10-Q 1 rrc-10q_20150630.htm 10-Q rrc-10q_20150630.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark one)

þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

Commission File Number: 001-12209

 

RANGE RESOURCES CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

34-1312571

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

 

100 Throckmorton Street, Suite 1200

Fort Worth, Texas

 

76102

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s telephone number, including area code

(817) 870-2601

 

Former Name, Former Address and Former Fiscal Year, if changed since last report: Not applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).

    Yes  þ    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

 

þ

  

Accelerated Filer

 

¨

 

 

 

 

Non-Accelerated Filer

 

¨  (Do not check if smaller reporting company)

  

Smaller Reporting Company

 

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

    Yes  ¨    No  þ

169,361,512 Common Shares were outstanding on July 27, 2015

 

 

 

 

 


RANGE RESOURCES CORPORATION

FORM 10-Q

Quarter Ended June 30, 2015

Unless the context otherwise indicates, all references in this report to “Range,” “we,” “us,” or “our” are to Range Resources Corporation and its directly and indirectly owned subsidiaries and its ownership interests in equity method investments.

TABLE OF CONTENTS

 

 

 

 

 

Page

PART I – FINANCIAL INFORMATION 

  

 

ITEM 1.

 

Financial Statements

  

3

 

 

   Consolidated Balance Sheets (Unaudited)

  

3

 

 

   Consolidated Statements of Operations (Unaudited)

  

4

 

 

   Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

  

5

 

 

   Consolidated Statements of Cash Flows (Unaudited)

  

6

 

 

   Selected Notes to Consolidated Financial Statements (Unaudited)

  

7

ITEM 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

23

ITEM 3.

 

Quantitative and Qualitative Disclosures about Market Risk

  

35

ITEM 4.

 

Controls and Procedures

  

37

PART II – OTHER INFORMATION

  

 

ITEM 1.

 

Legal Proceedings

  

38

ITEM 1A.

 

Risk Factors

  

38

ITEM 6.

 

Exhibits

  

38

 

 

 

 

 

SIGNATURES

  

39

 

 

 

2


PART I – FINANCIAL INFORMATION

 

ITEM 1.

Financial Statements

 

RANGE RESOURCES CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

June 30,

 

 

December 31,

 

 

2015

 

 

2014

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

521

 

 

$

448

 

      Accounts receivable, less allowance for doubtful accounts of $2,961 and $2,719

 

115,006

 

 

 

188,941

 

Derivative assets

 

237,167

 

 

 

363,049

 

Inventory and other

 

20,914

 

 

 

17,854

 

Total current assets

 

373,608

 

 

 

570,292

 

Derivative assets

 

31,654

 

 

 

40,314

 

Natural gas and oil properties, successful efforts method

 

10,966,160

 

 

 

10,567,971

 

Accumulated depletion and depreciation

 

(2,725,802

)

 

 

(2,590,398

)

 

 

8,240,358

 

 

 

7,977,573

 

Other property and equipment

 

128,198

 

 

 

127,808

 

Accumulated depreciation and amortization

 

(95,584

)

 

 

(90,227

)

 

 

32,614

 

 

 

37,581

 

Other assets

 

127,697

 

 

 

121,020

 

Total assets

$

8,805,931

 

 

$

8,746,780

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

206,748

 

 

$

396,942

 

Asset retirement obligations

 

17,689

 

 

 

15,067

 

Accrued liabilities

 

162,724

 

 

 

187,973

 

Accrued interest

 

45,650

 

 

 

39,695

 

Deferred tax liabilities

 

73,941

 

 

 

115,587

 

Total current liabilities

 

506,752

 

 

 

755,264

 

Bank debt

 

364,000

 

 

 

723,000

 

Senior notes

 

750,000

 

 

 

 

Subordinated notes

 

2,350,000

 

 

 

2,350,000

 

Deferred tax liabilities

 

999,532

 

 

 

997,494

 

Derivative liabilities

 

125

 

 

 

 

Deferred compensation liabilities

 

156,460

 

 

 

178,599

 

Asset retirement obligations and other liabilities

 

297,648

 

 

 

284,994

 

Total liabilities

 

5,424,517

 

 

 

5,289,351

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

Preferred stock, $1 par, 10,000,000 shares authorized, none issued and outstanding

 

 

 

 

 

Common stock, $0.01 par, 475,000,000 shares authorized, 169,356,015 issued at

     June 30, 2015 and 168,711,131 issued at December 31, 2014

 

1,693

 

 

 

1,687

 

Common stock held in treasury, 62,511 shares at June 30, 2015 and 82,954

     shares at December 31, 2014

 

(2,358

)

 

 

(3,088

)

Additional paid-in capital

 

2,428,168

 

 

 

2,400,475

 

Retained earnings

 

953,911

 

 

 

1,058,355

 

Total stockholders’ equity

 

3,381,414

 

 

 

3,457,429

 

Total liabilities and stockholders’ equity

$

8,805,931

 

 

$

8,746,780

 

See accompanying notes.

