# RANGE RESOURCES CORP (RRC) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from RANGE RESOURCES CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/315852/000095017025026789/rrc-20241231.htm
Accession: 0000950170-25-026789
Filing date: 2025-02-25
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/RRC/
All MD&A years: /company/RRC/mda/
Previous year: /company/RRC/mda/fy2023/ (FY 2023)
Next year: /company/RRC/mda/fy2025/ (FY 2025)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to assist you in understanding our business and results of operations together with our present financial condition and should be read in conjunction with the information under Item 8. Financial Statements and Supplementary Data and other financial information found elsewhere in this Form 10-K. See also matters referenced in the foregoing pages under "Disclosures Regarding Forward-Looking Statements."

The following tables and discussions set forth key operating and financial data for the years ended December 31, 2024 and 2023. For similar discussions of the year ended December 31, 2023 compared to December 31, 2022 results, refer to Item 7. Managements’ Discussion and Analysis of Financial Condition and Results of Operations under Part II of our annual report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 21, 2024.

Overview of Our Business

We are an independent natural gas, NGLs and oil company engaged in the exploration, development and acquisition of natural gas and oil properties located in the Appalachian region of the United States. We operate in one segment and have a single company-wide management team that administers all properties as a whole rather than by discrete operating segments. We measure financial performance as a single enterprise and not on an area-by-area basis.

Our overarching business objective is to build stockholder value through returns-focused development of natural gas, NGLs and oil properties. Our strategy to achieve our business objective is to generate consistent cash flows from reserves and production through internally generated drilling projects occasionally coupled with complementary acquisitions and divestitures of non-core or, at times, core assets. Currently, our investment portfolio is focused on high quality natural gas assets in the state of Pennsylvania. Our revenues, profitability and future growth depend substantially on prevailing prices for natural gas, NGLs and oil and on our ability to economically find, develop, acquire and produce natural gas, NGLs and oil reserves.

Commodity prices have been and are expected to remain volatile. We believe we are well-positioned to manage any challenges during a low commodity price environment and that we can endure the continued volatility in current and future commodity prices by:

•
exercising discipline in our capital investments;

•
optimizing drilling, completion and operational efficiencies;

•
maintaining a competitive cost structure;

•
managing price risk through the hedging of our production; and

•
managing our balance sheet.

Prices for natural gas, NGLs, and oil fluctuate widely and affect:

•
our revenues, profitability and cash flow;

•
the quantity of natural gas, NGLs and oil that we can economically produce;

•
the quantity of natural gas, NGLs and oil shown as proved reserves;

•
the amount of cash flow available to us for reinvestment or return to our stockholders; and

•
our ability to borrow and raise additional capital.

We prepare our financial statements in conformity with U.S. GAAP, which require us to make estimates and assumptions that affect our reported results of operations and the amount of our reported assets, liabilities and proved natural gas, NGLs and oil reserves. We use the successful efforts method of accounting for our natural gas, NGLs and oil activities.

Management’s Discussion and Analysis of Results of Operations

Commodity prices have remained volatile. Benchmarks for natural gas and oil decreased in 2024 compared to 2023 while NGLs benchmarks remained comparable. As a result, we experienced decreases in our price realizations when compared to the same period of 2023. Despite lower prices, we continued to focus on creating long-term value for our stockholders along with positioning ourselves to be a responsible and reliable supplier of natural gas, NGLs and oil.

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Overview of 2024 Results

During 2024, we recognized net income of $266.3 million, or $1.09 per diluted common share compared to $871.1 million, or $3.57 per diluted common share during 2023. The decrease in net income for the year ended December 31, 2024 when compared to 2023 is primarily due to lower realized prices and lower derivative fair value income which are partially offset by higher production.

For the year ended December 31, 2024, we experienced a decrease in revenue from the sale of natural gas, NGLs and oil due to a 2% decrease in net realized prices (average prices including all derivative settlements and third-party transportation costs paid by us) when compared to 2023. Daily production in 2024 averaged 2.18 Bcfe compared to 2.14 Bcfe in 2023.

During 2024, our financial and operating performance included the following results:

•
revenue from the sale of natural gas, NGLs and oil decreased 5% from the same period of 2023 with a 7% decrease in average realized prices (before cash settlements on our derivatives) partially offset by slightly higher production volumes;

•
revenue from the sale of natural gas, NGLs and oil (including cash settlements on our derivatives) increased 3% from the same period of 2023;

•
transportation, gathering, processing and compression expense per mcfe was $1.48 in 2024 compared to $1.43 in the same period of 2023 primarily due to the increase of NGLs volumes and prices;

•
direct operating expense per mcfe was $0.12 in 2024 compared to $0.12 in the same period of 2023;

•
general and administrative expense per mcfe for 2024 increased 5% from the same period of 2023 primarily due to higher employee costs;

•
interest expense per mcfe for 2024 decreased 6% from the same period of 2023 due to lower debt balances;

•
our DD&A rate per mcfe for 2024 remained the same when compared to the same period of 2023;

•
drilled 52 net wells with a 100% success rate; and

•
our capital investment for 2024 was $654.0 million, which was within our initially announced range of $620.0 million to $670.0 million.

The year ended December 31, 2024 also included the following highlights to enhance our balance sheet, return capital to investors and preserve liquidity:

•
paid $77.5 million in dividends or $0.32 per common share compared to $0.32 per common share in 2023;

•
repurchased $65.3 million of our common stock compared to $19.0 million in 2023;

•
repurchased in the open market $79.7 million face value of our 4.875% senior notes due 2025 at a discount; and

•
enhanced liquidity with the accumulation of cash on hand of $304.5 million along with $1.3 billion available under our credit facility.

We generated $944.5 million of cash from operating activities in 2024, which is $33.4 million lower when compared to 2023 and reflects lower realized prices combined with higher comparative working capital outflows.

The year ended December 31, 2024 also included the following highlights that emphasized our corporate sustainability and initiatives:

•
completed the MiQ certification for our Southwest Pennsylvania assets and re-certified an "A" grade;

•
continued to recycle approximately 100% of our produced water; and

•
expanded the installation and use of compressed air pneumatic controllers.

Acquisitions

During 2024, we invested $57.9 million to acquire unproved acreage compared to $40.1 million in 2023. We continue selective acreage leasing and lease renewals to consolidate our acreage positions in the Marcellus Shale play in Pennsylvania.

