Range Increases Resource Potential in Marcellus Shale

Marcellus Shale
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Range Resources provided an update of its Marcellus Shale operations. Range currently owns approximately 1.3 million net acres in the Marcellus Shale play, with approximately 900,000 net acres in the "fairway" of the play. Of the fairway acreage, approximately 600,000 net acres are located in the southwest portion of the play and 300,000 net acres are located in the northeast portion. Range had previously estimated that its horizontal wells in the southwest averaged 4.4 Bcfe per well at a development cost of $3.5 million. On average, these wells have lateral lengths of about 2,500 feet and eight stage completions. In mid-2009, Range began drilling wells in the southwest using longer laterals and more completion stages. In 2009, Range drilled 17 horizontal wells with average lateral lengths of 3,056 feet with an average completion of ten stages. Based on the results to date, Range estimates the longer lateral wells have reserves of 5.0 Bcfe with an average development cost of $4.0 million per well. The impact of the longer lateral wells is very favorable as Range believes it will be able to recover more of the gas in place with fewer wells, while generating higher rates of return. Range is continuing to evaluate longer laterals and more completion stages to determine the optimal design. Like other shale plays, Range believes the optimal lateral length and optimal number of completion stages will vary depending on different areas of the play.

As noted above, Range owns leases covering approximately 600,000 net acres in the southwest portion of the play. Range currently estimates that approximately 430,000 net acres of its southwest leasehold have been de-risked by the drilling of approximately 600 vertical and horizontal wells by Range and other industry participants. As a result of the additional well control and the performance of the longer lateral wells, Range has increased its estimated resource potential from 3 to 4 Bcfe per well to 4 to 5 Bcfe per well across the 430,000 net acres. As a result of increasing the per well resource potential, Range’s net unproved resource potential in the southwest has increased to a range of 14 to 19 Tcfe, including 270 to 380 million barrels of liquids and 12.4 to 16.7 Tcf of gas.

In the northeast portion of the play Range currently owns leases totaling approximately 300,000 net acres. Range previously announced that it had drilled its first two horizontal wells in this portion of the play. The average seven-day test rate for the first well was 13.3 Mmcfe per day, while the average seven-day test rate for second well was 13.6 Mmcfe per day. The two wells are currently shut-in awaiting pipeline connection. Range recently entered into a pipeline agreement with a third party to construct and operate a pipeline that will gather and transport Range's gas in this area of the play. The third party will fund and own the pipeline, while Range will pay a per mcf fee to transport its gas through the pipeline. The pipeline infrastructure to the first well is expected to be completed late this year. Based on Range’s drilling results and the results of other industry participants, Range estimates the net unproved resource potential of its northeast acreage to be 6 to 8 Tcfe.

Commenting on the announcement, John Pinkerton, Range's Chairman and Chief Executive Officer, said, "Our technical team continues to do an outstanding job in the Marcellus Shale. The results of our longer lateral wells are very encouraging. We will continue to evaluate longer laterals and more completion stages. Optimizing our well designs is critical as it will allow us to continue to drive down our unit cost and increase our returns. Early in the life of the play we developed a significant acreage position in the wet gas area of the southwest portion of the play. Given that a significant portion of our development over the next several years will be in the southwest, the impact of the high value liquids component of the product stream will significantly increase our returns. The high liquids component combined with the favorable gas basis differential due to proximity of the play to the northeast gas market helps make the Marcellus Shale play economics extremely attractive even in a low gas price environment."


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