3


 

RANGE RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas, NGLs and oil sales

$

258,053

 

 

$

477,517

 

 

$

583,536

 

 

$

1,049,534

 

Derivative fair value (loss) income

 

(34,791

)

 

 

(24,109

)

 

 

88,048

 

 

 

(170,959

)

Gain on the sale of assets

 

2,909

 

 

 

282,064

 

 

 

2,734

 

 

 

281,711

 

Brokered natural gas, marketing and other

 

21,339

 

 

 

30,052

 

 

 

35,824

 

 

 

62,580

 

Total revenues and other income

 

247,510

 

 

 

765,524

 

 

 

710,142

 

 

 

1,222,866

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct operating

 

34,780

 

 

 

34,935

 

 

 

71,917

 

 

 

74,730

 

Transportation, gathering and compression

 

95,198

 

 

 

76,809

 

 

 

184,624

 

 

 

150,970

 

Production and ad valorem taxes

 

9,242

 

 

 

10,844

 

 

 

19,170

 

 

 

22,522

 

Brokered natural gas and marketing

 

27,031

 

 

 

34,775

 

 

 

48,593

 

 

 

68,904

 

Exploration

 

5,025

 

 

 

13,621

 

 

 

12,911

 

 

 

28,467

 

Abandonment and impairment of unproved properties

 

12,330

 

 

 

9,332

 

 

 

23,821

 

 

 

19,327

 

General and administrative

 

55,964

 

 

 

56,888

 

 

 

104,293

 

 

 

106,100

 

Termination costs

 

417

 

 

 

 

 

 

6,367

 

 

 

 

Deferred compensation plan

 

(7,282

)

 

 

10,519

 

 

 

(12,906

)

 

 

8,484

 

Interest

 

43,479

 

 

 

45,488

 

 

 

82,686

 

 

 

90,889

 

Loss on early extinguishment of debt

 

 

 

 

24,596

 

 

 

 

 

 

24,596

 

Depletion, depreciation and amortization

 

151,895

 

 

 

133,361

 

 

 

299,185

 

 

 

262,043

 

Impairment of proved properties and other assets

 

 

 

 

24,991

 

 

 

 

 

 

24,991

 

Total costs and expenses

 

428,079

 

 

 

476,159

 

 

 

840,661

 

 

 

882,023

 

(Loss) income before income taxes

 

(180,569

)

 

 

289,365

 

 

 

(130,519

)

 

 

340,843

 

Income tax (benefit) expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

(1

)

 

 

 

 

 

5

 

Deferred

 

(61,975

)

 

 

117,977

 

 

 

(39,609

)

 

 

136,928

 

 

 

(61,975

)

 

 

117,976

 

 

 

(39,609

)

 

 

136,933

 

Net (loss) income

$

(118,594

)

 

$

171,389

 

 

$

(90,910

)

 

$

203,910

 

Net (loss) income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.71

)

 

$

1.04

 

 

$

(0.55

)

 

$

1.24

 

Diluted

$

(0.71

)

 

$

1.04

 

 

$

(0.55

)

 

$

1.24

 

Dividends paid per common share

$

0.04

 

 

$

0.04

 

 

$

0.08

 

 

$

0.08

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

166,421

 

 

 

161,909

 

 

 

166,230

 

 

 

161,354

 

Diluted

 

166,421

 

 

 

162,813

 

 

 

166,230

 

 

 

162,323

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

4


RANGE RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited, in thousands)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

$

(118,594

)

 

$

171,389

 

 

$

(90,910

)

 

$

203,910

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

De-designated hedges reclassified into natural gas, NGLs and oil sales, net of taxes (1)

 

 

 

 

(3,046

)

 

 

 

 

 

(4,286

)

Total comprehensive (loss) income

$

(118,594

)

 

$

168,343

 

 

$

(90,910

)

 

$

199,624

 

(1) Amounts are net of income tax benefit of $1,866 for the three months ended June 30, 2014 and $2,790 for the six months ended June 30, 2014. As of March 31, 2013, we elected to discontinue hedge accounting prospectively and as of December 31, 2014, all remaining accumulated other comprehensive income (“AOCI”) hedging gains had been transferred to earnings.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

 

5


RANGE RESOURCES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

 

 

Six Months Ended June 30,

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

 

Net (loss) income

$

(90,910

)

 

$

203,910

 

Adjustments to reconcile net (loss) income to net cash provided from operating activities:

 

 

 

 

 

 

 

Loss from equity method investments, net of distributions

 

 

 

 

3,096

 

Deferred income tax (benefit) expense

 

(39,609

)

 

 

136,928

 

Depletion, depreciation and amortization and impairment

 

299,185

 

 

 

287,034

 

Exploration dry hole costs

 

106

 

 

 

1

 

Abandonment and impairment of unproved properties

 

23,821

 

 

 

19,327

 

Derivative fair value (income) loss

 

(88,048

)

 

 

170,959

 

Cash settlements on derivative financial instruments that do not qualify for hedge

   accounting

 

222,716

 

 

 

(130,762

)

Allowance for bad debt

 

250

 

 

 

250

 

Amortization of deferred financing costs, loss on extinguishment of debt and other

 

3,090

 

 

 

29,812

 

Deferred and stock-based compensation

 

19,792

 

 

 

47,912

 

Gain on the sale of assets

 

(2,734

)

 

 

(281,711

)

Changes in working capital:

 

 

 

 

 

 

 

Accounts receivable

 

73,695

 

 

 

1,275

 

Inventory and other

 

(3,749

)

 

 

(6,872

)

Accounts payable

 

3,492

 

 

 

20,115

 

Accrued liabilities and other

 

(50,955

)

 

 

(59,751

)

Net cash provided from operating activities

 

370,142

 

 

 

441,523

 

Investing activities:

 

 

 

 

 

 

 

Additions to natural gas and oil properties

 

(671,166

)

 

 

(546,354

)

Additions to field service assets

 

(1,574

)

 

 

(5,119

)

Acreage purchases

 

(51,450

)

 

 

(110,471

)

Equity method investments and other

 

(75

)

 

 

1,103

 

Proceeds from disposal of assets

 

14,301

 

 

 

146,140

 

Purchases of marketable securities held by the deferred compensation plan

 

(19,897

)

 

 

(11,251

)

Proceeds from the sales of marketable securities held by the deferred compensation plan

 

24,992

 

 

 

13,343

 

Net cash used in investing activities

 

(704,869

)

 

 

(512,609

)

Financing activities:

 

 

 

 

 

 

 

Borrowing on credit facilities

 

1,009,000

 

 

 

1,175,000

 

Repayment on credit facilities

 

(1,368,000

)

