Range Resources Corporation (Range Resources), a company engaged in the exploration, development and acquisition of oil and gas properties, has provided an update on its operations. The production volumes averaged 416 Mmcfe per day, for the first quarter 2009, up 12%, over the previous year and 3% higher than fourth quarter of 2008. Range Resources earlier announced a 10% year-over-year production growth target for this year depending on its decreased capital program.
The first quarter production increase is attributable mainly to the Marcellus shale play in Pennsylvania, the Nora field in Virginia and the Barnett shale play in North Texas. At present, Range Resources has 15 rigs in operation against 33 rigs in the previous year.
Range Resources said that the first quarter development expenditures of $162 million funded the drilling of 101 (64.4 net) wells and seven net recompletions. A 99% success rate was achieved with 100 (63.8 net) wells productive, among which 52 (33.2 net) wells are in different stages of completion or waiting on pipeline connection. For the first quarter 2009, Range Resources anticipates to identify exploration expense of about $12 million which includes $8 million of seismic expenditures. The seismic was focused mainly in the Marcellus shale and Barnett shale plays.
For the first quarter 2009, the company is amending its accounting process to amortize unproved lease expirations over the life of the leases against on an occurrence basis. The first quarter 2009 amortization expense is expected to be $18 to $20 million. Range Resources considers this accounting treatment will give a more predictable approach for the upcoming lease expirations. Oil and gas prices, after adjustment for hedging, are anticipated to average $6.60 per mcfe for the first quarter of 2009. This compares to price realizations of $9.55 per mcfe for first quarter of 2008 and $6.86 per mcfe for fourth of quarter 2008.
All through the first quarter 2009, the Marcellus shale division sustained to make solid improvement. In the previous year, Range Resources ordered six custom-designed drilling rigs for the Marcellus. The first two of the custom-designed rigs have been delivered and are currently on location and drilling. These rigs, which come equipped with crawlers, can traverse a drill pad in a matter of hours against days for the older rigs. Since Range Resources is at present drilling multiple laterals from a single pad, these rigs are anticipated to save both time and money. The company intends to drill above 60 horizontal wells in the Marcellus shale play in 2009.
Last week, Range Resources stated that the second phase of the Marcellus infrastructure was concluded. This comprises a new cryogenic gas processing facility, which added a further 30 Mmcf per day in gas processing capability, bringing processing capacity to a total of 60 Mmcf per day. Two further expansions of processing capacity are planned for southwestern Pennsylvania that would bring processing capacity to 200 Mmcf per day by late 2009 or early 2010. Consequently of the new rigs being delivered on schedule and the infrastructure proceeding as planned, Range Resources restated its year-end target exit rate of 80 — 100 Mmcfe net per day from the Marcellus shale play.
The Southwest division delivered strong drilling results in the first quarter of 2009. In spite of going from six to three rigs in the North Texas Barnett shale play, production continued to climb. For the month of March 2009, Barnett output averaged to 125 Mmcfe per day. This is highlighted by the completion of a new southern Tarrant county well, which averaged 9.6 Mmcfe per day for the first 30 days. This is considered to be the highest 30-day average reported so far from any Barnett Shale well. Plans are to conclude the 2009 drilling program in the Barnett with a three-rig program. Activity will carry on focusing in the core of the company’s acreage where Range Resources has outstanding results in the past.
During the first quarter 2009, Range Resources 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, the company has drilled two horizontal Huron shale wells in the Nora field. So far, nine horizontals have been concluded to the Huron Shale and two horizontal Berea wells have been concluded. Of the eight horizontal Huron Shale wells that are now on production, the early production rates have averaged 1.1 Mmcf per day. The initial production rate on the two Berea horizontal wells has averaged 1.3 Mmcf per day. Additionally for the first quarter of 2009, Range Resources has drilled 46 coal bed and 11 tight gas sand wells in the Nora field.
First quarter activity for the Midcontinent division yielded seven (4.9 net) wells with a 100% success rate. St. Louis Lime activity drove Texas Panhandle drilling in the quarter with three (1.6 net) wells turned to first sales at a joint production rate of 7.8 (3.36 net) Mmcfe per day. Activity in the Ardmore basin Woodford play is also starting to yield encouraging results. A fourth quarter completion started sales at rates up to 4.8 (2.6 net) Mmcfe per day. Four additional wells will begin sales in the second quarter as new pipeline infrastructure has been concluded into the area. In the Watonga/Chickasha trend of the Anadarko basin, two (1.75 net) wells were concluded with combined rates of 2.8 (1.8 net) Mmcfe per day.
Commenting on the announcement, John Pinkerton, Range Resources’ chairman and chief executive officer said, Our first quarter drilling and production results exceeded expectations. Despite the number of drilling rigs dropping from 33 to 15 we continued to grow production at low cost. Achieving 25 consecutive quarters of production growth is a testament to the quality of our technical teams as well as the depth and quality of our drilling inventory. Looking to the remainder of the year, we are well-positioned to continue to add per share value despite the lower commodity prices. Our low cost structure, strong hedge position and increasing production are leading the way. Importantly, we are on track to more than double our Marcellus production in 2009 and are setting the stage for further increases by expanding the infrastructure and bringing in state-of-the-art drilling technology to the Marcellus Shale play.