Outlook for 2025

As we enter 2025, we believe we are positioned for sustainable long-term success. For 2025, we expect our capital budget to be in the range of $650 million to $690 million for natural gas, NGLs and oil related activities, excluding any potential acquisitions, for

33

which we do not budget. As has been our historical practice, we will periodically review our capital expenditures throughout the year and may adjust the budget based on commodity prices, drilling success and other factors. We expect our 2025 capital budget to achieve modest growth in production relative to 2024 production, while also supporting our longer-term operational plans. Our 2025 capital budget is focused on generating free cash flow while efficiently developing our resource base to achieve competitive full cycle returns for our stockholders. The prices we receive for our natural gas, NGLs and oil production are largely based on current market prices, which are beyond our control. The price risk on a portion of our forecasted natural gas, NGLs and oil production for 2025 is partially mitigated by entering into commodity derivative contracts, and we intend to continue to enter into these types of contracts. We believe it is likely that commodity prices will continue to be volatile during 2025.

Market Conditions

We believe we are positioned for sustainable long-term success. We continue to monitor the impact of the actions of OPEC and other large producing nations, the Russia-Ukraine conflict, hostilities in the Middle East, global inventories of gas, NGLs and oil, future monetary and fiscal policy and governmental policies aimed at transitioning towards lower carbon energy, and we expect prices for commodities we produce to remain volatile given the complex dynamics of supply and demand that exist in the global energy markets. In fourth quarter 2024, natural gas prices declined based on the relatively mild early days of winter in the United States. Longer term natural gas futures prices remain stronger based on market expectations that associated gas-related activity in oil basins and dry gas basin activity will show modest rates of growth due to infrastructure constraints, moderated reinvestment rates and core inventory exhaustion. In addition, the global energy crisis experienced in recent years further highlighted the low cost and low emissions shale gas resource base in North America, supporting continued strong structural demand growth for United States liquefied natural gas exports, domestic industrial gas demand and power generation. Other factors such as geopolitical disruptions, supply chain disruptions, cost inflation, concerns over a potential economic recession and the pace and changes in global monetary policy may impact the demand for natural gas, NGLs and oil. We continue to assess and monitor the impact and consequences of these factors on our operations.

Prices for various quantities of natural gas, NGLs and oil that we produce significantly impact our revenues and cash flows. Prices for commodities, such as hydrocarbons, are inherently volatile. Recently, natural gas prices have increased when compared to the fourth quarter 2024, with the average NYMEX monthly settlement price for natural gas increasing to $3.51 per mcf for January and $3.54 per mcf for February 2025 following cold winter weather. Oil prices slightly increased from December 2024, to $75.10 per barrel in January 2025. The following table lists related benchmarks for natural gas, oil and NGLs composite prices for the years ended December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023"],["Benchmarks:"],["Average NYMEX prices (a)"],["Natural gas (per mcf)","$","2.27","","","$","2.75"],["Oil (per bbl)","","76.17","","","","77.54"],["Mont Belvieu NGLs composite (per gallon) (b)","","0.56","","","","0.56"]]
[[/GREPCENT_TABLE]]

(a)
Based on average of monthly last day settlement prices on the New York Mercantile Exchange ("NYMEX").

(b)
Based on our estimated NGLs product composition per barrel.

Our price realizations (not including the impact of our derivatives) may differ from the benchmarks for many reasons, including quality, location, or production being sold at different prices.

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Natural Gas, NGLs and Oil Sales, Production and Realized Price Calculations

Our revenues vary from year to year as a result of changes in realized commodity prices and production volumes. In 2024, natural gas, NGLs and oil sales decreased 5% from 2023 with a 7% decrease in realized prices (excluding cash settlements on our derivatives) partially offset by slightly higher production volumes. The following table illustrates the primary components of natural gas, NGLs and oil sales for the last two years (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023","","","Change","","","%"],["Natural gas, NGLs and oil sales"],["Natural gas","$","1,052,442","","","$","1,234,308","","","$","(181,866",")","","","(15",")%"],["NGLs","","1,020,903","","","","933,791","","","","87,112","","","","9","%"],["Oil","","140,505","","","","166,562","","","","(26,057",")","","","(16",")%"],["Total natural gas, NGLs and oil sales","$","2,213,850","","","$","2,334,661","","","$","(120,811",")","","","(5",")%"]]
[[/GREPCENT_TABLE]]

Production is maintained through drilling success as we place new wells on production, which is partially offset by the natural decline of our natural gas, NGLs and oil reserves through production. Our production for the last two years is set forth in the following table:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023","","","Change","","","%"],["Production (a)"],["Natural gas (mcf)","","545,415,974","","","","538,084,671","","","","7,331,303","","","","1","%"],["NGLs (bbls)","","39,622,576","","","","37,939,700","","","","1,682,876","","","","4","%"],["Oil (bbls)","","2,180,528","","","","2,475,306","","","","(294,778",")","","","(12",")%"],["Total (mcfe) (b)","","796,234,598","","","","780,574,707","","","","15,659,891","","","","2","%"],["Average daily production (a)"],["Natural gas (mcf)","","1,490,208","","","","1,474,205","","","","16,003","","","","1","%"],["NGLs (bbls)","","108,258","","","","103,944","","","","4,314","","","","4","%"],["Oil (bbls)","","5,958","","","","6,782","","","","(824",")","","","(12",")%"],["Total (mcfe) (b)","","2,175,504","","","","2,138,561","","","","36,943","","","","2","%"]]
[[/GREPCENT_TABLE]]

(a)
Represents volumes sold regardless of when produced.

(b)
Oil and NGLs volumes are converted to mcfe at the rate of one barrel equals six mcf based upon the approximate relative energy content of oil and natural gas, which is not indicative of the relationship between oil and natural gas prices.

