Range Resources' 3Q Production Volumes Up by 13%
Range Resources reported that its third quarter production volumes averaged 437 Mmcfe per day, a 13% increase over the prior year. Third quarter production volumes also exceeded second quarter, despite losing 15 Mmcfe per day of production as a result of Range selling its Fuhrman Mascho Field in West Texas effective June 30, 2009. Range has now posted 27 consecutive quarters of sequential production growth. Third quarter production exceeded the Company’s guidance due to excellent drilling results, particularly in the Barnett and Marcellus Shale plays.
Third quarter development expenditures of $145 million funded the drilling of 128 (76.9 net) wells and no recompletions. A 100% success rate was achieved. For the first nine months of 2009, 297 (186.5 net) wells have been successfully drilled and are now on production, while 76 (50.0 net) wells are currently in various stages of completion or waiting on pipeline connection. Currently, Range has 15 rigs in operation.
During the third quarter, the Marcellus Shale division continued to make excellent progress. Recently, we added two key members to our Marcellus team. Joe Frantz has been added as Vice President of Engineering and Scott Roy has been added as Vice President of Government and Regulatory Affairs. Both are leaders in their fields and bring substantial experience. The Marcellus Division is continuing to delineate and de-risk its large land position. We now have a rig in northeast Pennsylvania in Lycoming County drilling the first of two horizontal wells, which offset our high-rate vertical wells. We expect initial results from these two wells by early next year. We also plan to drill a Utica Shale horizontal and a shallow upper Devonian horizontal before year-end. Results of these two wells should be available by early first quarter.
Marcellus Shale production is well on plan and now exceeds 80 Mmcfe per day net and is expected to approach the higher end of the previously revised target of 90 - 100 Mmcfe per day net by year-end 2009. From inception, Range has drilled 77 horizontal Marcellus Shale wells, of which 60 have been completed and 54 are on production. The Company expects to drill and case approximately 20 additional horizontal wells in the Marcellus Shale play during the fourth quarter 2009 and carryover approximately 20 wells for completion in 2010. The Marcellus division is currently running a total of four horizontal rigs. We anticipate entering 2010 with six custom-built horizontal rigs running.
The build out of the Marcellus midstream infrastructure in southwest Pennsylvania is progressing as scheduled. By December 2009 or January 2010, gross cryogenic processing capacity is expected to increase to 155 Mmcf per day. An additional 30 Mmcf per day of processing capacity is expected to be added in mid-2010 and another 150 Mmcf per day has been ordered for start-up in mid-2011, increasing gross cryogenic processing capacity to more than 300 Mmcf per day. The current 65 Mmcf per day refrigeration processing is expected to be suspended during 2010 as the new cryogenic processing is brought on.
The Southwest division also delivered strong drilling results in the third quarter. Production in the Barnett averaged 123 Mmcfe net per day during the third quarter and is currently producing approximately 130 Mmcfe net per day. The highlight of the quarter has been the completion of eight wells in southern Tarrant County for a combined production rate of 32 (20.4 net) Mmcfe per day. Also in Hood County, Range’s Barnett team completed four wells for a combined rate of 8 (6.0 net) Mmcfe per day.
During the third quarter 2009, Range's Appalachian division continued to focus on its key coal bed methane, shale and tight gas sand drilling projects in the Nora area of Virginia. During the quarter, Range drilled five horizontal Huron Shale wells, two horizontal Big Lime wells and one horizontal Berea well. Year-to-date, 15 horizontal wells have been completed in these three target zones, of which 10 are currently online and producing on par with expectations. In addition, during the third quarter of 2009, 71 coal bed methane and 20 vertical tight gas sand wells were drilled in the Nora field.
Range also announced that for the third quarter it will recognize exploration expense of approximately $10 million, including $6 million of seismic expenditures. The seismic was focused principally in the Barnett and Midcontinent areas. The quarterly provision for our unproved properties in the third quarter is expected to be approximately $25 million. Oil and gas prices, after adjustment for hedging, are estimated to average $6.35 per mcfe for the third quarter, with natural gas prices averaging just over $6.00 per mcf. This compares to price realizations of $9.02 per mcfe for third quarter 2008 and $6.18 per mcfe for second quarter 2009. For the fourth quarter of the year, the Company has approximately two-thirds of its 2009 gas production hedged at an average floor price of $7.79 and an average cap price of $8.53. Range has hedged 53% of its first half 2010 gas production at a $5.50 floor and a $7.45 cap and 37% of its second half 2010 gas production at a $5.53 floor and a $7.50 cap. Details of the hedge positions are posted on the Company's home page of its website.
Commenting on the announcement, John Pinkerton, Range's Chairman and CEO, said, "Our operating results for the third quarter were terrific. In particular, we were able to fully offset the production lost due to the Fuhrman Mascho sale with the excellent results of our drilling program. The Fuhrman Mascho sale proceeds, coupled with our operating cash flow should more than fund our 2009 capital spending program. Conversely, our excellent drilling results are more than making up for the production we gave up in the sale. In addition, the recently drilled production has a much lower operating cost than the higher cost properties that we sold. This is a 'win, win, win' situation for Range and its shareholders. Our strategy of consistent growth at low cost is really paying off in this period of low natural gas prices."
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