Fort Worth, TX-based Range Resources Corp. said last week its net production from Pennsylvania’s Marcellus Shale play has reached 100 MMcfe/d, marking a nearly four fold increase from a year ago. The company also announced a gas processing expansion that it said will lift its netback on production.

The company’s current Marcellus production represents the high end of its 2009 target of 80-100 MMcfe/d net. Range’s Marcellus Shale production target exit rate for 2010 is 180-200 MMcfe/d net. Given the progress made in 2009, Range extended its forecast to include a 2011 exit rate from the play of 360-400 MMcfe/d net.

Range COO Jeff Ventura said the company’s Marcellus per-well production rates continue to improve while costs continue to decline. The company entered 2009 running four rigs in the play and will end the year with 11 rigs. Range anticipates exiting 2010 with 16 rigs in the Marcellus, increasing to 24 by year-end 2011. Additionally, Range has completed the drilling of two horizontal wells in Lycoming County, PA, in the northeastern portion of the play. Completion operations have commenced on the first of these two wells.

“With the wells drilled by Range and the industry, we believe that approximately 390,000 net acres of Range’s large leasehold in the southwestern portion of the play has been materially derisked,” said Range CEO John Pinkerton. “Our Marcellus team is continuing to delineate our sizeable acreage position in the northeastern part of the play. In addition, we are testing additional shale formations, above and below the Marcellus. It’s becoming more and more clear that the Marcellus Shale will likely become a very large natural gas field.”

Rising Marcellus production in the area from West Virginia through Pennsylvania into central New York is expected to eventually reduce the market-topping gas prices that Northeast citygates have experienced in recent years (see NGI, Dec. 7).

Last week Range said the third phase of a Marcellus Shale gas processing infrastructure expansion program has been completed, adding 120 MMcf/d of cryogenic processing capacity.

The project also added 20 miles of gathering and residue pipelines and 21,000 hp of compression. The phase three assets are in southwestern Pennsylvania and are owned and operated by MarkWest Liberty Midstream & Resources LLC, a joint venture of MarkWest Energy Partners LP and Midstream & Resources, a private equity fund. MarkWest Liberty has long-term agreements with Range to provide gathering and processing services and infrastructure assets.

With the expansion, Range’s Marcellus Shale capacity is approximately 180 MMcf/d. Processing capacity for high-Btu gas is approximately 155 MMcf/d, while the gathering capacity for dry gas, which does not require processing, is approximately 25 MMcf/d.

With the completion of the additional cryogenic processing facilities, all high-Btu gas will be processed through cryogenic facilities and the existing refrigeration facilities will be removed, Range said. The new cryogenic plant will recover approximately twice the amount of hydrocarbon liquids versus the refrigeration facilities.

Given the high-Btu content of Marcellus Shale gas in southwestern Pennsylvania, coupled with currently strong liquids prices, the Marcellus gas price receives a significant uplift, Range said. Based on the current gas liquids and gas prices, the gross netback at the wellhead is approximately $2.25/MMBtu greater than dry gas, a 45% uplift. As a result, the economics for drilling high-Btu Marcellus wells is extremely attractive.

“…[W]e are now at zero liquid discharge, and we are recycling and reusing 100% of the water in our core [Marcellus Shale] operating area,” Pinkerton said. “Our Marcellus drilling continues to generate exceptional results, and we have made excellent headway driving down costs. We are also making great strides in familiarizing Pennsylvanians, including landowners, elected officials, regulators and conservation groups, on modern, responsible natural gas development.”

Additional high-Btu gas expansion projects are being developed to increase Range’s high-Btu gas infrastructure capacity to 185 MMcf/d by the third quarter of 2010 and to more than 300 MMcf/d by mid-2011. In addition, Range has several dry gas infrastructure projects under consideration, the company said.

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