Range Resources (RRC) Q1 2020 Earnings Call Transcript

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Range Resources (RRC -2.67%)
Q1 2020 Earnings Call
May 01, 2020, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the Range Resources first-quarter 2020 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 speakers' remarks, there will be a question-and-answer period.

At this time, I would like to turn the call over to Mr. Laith Sando, vice president, investor relations at Range Resources. Please go ahead, sir.

Laith Sando -- Vice President, Investor Relations

Thank you, operator. Good morning, everyone, and thank you for joining Range's first-quarter earnings call. The speakers on today's call are Jeff Ventura, chief executive officer; Dennis Degner, chief operating officer; and Mark Scucchi, chief financial officer. Hopefully, you've had a chance to review the press release and updated investor presentation that we posted on our website.

We also filed our 10-Q with the SEC yesterday. It's available on our 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.

For additional information, we've posted supplemental tables on our website to assist in the calculation of EBITDAX, cash margins and other non-GAAP measures. With that, let me turn the call over to Jeff.

Jeff Ventura -- Chief Executive Officer

Thank you, Laith, and thanks, everyone, for joining us on this morning's call. Before we review the quarter, I would like to thank all of our employees and service providers for their hard work and dedication to keep our business plans on track while ensuring the health and safety of our employees and their families. In particular, our field employees have continued to deliver each day on our well sites while practicing social distancing, adhering to CDC guidelines and helping us supply the much-needed energy the world relies on during a crisis. Natural gas is a critical resource that powers our everyday lives, as well as helps to provide critical electricity to hospitals and clinics.

One step further, the NGLs we produce are being used as a feedstock for lifesaving medical equipment, cleaning supplies and medicine. Range's culture has always been one to lend a hand, roll up our sleeves and help our community. Earlier this month, Range provided more than $100,000 to nonprofit organizations supporting those that need it most in our local areas. On top of this program, Range has donated protective health supplies to area medical providers and technology to multiple school districts for students to be able to participate in remote learning.

These are unique and challenging times in our industry and in the world. I believe it's during these moments that we really come closer together and grow stronger, supporting each other in our local communities. I especially want to thank those that are working each day on the front lines of this pandemic as is the case for numerous Range family members and likely the case for many listening to the call. We appreciate you taking time to join us today and wish the best for you and your families.

Reflecting on the first quarter, Range continued to make steady progress on key strategic initiatives. We improved our cost structure, bolstered liquidity, operated safely and efficiently and maintained the peer-leading base decline in capital efficiency. The results of these efforts are reflected in our first-quarter results and have better positioned Range to navigate a difficult commodity environment. Looking forward, I believe Range is very well-positioned to benefit from an improving macro for natural gas and natural gas liquids.

Looking first at unit cost. Range's unit costs have improved by $0.20 per Mcfe since the first quarter of last year. These cost improvements have resulted from a focused effort to find margin-enhancing cost reductions across our various line items, led by a $0.13 improvement in transportation, gathering and compression, and processing expense and greater than 10% improvements in both G&A and interest expense. These are lasting improvements at one door through price cycles.

Mark will highlight some of these efforts in more detail. Just as important as these lasting improvements to unit costs are the decisive actions we've taken to derisk our balance sheet and bolster our liquidity. Early in the first quarter, Range refinanced $550 million in debt, improving our maturity profile. Later in the quarter, the banks reaffirmed their commitments on our credit facility of $2.4 billion, solidifying Range's liquidity.

When combined over $1 billion in successful asset sales completed over the last 18 months, we have materially derisked our go-forward plans. We remain focused on continuing this trend of absolute debt reduction through a disciplined capital program that prioritizes free cash flow. We also remain active in our efforts to monetize additional assets to accelerate our deleveraging and in the improving backdrop for natural gas prices should help these ongoing efforts. Looking at our go-forward plans, we've put together a thoughtful capital program that efficiently develops our resource, delivering it to a diverse set of end markets ranging from Pennsylvania utilities using clean-burning natural gas to international customers using propane and butane for heating and cooking.

Like we discussed on our call in February, we're going to adjust our capital spending plans if near-term commodity prices were challenged. So in March, we announced a reduced capital budget of $430 million. This is greater than a 40% reduction in capital versus 2019, and I believe this operational plan, which holds 2.3 Bcfe per day of production flat makes Range the most efficient producer in Appalachia. This level of capital efficiency is made possible because of our low well costs that are approaching $600 per foot, but it's also driven by our shallow base decline.

