Continuing as one of the leading producers in the Marcellus Shale play, Fort Worth, TX-based Range Resources Corp. on Thursday reported increased production of natural gas, liquids and crude oil, while prices were down and initial results were in on Pennsylvania's newly imposed natural gas impact fee. The fee's initial charge put overall production taxes at about $13.6 million, or 23 cents/Mcfe, for the first quarter, Range said.
Analysts and Range CEO Jeff Ventura were calling the first quarter results a solid performance. Production was 3% higher than the company's previous guidance. Natural gas liquids (NGL) and crude oil are becoming a bigger part of Range's production mix, Ventura said.
While realized prices were down, production was up for natural gas, NGLs and oil. First quarter gas production averaged 655.5 MMcfe/d, a 20% jump from first quarter totals last year. "Adjusting for the Barnett production sold in April 2011, the production increase would have been 50%," said a Range spokesperson, noting that record production was driven by continued success in the company's drilling program.
The mix in production was led by gas (78%), followed by NGLs (16%) and then crude oil (6%). Year-over-year oil production increased 36%; NGL grew 20% and natural gas production increased 19% in the quarter, Range said.
Price realization on production decreased about 14% in the first quarter, averaging $5.19/Mcfe before deduction of third-party transportation, gathering and compression costs. Realized prices and average production for each commodity in the first quarter were: natural gas, $4.01/Mcfe on average production of 512.5 MMcf/d; NGLs, $46.20/bbl on average production of 17,152 b/d; and crude oil, $83.54/bbl on production averaging 6,682 b/d.
Third-party transportation, gathering and compression fees were expected to average 68 cents/Mcfe for the first quarter, Range said.
Ventura said the results reflect "excellent performance" across the board by operating, midstream and marketing teams at the company. He said the company is on track to achieve its 2012 production growth target of 30-35%.
According to Pennsylvania Department of Environmental Protection data, Range Resources was the fourth largest producer in the Marcellus during the last six months of 2011, contributing 11.9% of the total production for the area. Range had a much higher share during the last six months of 2009 and the first six months of 2010, at 19%, when the play was still in its infancy.
On the Pennsylvania Marcellus impact fee, Range said it will record a one-time expense of about $24 million, or 40 cents/Mcfe, based on the required retroactive payment for wells drilled in 2011 and previous years. The expected company wide Pennsylvania production taxes for the first quarter were about $13.6 million, or 23 cents/Mcfe. A judge's order Wednesday delaying implementation of a portion of Act 13 affecting municipalities does not delay collection of the impact fee (see Shale Daily, April 12).
The fee covers essentially all of Range's Marcellus Shale acreage, reportedly the second largest holding in the formation. It imposes an annual fee for a 15-year period on each well drilled, with the fee adjusted annually based on three factors: age of each well, changes in the Consumer Price Index and the average monthly Nymex natural gas price.
According to some financial reports, Range's drilling operations in the Marcellus shale natural gas fields are "coveted," and the exploration and production (E&P) company has been labeled at times as a takeover target. Analysts, however, have pointed out that there are no gaps in the company's performance that could be negotiated into a discount.
In a comment last September, Tudor, Pickering, Holt & Co. said a buyer for Range would need to "think they have some edge" in running the company. "Finding a weak link in [Range] as a company is difficult..." The Range machine is "pretty well oiled" and would demand a deep-pocket buyer (see Shale Daily, Sept. 22, 2011).
The company is reportedly trading at 56 times its estimated 2012 earnings, the highest of any E&P company valued at more than $5 billion. Range is second in number of leases owned in the Marcellus Shale.
Along with helping kick start Marcellus, Range has gotten credit for being a leading proponent of reducing environmental impacts from its operations. It has been honored over the past year with industry awards for its best practices, cost reductions and safety programs.