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Our average realized price (including all derivative settlements and third-party transportation costs paid by Range) received during 2024 was $1.84 per mcfe compared to $1.88 per mcfe in 2023. The majority of our production is sold at market-sensitive prices. We believe computed final realized prices should include the impact of transportation, gathering, processing and compression expense. Average sales prices (excluding derivative settlements) do not include any derivative settlements or third-party transportation costs which are reported in transportation, gathering and compression expense on the accompanying consolidated statements of income. Average sales prices (excluding derivative settlements) do include transportation costs where we receive net proceeds from the purchaser. Our average realized price (including all derivative settlements and third-party transportation costs paid by Range) calculation includes all cash settlements for derivatives. Average realized price calculations for the last two years are shown below:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023","","","Change","","","%"],["Average Prices"],["Average realized prices (excluding derivative settlements):"],["Natural gas (per mcf)","$","1.93","","","$","2.29","","","$","(0.36",")","","","(16",")%"],["NGLs (per bbl)","","25.77","","","","24.61","","","","1.16","","","","5","%"],["Oil (per bbl)","","64.44","","","","67.29","","","","(2.85",")","","","(4",")%"],["Total (per mcfe) (a)","","2.78","","","","2.99","","","","(0.21",")","","","(7",")%"],["Average realized prices (including all derivative settlements):"],["Natural gas (per mcf)","$","2.70","","","$","2.77","","","$","(0.07",")","","","(3",")%"],["NGLs (per bbl)","","25.86","","","","24.61","","","","1.25","","","","5","%"],["Oil (per bbl)","","68.77","","","","62.77","","","","6.00","","","","10","%"],["Total (per mcfe) (a)","","3.32","","","","3.31","","","","0.01","","","","0","%"],["Average realized prices (including all derivative settlements and third-party transportation costs paid by Range):"],["Natural gas (per mcf)","$","1.58","","","$","1.68","","","$","(0.10",")","","","(6",")%"],["NGLs (per bbl)","","11.62","","","","10.80","","","","0.82","","","","8","%"],["Oil (per bbl)","","67.87","","","","62.43","","","","5.44","","","","9","%"],["Total (per mcfe) (a)","","1.84","","","","1.88","","","","(0.04",")","","","(2",")%"]]
[[/GREPCENT_TABLE]]

(a)
Oil and NGLs volumes are converted at the rate of one barrel equals six mcf based upon the approximate relative energy content of oil to natural gas, which is not indicative of the relationship between oil and natural gas prices.

Realized prices include the impact of basis differentials and gains or losses realized from our basis hedging. The prices we receive for our natural gas can be more or less than the NYMEX price because of adjustments for delivery location, relative quality and other factors. The following table provides this impact on a per mcf basis:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023"],["Average natural gas differentials below NYMEX","$","(0.34",")","","$","(0.46",")"],["Realized (losses) gains on basis hedging","$","(0.02",")","","$","0.05"]]
[[/GREPCENT_TABLE]]

The following tables reflect our production and average realized commodity prices (excluding derivative settlements and third-party transportation costs paid by Range) (in thousands, except prices):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","","Price Variance","","","Volume Variance","","","2024"],["Natural gas"],["Price (per mcf)","$","2.29","","","$","(0.36",")","","$","\u2014","","","$","1.93"],["Production (Mmcf)","","538,085","","","","\u2014","","","","7,331","","","","545,416"],["Natural gas sales","$","1,234,308","","","$","(198,683",")","","$","16,817","","","$","1,052,442"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","","Price Variance","","","Volume Variance","","","2024"],["NGLs"],["Price (per bbl)","$","24.61","","","$","1.16","","","$","\u2014","","","$","25.77"],["Production (Mbbls)","","37,940","","","","\u2014","","","","1,683","","","","39,623"],["NGLs sales","$","933,791","","","$","45,692","","","$","41,420","","","$","1,020,903"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","","Price Variance","","","Volume Variance","","","2024"],["Oil"],["Price (per bbl)","$","67.29","","","$","(2.85",")","","$","\u2014","","","$","64.44"],["Production (Mbbls)","","2,475","","","","\u2014","","","","(294",")","","","2,181"],["Oil sales","$","166,562","","","$","(6,222",")","","$","(19,835",")","","$","140,505"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2023","","","Price Variance","","","Volume Variance","","","2024"],["Consolidated"],["Price (per mcfe)","$","2.99","","","$","(0.21",")","","$","\u2014","","","$","2.78"],["Production (Mmcfe)","","780,575","","","","\u2014","","","","15,660","","","","796,235"],["Total natural gas, NGLs and oil sales","$","2,334,661","","","$","(167,649",")","","$","46,838","","","$","2,213,850"]]
[[/GREPCENT_TABLE]]

Transportation, gathering, processing and compression expense was $1.2 billion in 2024 and $1.1 billion in 2023. These third-party costs are higher than the prior year due to an increase in NGLs volumes and higher prices throughout the year which increases processing cost. Gas transportation and gathering also increased with the use of new facilities in the current year. We have included these costs in the calculation of average realized prices (including all derivative settlements and third-party transportation expenses paid by Range). The following table summarizes transportation, gathering, processing and compression expense for the last two years (in thousands) and on a per mcf and per barrel basis:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023","","","Change","","","%"],["Transportation, gathering processing and compression"],["Natural gas","$","611,698","","","$","588,970","","","$","22,728","","","","4","%"],["NGLs","","564,269","","","","524,114","","","","40,155","","","","8","%"],["Oil","","1,958","","","","857","","","","1,101","","","","128","%"],["Total","$","1,177,925","","","$","1,113,941","","","$","63,984","","","","6","%"],["Natural gas (per mcf)","$","1.12","","","$","1.09","","","$","0.03","","","","3","%"],["NGLs (per bbl)","","14.24","","","","13.81","","","","0.43","","","","3","%"],["Oil (per bbl)","","0.90","","","","0.35","","","","0.55","","","","157","%"],["Total (per mcfe)","","1.48","","","","1.43","","","","0.05","","","","3","%"]]
[[/GREPCENT_TABLE]]

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Derivative fair value income was $56.7 million in 2024 compared to income of $821.2 million in 2023. All of our derivatives are accounted for using the mark-to-market accounting method. Mark-to-market accounting treatment can result in more volatility in our revenues as the change in fair value of our commodity derivative positions is included in total revenue. As commodity prices increase or decrease, such changes will have an opposite effect on the mark-to-market value of our derivatives. Gains on our derivatives generally indicate lower wellhead revenues in the future while losses indicate higher future wellhead revenues. The following table summarizes the impact of our commodity derivatives for the last two years (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023"],["Derivative fair value income per consolidated statements of income","$","56,726","","","$","821,154"],["Non-cash fair value (loss) income: \u207d\u1d43\u207e"],["Natural gas derivatives","$","(364,467",")","","$","557,419"],["NGLs derivatives","","\u2014","","","","\u2014"],["Oil derivatives","","(11,199",")","","","23,301"],["Divestiture contingent consideration","","\u2014","","","","(13,080",")"],["Total non-cash fair value (loss) income \u207d\u1d43\u207e","$","(375,666",")","","$","567,640"],["Net cash receipt (payment) on derivative settlements:"],["Natural gas derivatives","$","419,199","","","$","256,693"],["NGLs derivatives","","3,743","","","","\u2014"],["Oil derivatives","","9,450","","","","(11,179",")"],["Divestiture contingent consideration","","\u2014","","","","8,000"],["Total net cash receipt","$","432,392","","","$","253,514"]]
[[/GREPCENT_TABLE]]

(a)
Non-cash fair value adjustments on commodity derivatives is a non-GAAP measure. Non-cash fair value adjustments on commodity derivatives only represent the net change between periods of the fair market values of commodity derivative positions and exclude the impact of settlements on commodity derivatives during the period. We believe that non-cash fair value adjustments on commodity derivatives is a useful supplemental disclosure to differentiate non-cash fair market value adjustments from settlements on commodity derivatives during the period. Non-cash fair value adjustments on commodity derivatives is not a measure of financial or operating performance under GAAP, nor should it be considered a substitute for derivative fair value income or loss as reported in our consolidated statements of income.

