Bolstered by record production, especially in the southwest Pennsylvania portion of the Marcellus Shale, and revisions to its estimated ultimate recovery (EUR) curves, Range Resources Corp. reported net earnings of nearly $144 million for the second quarter of 2013.
On Wednesday, Houston-based Range reported record production of 910 MMcfe/d in 2Q2013, a 27% increase over the 719.3 MMcfe/d it produced in the year-ago quarter. The latest production figure was adjusted 30% to reflect the sale of 7,000 net acres in the Permian Basin in New Mexico and West Texas for $275 million, a transaction that closed April 1 (see Shale Daily, Feb. 28; July 16, 2012).
But the highlight of an earnings call with financial analysts on Thursday was the changes Range was making to its EUR curves. Specifically the company said EUR in the super-rich area of the Marcellus, in southwest Pennsylvania, would increase 38% over 2012, to 1.82 million boe (10.9 Bcfe). In the wet and dry gas areas, EURs were increased 41% and 63%, to 12.3 Bcfe and 12.2 Bcf, respectively.
"We're still going up the learning curve in the super-rich area," CEO Jeff Ventura said Thursday. "We don't have the history quite there yet that we have in the wet area. So we are being conservative, and we don't want to take a group of wells that are really performing well in one specific area and then base everything off of that until we get more wells under our belt.
"It gives us confidence that there's a lot of upside [in the super-rich area], but we're not really wanting to model our forward projections [everywhere] on that yet."
According to Range, EUR potential is believed 12 to 15 Tcfe higher in the wet and super-rich areas, after receiving positive results from three years of testing tighter well spacing, specifically going from 1,000-foot laterals down to 500-foot laterals.
Dan McSpirit, an analyst with BMO Capital Markets Corp., said the 12 to 15 Tcfe revision was "a big number on top of an already big number," referring to Range's total EUR potential of 60 to 83 Tcfe.
"It's enough to say here that both recoveries per 1,000' of lateral length and F&D [finding and development] costs improve for super-rich and wet gas wells," McSpirit said on Thursday. "Dry gas wells show a slight decrease in recoveries per unit of measure (by our calculation), but do exhibit the most significant decrease in F&D cost. That's a good thing, especially considering the somewhat chronic pricing pressure under which dry gas and wet gas constituents remain."
Range holds about 540,000 net acres in southwest Pennsylvania. It classifies 110,000 of those acres as super-rich to the Marcellus, while 220,000 acres are wet and 210,000 are dry gas.
Range said it brought 45 wells online during 2Q2013 in southwest Pennsylvania, including 19 in the super-rich area. The initial production (IP) rate for those 19 wells, all completed with reduced cluster spacing, averaged 1,863 gross (1,548 net) boe/d, with 65% weighted toward liquids (344 bbl of condensate, 866 bbl of natural gas liquids [NGL] and 3.9 MMcf of gas).
The company added that two of the super-rich wells posted "extraordinary" 24-hour initial IP rates. Range said the first well hit 3,670 gross (3,046 net) boe/d with 72% weighted toward liquids, assuming an 80% ethane extraction. The second well reached 5,721 gross (4,748 net) boe/d, with 63% weighted toward liquids, again assuming an 80% ethane extraction. Both wells, which are on pads about 10 miles apart, were turned into sales this month.
Fifteen wells in the wet gas window of the Marcellus in southwest Pennsylvania and 11 gross (9.6 net) dry wells were also brought online during the quarter. At the wet gas wells, Range said IP averaged 13.7 gross (11.5 net) MMcfe/d, with 38% weighted toward liquids (8.5 MMcf gas, 854 bbl of NGL and 16 bbl of condensate). The dry wells posted an average IP of 8.5 MMcf/d.
Elsewhere during the second quarter, Range brought two Marcellus wells online in Lycoming County, PA, that produced at an average rate of 12.6 gross (10.7 net) MMcf/d; turned 11 gross (10.1 net) wells into sales in the Midcontinent Division; drilled eight vertical test wells targeting the Wolfberry play in the Permian Division; and continued developing, in its Southern Appalachia Division, multi-pay horizons on the 350,000 gross (250,000 net) acres it owns in Virginia.
Asked if the company would possibly divest its holdings elsewhere to focus on southwest Pennsylvania, Ventura said it was a possibility.
"We're always looking at redirecting our capital to the highest return areas," Ventura said. "That being said, we look at [our entire] portfolio and we look at the opportunities in there."
Range posted net income of $144.0 million for 2Q2013, which translates to 88 cents of income per basic and diluted share. By comparison, the company posted earnings of $55.7 million (34 cents/share) during the preceding second quarter. Shares of Range were trading at $81.39/share on the New York Stock Exchange on Thursday afternoon, an increase of 7.02% ($5.34/share).