 

 

(1,195,000

)

Issuance of senior notes

 

750,000

 

 

 

 

Repayment of subordinated notes

 

 

 

 

(312,000

)

Debt issuance costs

 

(13,929

)

 

 

 

Dividends paid

 

(13,534

)

 

 

(13,114

)

Issuance of common stock, net of offering expenses

 

 

 

 

396,662

 

Change in cash overdrafts

 

(35,921

)

 

 

4,679

 

Proceeds from the sales of common stock held by the deferred compensation plan

 

7,184

 

 

 

14,803

 

Net cash provided from financing activities

 

334,800

 

 

 

71,030

 

Increase (decrease) in cash and cash equivalents

 

73

 

 

 

(56

)

Cash and cash equivalents at beginning of period

 

448

 

 

 

348

 

Cash and cash equivalents at end of period

$

521

 

 

$

292

 

 

 

 

 

See accompanying notes.

 

6


RANGE RESOURCES CORPORATION

SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

(1) SUMMARY OF ORGANIZATION AND NATURE OF BUSINESS

Range Resources Corporation (“Range,” “we,” “us,” or “our”) is a Fort Worth, Texas-based independent natural gas, natural gas liquids (“NGLs”) and oil company primarily engaged in the exploration, development and acquisition of natural gas and oil properties in the Appalachian and Midcontinent regions of the United States. Our objective is to build stockholder value through consistent growth in reserves and production on a cost-efficient basis. Range is a Delaware corporation with our common stock listed and traded on the New York Stock Exchange under the symbol “RRC.”

 

(2) BASIS OF PRESENTATION

These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Range Resources Corporation 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2015. The results of operations for the second quarter and the six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the full year. These consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for fair presentation of the results for the periods presented. All adjustments are of a normal recurring nature unless otherwise disclosed. These consolidated financial statements, including selected notes, have been prepared in accordance with the applicable rules of the SEC and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements.

 

(3) NEW ACCOUNTING STANDARDS

Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standard for “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in “Topic 605, Revenue Recognition” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July, 2015, the FASB approved a one-year deferral of the effective date of this new standard so now the new guidance is effective for us for the reporting period beginning January 1, 2018, with early adoption permitted in the first quarter 2017. Entities have the option of using either a fully retrospective or modified approach to adopt the new standard. We are currently evaluating the new guidance and have not determined the impact this standard may have on our financial statements or decided upon the method of adoption.

In August 2014, the FASB issued an accounting standards update that requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in United States auditing standards. This standard is effective for us in first quarter 2017 and early adoption is permitted. We do not expect the adoption of this standard to have any impact on our consolidated results of operations, financial position or cash flows.

In April 2015, the FASB issued an accounting standards update, “Interest-Imputation of Interest:  Simplifying the Presentation of Debt Issuance Cost” which requires entities to present debt issuance cost related to a recognized debt liability as a direct deduction of the carrying amount of debt in the balance sheet, consistent with the presentation of debt discounts. This standard is effective for us for the reporting period beginning January 1, 2016, with early adoption permitted. Entities will be required to apply the guidance on a retrospective basis to each period presented as a change in accounting principle. We do not expect the adoption of this standard to have any material impact on our consolidated results of operations, financial position or cash flows. We will adopt the new standard as of December 31, 2015.

Recently Adopted

In April 2014, an accounting standards update was issued that raised the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other material disposal transactions that do not meet the revised definition of a discontinued operation. Under the updated standard, a disposal of a component or group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component or group of components of the entity (1) has been disposed of by a sale, (2) has been disposed of other than by a sale or (3) is classified as held for sale. This accounting standards update was effective for annual periods beginning on or after December 15, 2014 and is applied prospectively. Early adoption was permitted but only for disposals (or classifications that are held for sale) that had not been reported in financial statements previously issued or available for use. We adopted this new standard in first quarter 2014 and, as a result, the Conger Exchange (see discussion below) is not reported as a discontinued operation.

(4) ACQUISITIONS AND DISPOSITIONS

2015 Dispositions

In second quarter 2015, we sold miscellaneous unproved property and inventory for proceeds of $3.6 million resulting in a pre-tax gain of $2.9 million. In first quarter 2015, we also sold miscellaneous unproved and proved property and inventory for proceeds of

7


$10.7 million resulting in a pre-tax loss of $175,000. Included in the $10.7 million of proceeds is $10.5 million received from the sale of certain West Texas properties which closed in February 2015.

2014 Dispositions

In addition to the Conger Exchange described below, we sold miscellaneous unproved and proved property and inventory in the three months and the six months ended June 30, 2014 for total proceeds of $1.1 million resulting in a pre-tax gain of $1.6 million.

Conger Exchange Transaction

In April 2014, we entered into an exchange agreement with EQT Corporation and certain of its affiliates (collectively, “EQT”) in which we sold our Conger assets in Glasscock and Sterling Counties, Texas in exchange for producing properties and gas gathering assets in Virginia and $145.0 million in cash, before closing adjustments (“the Conger Exchange”). We closed the exchange transaction on June 16, 2014 and recognized a pre-tax gain of $285.1 million, before selling expenses of $5.0 million, which is recognized as a gain on sale of assets in our consolidated statements of operations for the three months and six months ended June 30, 2014. For the period from January 1, 2014 through June 16, 2014, we recognized $21.9 million of field net operating income (defined as natural gas, oil and NGLs sales and net brokered margin less direct operating expenses, production and ad valorem taxes and transportation expenses) for our Conger assets.

For the period from June 16, 2014 through June 30, 2014, we recognized $2.8 million of natural gas, oil and NGLs sales from the property interests acquired in the Conger Exchange and we recognized $2.1 million of field net operating income (defined as natural gas, oil and NGLs sales less direct operating expenses, production and ad valorem taxes and transportation expenses).

