Range Boosts Production in 1Q 2011
Range provided an operations update. First quarter production volumes averaged 545.5 Mmcfe net per day, a 17% increase over the prior-year period and 1% higher than fourth quarter 2010. The record production marked the Company's 33rd consecutive quarter of sequential production growth. Production was 79% natural gas, 16% natural gas liquids (NGLs) and 5% crude oil. Targeted drilling to the liquids-rich portion of the Marcellus Shale play in Pennsylvania and the Midcontinent regions drove the production growth. First quarter 2011 production was 16% NGLs versus 12% for first quarter of 2010.
The Company also announced that its preliminary first quarter 2011 commodity price realizations (including the impact of cash-settled hedges and derivative settlements which would correspond to analysts' estimates) averaged $5.46 per mcfe. This represents a 2% decrease from the prior-year period, but a 2% increase as compared to the fourth quarter 2010. Preliminary first quarter production and realized prices by each commodity are: natural gas – 429.9 Mmcfe per day ($4.40), natural gas liquids – 14,338 barrels per day ($47.96) and crude oil – 4,924 barrels per day ($81.35).
Commenting on the announcement, John Pinkerton, Range's Chairman and CEO, said, "Despite the unusually cold weather conditions we incurred in the first quarter, we were able to reach the mid-point of our production guidance. Adjusting for the weather related downtime, we would have exceeded the high end of our guidance. Our operating teams did an outstanding job battling some of the most brutal weather conditions we have experienced in many years. Looking ahead, due to the terrific drilling results so far this year, combined with the progress of the infrastructure projects, we are well on track to reach our production growth target for the year. In addition, the Barnett sale is on schedule to close at the end of the month."
Marcellus Shale Division
We exited the first quarter at approximately 260 Mmcfe per day net from the Marcellus Shale, up from approximately 200 Mmcfe per day at year-end 2010. During the first quarter, the Marcellus Division brought online 26 horizontal wells in southwest Pennsylvania, 15 of which were located in the liquids-rich area of the play. The initial production rates of the 15 new wells averaged 7.4 (6.3 net) Mmcf per day of natural gas and 452 (384 net) barrels of NGLs and condensate per day or 10.1 (8.6 net) Mmcfe per day. An additional 16 wells were completed in southwest Pennsylvania during the first quarter that are awaiting connection to the gathering system. In northeast Pennsylvania, Range brought on its first five wells in Lycoming County at a combined initial production rate of 45 (39 net) Mmcf per day in mid-February.
Due to the outstanding performance of its existing wells combined with the initial performance of the newly connected wells, Range's Marcellus production has temporarily outgrown the existing infrastructure. In southwestern Pennsylvania, the third expansion of the gas processing facilities has been completed and is in the testing phase. This 200 Mmcf per day of additional processing capacity is expected to commence operation in May. With this expansion, Range's total processing capacity will expand to 350 Mmcf per day. Later in the third quarter, Range's processing capacity is scheduled to increase again to 390 Mmcf per day. In northeast Pennsylvania, the next expansion of the Lycoming County gathering system is scheduled to be completed late in the third quarter which will tie in an additional 20 wells.
Range has entered into two memorandums of understanding exploring options to sell ethane from the liquids-rich area in southwest Pennsylvania. Range plans to complete firm ethane sales agreements in the next 12 months covering a significant portion of its projected ethane production.
First quarter activity for the Midcontinent Division focused on drilling operations in several key areas. One rig remains active in the Texas Panhandle, where two Granite Wash wells and one vertical St. Louis exploratory well are undergoing completion. Range's original horizontal St. Louis Lime well continues to perform above expectations. After 12 weeks of production, the well has produced more than 1.0 Bcfe with current rates still at 13.0 Mmcf of natural gas and over 900 barrels of liquids per day or 18.4 (5.6 net) Mmcfe per day. Activity in the Ardmore Basin Woodford play continues with four wells in various stages of completion. Production from these liquids-rich completions is expected to reach sales by the end of the second quarter. One operated rig is currently running in the play, along with additional non-operated activity. Drilling also continues in the Mississippian Lime play of northern Oklahoma with one operated rig and one non-operated rig in the Woodford "Cana" Shale play of the Anadarko Basin.
During the first quarter of 2011, the Appalachian Division continued to focus on tight gas sand and coal bed methane (CBM) drilling projects on its 350,000 (235,000 net) acres in Virginia. All of this acreage is either owned or held by production allowing for discretionary drilling with no lease expiration issues. In 2011, Range plans 50 tight gas sand wells, 15 CBM wells and 15 horizontal wells targeting the Huron Shale, Berea and Big Lime formations in Virginia. For the first quarter, the division drilled 5 (4.5 net) vertical tight gas sand wells and one CBM well in the Nora field. Also in the quarter, Range performed 8 recompletions of behind-pipe pays to continue to maximize production on existing wells.
In the first quarter the Southwest Division drilled its first Penn Shale well in the Conger Field of West Texas where Range has approximately 91,000 net acres. The well has a lateral length of 4,000 feet and will be completed with a multi-stage fracture treatment later in the second quarter.
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