uploads/2016/02/RRC-Hedges1.jpg

Understanding Range Resources’ Hedging Activities

By

Updated

Range Resources’ hedging advantage

For 3Q15, natural gas hedging activities increased Range Resources’ (RRC) average realized natural gas price by $0.83 per Mcf (thousand cubic feet). As we have seen in the previous part of this series, the 3Q15 average realized price for RRC’s natural gas production was $2.77 per Mcf. This means that the commodity hedging activities increased RRC’s average realized natural gas price by ~43%.

Article continues below advertisement

RRC’s 4Q15 hedges on natural gas

Range Resources has hedged its 4Q15 natural gas production. As shown in the above chart, RRC had fixed price hedges in 4Q15 on natural gas for ~67 trillion British thermal units at price of $3.63 per MMBtu (million British thermal units).

As of September 30, 2015, RRC had derivative coverage for ~85% of forecasted natural gas production for 4Q15.

RRC’s future hedges on natural gas

As shown in the above chart, for 1Q16 and 2Q16, Range Resources has fixed price hedges on natural gas for ~57 trillion British thermal units at prices of $3.42 per MMBtu. Also for 3Q16 and 4Q16, RRC has fixed price hedges on natural gas for ~58 trillion British thermal units at prices of $3.42 per MMBtu.

As of September 30, 2015, RRC had derivative coverage for ~65% of forecasted natural gas production for 2016.

Article continues below advertisement

RRC’s production costs

For 3Q15, Range Resources’ (RRC) total production cost including LOE (lease operating expense), production and ad valorem taxes, G&A (general and administrative) costs, and gathering and transmission costs of $1.64 per Mcfe (million cubic feet equivalent), which is ~12% lower when compared with 3Q14.

In 3Q15, Range Resources’ LOE was $0.26 per Mcfe, which is ~21% lower when compared with 3Q14.

Oil and gas producers

Among the S&P 500 (SPY) upstream companies, Murphy Oil (MUR), Pioneer Natural Resources (PXD), and Noble Energy (NBL) have LOEs of $9.62 per boe (barrel of oil equivalent), $6.82 per boe, and $3.81 per boe, respectively.

Advertisement

More From Market Realist