It's only been two and a half months, but Range Resources Corp. said its decision to leave the Barnett Shale is already paying off.
"Despite closing the Barnett sale at the end of April, we have already made up roughly half of the production we sold," Range CEO John Pinkerton said Monday. "By the end of the third quarter, we expect to have fully replaced all of the Barnett production."
Those second quarter results still included a month of Barnett production, though, a benefit Range won't have in the third quarter. Range said its goal is to produce 400 MMcfe/d from the Marcellus Shale by the end of this year and increase that to 600 MMcfe/d by the end of 2012.
The Fort Worth, TX-based company lost 100 MMcfe/d of production through the sale but still averaged 508 MMcfe/d in the second quarter of the year, up 8% from the second quarter of 2010. Without the sale, Range said production would have been up 33% year over year.
Range sold its Barnett portfolio to focus on the Marcellus Shale, where it can theoretically develop three stacked shale plays simultaneously and use the liquids-rich shale of southwestern Pennsylvania to offset depressed gas prices (see Shale Daily, March 7).
While natural gas accounted for 76% of production in the second quarter, natural gas liquids (NGL) production increased 20% year over year, helping Range realize an 11% increase in commodity prices between the second quarters of 2010 and 2011, the company said. When ethane extraction begins in late 2013, Range said its NGL volumes would "essentially double" (see Shale Daily, June 7; April 25).
That said, Range, like most operators in the Marcellus, is still crimped by limited infrastructure.
Through the first half of the year, Range spent $547 million drilling 146 gross wells, but it only placed 20 into production. That backlog is largely in the Marcellus, where Range is waiting to complete 58 wells and connect another 30 to a gathering system.
Range hopes to bring more of those wells online this year as it adds capacity to its own system, the company said. Range increased its processing capacity in southwestern Pennsylvania to 350 MMcf/d in May and expects to have that figure up to 390 MMcf/d by the end of the year. Range expects to add 150 MMcf/d of capacity to its Lycoming County trunkline in northeastern Pennsylvania in the second half of the year, allowing it to bring an additional 33 wells online by the end of November.
With 103 producing wells under its belt in southwest Pennsylvania, Range now has estimated ultimate recovery (EUR) of 5.7 Bcfe per well. Although volumes vary within the play, Range estimates that those wells will produce 4 Bcf of gas and 281,000 bbl of liquids.
With a drilling and completion cost of $4 million per well, and commodity prices of $4/Mcf for gas and $85/bbl for oil, Range said its rate of return would increase to 79% and its finding and development costs would drop to 82 cents/Mcfe.
Those wells would produce 40% of their EUR within the first five years of production, Range said. Because the company only recently brought its initial wells online in northeastern Pennsylvania, it didn't provide EUR rates for that segment of the Marcellus.
In the Midcontinent Range is also focusing on liquids-rich plays.
The company brought five wells into production in the Ardmore Basin Woodford play in southern Oklahoma at 5,069 gross boe/d and drilled four wells in the Mississippi Lime play in northern Oklahoma, where production is currently at 3,200 gross boe/d.