Range's base decline rate of approximately 20% is lower than our gassy peers and significantly better than most oil producers, which means that Range has a smaller wedge of production that needs to be replaced each day to hold production flat, as evidenced by this year's capital plan. Importantly, this year's operational programs positions us well heading into 2021, which Dennis will touch on in a minute, as we are not relying on significant DUC drawdowns or sizable prior-year outspends to accomplish our 2020 plans, like some other companies appear to be. Instead, our peer-leading capital efficiency is sustainable into 2021 and beyond into what we believe will be a better market for natural gas and NGLs. Range's sizable core inventory, measured in decades, provides us the long life repeatability that is a positive differentiator for Range.

We believe this will become more evident over time as inventory life and core exhaustion become growing narratives for other operators in Appalachia and in other basins. Before turning it over to Mark and Dennis, I'll reiterate how proud I am of the efforts the Range team has made during these challenging times. Our employees in the office and in the field have shown a great deal of dedication and innovation and making sure the company continues to make progress on our key objectives, all while prioritizing the health and safety of one another. You have made Range an even stronger company as a result.

Over to you, Dennis.

Dennis Degner -- Chief Operating Officer

Thanks, Jeff. Reviewing the first quarter, capital spending came in at approximately $131 million or 30% of the planned capital spend while Q1 production closed out at 2.29 Bcf equivalent per day. This puts us firmly on track with our capital budget of $430 million while delivering production guidance at maintenance levels, which we announced at the end of March. The details of our capital plan include $405 million dedicated for drilling and completions activity, $20 million for leasing, and approximately $5 million for gathering and other support projects.

This keeps us in line with our prior plan to direct 94% of the capital toward drilling and completions-related activity. Our Q1 execution resulted in turning to sales 20 wells from an average horizontal length of over 11,500 feet. Looked at a different way, we turned to sales over 230,000 feet of lateral footage in the first quarter. 40% of the wells turned to sales were in our dry gas acreage position with the remaining located in our wet area.

Continued excellent field run time in our production operations and strong well performance from both new and existing wells across Southwest Pennsylvania have firmly positioned us to achieve our 2020 maintenance target of approximately 2.3 Bcf equivalent per day, while spending $430 million or less. On the operations front, during the first quarter, we drilled 20 wells across our dry and wet acreage with a total horizontal footage of approximately 240,000 feet or nearly 12,000 feet per well. This drilling performance represents a 20% increase over last year's per well horizontal length average. In Q1, over 50% of our activity was on existing pad sites, which is similar to prior quarters and has allowed us to capture operational efficiencies and cost savings.

Lastly, the drilling team achieved a new milestone by successfully drilling our longest horizontal wellbore to date. This well is located in our dry gas area with a horizontal length of over 19,600 feet and is one of five wells drilled in the quarter with a lateral length greater than 15,000 feet. On the completion side, the team completed 28 wells with a total lateral footage of just under 280,000 feet, with an average horizontal length of just under 10,000 feet per well. Overall completion efficiency continues to improve with approximately 1,400 frac stages completed for the quarter, representing a 3% increase in the number of stages per crude day.

These incremental improvements translate into less capital required and reduced cycle times. Water operations once again exceeded our operational and capital efficiency expectations in the first quarter through increased third-party produced water utilization. The team was able to utilize more third-party water produced when compared to the same time period last year, as well as posting our most successful month-to-date by utilizing more than 750,000 barrels in March. As a result, this reduced our completion cost by nearly $2 million for the quarter.

When you look at our strategy of efficient long lateral development, utilizing pads with existing infrastructure and couple this with creative drill and complete cost reductions, we generate peer-leading well costs and repeatable capital efficiency. As we've discussed, we announced a capital budget of $430 million in March, which was a reduction of $90 million from our original 2020 budget. The framework of this reduction involves scheduling optimization, reduced activity and further cost reductions from increased efficiencies in areas such as self-sourced frac sand, reduced fuel costs associated with our electric frac fleet and expanded water recycling. The blueprint of our activity for the year is front-end loaded with approximately 60% of the capital projected to be spent across the first and second quarters.