 

(5) INCOME TAXES

Income tax (benefit) expense was as follows (in thousands):

 

 

Three Months Ended
June 30,

 

 

 

Six Months Ended

June 30,

 

 

2015

 

 

 

2014

 

 

 

2015

 

 

 

2014

 

Income tax (benefit) expense

$

(61,975

)

 

$

117,976

 

 

$

(39,609

)

 

$

136,933

 

Effective tax rate

 

34.3

%

 

 

40.8

%

 

 

30.3

%

 

 

40.2

%

 

We compute our quarterly taxes under the effective tax rate method based on applying an anticipated annual effective rate to our year-to-date income, except for discrete items. Income taxes for discrete items are computed and recorded in the period that the specific transaction occurs. For second quarter and the six months ended June 30, 2015 and 2014, our overall effective tax rate was different than the federal statutory rate of 35% due primarily to state income taxes, valuation allowances and other permanent differences. The three months ended June 30, 2015 includes tax expense of $6.1 million and the six months ended June 30, 2015 includes $11.3 million of income tax expense related to increases in our valuation allowances for state net operating loss and credit carryforwards. The three months ended June 30, 2015 includes an income tax expense of $1.1 million and the six months ended June 30, 2015 includes an income tax benefit of $874,000 adjusting our valuation allowance for our deferred tax asset related to future deferred compensation plan distributions of our senior executives.

 

(6) (LOSS) INCOME PER COMMON SHARE

Basic income or loss per share attributable to common shareholders is computed as (1) income or loss attributable to common shareholders (2) less income allocable to participating securities (3) divided by weighted average basic shares outstanding. Diluted income or loss per share attributable to common stockholders is computed as (1) basic income or loss attributable to common shareholders (2) plus diluted adjustments to income allocable to participating securities (3) divided by weighted average diluted shares outstanding. The following tables set forth a reconciliation of income or loss attributable to common shareholders to basic income or loss attributable to common shareholders to diluted income or loss attributable to common shareholders (in thousands except per share amounts):


8


 

 

 

Three Months Ended
June 30,

 

 

 

Six Months Ended
June 30,

 

 

2015

 

 

 

2014

 

 

 

2015

 

 

 

2014

 

Net (loss) income, as reported

$

(118,594

)

 

$

171,389

 

 

$

(90,910

)

 

$

203,910

 

Participating earnings (a)

 

(111

)

 

 

(2,868

)

 

 

(224

)

 

 

(3,460

)

Basic net (loss) income attributed to common shareholders

 

(118,705

)

 

 

168,521

 

 

 

(91,134

)

 

 

200,450

 

Reallocation of participating earnings (a)

 

¾

 

 

 

15

 

 

 

¾

 

 

 

19

 

Diluted net (loss) income attributed to common shareholders

$

(118,705

)

 

$

168,536

 

 

$

(91,134

)

 

$

200,469

 

Net (loss) income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.71

)

 

$

1.04

 

 

$

(0.55

)

 

$

1.24

 

Diluted

$

(0.71

)

 

$

1.04

 

 

$

(0.55

)

 

$

1.24

 

(a)

Restricted Stock Awards represent participating securities because they participate in nonforfeitable dividends or distributions with common equity owners. Income allocable to participating securities represents the distributed and undistributed earnings attributable to the participating securities. Participating securities, however, do not participate in undistributed net losses.

The following table provides a reconciliation of basic weighted average common shares outstanding to diluted weighted average common shares outstanding (in thousands):

 

 

Three Months Ended
June 30,

 

 

 

Six Months Ended
June 30,

 

 

2015

 

 

 

2014

 

 

 

2015

 

 

 

2014

 

Weighted average common shares outstanding – basic

 

166,421

 

 

 

161,909

 

 

 

166,230

 

 

 

161,354

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Director and employee stock options and SARs

 

¾

 

 

 

904

 

 

 

¾

 

 

 

969

 

Weighted average common shares outstanding – diluted

 

166,421

 

 

 

162,813

 

 

 

166,230

 

 

 

162,323

 

 

Weighted average common shares-basic for both the three months ended June 30, 2015 and the three months ended June 30, 2014 excludes 2.8 million shares of restricted stock held in our deferred compensation plans (although all awards are issued and outstanding upon grant). Weighted average common shares-basic for both the six months ended June 30, 2015 and the six months ended June 30, 2014 excludes 2.8 million shares of restricted stock held in our deferred compensation plans. Due to our net loss from operations for the three months and the six months ended June 30, 2015, we excluded all outstanding stock appreciation rights (“SARs”) and restricted stock from the computation of diluted net loss per share because the effect would have been anti-dilutive to the computations. All SARs outstanding for the three months ended June 30, 2014 and the six months ended June 30, 2014 were included in the computations of diluted income per share because the grant prices of the SARs were less than the average market price of the common stock.

 

(7) SUSPENDED EXPLORATORY WELL COSTS

We capitalize exploratory well costs until a determination is made that the well has either found proved reserves or that it is impaired. Capitalized exploratory well costs are presented in natural gas and oil properties in the accompanying consolidated balance sheets. If an exploratory well is determined to be impaired, the well costs are charged to exploration expense in the accompanying consolidated statements of operations. We did not have any exploratory well costs that have been capitalized for a period greater than one year as of December 31, 2014 and June 30, 2015. The following table reflects the change in capitalized exploratory well costs for the six months ended June 30, 2015 and the year ended December 31, 2014 (in thousands):

 

 

 

June 30,

2015

 

 

 

December 31,

2014

 

Balance at beginning of period

$

2,996

 

 

$

6,964

 

Additions to capitalized exploratory well costs pending the determination of proved reserves

 

35,111

 

 

 

18,747

 

Reclassifications to wells, facilities and equipment based on determination of proved reserves

 

¾

 

 

 

(15,735

)

Divested wells

 

¾

 

 

 

