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Range Proved Reserves Up 18%, Output Hits Record High

On the back of its Marcellus Shale leasehold, Range Resources Corp. said natural gas-weighted proved reserves in 2009 grew 18% to 3.1 Tcfe from 2.7 Tcfe at year-end 2008. Production averaged 457 MMcfe in 4Q2009, which was 13% higher than in 4Q2008, setting a new record for the independent.

On a sequential basis, the Fort Worth, TX-based producer said output in the last three months of last year rose 5% from 3Q2009.

"While proved reserves grew 18%, our estimate of the net unproved resource potential has increased to 22-30 Tcfe," said CEO John Pinkerton. "Importantly, the largest portion of our unproved resource potential relates to the Marcellus Shale play, where our drilling results and those of the industry have materially derisked a significant portion of our acreage position."

At the end of 2009, for each of its proved developed wells in the Marcellus Shale play Range said it recorded on average 1.2 offset drilling locations as proved undeveloped reserves. Unproven Marcellus acreage, net to its interest, is estimated at 18-25 Tcfe.

Under the new Securities and Exchange Commission (SEC) rules, which took effect this year to calculate reserves revisions based on average gas and oil prices for the year, Range said its benchmark cash prices were $3.87/MMBtu for gas and $60.85/bbl for crude oil. Using the previous SEC pricing method (year-end benchmark prices of $5.79/MMBtu and $79.36/bbl), Range said its proved reserves would have totaled 3.2 Tcfe and the pre-tax discounted current value would have been $5.1 billion.

The SEC also implemented new rules for proved undeveloped (PUD) reserves, which allows additional drilling locations to be classified as PUD reserves if the locations are supported by reliable technologies. Using the new PUD rules Range's F&D costs averaged 98 cents/Mcfe; under the previous SEC rules, PUD F&D costs would have been $1.21/Mcfe.

Said Range, "The apples-to-apples decrease of approximately 40% in finding and development cost for 2009 versus the prior five-year period is a reflection of Range's high-graded property portfolio and, in particular, the impact of the Marcellus Shale play."

Preliminary price realizations, including the impact of derivative settlements, in 4Q2009 averaged $6.59/MMcfe, down 4% from the prior-year period but up 4% sequentially. In 2010 69% of Range's anticipated gas production is hedged at an average floor price of $5.53/Mcf and an average cap price of $7.33/Mcf.

From all sources, Range, which is 84% weighted to gas, said it replaced 486% of production last year "through the drillbit and positive performance revisions" and added 770 Bcfe of proved reserves organically. Finding and development (F&D) costs averaged 98 cents/Mcfe, but excluding price revisions, F&D costs averaged 89 cents/Mcfe. No reserves were added through acquisitions. Last year Range sold properties containing 140 Bcfe of proved reserves.

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