Turned in line totals were reduced for the year to 67 under the revised capital plan while maintaining over 300,000 feet of lateral inventory for a 2021 program. For context, this is approximately 90% of the footage carried into 2020 and lines up perfectly with our current thoughts on maintaining a similar program in 2021. With our 2020 capital program, we will maintain operations with one drilling rig and one frac crew through year-end and are well-positioned to continue maintenance operations throughout 2021 if needed, with an associated drill and complete capital similar to 2020, all while maximizing the utilization of existing infrastructure. Between scheduling optimization, capital and operational efficiencies, along with a low base decline, we have a clear line of sight to deliver on our peer-leading drill and complete capital target of $610 per foot, while meeting our production goal of 2.3 Bcf equivalent per day.

On the marketing front, Range's liquids business continued to expand on premiums relative to Mont Belvieu, with first-quarter NGL realizations averaging $1.30 per barrel premium. Our portfolio of domestic and international ethane contracts performed very well during the quarter and generated a significant uplift relative to Mont Belvieu while propane and butane markets benefited from an increase in Marcus Hook export premiums. As the quarter progressed, propane fundamentals improved despite a warmer-than-average winter. The improvements were driven by decreasing domestic propane production, which fell over 400,000 barrels per day or 17% from the start of the year.

Given the historic reduction in U.S. drilling activity and refinery utilization that will be experienced this year, we expect reductions in NGL supply to accelerate as the year continues and into 2021. We are already seeing the results of a tighter market in the Northeast with propane barrels bid at a much higher differential to Mont Belvieu than at this time last year. International demand for our propane and butane has remained strong in the second quarter on significantly reduced global refinery supply and expectations of decreased supply from OPEC producers as the year progresses.

Range will continue to benefit from strong export realizations this year with our 15,000 barrel per day increase through the Mariner East 2 pipeline and export DUC capacity that became operational, April 1, 2020. Condensate sales and pricing were strong during the first quarter. However, COVID-19-related gasoline and jet fuel demand loss began to affect markets as we entered the second quarter. While we anticipate some second-quarter weakness in condensate pricing, Range's diverse portfolio of condensate counterparties, with sales contracted on monthly, quarterly and annual basis, has shielded the majority of our production from the spot market.

Range continues to expect annual condensate differentials to be in the WTI minus $7 to $8 window, and we have a strong WTI hedge protection in the form of swaps that mitigate lower movements in price. For the second half of the year, we expect prices to improve for condensate as demand recovers while the trajectory of decreasing supply accelerates. On the natural gas side, which is approximately 70% of Range's production, we reported a differential of $0.12 under nonmix during the quarter, including basis hedging. Our transportation portfolio gives us access to premium winter markets for the natural gas in Midwest and the Northeast.

And while an 11% warmer-than-normal winter caused those markets to be weaker than normal, our basis hedging activity captured a good portion of the higher prices from last November's early cold weather. As a result, Range remains on track with its differential guidance of $0.20 to $0.26 for the year. Looking ahead, recently, we have seen some improvement in overall prices as natural gas demand is holding up much better than oil, due in part to the role that plays in power generation across the United States. Lower 48 natural gas production has clearly started to decline.

And we expect to see a more substantial decline in the coming months, in large part driven by what is happening in the oil basins. The good news is that oil prices are creating a structural shift in the supply curve of natural gas in the U.S. Associated gas has grown 3 to 4 Bcf per year over the prior two years, and that portion of supply is set to decline under the current oil price environment. We see this as a bright light for natural gas as we approach the second half of 2020 and especially as we look into 2021.

Before closing out the operations and marketing section, I'd like to spend a moment on safety. In addition to the highlights we've shared today regarding efficiency gains and cost reductions, similar advancements were seen when looking at our safety performance in the first quarter. The overall results showcased a significant improvement in our safety metrics in Q1 versus the same time period last year. In addition to reducing worksite recordables, we also saw a similar improvement in vehicle safety metrics versus the same time period a year ago.

The winter months present seasonal challenges. But when comparing this year's Q1 results to the same time period over the last four years, this was our best safety performance we've seen. These results reflect the continued commitment by our employees to deploy safe work practices day in and day out, all while ensuring that safety is an integral part of the Range culture. Lastly, I wanted to bring you up-to-date on Range's operations during the presence of COVID-19.

Due to the incident management training Range has conducted over the past several years, we were prepared to respond to COVID-19 in an organized and systematic manner. A team comprised of Range leaders began monitoring information regarding the virus early in Q1. And when the situation warranted, they determined the necessary actions to take and communicated with our employees. Our mission was clear, protect and health of safety of our Range team and continue our operations.