(6,980

)

Balance at end of period

 

38,107

 

 

 

2,996

 

Less exploratory well costs that have been capitalized for a period of one year or less

 

(38,107

)

 

 

(2,996

)

Capitalized exploratory well costs that have been capitalized for a period greater than one year

$

¾

 

 

$

¾

 

 

9


    

(8) INDEBTEDNESS

We had the following debt outstanding as of the dates shown below (bank debt interest rate at June 30, 2015 is shown parenthetically). No interest was capitalized during the three months or six months ended June 30, 2015 or the year ended December 31, 2014 (in thousands):

 

 

June 30,
2015

 

 

December 31,
2014

 

Bank debt (1.5%)

 

$

364,000

 

 

$

723,000

 

Senior notes:

 

 

 

 

 

 

 

 

4.875% senior notes due 2025

 

 

750,000

 

 

 

¾

 

Senior subordinated notes:

 

 

 

 

 

 

 

 

6.75% senior subordinated notes due 2020

 

 

500,000

 

 

 

500,000

 

5.75% senior subordinated notes due 2021

 

 

500,000

 

 

 

500,000

 

5.00% senior subordinated notes due 2022

 

 

600,000

 

 

 

600,000

 

5.00% senior subordinated notes due 2023

 

 

750,000

 

 

 

750,000

 

Total debt

 

$

3,464,000

 

 

$

3,073,000

 

Bank Debt

In October 2014, we entered into an amended and restated revolving bank facility, which we refer to as our bank debt or our bank credit facility, which is secured by substantially all of our assets and has a maturity date of October 16, 2019. The bank credit facility provides for a maximum facility amount of $4.0 billion. On June 30, 2015, the bank commitments were $2.0 billion. The bank credit facility provides for a borrowing base subject to redeterminations annually by May and for event-driven unscheduled redeterminations. As part of our annual redetermination completed on March 31, 2015, our borrowing base was reaffirmed at $3.0 billion and our bank commitment was also reaffirmed at $2.0 billion. As of June 30, 2015, our bank group was composed of twenty-nine financial institutions with no one bank holding more than 6% of the total facility. The bank credit facility amount may be increased to the committed borrowing base amount, subject to the banks agreeing to participate in the facility increase and our payment of a mutually acceptable commitment fee to those banks. As of June 30, 2015, the outstanding balance under our bank credit facility was $364.0 million. Additionally, we had $108.7 million of undrawn letters of credit leaving $1.5 billion of committed borrowing capacity available under the facility. During a non-investment grade period, borrowings under the bank credit facility can either be at the alternate base rate (“ABR,” as defined in the bank credit agreement) plus a spread ranging from 0.25% to 1.25% or LIBOR borrowings at the LIBOR Rate (as defined in the bank credit agreement) plus a spread ranging from 1.25% to 2.25%. The applicable spread is dependent upon borrowings relative to the borrowing base. We may elect, from time to time, to convert all or any part of our LIBOR loans to base rate loans or to convert all or any of the base rate loans to LIBOR loans. The weighted average interest rate was 1.7% for the three months ended June 30, 2015 compared to 2.1% for the three months ended June 30, 2014. The weighted average interest rate was 1.7% for the six months ended June 30, 2015 compared to 2.1% for the six months ended June 30, 2014. A commitment fee is paid on the undrawn balance based on an annual rate of 0.30% to 0.375%. At June 30, 2015, the commitment fee was 0.30% and the interest rate margin was 1.25% on our LIBOR loans and 0.25% on our base rate loans.

At any time during which we have an investment grade debt rating from Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services and we have elected, at our discretion, to effect the investment grade rating period, certain collateral security requirements, including the borrowing base requirement and restrictive covenants, will cease to apply and an additional financial covenant (as defined in the bank credit facility) will be imposed. During the investment grade period, borrowings under the credit facility can either be at the ABR plus a spread ranging from 0.125% to 0.75% or at the LIBOR Rate plus a spread ranging from 1.125% to 1.75% depending on our debt rating. The commitment fee paid on the undrawn balance would range from 0.15% to 0.30%.

Senior Notes

In May 2015, we issued $750.0 million aggregate principal amount of 4.875% senior notes due 2025 (the “4.875% Notes”) for net proceeds of $737.8 million after underwriting discounts and commissions of $12.2 million. The notes were issued at par. The 4.875% Notes were offered to qualified institutional buyers and to non-U.S. persons outside the United States in compliance with Rule 144A and Regulation S of the Securities Act of 1933, as amended (the “Securities Act”). Interest due on the 4.875% Notes is payable semi-annually in May and November and is unconditionally guaranteed on a senior unsecured basis by all of our subsidiary guarantors. On or after February 15, 2025, we may redeem the notes, in whole or in part and from time to time, at 100% of the principal amount, plus accrued and unpaid interest. Upon the occurrence of certain changes in control, we must offer to repurchase the 4.875% Notes. The 4.875% Notes are unsecured and are subordinated to all of our existing and future secured debt, rank equally with all of Range’s existing and future senior unsecured debt, and rank senior to all of our existing and future subordinated debt. On the closing of the 4.875% Notes, we used the net proceeds to repay borrowings under our bank credit facility pending our intended redemption of all of our 6.75% senior subordinated notes due 2020, which we expect to complete in August 2015 using borrowings under our bank credit facility.

10


Senior Subordinated Notes

If we experience a change of control, bondholders may require us to repurchase all or a portion of our senior subordinated notes at 101% of the aggregate principal amount plus accrued and unpaid interest, if any. All of the senior subordinated notes and the guarantees by our subsidiary guarantors are general, unsecured obligations and are subordinated to our bank debt and will be subordinated to existing and future senior debt that we or our subsidiary guarantors are permitted to incur under the bank credit facility and the indentures governing the subordinated notes.

