Range Resources Corp. (NYSE: RRC) has reported that its first quarter 2011 production averaged 545.5 Mmcfe net per day, a record high for the company and a 17% increase over the prior-year quarter. This represents the 33rd consecutive quarter of sequential production growth. Drilling in the Marcellus Shale and Midcontinent region drove the production growth. On a year-over-year basis, NGLs and crude oil production rose 29%, while natural gas production rose 15%.
Capital Expenditures
First quarter drilling expenditures of $267 million funded the drilling of 63 (57 net) wells and the completion of wells drilled last year. A 100% drilling success rate was achieved. At March 31, 51 (46 net) wells drilled during the quarter were in various stages of completion or waiting on pipeline connection. As of March 31, Range had drilled 244 horizontal Marcellus wells to date of which 49 are awaiting completion and 24 are awaiting pipeline hook up. In the first quarter, $19 million was expended on acreage, $6 million on gas gathering systems and $26 million for exploration expense (includes $13 million for seismic and $9 million for delay rentals).
Operational Discussion
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 are 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 and 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 the very near future. With this expansion, Range’s total processing capacity will expand to 350 Mmcf per day. Range has also 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.
Midcontinent Division
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 well continues to perform above expectations. After 12 weeks of production, the well has produced more than 1.5 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.
Appalachian Division
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.
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