Range Resources Inc., which is 82% weighted to natural gas, last year built its proven reserves base in the United States by 27% to 2.2 Tcfe, driven by strong growth in the Marcellus and Barnett shales.
From all sources, Range said it replaced 537% of its production last year, with organic drilling fueling 424% of the output. Total finding costs were estimated at $1.83/Mcfe. Drill bit finding costs, including $78 million of acreage purchases, totaled $1.80/Mcfe; excluding acreage purchases the finding costs were $1.65. Capital expenditures for 2007, excluding acquisitions, totaled $900 million.
"Achieving 537% reserve replacement at an all-in finding cost of $1.83 per Mcfe is exceptional performance," said President John H. Pinkerton. "Maintaining a low-cost structure in times of record growth is an extraordinary accomplishment. Importantly, our 424% drill bit replacement was the highest in our history. These results reflect the superb team we have at Range coupled with excellent 2007 drilling results."
In addition to Range's proved reserves, Pinkerton said the company estimates that the unproven reserve potential of its drilling inventory "now exceeds 3 Tcfe and the unrisked reserve potential of our emerging plays exceeds 13 Tcfe. We are in an excellent position to continue to add production and reserves for many years to come."
Range expanded its Barnett Shale holdings in December in separate sales agreements with a subsidiary of DTE Energy Co. and a private company (see NGI, Dec. 17, 2007).
At year's end, 82% of the proved reserves by volume were natural gas, Range said. Proved developed reserves last year increased to 64% versus 63% in 2006. The company's reserve life index stood at 17.7 years based on 4Q2007 output. Range said 86% of the reserves were audited by independent petroleum consultants.
Range reported that its 4Q2007 production volumes rose to 343 MMcfe/d, a 17% increase over 4Q2006. Production for 2007 averaged 322 MMcfe/d, 17% higher than in 2006.
Energy analysts with Friedman, Billings, Ramsey & Co. Inc. (FBR) said Range's performance last year followed "top-notch execution on the reserve front, as well as substantial growth in unbooked reserve potential," which was led by "considerable growth" in the emerging Marcellus Shale, which is located in the Appalachian Basin.
"Almost glossed over in the press release (but flushed out in an updated company presentation) was impressive growth in RRC's [Range's] unbooked reserve potential," said the FBR analysts in a note. "Unrisked reserve potential in the company's drilling inventory stood at 3.1 Tcfe, up from 2.7 Tcfe at the last report, based on progress in the Barnett Shale, Marcellus Shale and Nora CBM [coalbed methane] properties."
The independent's "emerging play upside potential is anchored by a massive 10-15 Tcfe net unrisked potential across Range's Marcellus Shale position; this demonstrates the company's success in making tremendous strides (in short order) in building its knowledge base of correlating the shale's pressure, thickness, porosity, organic content and completion properties to optimize production and recoveries."
Analysts said they expect Range's progress in the Marcellus and Barnett shales "to dominate news flow in much of 2008. Of particular consequence will be Marcellus updates..."
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