Early Extinguishment of Debt

On July 1, 2015, we announced a call for the redemption of $500.0 million of our outstanding 6.75% senior subordinated notes due 2020 at a price of 103.375% of par plus accrued and unpaid interest and we estimate we will recognize a loss on early extinguishment of debt of $22.5 million. The notes will be redeemed on August 3, 2015. On May 27, 2014, we announced a call for the redemption of $300.0 million of our outstanding 8.0% senior subordinated notes due 2019 at 104.0% of par plus accrued and unpaid interest, which were redeemed on June 26, 2014. In second quarter 2014, we recognized a $24.6 million loss on early extinguishment of debt, including transaction call premium cost as well as expensing of the remaining deferred financing costs on the repurchased debt.

Guarantees

Range Resources Corporation is a holding company which owns no operating assets and has no significant operations independent of its subsidiaries. The guarantees by our subsidiaries, which are directly or indirectly owned by Range, of our senior notes, senior subordinated notes and our bank credit facility are full and unconditional and joint and several, subject to certain customary release provisions. A subsidiary guarantor may be released from its obligations under the guarantee:

in the event of a sale or other disposition of all or substantially all of the assets of the subsidiary guarantor or a sale or other disposition of all the capital stock of the subsidiary guarantor, to any corporation or other person (including an unrestricted subsidiary of Range) by way of merger, consolidation, or otherwise; or

if Range designates any restricted subsidiary that is a guarantor to be an unrestricted subsidiary in accordance with the terms of the indenture.

Debt Covenants

Our bank credit facility contains negative covenants that limit our ability, among other things, to pay cash dividends, incur additional indebtedness, sell assets, enter into certain hedging contracts, change the nature of our business or operations, merge, consolidate, or make certain investments. In addition, we are required to maintain a ratio of EBITDAX (as defined in the credit agreement) to cash interest expense of equal to or greater than 2.5 and a current ratio (as defined in the credit agreement) of no less than 1.0. In addition, the ratio of the present value of proved reserves (as defined in the credit agreement) to total debt must be equal to or greater than 1.5 until Range has two investment grade ratings. We were in compliance with applicable covenants under the bank credit facility at June 30, 2015.

The indentures governing our senior subordinated notes contain various restrictive covenants that are substantially identical to each other and may limit our ability to, among other things, pay cash dividends, incur additional indebtedness, sell assets, enter into transactions with affiliates, or change the nature of our business. At June 30, 2015, we were in compliance with these covenants.

 

(9) ASSET RETIREMENT OBLIGATIONS

Our asset retirement obligations primarily represent the estimated present value of the amounts we will incur to plug, abandon and remediate our producing properties at the end of their productive lives. Significant inputs used in determining such obligations include estimates of plugging and abandonment costs, estimated future inflation rates and well lives. The inputs are calculated based on historical data as well as current estimated costs. In the first six months 2015, we increased our estimated abandonment costs on certain of our water impoundments and changed estimated well lives for certain wells in Pennsylvania. A reconciliation of our liability for plugging and abandonment costs for the six months ended June 30, 2015 is as follows (in thousands):

11


 

 

  

Six Months
Ended
June 30,

 2015

 

Beginning of period

  

$

287,463

  

Liabilities incurred

  

 

2,994

 

Liabilities settled

 

 

(7,410

)

Disposition of wells

 

 

(4,115

)

Accretion expense

  

 

9,570

 

Change in estimate

  

 

15,690

 

End of period

  

 

304,192

 

Less current portion

  

 

17,689

 

Long-term asset retirement obligations

  

$

286,503

 

Accretion expense is recognized as a component of depreciation, depletion and amortization expense in the accompanying consolidated statements of consolidated operations.

(10) CAPITAL STOCK

We have authorized capital stock of 485.0 million shares which includes 475.0 million shares of common stock and 10.0 million shares of preferred stock. We currently have no preferred stock issued or outstanding. The following is a schedule of changes in the number of common shares outstanding since the beginning of 2014:

 

 

 

Six Months
Ended
June 30,
2015

 

 

Year
Ended
December 31,
2014

 

Beginning balance

 

 

168,628,177

 

 

 

163,342,894

 

Equity offering

 

 

 

 

 

4,560,000

 

SARs exercised

 

 

76,989

 

 

 

195,242

 

Restricted stock grants

 

 

324,294

 

 

 

270,062

 

Restricted stock units vested

 

 

243,601

 

 

 

244,413

 

Treasury shares issued

 

 

20,443

 

 

 

15,566

 

Ending balance

 

 

169,293,504

 

 

 

168,628,177

 

 

12


(11) DERIVATIVE ACTIVITIES

We use commodity-based derivative contracts to manage exposure to commodity price fluctuations. We do not enter into these arrangements for speculative or trading purposes. We do not utilize complex derivatives, as we typically utilize commodity swaps or collars to (1) reduce the effect of price volatility of the commodities we produce and sell and (2) support our annual capital budget and expenditure plans. The fair value of our derivative contracts, represented by the estimated amount that would be realized upon termination, based on a comparison of the contract price and a reference price, generally the New York Mercantile Exchange (“NYMEX”) for natural gas and oil or Mont Belvieu for NGLs, approximated a net asset of $262.8 million at June 30, 2015. These contracts expire monthly through December 2017. The following table sets forth our commodity-based derivative volumes by year as of June 30, 2015, excluding our basis swaps which are discussed separately below:

Period

  

Contract Type

  

Volume Hedged

  

Weighted
Average Hedge Price

Natural Gas

  

 

  

 

  

 

2015

  

Collars

  

145,000 Mmbtu/day

  

$ 4.07–$ 4.56

2015

  

Swaps

  

737,500 Mmbtu/day

  

$ 3.63

2016

  

Swaps

  

630,000 Mmbtu/day

  

$ 3.42

2017

 

Swaps

 

20,000 Mmbtu/day

 