Brokered natural gas and marketing revenue was $133.0 million in 2024 compared to $206.6 million in 2023. We enter into purchase transactions with third parties and separate sale transactions with third parties at different times to utilize available pipeline capacity and to fulfill sales commitments in the event of operational upsets. These brokered revenues decreased compared to 2023 due to lower brokered volumes and sales prices. See also Brokered natural gas and marketing expense below for more information on our net brokered margin.

Other income was $13.5 million in 2024 compared to $12.5 million in 2023. This includes $12.7 million of interest income and $311,000 of gain on sale of assets in 2024 compared to $5.9 million of interest income and $455,000 gain on sale of assets in 2023. The 2023 period also includes the receipt of $5.1 million in make-whole payments. In 2023 and prior, interest income was included within brokered natural gas and marketing revenue and other and gain on sale of assets was its own discrete line item within our annual report on Form 10-K for the year ended December 31, 2023. In 2024, and for the prior years presented in the accompanying consolidated statements of income, we reclassified both of these items into other income on the accompanying consolidated statements of income.

Costs and Expenses per mcfe

We believe some of our expense fluctuations are best analyzed on a unit-of-production, or per mcfe, basis. The following presents information about certain of our expenses on a per mcfe basis for the last two years:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023","","","Change","","","%"],["Direct operating expense","$","0.12","","","$","0.12","","","$","\u2014","","","","\u2014","%"],["Taxes other than income","","0.03","","","","0.03","","","","\u2014","","","","\u2014","%"],["General and administrative expense","","0.22","","","","0.21","","","","0.01","","","","5","%"],["Interest expense","","0.15","","","","0.16","","","","(0.01",")","","","(6",")%"],["Depletion, depreciation and amortization expense","","0.45","","","","0.45","","","","\u2014","","","","\u2014","%"]]
[[/GREPCENT_TABLE]]

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Direct operating expense was $95.3 million in 2024 compared to $96.1 million in 2023. Direct operating expenses include normally recurring expenses to operate and produce our wells, non-recurring workover and repair-related expenses. Our direct operating expenses for 2024 decreased from the prior year primarily due to lower water hauling/handling costs and lower workover costs, partially offset by higher labor expense. We incurred $3.3 million of workover costs in 2024 compared to $4.5 million of workover costs in 2023. Stock-based compensation expense represents the amortization of equity grants as part of the compensation of field employees. The following table summarizes direct operating expenses per mcfe for the last two years:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023","","","Change","","","%"],["Direct operating"],["Lease operating expense","$","0.12","","","$","0.11","","","$","0.01","","","","9","%"],["Workovers","","\u2014","","","","0.01","","","","(0.01",")","","","(100",")%"],["Stock-based compensation","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","%"],["Total direct operating expense","$","0.12","","","$","0.12","","","$","(0.00",")","","","(0",")%"]]
[[/GREPCENT_TABLE]]

Taxes other than income expense was $21.6 million in 2024 compared to $23.7 million in 2023. This expense category is primarily the Pennsylvania impact fee. In 2012, Pennsylvania enacted an "impact fee" on unconventional natural gas and oil production which includes the Marcellus Shale. The impact fee is based upon the year wells are drilled and the fee varies, like a severance tax, based upon natural gas prices. The year ended December 31, 2024 includes a $21.2 million impact fee compared to $21.8 million in the year ended December 31, 2023, with the decrease primarily due to a decrease in the average fee per well. This category also includes other taxes such as franchise, real estate and commercial activity taxes. The following table summarizes taxes other than income per mcfe for the last two years:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023","","","Change","","","%"],["Taxes other than income"],["Impact fee","$","0.03","","","$","0.03","","","$","\u2014","","","","\u2014","%"],["Other","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","%"],["Total taxes other than income","$","0.03","","","$","0.03","","","$","\u2014","","","","\u2014","%"]]
[[/GREPCENT_TABLE]]

General and administrative expense was $172.1 million for 2024 compared to $164.7 million for 2023. The increase in 2024, when compared to 2023, is primarily due to higher salary and benefit related costs and higher stock-based compensation. As of December 31, 2024, the number of general and administrative employees increased by 1% when compared to December 31, 2023. Stock-based compensation expense represents the amortization of stock-based compensation awards granted to our employees and our non-employee directors as part of their compensation. The following table summarizes general and administrative expenses per mcfe for the last two years:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023","","","Change","","","%"],["General and administrative"],["General and administrative","$","0.17","","","$","0.16","","","$","0.01","","","","6","%"],["Stock-based compensation","","0.05","","","","0.05","","","","\u2014","","","","\u2014","%"],["Total general and administrative expense","$","0.22","","","$","0.21","","","$","0.01","","","","5","%"]]
[[/GREPCENT_TABLE]]

Interest expense was $118.8 million for 2024 compared to $124.0 million for 2023. The following table summarizes interest expense per mcfe for the last two years:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023","","","Change","","","%"],["Bank credit facility (a)","$","0.01","","","$","0.01","","","$","\u2014","","","","\u2014","%"],["Senior notes","","0.13","","","","0.14","","","","(0.01",")","","","(7",")%"],["Amortization of deferred financing costs and other","","0.01","","","","0.01","","","","\u2014","","","","\u2014","%"],["Total interest expense","$","0.15","","","$","0.16","","","$","(0.01",")","","","(6",")%"],["Average debt outstanding ($000s)","$","1,741,648","","","$","1,821,940","","","$","(80,292",")","","","(4",")%"],["Average interest rate (b)","","6.5","%","","","6.5","%","","","\u2014","%","","","\u2014","%"]]
[[/GREPCENT_TABLE]]

(a)
Includes commitment fees.

(b)
Excludes deferred financing costs.

