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Range Resources Sees Prices, Production Going in Opposite Directions

While pouring through its 4Q2008 data, Range Resources found what any producer loathes to see: natural gas and oil production volumes for the company were up by 17% over the same period of 2007, however, realized prices were down by the same percentage.

The Fort Worth, TX-based independent said 4Q2008 production volumes rose to 403 MMcfe/d, a 17% increase over 4Q2007 and a 4% increase over 3Q2008. Approximately 82% of the company's production in the quarter was natural gas. Production for full-year 2008 averaged 386 MMcfe/d, a 20% increase over 2007.

The snapshot of the company's realized prices was not as rosy. Preliminary 4Q2008 oil and gas price realizations (including the impact of derivative settlements) averaged $6.86/Mcfe, which represents a 17% decrease from the prior-year period and a 24% decrease from 3Q2008.

"Once again our operating teams did an outstanding job efficiently increasing production in the fourth quarter," said CEO John Pinkerton. "Reaching our 24th consecutive quarter of production growth is a tremendous achievement and reflects the quality and dedication of the Range team. In particular, the progress made in the Marcellus play during the fourth quarter will be a significant catalyst for Range in 2009. For the past several years as the Marcellus play was in the testing phase, it was a hindrance to our overall capital efficiency. Now that we have achieved significant commercial success, the Marcellus play will be highly accretive to our capital efficiency in 2009.

"With the combination of exceptional well performance, reductions in well costs and superior natural gas prices due to the play's proximity to the Northeast markets, the Marcellus play is capable of delivering attractive returns even at today's low natural gas prices. The Marcellus play and Range's other low-cost projects, coupled with our solid financial position and hedges that cover 74% of our estimated 2009 gas production, position us to prudently build shareholder value in 2009."

Range said 74% of anticipated gas production is hedged at an average floor price of $7.62/Mcf. This includes recent hedges for the second and third quarters of 2009 to protect against the current weakness in the market.

Looking more in-depth, Range said its 2009 drilling program is off to a solid start with 13 drilling rigs currently running. For the year, the company anticipates drilling approximately 730 (500 net) wells. 4Q2008 development and exploration expenditures are anticipated to total roughly $210 million, funding the drilling of 129 (94 net) wells. A 97% success rate was achieved with 126 (91 net) wells productive. In 2008, 533 (395 net) wells were placed on production. At year-end, the remaining 114 (90 net) wells were in various stages of completion or waiting on pipeline connection.

Range, one of the largest Marcellus Shale operators, also operates in the Southwest and Gulf Coast regions.

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