Shale Daily / NGI All News Access

Range CEO: Market Development Essential

If the natural gas industry can grab even 10% of the transportation fuel and electric generation sectors markets as an outlet for burgeoning production coming out of shale plays, it could be on the verge of a golden era, according to Range Resources Corp. CEO John Pinkerton.

"That's what we're playing for here," Pinkerton said at the recent Developing Unconventional Gas (DUG) East conference in Pittsburgh. "If we do that, natural gas prices will move up, but if we don't do that, then we're just going to be developing a larger and larger supply for a stagnant market and prices will continue to go down. I'm actually convinced that the next 20 years is going to be the golden era of natural gas."

The Fort Worth, TX-based company recently put its Barnett Shale properties on the block and announced that it plans to focus on its "liquids-rich plays" in the Marcellus Shale (see Shale Daily, Oct. 29). Range's Barnett properties include approximately 360 producing wells and 1,000 drilling locations, with net production from the properties expected to average approximately 120-130 MMcfe/d in 4Q2010. The holdings include 53,000 net acres, of which approximately 80% is located in the core of the play and nearly 80% of the acreage is currently held by production.

"We've got a huge tiger by the tail here and it's going to be a really, really exciting place to be for the next 20 to 30 to 50 years as we continue to peel back the onion in terms of the Marcellus," Pinkerton said.

Range recognized that the Marcellus had characteristics similar to the Barnett and is applying some of the lessons it learned during its time in the Texas shale play to its Pennsylvania acreage, Pinkerton said.

"You've got roughly 28-30 million acres of potential in the Appalachian basin, and that was the thing that really got our interest, and we [spent] many years working through the science trying to figure out whether it was really going to work. The other thing we really like about the basin -- it services the best gas market on the planet earth. You get the best prices up here, and...within a 300-350 mile radius of Pittsburgh, you've got two-thirds of the population of the United States, so it's a pretty stunning area if you want to sell natural gas."

Range plans to exit 2010 with Marcellus net production at 200-210 MMcfe/d, twice what it was when the year began, and expects to double production again in 2011 to more than 400 MMcfe/d. Range's Marcellus resource potential has increased to 20-27 Tcfe. "Quite frankly, if anything, I think those numbers are a bit low," Pinkerton said.

"With our acreage position, given the technology we see today, there's no reason why we can't get the production up to 2-3 Bcf/d -- and that's a staggering number."

Helping Range push towards those lofty goals is a continuing improvement in well performance.

"As our technical team drills more and more wells, they're making better and better wells, and I think we'll continue to do that over time...we think it's really important to continue to drive the cost [of drilling] down, which is going to be challenging considering the service environment we're in, but this is clearly a play where the low-price guy is going to win."

Key to the industry's success in the Marcellus will be public perception of drilling operations, he said.

"The facts are on our side, the science is on our side, we just need to get it out there...Every company needs to take part of that on their own shoulders and really talk to their local legislatures, talk to their local officials and really educate them on what we're trying to do.

"I know we're competitors in terms of leasing and employees and a lot of different things, but we've really got to work together to make this work. We've got a lot at stake, all of us that work in the Marcellus. We've all got a lot at stake and a lot of risk and it's really going to take our collective wisdom and common interest to make this work."

For its part, Range was the first company in Pennsylvania to voluntarily disclose the chemicals used in its hydraulic fracturing operations (see Daily GPI, Aug. 13). The information is available from the company's website as part of each well's completion report.

"It was clear to us that if we could be transparent, it would have huge impact on the way the public views us," Pinkerton said.

Range also recycles 100% of its produced water in southwest Pennsylvania. "DEP [the Pennsylvania Department of Environmental Protection] loves that and it saves us a couple of hundred thousand dollars at each well," Pinkerton said. Water recycling hadn't worked for Range in the Barnett.

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