Like many, we are working remotely when possible, practicing proper social distancing and conducting our business in line with local, state and federal guidance. Due to the commitment by our Range team to operate safely, we are proud to announce that we have not had one single reported positive case of COVID-19 with our employee workforce. We remain dedicated to the health and safety of our team, along with our business objectives as the country progresses toward a recovery. In closing, the first-quarter results clearly reflect our operations are off to a strong start for the year, delivering on our production and capital plans all while generating peer-leading drill and complete costs, coupled with our strongest safety performance yet.

I'll now turn it over to Mark.

Mark Scucchi -- Chief Financial Officer

Thanks, Dennis. Like Jeff and Dennis mentioned, in the midst of a pandemic affecting nearly every aspect of daily life, I'm proud to state that as a corporation prioritizing employee and community health, we remain fully capable and focused on shareholder value. In terms of preserving and enhancing shareholder value, over the past two years, the steps Range has taken to reduce debt, enhance liquidity, extend maturities, reduce operating and capital costs have collectively positioned Range, as well as possible to pass through this business cycle. In fact, the steps Range took proactively to reduce debt by $1 billion, expand its credit facility, refinance bonds and receive reaffirmed bank commitments and borrowing base at existing levels, serve as important stepping stones for Range to benefit from what appears to be an accelerated rebalancing of natural gas and natural gas liquids supply and demand and resulting better prices.

Looking back on the first quarter, let's start at the bottom line, free cash flow. Range was cash flow positive before refinancing costs and returns of capital to shareholders. After all cash flows, including debt issuance costs, share repurchases and working capital, debt increased a modest $19 million. This was driven by $23 million in share repurchases during the first quarter, which represents a very carefully considered deployment of capital.

On a cumulative basis, we've repurchased approximately 10 million shares for $29.9 million through April, equating to an average share price of less than $3. Protecting Range's core asset through bolstering the balance sheet remains the priority, but during the first quarter, the disconnect between intrinsic value and the share price presented an opportunity to create long-term value. To reiterate and evidence our priority, of the $1.1 billion in recent asset sale proceeds, less than 10% of those proceeds were earmarked for the share repurchase plan. To date, we have used roughly 30% of that approved amount or said differently, 3% of the proceeds have gone to share repurchases with 97% going to debt reduction in order to secure and enhance shareholder value.

Another important factor to keep in mind is the per share ownership of production and resource potential. After selling 3.5% royalty interest, we have repurchased roughly 4% of shares outstanding with a small portion of the proceeds offsetting the per share ownership of sold resource potential. We will continue to be thoughtful and deliberate in our use of liquidity under the share repurchase program. On the topic of balance sheet maintenance, during our last earnings call, I commented that Range's assets provided substantial cushion to the borrowing base and committed amount under the reserve-based credit facility.

During the quarter, we announced the formal reaffirmation of both a $3 billion borrowing base and $2.4 billion in commitments, demonstrating a high level of asset coverage, the resiliency of Range's reserves and the value of Range's diverse marketing arrangements borne out via the highly mechanical reserve-based lending process despite a challenged commodity price environment, with price decks as low as the market has seen in a very long time. With that important step complete, Range ended the quarter with $1.5 billion in available liquidity under the facility, providing substantial capacity if needed to address near-term headwinds, and again, if need be, to serve as a backstop for nearer-term maturities. Our stated goal is to reduce absolute debt. Range is taking advantage of the dislocation in capital markets, repurchasing a cumulative $347 million in bond principal through April, realizing $46 million in debt reduction.

On an annualized basis, this equates to approximately $10 million in interest expense savings. Despite creating a long runway, it is not our strategy to passively wait for improved prices, though it would appear a rerating has begun. Nevertheless, asset sales remain a high priority, and progress is being made on multiple fronts. Results for the first quarter reflect Range's focus and ability to deliver on financial and operating objectives despite choppy market conditions.

Consistent with prior periods, operating efficiency and our close attention to capital discipline delivered planned production with capital spending in line with budget and continuing to drive down unit costs. Capital costs incurred for the quarter was approximately $130 million, in line with the planned cadence of this year's annual budget. Turning to cash unit costs. In the fourth quarter last year, we drove total cash unit cost below $2 per Mcfe.

