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Marcellus Helps Range Break Production Record Again

Range Resources Corp. achieved a record high production volume of 876 MMcfe/d during the first quarter of 2013, driven in large part by the continuing success of its drilling program in the Marcellus Shale, the company said Thursday.

The record quarter was 33.6% higher than 1Q2012, when Range produced a then-record 655.5 MMcfe/d (see Shale Daily, April 27, 2012). It also shattered the previous record of 844 MMcfe/d produced during the preceding quarter, 4Q2012 (see Shale Daily, Jan. 17).

Range said 79% of its production for 1Q2013 was weighted toward natural gas, while 14% was natural gas liquids (NGL) and the remaining 7% was crude oil and condensate. The company said year-over-year (y/y) oil and condensate production had increased 52%, while natural gas and NGL production rose 34% and 22%, respectively.

According to Range, the 876 MMcfe/d of production realized in 1Q2013 had exceeded the high end of its guidance for the quarter, 845-850 MMcfe/d (see Shale Daily, Dec. 13, 2012). The company attributed the unexpected results to the timing of turning wells into production.

"We are off to a terrific start with our first quarter production results," CEO Jeff Ventura said. "We are well on track to achieve our production growth target of 20% to 25% for 2013.

"More importantly, we believe that we have line-of-sight production growth of 20% to 25% for many years. This growth will be led by our approximately one million net acre leasehold position in Pennsylvania. The strong growth, coupled with high returns, low cost and low reinvestment risk will drive substantial per share value for years to come."

Analysts with Wells Fargo Securities LLC said they were also surprised by Range's higher production for the quarter, but they said it was a positive sign and expected stocks to benefit. Wells Fargo had estimated that Range's 1Q2013 production would be 849 MMcfe/d, which was also below a Wall Street estimate of 861 MMcfe/d.

"Gas realizations came in very strong at $4.09/Mcf versus our expectation of $3.67, [and] with NGLs at $35.29/boe versus our $39.95/boe," Wells Fargo Senior Analyst David Tameron said in a note Thursday. "With Range's liquids primarily in southwest Pennsylvania, we expect that there could be a read through to Noble Energy Inc. and Rex Energy Corp." (see Shale Daily, Dec. 11, 2012; May 18, 2012).

Range said its combined preliminary price realization for natural gas, NGL and oil averaged $5.06/Mcfe in 1Q2013, a 3% decrease from the prior year quarter. Production for the quarter was 689 MMcf/d of natural gas, 20,994 b/d of NGL, and 10,141 b/d of crude oil and condensate, the latter of which had a price realization of $85.46/bbl.

The company said third party transportation, gathering and compression fees would average approximately 80 cents/Mcfe during 1Q2013, which Range attributed to "higher than expected production volumes from the Marcellus Shale."

Tameron added the 80 cents/Mcfe figure cited by Range was higher than expected, stating the high-end for annual guidance ranges from 75-77 cents/Mcfe. He also assumed Range's transportation costs were above Wall Street estimates as well.

"Midstream expansion in the southwest, when Range is drilling, is cited as the reason for the higher than expected transportation expense in the Marcellus," Tameron said. "Overall, we view the report as a positive and expect shares will react favorably."

Shares of Range were trading at $80.32 on the New York Stock Exchange at midday Thursday, a 0.58% increase (up 46 cents/share).

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