On the backs of its Marcellus and Barnett shale drilling success, Range Resources Corp. on Thursday reported a higher-than-expected 14% jump in natural gas-weighted production in 2Q2009 from a year ago. However, because of low gas prices, the producer won't renew some of its Barnett Shale leases in North Texas.
The Fort Worth, TX-based independent's quarterly volumes averaged 434 MMcfe/d, exceeding the company's guidance of 420-425 MMcfe/d on "better than expected drilling results" from shale drilling. Output also climbed 4% sequentially from the first three months of this year.
Even with "significantly lower" capital spending and the recent sale of some West Texas oil properties, Range still expects to achieve double-digit production growth in 2009. Ninety percent of Range's capital spending is focused this year on the Marcellus and Barnett shales and in the Nora Field in Virginia (see NGI, May 4).
"Given the current low natural gas price environment, Range is only spending capital on drilling and leasehold projects where we are confident we are generating attractive rates of return," said CEO John Pinkerton. "In particular, we have derisked a significant portion of our Marcellus Shale leasehold, which we believe will result in Range developing a large-scale, repeatable play at finding costs of approximately $1.00/Mcfe and at extremely attractive returns of 50% or better."
Output in the Marcellus Shale now exceeds 50 MMcfe/d and should approach the "higher end" of a previously announced target of 80-100 MMcfe/d by year's end, the company said. Range is drilling in southwestern Pennsylvania and to date it has drilled and completed 46 horizontal wells, with 41 now producing. Twenty-four of the Marcellus wells have been producing for at least 120 days; some have been producing for as long as two years, the company said. Average gross ultimate recovery for the 24 wells is estimated at 4.4 Bcfe.
In the Barnett Shale, output averaged 120 MMcfe/d during the quarter. Seven wells were tested in Denton County, TX, at a combined rate of 17 MMcfe/d, and the wells are expected to be producing by the end of July. "We also completed two wells in northeast Parker County, [TX] one of which recently came online at 7.6 MMcfe/d and may be the best well to date in that county," Range said. Finding and development costs in the Barnett are expected to be around $1.25/Mcfe for the second half of the year.
However, Range said it won't renew some of its noncore Barnett Shale leases because of low gas prices. Canceling the leases is expected to result in a one-time, noncash charge of $22 million in 2Q2009. When combined with the quarterly provision for its unproved properties of about $20 million, charges are expected to total around $42 million, the company said.
The producer is scheduled to issue its quarterly earnings on Wednesday, and a conference call is planned for Thursday (July 23).
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