Range Resources Corp. made good on its 2008 goal to build its leasehold position in targeted onshore plays, and it increased its proved natural gas and oil reserves by 19% -- to 2.7 Tcfe from 2.2 Tcfe.
From all sources, Range said it replaced 405% of production during the year with drilling alone replacing 367% of production. The Fort Worth, TX-based independent oil and gas company said its drill bit finding cost with performance revisions, but excluding acreage cost and price revisions, was $1.68/Mcfe. Negative revisions as a result of lower oil and gas prices amounted to 69 Bcfe. Finding costs from all sources, including leasehold additions and acreage acquisitions and all price and performance revisions, totaled $3.08/Mcfe.
"In 2008 our efforts and capital were dedicated toward not only building shareholder value by increasing reserves per share and production per share, but also expanding our acreage positions in key plays," said CEO John H. Pinkerton. "For 2008, production rose 20% over the prior year. Given the industry's high cost of acquisitions in 2008, Range's strategy to stay focused on increasing value through drilling served us extremely well."
At year-end 2008, 83% of the proved reserves by volume was natural gas. The percentage of Range reserves in the proved undeveloped category was 38% versus 36% in 2007. The company's reserve life index stood at 18 years based on fourth quarter production levels. Approximately 87% of the reserves was audited by independent petroleum consultants.
In last week's earnings report, Range said its natural gas and oil production volumes for 4Q2008 were up by 17% over the same period of 2007. However, realized prices for the quarter were down by the same percentage (see NGI, Jan. 26). The company 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.
Range said it spent approximately $600 million in 2008 on leasehold additions and acreage acquisitions, primarily in the Marcellus Shale play. For 2008, approximately 400,000 net acres were acquired companywide at an average cost of $1,500 per acre. At year-end 2008 the company owned approximately 900,000 net acres in the Marcellus Shale fairway.
"While very pleased with the increase in proved reserves to 2.7 Tcfe, our unproven, unrisked resource potential of more than 20 Tcfe relating to our three million-acre leasehold position will be the driver for future growth for many years to come," Pinkerton added.
Based on the year-end proved reserves, Range said it does not expect to record any impairments of its proved properties. However, current analysis indicates that $25-30 million of unproved leasehold impairments will be recorded due to lease expirations and acreage that the company believes will not be developed due to "high grading" of its drilling inventory in the current commodity price environment.
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