39

The decrease in interest expense from 2023 to 2024 was primarily due to lower overall outstanding average debt balances. See Note 6 to our consolidated financial statements for additional information. We had no debt outstanding on the bank credit facility during 2024. Average debt outstanding on the bank credit facility for 2023 was $8.0 million and the weighted average interest rate on the bank credit facility was 8.4% in 2023.

Depletion, depreciation and amortization ("DD&A") was $358.4 million in 2024 compared to $350.2 million in 2023. The increase in 2024 when compared to 2023 is due to higher production volumes. Depletion expense, the largest component of DD&A, was $0.44 per mcfe in 2024 compared to $0.44 per mcfe in 2023. We have historically adjusted our depletion rates in the fourth quarter of each year based on our year-end reserve report and at other times during the year when circumstances indicate there has been a significant change in reserves or costs. The following table summarizes DD&A expenses per mcfe for the last two years:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023","","","Change","","","%"],["DD&A"],["Depletion and amortization","$","0.44","","","$","0.44","","","$","\u2014","","","","\u2014","%"],["Depreciation","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","%"],["Accretion and other","","0.01","","","","0.01","","","","\u2014","","","","\u2014","%"],["Total DD&A expense","$","0.45","","","$","0.45","","","$","\u2014","","","","\u2014","%"]]
[[/GREPCENT_TABLE]]

Other Operating Expenses

Our total operating expenses also include other expenses that generally do not trend with production. These expenses include stock-based compensation (including the amortization of restricted stock and performance-based grants), brokered natural gas and marketing, exploration expense, abandonment and impairment of unproved properties, exit costs, deferred compensation plan and gain or loss on early extinguishment of debt. See Note 10 to our consolidated financial statements for more information on allocation of stock-based compensation to functional expense categories.

Brokered natural gas and marketing expense was $140.5 million in 2024 compared to $202.9 million in 2023. We enter into purchase transactions with third parties and separate sale transactions with third parties at different times to utilize available pipeline capacity and fulfill sales commitments in the event of operational upsets. The decrease in these costs reflects lower purchase prices and lower purchased volumes. The following table details our brokered natural gas and marketing net margin which includes the net effect of these third-party transactions for the last two years (in thousands):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","","2023"],["Brokered natural gas and marketing"],["Brokered natural gas sales","","$","119,767","","","$","195,656"],["Brokered NGLs sales","","","5,370","","","","1,834"],["Other marketing revenue","","","7,911","","","","9,062"],["Brokered natural gas purchases and transportation","","","(123,851",")","","","(191,659",")"],["Brokered NGLs purchases","","","(4,947",")","","","(1,632",")"],["Other marketing expense","","","(11,747",")","","","(9,593",")"],["Net brokered natural gas and marketing net margin","","$","(7,497",")","","$","3,668"]]
[[/GREPCENT_TABLE]]

Exploration expense was $26.8 million in 2024 compared to $26.5 million in 2023. Exploration expense in 2024 was higher when compared to the prior year due to higher delay rentals partially offset by lower seismic costs. Stock-based compensation represents the amortization of equity stock grants as part of the compensation of our exploration staff. The following table details our exploration related expenses for the last two years (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023","","","Change","","","%"],["Exploration"],["Seismic","$","229","","","$","1,687","","","$","(1,458",")","","","(86",")%"],["Delay rentals and other","","19,256","","","","17,644","","","","1,612","","","","9","%"],["Personnel expense","","6,004","","","","5,949","","","","55","","","","\u2014","%"],["Stock-based compensation expense","","1,354","","","","1,250","","","","104","","","","8","%"],["Total exploration expense","$","26,843","","","$","26,530","","","$","313","","","","1","%"]]
[[/GREPCENT_TABLE]]

40

Abandonment and impairment of unproved properties was $8.4 million in 2024 compared to $46.4 million in 2023. These costs decreased when compared to 2023 due to lower estimated lease expirations in Pennsylvania. Impairment of individually insignificant unproved properties is assessed and amortized on an aggregate basis based on our average holding period, expected forfeiture rate and anticipated drilling success. We assess individually significant unproved properties for impairment on a quarterly basis and recognize a loss where circumstances indicate impairment in value. In determining whether a significant unproved property is impaired we consider numerous factors including, but not limited to, current exploration plans, favorable or unfavorable activity on the property being evaluated and/or adjacent properties, our geologists’ evaluation of the property and the remaining months in the lease term for the property.

Exit costs were $37.2 million in 2024 compared to $99.9 million in 2023. In August 2020, we completed the sale of our North Louisiana operations in a transaction that included the retention of certain related gathering, transportation and processing obligations extending until 2030. The present value of these estimated future obligations totaled $479.8 million which was recorded in third quarter 2020. In the year ended December 31, 2024, we recorded $39.2 million of accretion expense related to these retained liabilities, and during 2024, we recorded an adjustment of $2.1 million to decrease this obligation mainly due to a decrease in forecasted electricity costs. In the year ended December 31, 2023, we recorded $41.9 million of accretion expense related to these retained liabilities, and we recorded adjustments of $57.7 million to increase this obligation for a change in forecasted drilling plans of the buyer and an increase in forecasted rates due to inflation. See Note 14 to our consolidated financial statements for further detail.

Deferred compensation plan expense was $9.6 million in 2024 compared to $26.6 million in 2023. Our stock price increased to $35.98 at December 31, 2024 from $30.44 at December 31, 2023. This non-cash item relates to the increase or decrease in value of the liability associated with our common stock that is vested and held in our deferred compensation plan. The deferred compensation liability is adjusted to fair value by a charge or a credit to deferred compensation plan expense. Although the stock price increased, the amount of vested shares decreased as we are no longer contributing annual employee stock awards into the deferred compensation plan. The deferred compensation plan held 724,000 vested shares at December 31, 2024 compared to 1.5 million shares at December 31, 2023. See Note 10 to our consolidated financial statements for further detail.

Gain (loss) on early extinguishment of debt was a gain of $257,000 in 2024 compared to a gain of $438,000 in 2023. During 2024, we purchased on the open market $79.7 million principal amount of 4.875% senior notes due 2025 at a discount and recorded a gain of $257,000, net of transaction costs and the expensing of deferred financing costs on the repurchased debt. During 2023, we purchased on the open market $61.6 million principal amount of 4.875% senior notes due in May of 2025. We recognized a gain on early extinguishment of debt of $438,000 net of transaction costs and the expensing of deferred financing costs on the repurchased debt.