$ 3.49

 

 

 

 

 

 

 

Crude Oil

  

 

  

 

  

 

2015

  

Swaps

  

11,250 bbls day

  

$ 85.87

2016

 

Swaps

 

3,000 bbls/day

 

$ 70.54

 

 

 

 

 

 

 

NGLs (C3-Propane)

  

 

  

 

  

 

2015

 

Swaps

 

13,000 bbls/day

 

$ 0.58/gallon

2016

 

Swaps

 

5,500 bbls/day

 

$ 0.60/gallon

 

 

 

 

 

 

 

NGLs (NC4-Normal Butane)

  

 

  

 

  

 

2015

  

Swaps

  

3,500 bbls/day

  

$ 0.72/gallon

2016

 

Swaps

 

2,500 bbls/day

 

$ 0.72/gallon

 

 

 

 

 

 

 

NGLs (C5-Natural Gasoline)

  

 

  

 

  

 

2015

  

Swaps

  

4,000 bbls/day

  

$ 1.16/gallon

2016

 

Swaps

 

2,500 bbls/day

 

$ 1.23/gallon

Every derivative instrument is required to be recorded on the balance sheet as either an asset or a liability measured at its fair value. If the derivative does not qualify as a hedge or is not designated as a hedge, changes in fair value of these non-hedge derivatives are recognized in earnings as derivative fair value income or loss.

Basis Swap Contracts

In addition to the collars and swaps above, at June 30, 2015, we had natural gas basis swap contracts that are not designated for hedge accounting, which lock in the differential between NYMEX and certain of our physical pricing indices primarily in Appalachia. These contracts settle monthly through March 2017 and include a total volume of 50,565,000 Mmbtu. The fair value of these contracts was an asset of $5.9 million on June 30, 2015.

13


Derivative Assets and Liabilities

The combined fair value of derivatives included in the accompanying consolidated balance sheets as of June 30, 2015 and December 31, 2014 is summarized below. The assets and liabilities are netted where derivatives with both gain and loss positions are held by a single counterparty and we have master netting arrangements. The tables below provide additional information relating to our master netting arrangements with our derivative counterparties (in thousands):

 

 

  

June 30, 2015

 

 

 

  

Gross 

Amounts
of Recognized
 Assets

 

  

Gross

Amounts
Offset in the
Balance Sheet

 

  

Net Amounts
of Assets 
Presented in the
Balance Sheet

 

Derivative assets

 

  

 

 

 

  

 

 

 

  

 

 

 

Natural gas

–swaps

  

$

157,138

 

  

$

(1,119

)

  

$

156,019

  

 

–collars

 

 

31,149

 

 

 

 

 

 

31,149

 

 

–basis swaps

 

 

7,240

 

 

 

(1,380

)

 

 

5,860

 

Crude oil

–swaps

  

 

64,690

 

  

 

(2,731

)

  

 

61,959

 

NGLs

–C3 swaps

  

 

13,966

 

  

 

 

  

 

13,966

 

 

–NC4 swaps

  

 

2,774

 

  

 

(5

)

  

 

2,769

 

 

–C5 swaps

 

 

402

 

 

 

(3,303

)

 

 

(2,901

)

 

 

  

$

277,359

 

  

$

(8,538

)

  

$

268,821

 

 

 

 

  

June 30, 2015

 

 

 

  

Gross

Amounts
of Recognized 

(Liabilities)

 

  

Gross 

Amounts
Offset in the
Balance Sheet

 

  

Net Amounts of (Liabilities) 
Presented in the
Balance Sheet

 

Derivative (liabilities):

 

  

 

 

 

  

 

 

 

  

 

 

 

Natural gas

–swaps

 

$

(1,244

)

 

$

1,119

 

 

$

(125

)

 

–basis swaps

 

 

(1,380

)

 

 

1,380

 

 

 

 

Crude oil

–swaps

 

 

(2,731

)

 

 

2,731

 

 

 

 

NGLs

–NC4 swaps

 

 

(5

)

 

 

5

 

 

 

 

 

–C5 swaps

  

 

(3,303

)

  

 

3,303

 

  

 

 

 

 

  

$

(8,663

)

  

$

8,538

 

  

$

(125

)

 

 

 

  

December 31, 2014

 

 

 

  

Gross

Amounts
of Recognized 
Assets

 

 

Gross 

Amounts
Offset in the
Balance Sheet

 

 

Net Amounts
of Assets 
Presented in the
Balance Sheet

 

Derivative assets:

 

  

 

 

 

  

 

 

 

  

 

 

 

Natural gas

–swaps

  

$

198,740

  

 

$

 

 

$

198,740

 

 

–collars

  

 

57,460

  

 

 

 

 

 

57,460

 

 

–basis swaps

  

 

2,442

  

 

 

(755

)

 

 

1,687

 

Crude oil

–swaps

  

 

128,578

  

 

 

 

 

 

128,578

 

NGLs

–C3 swaps

  

 

14,727

  

 

 

 

 

 

14,727

 

 

–C5 swaps

  

 

2,171

  

 

 

 

 

 

2,171

 

 

 

  

$

404,118

  

 

$

(755

)

 

$

403,363

 

 

 

 

  

December 31, 2014

 

 

 

  

Gross

Amounts
of Recognized 
(Liabilities)

 

 

Gross 

Amounts
Offset in the
Balance Sheet

 

 

Net Amounts

of (Liabilities) 
Presented in the
Balance Sheet

 

Derivative (liabilities):

 

  

 

 

 

 

 

 

 

 

 

 

 

Natural gas

–basis swaps

  

$

(755

)

 

$

755

  

 

$

 

 

 

  

$

(755

)

 

$

755

  

 

$

 

14


For the three and six months ended June 30, 2014, the realized gains from our cash flow hedges (for those derivatives that previously qualified for hedge accounting which were reclassified from AOCI into revenue) is summarized below (in thousands):

