran and Range bought back in $400 million in shares. But it was about 28% of free cash flow, softer prices, while we were still working on the balance sheet 2023 about 19% of cash flow -- free cash flow went to returns of capital in the form of both repurchases and dividends. As we got within our target and towards the mid and lower end of that, you've seen us lean more into those share repurchases and increase our returns of capital, while investing in the business, building the inventory and developing this growth plan. So 2023, 2024 and year-to-date this year, you've seen returns of capital be 19%, 31% and about 50% year-to-date this year. So those are just examples of the trends, what the business is capable of expect us to continue to do all of the above and try to execute in an efficient, opportunistic manner. When we see signs of weakness, we certainly have the willingness and capability of leaning in and buying shares. But most fundamentally, we have an extremely attractive inventory and highly profitable projects and a really exciting growth plan that's tied directly to market-driven demand and we'll continue to focus on that as well.

And I also just wanted to get your latest thoughts on M&A as it also continued to be a prevalent topical theme in upstream space here, acknowledging that you have significant low-cost inventory depth as you've outlined so far and on Slide 5. Are there any acreage packages potentially available that you believe could be accretive to Range's portfolio?

Yes, Greta, I'll tackle that one. I think when you look around the acreage position that we have really the efforts to block up all of the acreage has really limited some of that opportunity. However, we do see some opportunities to pick up some what I'll call white space acreage that's in and around our footprint. Some of that's in the capital numbers that you see us reported on this year, where there's roughly up to $30 million in incremental spend above maintenance type levels to manage your land program where we have the ability to pick up some of that, I'll say, the open track leasing that allows us to very efficiently add some inventory and also extend lateral lengths in many of those cases. We think that's going to continue to exist for the next few years. Of course, as you would imagine, over the course of time, that gets -- that opportunity gets smaller and smaller. There's a few other parcels that -- in areas that we've got our eyes on that are right in the, I'll just say, the operating window of our footprint. Some of them are state parks. And -- no doubt that could present a little bit of a challenge to -- given where the state may be viewing leasing today. But you've seen a willingness from like Ohio as an example to consider leasing under their state parts. We think that's a good sign. And then on top of it, we have the surrounding operating footprint where we would be able to drill underneath maybe those type areas without having any service access. So there are some further opportunities right in and around where we operate today, high-quality inventory, and we think there will be those opportunities that surface in the future.

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

Let me be the caboose here, guys. I did just want to get your thoughts on -- you've commented a lot about your optimism -- excuse me, optimism around NGL markets and obviously in the natural gas markets. Just given the amount of international demand capacity that's coming online, particularly for markets like ethane, should we expect to see that percentage of your portfolio that you're directing internationally to increase? Should we anticipate that we're going to see some commercial agreements into '26 and '27 as new volumes are commissioned for '28? Or how do you think about, I guess, that marketing strategy and perhaps outlook for premium relative to Belvieu in the next couple of years?

David, this is Alan. So yes, I appreciate your comments, and I'm glad you see it similar as we do. There is a tremendous amount of new demand coming on. We're going to be growing our business at the same time. So we're going to be able to supply into that. The proportion of our business on the LPG side, we're involved in international exports has been roughly around 80% of our production, which puts us at the highest level relative to our peers. And what's good about the additions to that capacity that we talked about that I referenced earlier is that, that percentage is going to stay about the same. So it will be growing, but it will be staying roughly 80%. And it will continue to have a fair amount of flexibility built into it, so that we can optimize between domestic and export markets, depending on the highest overall return. On the ethane side, similar type thing. There's -- as was mentioned previously, I believe by Mark, some of the expansions that we're seeing internationally are with people that we already have relationships with. So I wouldn't be surprised to see some more commitments in that space as we move forward.

Appreciate that. And just, I guess, to close out as a follow-up to that. As we think about the balance between gas and liquids, anything just in terms of area or geologically that would otherwise target like a mix shift over the next couple of years?

Yes. I'll close this out for us today, David, on that one. I think if you look at our program, roughly our activity level should look very similar in the next few years to what you've seen on that allocation of a portion of the field to what you've seen over the last couple of years. But over the course of time, it's very reasonable to think that our production mix will continue to get slightly wetter. Our inventory is more weighted on the liquid side. You can see where the processing capacity that we have, getting commissioned and gathering. It's also focused on the wet side, coupled with the optimism that we've shared about the future of NGLs and what that demand growth looks like, we think it's all kind of hand in glove complementary to each other. So I would expect a similar production mix where you're going to see somewhere in the neighborhood of probably 65% to 70%, let's just say, approximate range of wet to super rich type activity. But then with an underlying 30 roughly percent of dry activity that also continues to keep that gathering system at a high level of utilization, very competitive returns, very comparable and allows us to continue to grow our NGL business as well over time.

This concludes our question-and-answer session. I would like to turn the call back to Mr. Degner for concluding remarks.

Yes. I'd just like to thank everybody for joining our call today. It's always exciting to share the results from our prior quarter. And so really appreciate everyone joining the call. As always, if you have any follow-up questions, please don't hesitate to follow up with our Investor Relations team, and we look forward to sharing our 2025 full year results and plans for 2026 at the next call. We appreciate you joining. Thanks, everyone.