Income tax benefit was $15.7 million in 2024 compared to an expense of $229.2 million in 2023. Income tax expense was lower than prior year due to lower operating income combined with the impact of changes in our valuation allowances and generation of tax credits in 2024. See Note 4 to our consolidated financial statements for further detail. The following is a summary of income tax expense (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023"],["Income tax (benefit) expense"],["Current tax expense","$","8,165","","","$","1,547"],["Deferred income tax (benefit) expense","","(23,900",")","","","227,654"],["Total income tax (benefit) expense","$","(15,735",")","","$","229,201"],["Combined federal and state effective income tax rate","","(6.3",")%","","","20.8","%"]]
[[/GREPCENT_TABLE]]

Management’s Discussion and Analysis of Financial Condition, Cash Flows, Capital Resources and Liquidity

Commodity prices are the most significant factor impacting our revenues, net income, operating cash flows, the amount of capital we invest in our business, payment of dividends and funding of share or debt repurchases. Commodity prices have been and are expected to remain volatile. Our top priorities for using cash provided by operations are to fund our capital budget program, repay debt and return capital to stockholders. We currently believe we have sufficient liquidity and capital resources to execute our business plan for the foreseeable future and across a wide range of commodity price environments.

41

Cash Flows

The following table presents sources and uses of cash and cash equivalents for the last two years (in thousands):

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","","2023"],["Sources of cash and cash equivalents"],["Operating activities","$","944,514","","","$","977,892"],["Disposal of assets","","313","","","","872"],["Borrowing on credit facility","","\u2014","","","","185,000"],["Other","","66,363","","","","124,722"],["Total sources of cash and cash equivalents","$","1,011,190","","","$","1,288,486"],["Uses of cash and cash equivalent"],["Additions to natural gas properties","$","(570,426",")","","$","(571,819",")"],["Repayments on credit facility","","\u2014","","","","(204,000",")"],["Acreage purchases","","(56,085",")","","","(34,410",")"],["Additions to field service assets","","(2,069",")","","","(701",")"],["Repayment of senior notes","","(79,272",")","","","(60,934",")"],["Treasury stock purchases","","(65,260",")","","","(19,042",")"],["Dividends paid","","(77,463",")","","","(77,241",")"],["Other","","(68,099",")","","","(108,572",")"],["Total uses of cash and cash equivalents","$","(918,674",")","","$","(1,076,719",")"]]
[[/GREPCENT_TABLE]]

Sources of Cash and Cash Equivalents

Cash flow from operating activities in 2024 was $944.5 million compared to $977.9 million in 2023. Cash provided from operating activities is largely dependent upon commodity prices and production volumes, net of the effects of settlement of our derivative contracts. The decrease in cash provided from operating activities in 2024 from 2023 reflects lower realized prices combined with higher working capital outflow (the timing of cash receipts and disbursements). Changes in working capital (as reflected in our consolidated statements of cash flows) for 2024 was an outflow of $135.3 million compared to an outflow of $121.1 million for 2023.

Uses of Cash and Cash Equivalents

Additions to natural gas and oil properties are our most significant use of cash and cash equivalents. These cash outlays are associated with our drilling and completion capital investment program. The following table shows capital investments and reconciles to additions to natural gas and oil properties as presented on our consolidated statements of cash flows for the last two years (in thousands):

[[GREPCENT_TABLE]]
[["","","2024","","","2023"],["Additions due to natural gas and oil properties","","$","593,998","","","$","571,607"],["Change in capital expenditure accrual for proved properties","","","(23,318",")","","","1,204"],["Change in other non-cash capital expenditures","","","(254",")","","","(992",")"],["Additions to natural gas and oil properties","","$","570,426","","","$","571,819"]]
[[/GREPCENT_TABLE]]

Repayment of senior notes for 2024 includes the repurchase of $79.7 million principal of our 4.875% senior notes due 2025, at a discount.

Purchases of treasury stock for 2024 include the repurchase of 2.1 million shares of common stock for a total of $65.3 million as part of our previously announced stock repurchase program.

Liquidity and Capital Resources

Our main sources of liquidity are cash on hand, internally generated cash flow from operations, capital market transactions and our bank credit facility. At December 31, 2024, we had approximately $1.6 billion of liquidity consisting of cash on hand and availability under our bank credit facility.

Our liquidity requirements are supported by our cash on hand and our bank credit facility. We may draw on our bank credit facility to meet short-term cash requirements or issue debt or equity securities through the shelf registration discussed below as part of our longer-term liquidity and capital management. We believe our short-term and long-term liquidity is adequate to fund our current

42

operations and our near-term and long-term funding requirements including our capital spending programs, repayment of debt maturities and dividends. Although we expect cash flows to be sufficient to fund our expected 2025 capital program, we may elect to use the bank credit facility or raise funds through new debt or equity offerings or from other sources of financing.

Bank Credit Facility

Our bank credit facility is secured by substantially all of our assets. In April 2022, we entered into an amended bank credit facility with a maturity date of April 14, 2027. As of December 31, 2024, we had no outstanding borrowings under our bank credit facility, and we maintain a borrowing base of $3.0 billion and aggregate lender commitments of $1.5 billion. We also have undrawn letters of credit of $165.3 million as of December 31, 2024 which reduce the borrowing capacity under our bank credit facility.

The borrowing base is subject to regular, semi-annual re-determinations and is dependent on a number of factors but primarily the lenders' assessment of our future cash flows. The next scheduled borrowing base re-determination is during the spring of 2025. We currently must comply with certain financial and non-financial covenants, including limiting dividend payments, debt incurrence and requirements that we maintain certain financial ratios (as defined in our bank credit agreement). We were in compliance with all such covenants at December 31, 2024. See Note 6 to our consolidated financial statements for more information.

Capital Requirements

Our material cash requirements include the following contractual and other potential or expected obligations:

Capital Budget

Our approved capital budget for 2025 is $650 million to $690 million. The amount of our future capital investment will depend upon a number of factors including our cash flows from operations, investing and financing activities, infrastructure availability, supply and demand fundamentals and our ability to execute our development program. We periodically review our budget to assess changes in these and other factors.

Long-Term Debt

As of December 31, 2024, we had $1.7 billion of total debt outstanding. Our next significant long-term debt maturity is in the amount of $608.7 million due in May 2025, which is currently classified as a short term liability on the consolidated balance sheet. Anticipated cash annual interest payments related to our fixed-rate debt, based on the amount outstanding at December 31, 2024, is $23.8 million on our 4.75% senior notes and $49.5 million on our 8.25% senior notes, while anticipated cash annual interest for the our 4.875% senior notes is $12.4 million as these notes are due in May 2025.