And in the first quarter, Range maintained that competitive level at all-in cash costs of $1.93 per unit of production. Lease operating expense decreased by $0.01 from the first quarter last year from a host of items, including the sale of higher cost legacy assets and water handling, among other items. Gathering, processing, transport declined $0.03 from the preceding quarter and $0.13 from the same quarter prior year as we efficiently manage the midstream portfolio with full utilization in Southwest Pennsylvania, certain capacity contracts allowed to expire and savings from lower processing costs as a result of reduced NGL prices. Cash G&A savings of $3 million year over year is due to reduced compensation expense as a result of a leaner organization.

The slight increase compared to the preceding quarter is due to timing of certain annual subscriptions and data services that are paid in the first quarter. Interest expense decreased by $0.03 per unit compared to the first quarter of last year on lower debt balances and up $0.03 from the fourth quarter of last year on higher coupon costs of the recent refinancing. In total, the first quarter is better than the low end of annual guidance for unit costs. Over time, we expect a downward trend in cash unit cost to continue, driven by improvements in GP&T as certain contracts expire and others see reduced rates over time, as well as expected improvements in G&A and interest expense.

In the first quarter, we recorded noncash impairment charges, reducing book value of assets in North Louisiana based on market indications of value. There were no impairments of the Marcellus. The first step in a GAAP proved property impairment test is to compare undiscounted future net revenue to book value. At quarter end, strip pricing for the Marcellus future net revenue exceeds book value by greater than $18 billion or greater than 500%, providing a substantial cushion.

While globally we're experiencing unprecedented events, we believe that the value of Range's business and its contributions to the U.S. and global supply chain are clear. We have made steady, consistent progress operationally and financially to secure and enhance that value. We continue work on incremental steps to further strengthen the company's financial position.

Steps taken, steps planned and Range's 2020 outlook, we believe, place the company in a good spot in what appears to be a rerating of the natural gas industry. In summary, Range delivered again on its operating and financial plans, has created significant running room for supply and demand to rebalance prices, recast the cost structure to enhance resilience for a low price environment and continues to work meaningful transactions with the goal of extending these trends. Jeff, back to you.

Jeff Ventura -- Chief Executive Officer

Operator, we are happy to take questions.

Questions & Answers:

Operator

Thank you, Mr. Ventura. [Operator instructions] The first question is from Jane Trotsenko from Stifel. Your line is now open.

Jane Trotsenko -- Stifel Financial Corp. -- Analyst

Good morning, and thanks for taking my questions. The first question is on TG&P savings. Maybe you could provide some color where those savings are coming from and how sustainable they are on a going-forward basis? And finally, the trajectory for the remainder of the year for TG&P.

Mark Scucchi -- Chief Financial Officer

Good morning, Jane. It's Mark. I'll take that. So as we discussed over the last year or so, and I think you're really beginning to see in the reported numbers, there are components of our gathering, processing and transport costs that are being optimized and have a long-term trend of gliding downwards.

So recall that of the total unit cost for gathering, processing and transport, it has been running roughly a third, a third, a third. A third processing cost, a third long-haul transport and a third gathering. The processing component, remember, will fluctuate with the price of natural gas, so you'll see some savings as we run through periods like now. But you'll also see continued savings as the marketing team does an outstanding job optimizing and fully utilizing our transportation as we are currently able to do out of Southwest Pennsylvania.

You also have what are first mover advantages that are coming to fruition at this point. Those are contracts that reach the maturity and renewal options that are our options to choose or to not elect to extend. So you have the benefit this quarter and in quarters and years going ahead where we can allow contracts to expire, obligations when MVCs roll off as we saw with some processing capacity this quarter, right way to risk on the processing cost, so as NGLs fluctuate, that cost goes up and down. And then on the gathering side, as we talked about on prior calls, a component of that cost structure has a capital recovery element to it.

And small portions of that have just begun to roll out. So over time, you'll continue to see that trend down. And as far as our guidance for the year, I'll refer to the annual guidance we provided, as well as the glide slope that's in the investor presentation. A long-term trend here but this is a year-over-year downward trend we think we can continue to achieve.

Jane Trotsenko -- Stifel Financial Corp. -- Analyst

That's perfect. The second question is on NGL and condensate pricing, and maybe you guys can talk a little bit what you are seeing this quarter and how it compares to the 1Q?