 

 

Three Months Ended

June 30,

 

 

 

Six Months Ended

June 30,

 

 

 

2014

 

 

 

2014

 

Swaps

$

1,052

 

 

$

1,888

 

Collars

 

3,860

 

 

 

5,188

 

Income taxes

 

(1,866

)

 

 

(2,790

)

 

$

3,046

 

 

$

4,286

 

 

The effects of our non-hedge derivatives (those derivatives that do not qualify for hedge accounting) on our consolidated statements of operations are summarized below (in thousands):

 

Three Months Ended June 30,

 

 

Derivative Fair Value

Income (Loss)

 

 

2015

 

 

2014

 

Swaps

$

(42,100

)

 

$

(38,521

)

Collars

 

(1,650

)

 

 

1,032

 

Basis swaps

 

8,959

 

 

 

13,380

 

Total

$

(34,791

)

 

$

(24,109

)

 

 

 

Six Months Ended June 30,

 

 

Derivative Fair Value

Income (Loss)

 

 

 

2015

 

 

 

2014

 

Swaps

$

83,676

 

 

$

(82,593

)

Collars

 

6,765

 

 

 

(38,116

)

Basis swaps

 

(2,393

)

 

 

(50,250

)

Total

$

88,048

 

 

$

(170,959

)

 

(12) FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three approaches for measuring the fair value of assets and liabilities: the market approach, the income approach and the cost approach, each of which includes multiple valuation techniques. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to measure fair value by converting future amounts, such as cash flows or earnings, into a single present value amount using current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace the service capacity of an asset. This is often referred to as current replacement cost. The cost approach assumes that the fair value would not exceed what it would cost a market participant to acquire or construct a substitute asset of comparable utility, adjusted for obsolescence.

The fair value accounting standards do not prescribe which valuation technique should be used when measuring fair value and does not prioritize among the techniques. These standards establish a fair value hierarchy that prioritizes the inputs used in applying the various valuation techniques. Inputs broadly refer to the assumptions that market participants use to make pricing decisions, including assumptions about risk. Level 1 inputs are given the highest priority in the fair value hierarchy while Level 3 inputs are given the lowest priority. The three levels of the fair value hierarchy are as follows:

Level 1 – Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Observable market-based inputs or unobservable inputs that are corroborated by market data. These are inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Level 3 – Unobservable inputs that are not corroborated by market data and may be used with internally developed methodologies that result in management’s best estimate of fair value.

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Valuation techniques that maximize the use of observable inputs are favored. Assets and liabilities are classified in their entirety based on the lowest priority level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities within the levels of the fair value hierarchy.

Fair Values – Recurring

We use a market approach for our recurring fair value measurements and endeavor to use the best information available. The following tables present the fair value hierarchy table for assets and liabilities measured at fair value, on a recurring basis (in thousands):

 

 

Fair Value Measurements at June 30, 2015 using:

 

 

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

 

Total
Carrying
Value as of
June 30,
2015

 

Trading securities held in the deferred compensation plans

 

$

64,420

 

 

$

 

 

$

 

 

$

64,420

 

Derivatives swaps

 

 

 

 

 

231,687

 

 

 

 

 

 

231,687

 

                    –collars

 

 

 —

 

 

 

31,149

 

 

 

 —

 

 

 

31,149

 

                    –basis swaps

  

 

  —

 

  

 

5,860

 

 

 

 

  

 

5,860

 

 

 

  

Fair Value Measurements at December 31, 2014 using:

 

 

  

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

  

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

  

Total
Carrying
Value as of
December 31,
2014

 

Trading securities held in the deferred compensation plans

  

$

68,454

  

  

$

  

 

$

  

  

$

68,454

  

Derivatives swaps

  

 

 —

 

  

 

344,216

 

 

 

  

  

 

344,216

 

                    –collars

  

 

 —

 

  

 

57,460

  

 

 

  

  

 

57,460

  

                    –basis swaps

  

 

 —

 

  

 

1,687

  

 

 

  

  

 

1,687

  

Our trading securities in Level 1 are exchange-traded and measured at fair value with a market approach using end of period market values. Derivatives in Level 2 are measured at fair value with a market approach using third-party pricing services, which have been corroborated with data from active markets or broker quotes.

Our trading securities held in the deferred compensation plan are accounted for using the mark-to-market accounting method and are included in other assets in the accompanying consolidated balance sheets. We elected to adopt the fair value option to simplify our accounting for the investments in our deferred compensation plan. Interest, dividends, and mark-to-market gains or losses are included in deferred compensation plan expense in the accompanying consolidated statements of operations. For second quarter 2015, interest and dividends were $139,000 and the mark-to-market adjustment was a loss of $576,000 compared to interest and dividends of $103,000 and mark-to-market gain of $2.1 million in second quarter 2014. For the six months ended June 30, 2015, interest and dividends were $248,000 and the mark-to-market adjustment was a gain of $832,000 compared to interest and dividends of $171,000 and the mark-to-market adjustment of a gain of $2.6 million in the same period of 2014.

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Fair Values—Reported

The following table presents the carrying amounts and the fair values of our financial instruments as of June 30, 2015 and December 31, 2014 (in thousands):

 

 

 

June 30, 2015

 

 

December 31, 2014

 

 

 

Carrying
Value

 

 

Fair
Value

 

 

Carrying
Value

 

 

Fair
Value

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity swaps, collars and basis swaps

 

$

268,821

 

 

$

268,821

 

 

$

403,363

 

 

$

403,363

 

Marketable securities(a)

 

 

64,420

 

 

 

64,420

 

 

 

68,454

 

 

 

68,454

 

(Liabilities):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity swaps

 

 

(125

)

 

 

(125

)

 

 

 

 

 

 

Bank credit facility(b)

 

 

(364,000

)