A new completion design doubled initial production (IP) rates from the Marcellus Shale in southwestern Pennsylvania for Range Resources, the Fort Worth, TX-based company said Thursday.

The “reduced cluster spacing” (RCS) method involves placing perforations closer together along a lateral to increase the amount of hydraulic energy focused on a particular section of a shale formation. Generally speaking, Range went from spacing three clusters every 300 feet to three clusters every 200 feet.

Range recently completed two wells using the method that produced at double the rate of wells on the same pad completed in a conventional manner, and a third with an IP rate of 11 MMcfe/d. By comparison, the 28 wells Range brought online in southwestern Pennsylvania in the first quarter averaged 24-hour IP rate of 8.2 MMcfe/d.

“While data from the new completion technique is limited to three wells, we are encouraged by these initial results as they suggest the potential for further capital productivity improvements,” analysts from Canaccord Genuity Energy Research said in a note Thursday.

It’s still too early to say how much of that increase can be attributed to RCS, according to COO Ray Walker. Range is currently experimenting with four completion strategies, often using more than one at a given well. Those include longer and better-placed laterals and increased conductivity, but “everything we’ve done today says that we’re getting better results,” Walker said during an earnings conference call.

Using “30-foot cluster spacing,” EQT Corp. increased production by 60% while increasing well costs by about 25%. Because EQT drills many wells using identical completion strategies, it could estimate the potential cost of the technique, but Range said it’s too early to say know RCS would impact its $4 million average Marcellus well cost. “You’re going to see those prices go up and down as we incorporate those different techniques in the well design, but the standard well today is about $4 million,” Walker said.

The tighter spacing increases well costs because it requires more stages per lateral, but Range believes other techniques could decrease costs in turn. “A year or so ago, I would have said it wouldn’t make any difference where you land a lateral because we’re going to bust it all up when we frac it, but today I’ll tell you that the guys have made a real impression on me that it does make a big difference,” Walker said.

Higher production and lower operating costs helped overcome low gas prices and lift sales by $16 million year/year to $247 million, but Range still reported a net loss in the first three months of $42 million (minus 26 cents/share), versus a net loss of $25 million (minus 21 cents) in the year-ago period. The latest period’s losses were attributed to Pennsylvania’s newly enacted impact fee, as well as derivative mark-to-market losses.

The impact fee included a one-time $24 million retroactive charge for all of Range’s Marcellus wells drilled through 2011, as well as a $6.2 million charge to cover the future fee for wells drilled in the first period of this year. Minus those one-time factors, adjusted earnings were $24 million (15 cents/share), compared with $35 million (22 cents) in the year-ago period.

Production in the first three months hit a record — 655.5 MMcfe/d — up 20% from the first quarter of 2011, when Range could still count a sizable Barnett Shale portfolio among its assets (see NGI, March 7, 2011). In the first quarter, Range produced 512.5 Mcf/d of natural gas, 12,152 b/d of natural gas liquids (NGL) and 6,682 b/d of oil. At the same time, operating costs fell by 6% year/year.

In the Marcellus Shale Range is producing about 460 MMcfe/d, with about 80% coming from liquids-rich sections of the play. The company still expects to be producing 600 MMcfe/d by the end of the year. Because of chronically low gas prices, though Range said it may reduce drilling in the region to one rig by the end of the year and would focus its activity on wells needed to hold existing acreage.

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