Dennis Degner -- Chief Operating Officer

Yeah, Jane. This is Dennis. As we start to -- we tried to tackle some of this during the prepared remarks, but we're pretty comfortable at this point that we're seeing the ability to both move the barrels and also capture prices that are premiums relative to Mont Belvieu. So as we think about our condensate production, it really represents 2% of the total production stack in the profile, again, with 70% being on the natural gas side, another 20% really on the NGL barrel component.

So what we've seen is it represents a small portion of our business. We've been very successful keeping the barrels placed and staving off any concerns at this point around impacts to production. We have quality hedges in place also that help us with this discussion. So as we think about us being 90% hedged with WTI crude prices over $58 a barrel, it really helps us as we think about the long haul.

We know that there's going to be recovery just around the corner. We're starting to, no doubt, see and feel and hear about what that recovery could look like. But in the months ahead, we feel that we're well-positioned, especially on the condensate side. On the NGL component, we really see still good, strong demand when it comes to our propane barrels and also the other NGL stream as well.

On the heavier side, as you look at our C5 plus, we have multiple arrangements in place to be able to continue to have those barrels move. And again, it represents a small component of the overall barrel itself. So as we look for the rest of the year, we have a high degree of confidence that we'll both be able to move the barrels, keep our production flowing and also be able to attain prices due to, really, our advantage of being able to get to premium markets.

Jeff Ventura -- Chief Executive Officer

And I think, Dennis, just to tack on, again, just the NGL guide that we have out there, that's a premium of $0.50 to $1.50.

Jane Trotsenko -- Stifel Financial Corp. -- Analyst

Got it. And the final question, if I may. Maybe you guys can provide some preliminary thoughts on 2021, and if flat production outlook is still appropriate?

Jeff Ventura -- Chief Executive Officer

Let me just start at a high level and say, really, we've been clear about our philosophy and strategy with the goal of really generating free cash flow per share and real corporate returns. So we have a lot of flexibility. Because we've fulfilled all of our pipeline commitments, and there's a slide in the back that shows that, Slide 23, we have a lot of flexibility. So I think we're in good shape or position, which should be going into a better natural gas and NGL market.

But Mark, do you want to tackle on to that or --

Mark Scucchi -- Chief Financial Officer

Yeah, I think you get the highlights there that we have the flexibility. So economics and cash flow warranted and driving corporate returns and the free cash flow yield will dictate the outcome of our reinvestment program from organic cash flow. So we remain flexible and have a latitude to do that.

Jane Trotsenko -- Stifel Financial Corp. -- Analyst

That's better. Thank you so much.

Operator

Thank you. Our next question comes from the line of Brad Heffern from RBC Capital Markets. Your line is now open.

Brad Heffern -- RBC Capital Markets -- Analyst

Hey. Good morning, everyone. Just a follow-up on the asset sale comments you guys have made. You called out the potential improvement in the gas macro longer term, but obviously, we're still in a very uncertain economic environment right now.

So I'm curious if you've seen an increase or a decrease in the interest level? And if your comments or your confidence around getting additional deals done sort of pins some sort of economic recovery or if it's something that we could see in the near term?

Mark Scucchi -- Chief Financial Officer

Sure, Brad. I'll keep the comments at a fairly high level. It's certainly our preference to deliver the results rather than try to draw a box around the equation and then strive to hit that. So we do have a number of asset sales under way.

We have been encouraged by the level of interest and the dialogue. As you can see, we have a strong motivation to decrease absolute debt. Again, we can reference the proxy and the board and our targets of what we're trying to achieve this year and our philosophy of driving corporate value. So with that, I would just highlight the fact that we have a lot of optionality, we have processes formally under way and active discussions under way that are making progress.

Brad Heffern -- RBC Capital Markets -- Analyst

OK. Thank you. And then just as far as the use of any cash that might be coming in, I appreciate the comments earlier on the call about the repurchase program. Can you just talk about -- obviously, you've repurchased thus far at a much lower level than where the shares are now.

Will the repurchase program continue to be a priority? Or should we expect more of the reductions in outstanding principal like the bulk of capital has been going through already? Thanks.

Mark Scucchi -- Chief Financial Officer

Sure. I think you can look at our pattern of behavior thus far and kind of read into the future a bit that you're striving to maximize value by prudently using liquidity and protecting the value of the organization. So there's value enhancement by buying back the shares when there's a dramatic disconnect, which we continue to see, but the tilting, the preference, the priority you can see in how we spent the dollar so far. So you could expect similar behavior from us going forward.

