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Range Resources Experimenting With Completions as North Louisiana Wells Underperform

Range Resources Corp. again reported poor results from its Cotton Valley Sands Terryville Complex assets in North Louisiana that, combined with permitting delays in Pennsylvania during the second quarter, forced the company to lower its full-year production guidance. 

The company is wrestling with the right completion recipe in the Terryville and expects better results from the field in the second half of the year. Range acquired the assets in a $4.4 billion merger with Memorial Resource Development Corp. (MRD) late last year. CEO Jeff Ventura said the results from a batch of wells brought to sales in the first quarter are still "not up to par with our expectations."

Most of those wells were drilled by MRD in a concentrated area, forcing Range to shut-in production earlier this year to minimize interference during completion operations. As it worked through the backlog of drilled but uncompleted wells, the company experimented with completion designs to mitigate the interference and used less fluid to pump proppant. COO Ray Walker said Wednesday during a second quarter earnings call that it is "now apparent that we understimulated the wells, or more simply, the wells have had lower initial production (IP) with flatter declines indicating a less than optimum stimulation."

The ongoing Terryville issues have cast doubt on the company's decision to step outside of its Appalachian core to gain more exposure to the Gulf Coast. Financial analysts noted that it was the first time in years that Range has lowered its full-year guidance. The company still plans to bring online 23 additional Terryville wells this year that it would site, drill and design, with plans to pump more fluid. It also expects to have more test results from an encouraging extension area in Jackson Parish, where the company has had better results.

"As Range learned in the early stages of what has clearly been an extremely successful Marcellus development, which required several years, short-cutting the timeline and science is not an option," Ventura said of the Terryville. "Unlocking the resource potential across 220,000 net acres of stacked-pay requires a certain amount of time and well repetitions in order to establish a more predictable economic development program."

The permitting issues in Pennsylvania have been resolved, Walker said. However, Range is now guiding for 30% year/year production growth in 2017 rather than the previous 33-35%.

Range produced 1.94 Bcfe/d, up from 1.42 Bcfe/d in the year-ago quarter and nearly flat from 1.93 Bcfe/d in 1Q2017. Second quarter production was slightly above guidance, thanks mainly to the Appalachian division, which produced 1.5 Bcfe/d. The company also turned in impressive results at the western edge of its super-rich area in southwest Pennsylvania, where a seven-well pad came online at an average of 29.1 MMcfe/d per well. A four-well pad at the eastern edge of its dry gas area in the same region came online with an average per well IP of 30 MMcf/d.

Average gas price realizations during the quarter increased to $2.88/Mcfe, 15% higher year/year. Revenue was also up significantly year/year to to $673.1 million from $101.8 million.

Range reported net income of $70 million (28 cents/share) for the second quarter, compared with a net loss of $225 million (minus $1.35) in 2Q2017. 

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