Stock Repurchase Program

Our total remaining share repurchase authorization was approximately $1.0 billion at December 31, 2024.

Other Sources of Liquidity

We have a universal shelf registration statement filed with the SEC under which we, as a "well-known seasoned issuer" for purposes of SEC rules, have the ability to sell an indeterminate amount of various types of debt and equity securities.

Cash Contractual Obligations

Our contractual obligations include long-term debt, operating leases, derivative obligations, asset retirement obligations and transportation, gathering and processing commitments. As of December 31, 2024, we do not have any capital leases or any significant off-balance sheet debt or other such unrecorded obligations and we have not guaranteed any debt of any unrelated party. The table below provides estimates of the timing of future payments that we are obligated to make based on agreements in place at December 31, 2024. In addition to the contractual obligations listed in the table below, our consolidated balance sheet at December 31, 2024 reflects accrued interest payable associated with commitment fees on our bank debt of $1.3 million, which is payable in first quarter 2025.

43

The following summarizes our contractual financial obligations at December 31, 2024 and their future maturities. We expect to fund these contractual obligations with cash generated from operating activities, and, if necessary, borrowings under our bank credit facility or other sources (in thousands):

[[GREPCENT_TABLE]]
[["","Payment due by period"],["","2025","","","2026","","","2027","","","2028 and 2029","","","Thereafter","","","Total"],["Debt:"],["Bank debt due 2027 (a)","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014","","","$","\u2014"],["4.875% senior notes due 2025","","608,702","","","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","608,702"],["8.25% senior notes due 2029","","\u2014","","","","\u2014","","","","\u2014","","","","600,000","","","","\u2014","","","","600,000"],["4.75% senior notes due 2030","","\u2014","","","","\u2014","","","","\u2014","","","","\u2014","","","","500,000","","","","500,000"],["Other obligations:","","","","","","","","","","","","","","","","","\u2014"],["Operating leases, net (b)","","91,422","","","","7,186","","","","5,816","","","","6,532","","","","25,121","","","","136,077"],["Software licenses and other","","2,596","","","","1,988","","","","37","","","","\u2014","","","","\u2014","","","","4,621"],["Derivative obligations (c)","","9,634","","","","8,433","","","","(313",")","","","2,368","","","","\u2014","","","","20,122"],["Transportation and gathering commitments (d)","","835,018","","","","815,463","","","","794,968","","","","1,445,969","","","","2,691,096","","","","6,582,514"],["Asset retirement obligation liability (e)","","1,189","","","","535","","","","\u2014","","","","\u2014","","","","132,043","","","","133,767"],["Total contractual obligations (f)","$","1,548,561","","","$","833,605","","","$","800,508","","","$","2,054,869","","","$","3,348,260","","","$","8,585,803"]]
[[/GREPCENT_TABLE]]

(a)
We had no outstanding balance as of the end of the year.

(b)
Includes amounts expected to be received as sublease income.

(c)
Derivative obligations represent net liabilities determined in accordance with master netting arrangements for commodity derivatives that were valued as of December 31, 2024. Our derivatives are measured and recorded at fair value and are subject to market and credit risk. The ultimate liquidation value will be dependent upon actual future commodity prices which may differ materially from the inputs used to determine fair value as of December 31, 2024. See Note 8 to our consolidated financial statements.

(d)
The obligations above represent our minimum financial commitments pursuant to the terms of these contracts. Our actual expenditures may exceed these minimum commitments.

(e)
The amount above represents the discounted values. There are inherent uncertainties surrounding the obligations and the actual amount and timing may differ from our estimates. See Note 7 to our consolidated financial statements.

(f)
This table excludes the liability for the deferred compensation plans since these obligations will be funded with existing plan assets and does not include obligations to taxing authorities.

Not included in the above table are agreements that are contingent on future construction. See Note 13 to our consolidated financial statements for more information regarding these contracts. Also not included in the table above is our estimate of accrued contractual obligations related to certain obligations retained by us after our divestiture of our North Louisiana assets. See additional information for these obligations in Note 14 to our consolidated financial statements.

Delivery Commitments

We have various volume delivery commitments that we expect to be able to fulfill from our own production; however, we may purchase third-party volumes to satisfy our commitments or pay demand fees for commitment shortfalls, should they occur. As of December 31, 2024, our delivery commitments through 2037 are included in Note 13 to our consolidated financial statements.

Income Taxes

We are subject to income and non-income-based taxes under federal, state and local jurisdictions in which we operate. Historically, we have generated and carried forward net operating losses ("NOL") in amounts sufficient to offset the majority of our taxable income at the federal level. To the extent we utilize all or substantially all of our federal NOL carryovers, we expect to make federal income tax payments. In addition, the Inflation Reduction Act of 2022 could trigger minimum income taxes if we become subject to the corporate alternative minimum tax where we may have to make estimated federal income tax payments. We currently pay federal income taxes and state income taxes in the Commonwealth of Pennsylvania. See Note 4 to our consolidated financial statements for more information.

44

Proved Reserves

To maintain and grow production and cash flow, we must continue to develop existing proved reserves and locate or acquire new natural gas, NGLs and oil reserves. The following is a discussion of proved reserves, reserve additions and revisions and future net cash flows from proved reserves.

[[GREPCENT_TABLE]]
[["","Year End December 31,"],["","2024","","","2023"],["","(Mmcfe)"],["Proved Reserves:"],["Beginning of year","","18,113,125","","","","18,077,656"],["Reserve revisions","","75,765","","","","608,784"],["Reserve extensions, discoveries and additions","","749,362","","","","207,260"],["Sales","","(10,542",")","","","\u2014"],["Production","","(796,235",")","","","(780,575",")"],["End of year","","18,131,475","","","","18,113,125"],["Proved Developed Reserves:"],["Beginning of year","","11,535,852","","","","10,933,180"],["End of year","","11,930,793","","","","11,535,852"]]
[[/GREPCENT_TABLE]]

Reserve Revisions and Additions. See additional information and a summary of these revisions and additions in Note 16 to our consolidated financial statements.

Future Net Cash Flows. At December 31, 2024, the present value (discounted at 10%) of estimated future net cash flows from our proved reserves was $5.5 billion. The present value of our estimated future net cash flows at December 31, 2023 was $7.9 billion. This present value was calculated based on the unweighted average first-day-of-the-month oil and gas prices for the prior twelve months held flat for the life of the reserves, in accordance with SEC rules. At December 31, 2024, the after-tax present value of estimated future net cash flows from our proved reserves was $4.7 billion compared to $6.8 billion at December 31, 2023.

