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, because 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.

The idea is gaining traction in the Marcellus. Using "30-foot cluster spacing," EQT Corp. increased production by 60% while increasing well costs by about 25% (see Shale Daily, Jan. 24; Aug. 1, 2011).

Because EQT drills many wells using identical completion strategies, it could quickly 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.

Although higher production and lower operating costs helped bump first quarter revenues by $16 million year over year to $247 million in the first quarter, despite lower natural gas prices, Range reported a net loss of $42 million (26 cents/share), down from a $25 million loss (21 cents/share) for the first quarter of last year because of the Pennsylvania impact fee and a derivative mark-to-market loss.

The impact fee includes a one-time $24 million retroactive charge for all Marcellus wells drilled through 2011 and a $6.2 million charge to cover the future fee for Marcellus wells drilled during the first quarter.

Adjusting for those factors, Range said earnings would have been $24 million (15 cents/share) for the first quarter, compared to $35 million (22 cents/share) from the first quarter of 2011.

Range produced a record 655.5 MMcfe/d during the quarter, up 20% over the first quarter of 2011, when it could still count a sizable Barnett Shale portfolio among its assets (see Shale Daily, March 2, 2011). Of its first quarter production, Range said 71% came from liquids-rich and oil plays. 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.

The company also reduced operating costs by 6% year over year. Lease operating expenses fell 36% to 48 cents/Mcfe, interest expense fell 15% to 62 cents/Mcfe and administrative costs fell 9% to 50 cents/Mcfe, while midstream costs increased 23% to 68 cents/Mcfe because of Marcellus expansion projects.

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.

Range continues to focus on southwestern Pennsylvania, where it believes it can access three stacked shale formations: the Upper Devonian, the Marcellus and the Utica. The company is completing its first Upper Devonian test well and drilling its second, and although it doesn't have production figures for either, it said "the preliminary core analysis is very encouraging from both wells."

Range plans to drill two Utica wells this summer.

In northeastern Pennsylvania, Range drilled 10 horizontal wells and brought five online in Lycoming County. That program included four wells with an average 24-hour IP of 22 MMcf/d. The company also participated in 10 wells drilled and seven wells brought online in Bradford County during the quarter.

Because of chronically low gas prices, though Range said it may reduce drilling in the region to one rig toward the end of the year and would focus its activity on wells needed to hold existing acreage.