The program is still in place. It still represents options and choices. We can deploy that capital in that fashion. But you can see our bias is to protect that organization and its totality.

Brad Heffern -- RBC Capital Markets -- Analyst

OK. Thank you.

Operator

Thank you. [Operator instructions] Our next question comes from the line of Greg Tuttle from Simmons Energy. Your line is now open.

Greg Tuttle -- Simmons Energy -- Analyst

Hey, gentlemen. Thank you for taking the time this morning taking the question. So I wanted to first ask what the kind of long-term strategy for balancing growth leverage -- operating leverage to firm transport? And then any shareholder returns if gas and NGL prices move meaningfully higher, which is currently being indicated by the strip?

Jeff Ventura -- Chief Executive Officer

Again, let me start at a high level and turn it to Mark. It's the same answer I gave earlier. We have been very clear, I think, about our philosophy and strategy at Range and what we're trying to accomplish. And the goal is really to generate free cash flow per share and real corporate returns.

So with that philosophy, we really don't see the need or benefit to return to high growth. So prices are significantly higher and we're generating significant free cash flow. We'll first direct that to bolstering the balance sheet. And then from there, we'll look to position to expand cash returns to shareholders.

But Mark?

Mark Scucchi -- Chief Financial Officer

Yeah. I think with a good trend so far, debt reduction in 2018, 2019, we certainly intend to accomplish debt reduction this year as we go forward and think about the redeployment, the reinvestment of free cash flow. That's a philosophy that this is a self-funding organization where we are using organic cash flow to reinvest in the business and generate the highest corporate returns, whether it's through the drill bit. Once the balance sheet is where we want it to be, in the target place where we can always be on our front foot and opportunistic throughout the cycles, generating free cash flow with leverage in acceptable territory, whatever the future cycles may be, then we can elect what the right reinvestment rate is, whether that's maintenance capex.

And certainly, as we think about the macro, we think about core inventory going forward and what the call on the Appalachian Basin may be to meet natural gas demand, both domestically and internationally, and what that necessary price may be, ultimately. That puts us in a very good place in our perspective, given the depth of our inventory and the choice of how quickly to reinvest or how slow to reinvest, again, to optimize total corporate returns.

Greg Tuttle -- Simmons Energy -- Analyst

OK. No, that's great. Thanks. For second question here, I am curious as to what is -- if I look at Slide 14, shows declines in GP&T and LOE continuing through 2024.

So I'm curious, is that a ratable move lower each year through that time frame? Or is there a specific step down moment that occurs? And then if there is a specific step down, what's driving that? Thank you.

Mark Scucchi -- Chief Financial Officer

So it's actually a combination of the two. So on the gathering side, there's a capital recovery component, which, as you get to around year 12 or so, it just -- it glides down. So if you think back 12 years ago, 2008 type time frame, you were beginning to build out the hub-and-spoke gathering system in Southwest Pennsylvania. So you're just now at the first anniversary, if you will.

But again, that was the earliest development, so it's the smallest piece of the system. So each year as we step forward, it's ratable, but on an increasing size and component of that system. So it is ratable, but it increases somewhat over the next dozen years. Over that period of time, you also have options that come up on long-haul transport that can drop away.

So if you look at Slide 23 in the deck, the blue-shaded area is the Marcellus takeaway capacity, which, first, it shows you we have production greater than 10% above our FT requirements that are fully utilized and then some, giving us optionality. But you can see as this glides down, there are some step functions there when we hit the optional renewal dates on long-haul takeaway capacity. But at that point in time, we can evaluate the economics and determine whether or not to extend those. So it's a combination of the two.

Greg Tuttle -- Simmons Energy -- Analyst

OK. Perfect. Thank you so much. I appreciate it, guys.

Operator

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

Jeff Ventura -- Chief Executive Officer

I just want to thank everybody for participating on today's call.

Operator

[Operator signoff]

Duration: 44 minutes

Call participants:

Laith Sando -- Vice President, Investor Relations

Jeff Ventura -- Chief Executive Officer

Dennis Degner -- Chief Operating Officer

Mark Scucchi -- Chief Financial Officer

Jane Trotsenko -- Stifel Financial Corp. -- Analyst

Brad Heffern -- RBC Capital Markets -- Analyst

Greg Tuttle -- Simmons Energy -- Analyst

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