The present value of future net cash flows does not purport to be an estimate of the fair market value of our proved reserves. An estimate of fair value would also take into account, among other things, anticipated changes in future prices and costs, the expected recovery of reserves in excess of proved reserves and a discount factor more representative of the time value of money to the evaluating party and the perceived risks inherent in producing natural gas, NGLs and oil.

Other

We lease acreage that is generally subject to expiration if initial wells are not drilled within a specified period, generally between three and five years. We do not expect to lose significant lease acreage because of failure to drill due to inadequate capital, equipment or personnel. However, based on our evaluation of prospective economics, including the cost of infrastructure to connect production, we have allowed acreage to expire and will allow additional acreage to expire in the future. To date, our expenditures to comply with environmental or safety regulations have not been a significant component of our cost structure and are not expected to be significant in the future. However, new regulations, enforcement policies, claims for damages, or other events could result in significant future costs. We also regularly provide letters of credit in the normal course of business under certain contracts that may be drawn if we fail to perform under those contracts.

Off-Balance Sheet Arrangements

We do not currently utilize any off-balance sheet arrangements with unconsolidated entities to enhance our liquidity or capital resources position. However, as is customary in the natural gas and oil industry, we have various contractual work commitments which are described above under cash contractual obligations.

Management’s Discussion of Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at year-end and the reported amounts of revenues and expenses during the year. Accounting estimates are considered to be critical if (1) the nature of the estimates and assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to changes; and (2) the impact of the estimates and assumptions on financial condition or operating performance is material. Actual results could differ from the estimates and assumptions used.

45

Estimated Quantities of Net Reserves

We use the successful efforts method of accounting for natural gas, NGLs and oil producing activities as opposed to the alternate acceptable full cost method. We believe that net assets and net income are more conservatively measured under the successful efforts method of accounting than under the full cost method, particularly during periods of active exploration. One difference between the successful efforts method of accounting and the full cost method is that under the successful efforts method, all exploratory dry holes and geological and geophysical costs are charged against earnings during the periods they occur; whereas, under the full cost method of accounting, such costs are capitalized as assets, pooled with the costs of successful wells and charged against earnings of future periods as a component of depletion expense. Under the successful efforts method of accounting, successful exploration drilling costs and all development costs are capitalized and these costs are systematically charged to expense using the units of production method based on proved developed natural gas and oil reserves as estimated by our engineers and audited by independent engineers. Costs incurred for exploratory wells that find reserves that cannot yet be classified as proved are capitalized on our balance sheet if (1) the well has found a sufficient quantity of reserves to justify its completion as a producing well and (2) we are making sufficient progress assessing the reserves and the economic and operating viability of the project. Proven property leasehold costs are amortized to expense using the units of production method based on total proved reserves. Properties are assessed for impairment as circumstances warrant (at least annually) and impairments to value are charged to expense. The successful efforts method inherently relies upon the estimation of proved reserves, which includes proved developed and proved undeveloped volumes.

Proved reserves are defined by the SEC as those volumes of natural gas, NGLs and oil that geological and engineering data demonstrate with reasonable certainty are recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are volumes expected to be recovered through existing wells with existing equipment and operating methods. Proved undeveloped reserves include reserves for which a development plan has been adopted indicating each location is scheduled to be drilled within five years from the date it was booked as proved reserves, unless specific circumstances justify a longer time. Although our engineers are knowledgeable of and follow the guidelines for reserves established by the SEC, the estimation of reserves requires engineers to make a significant number of assumptions based on professional judgment. Reserve estimates are updated at least annually and consider recent production levels and other technical information. Estimated reserves are often subject to future revisions, which could be substantial, based on the availability of additional information, including reservoir performance, new geological and geophysical data, additional drilling, technological advancements, price and cost changes and other economic factors. Changes in natural gas, NGLs and oil prices can lead to a decision to start up or shut in production, which can lead to revisions to reserve quantities. Reserve revisions in turn cause adjustments in our depletion rates. We cannot predict what reserve revisions may be required in future periods. Reserve estimates are reviewed and approved by our Senior Vice President of Reservoir Engineering and Economics, who reports directly to our President and Chief Executive Officer. To further ensure the reliability of our reserve estimates, we engage independent petroleum consultants to audit our estimates of proved reserves. Estimates prepared by third parties may be higher or lower than those included herein. Independent petroleum consultants audited approximately 96% of our reserves in both 2024 and 2023. Historical variances between our reserve estimates and the aggregate estimates of our consultants have been approximately 5%. The reserves included in this report are those reserves estimated by our petroleum engineering staff. For additional discussion, see Items 1 & 2. Business and Properties – Proved Reserves and Note 16 to our consolidated financial statements.

Reserves are based on the weighted average of commodity prices during the 12-month period, using the closing prices on the first day of each month, as defined by the SEC. When determining the December 31, 2024 proved reserves for each property, benchmark prices are adjusted using price differentials that account for property-specific quality and location differences. If prices in the future average below prices used to determine reserves at December 31, 2024, it could have an adverse effect on our estimates of proved reserves. It is difficult to estimate the magnitude of any potential price change and the effect on proved reserves due to numerous factors (including commodity prices and performance revisions).

Depletion rates are determined based on reserve quantity estimates and the capitalized costs of producing properties. As the estimated reserves are adjusted, the depletion expense for a property will change, assuming no change in production volumes or the capitalized costs. While total depletion expense for the life of a property is limited to the property’s total cost, proved reserve revisions result in a change in the timing of when depletion expense is recognized. Downward revisions of proved reserves may result in an acceleration of depletion expense, while upward revisions tend to lower the rate of depletion expense recognition. Based on proved reserves at December 31, 2024, we estimate that a 1% change in proved reserves would increase or decrease 2025 depletion expense by approximately $3.0 million (based on current production estimates). We currently expect our DD&A rate to be approximately $0.45 per mcfe in 2025. Estimated reserves are used as the basis for calculating the expected future cash flows from property asset groups, which are used to determine whether that property may be impaired. Reserves are also used to estimate the supplemental disclosure of the standardized measure of discounted future net cash flows relating to natural gas and oil producing activities and reserve quantities in Note 16 to our consolidated financial statements. Changes in the estimated reserves are considered a change in estimate for accounting purposes and are reflected on a prospective basis. It should not be assumed that the standardized measure is the current market value of our estimated proved reserves.

46

Accounting Standards Not Yet Adopted

Refer to Note 2 to our consolidated financial statements for a discussion of new accounting pronouncements that may affect us in the future.