Range Resources Corp.’s natural gas net output in the third quarter reached 537.2 MMcf/d, which was 7% more than in the year-ago period, the Fort Worth, TX-based independent said Tuesday.

The gains came even though Range last April completed the sale of its Barnett Shale properties in North Texas, which once had accounted for one-fifth of total production (see Shale Daily, Oct. 29, 2010). Nearly 80% of Range’s capital spending now focuses on exploration efforts in the Pennsylvania portion of the Marcellus Shale, where it is a top operator (see Shale Daily, Oct. 4).

If the Barnett properties still were part of Range’s portfolio, quarterly volumes would have increased 27%, the company said. Output also materially exceeded company guidance of 515-520 MMcfe/d because infrastructure build-out is proceeding “faster than anticipated.” In fact, Range said by the end of September it had fully replaced all the production lost in the Barnett sale.

“Third quarter production results reflect excellent performance by our operating, infrastructure and marketing teams,” said Range CEO John Pinkerton. “Being able to fully replace the sold Barnett production in just five months is a testament to both the quality of our technical teams and our asset base. As a result, we are well on track to achieve our Marcellus and companywide production targets for the year.”

Production in the latest quarter was 76% weighted to natural gas, while 17% was natural gas liquids (NGL) and 7% was crude oil. Year/year gas output rose 5%, while NGL production was up 11% and oil rose 13%.

The company said it made “significant progress” on several fronts in the Marcellus Shale, putting the explorer on track to reach its year-end production target in the play of 400 MMcfe/d. Net Marcellus output currently is about 350 MMcfe/d. In southwest Pennsylvania Range drilled 42 wells during the quarter and 28 wells were turned to sales, bringing the number of horizontal Marcellus wells producing in the southwest part of the state to 214.

In southwestern Pennsylvania at the end of September Range had 12 wells waiting on pipeline connections and 74 wells waiting on completion. In northeast Pennsylvania, 14 wells were drilled in the latest quarter and 10 wells were turned to sales. Fifteen wells were producing in the northeastern play at the end of September, with 11 wells waiting on pipeline connections and 22 wells waiting on completion.

In addition to the operational progress in the latest period, Range said an additional 40 MMcf/d of fully dedicated cryogenic gas processing capacity was brought on line, which increased its total dedicated processing capacity to 390 MMcf/d. In addition, Range said it has access to 100 MMcf/d of interruptible processing capacity.

Phase I of the Lycoming trunkline system in northeast Pennsylvania was completed and Phase II is expected to be completed by the end of this year, which would give Range 350 MMcf/d of capacity flowing into the Transcontinental Gas Pipe Line (Transco) system moving gas into and out of the Leidy storage complex.

Range said it also has accomplished a “key element” to develop liquids-rich gas in the Marcellus by signing its first ethane sales contract with Canada’s NOVA Chemicals Corp. (see Shale Daily, Sept. 7).

“The project was the culmination of years of planning and will ensure that Range can continue accelerating its Marcellus Shale development plans,” the company said. “The first sales under the contract are targeted to occur in late 2013. Anticipating Range’s ethane production growth, numerous petrochemical companies, both domestic and international, have approached the company as potential customers.”

Also late in the quarter Range began to receive an incremental NGL pricing uplift because the C3+ fractionation facility was completed at the gas processing facility in Houston, PA. The complex has capacity to produce 60,000 b/d of purity propane, butane and natural gasoline for sale into northeastern markets.

“As a result, Range’s realizations should improve since the liquids will no longer be required to be trucked or railed offsite to be fractionated.” And beginning early next month “Range expects that the railroad siding at the Houston, PA, plant will be fully operational, allowing for direct rail shipment of purity NGL products to customers.” The rail facilities would allow Range to realize “the expected uplift in incremental NGL pricing of $12-15 million annually by the elimination of all intermediate transportation charges before freight cost to the customers.”

Basis during July, August and September in the southwestern area of the Marcellus “continued to be in the flat-to-positive 8 cent/Mcf range” above the New York Mercantile Exchange (Nymex) Henry Hub index price, Range said. In the Northeast along the Transco-Leidy transmission system, basis in the quarter “continued in the positive 10-15 cent/Mcf range” above the Nymex Henry Hub.

Outside the Marcellus, activity in the company’s Midcontinent division in 3Q2011 focused on the Texas Panhandle St. Louis play, as well as increased leasing in the Mississippian horizontal play in northern Oklahoma. Two St. Louis offset wells began flowing in 3Q2011 at combined rates of 20.4 MMcf/d of natural gas and 1,394 b/d of liquids. Range also has increased its position in northern Oklahoma to more than 92,000 net acres after starting the year with 15,000 net acres.

In addition, the company’s Appalachian division continues to develop its 350,000-acre (231,000 net) position in Virginia. Range owns the gas rights on 216,000 royalty acres. The division in the latest quarter averaged three drilling rigs, with activity focused on tight gas sand and horizontal drilling projects in the Nora field. Ten net vertical and 10 net horizontal wells were drilled in the quarter, targeting the Huron Shale and Berea Sandstone.

According to information compiled by NGI’s Shale Daily, Range holds a total of 790,000 net acres in the Marcellus. It also has 105,000 net acres in the Permian Basin, as well as 75,000 net in the Mississippian Lime play. Net acreage in the Granite Wash approaches 46,000 net acres, while in the Cana-Woodford the company has another 42,000 net acres. It also has an 8,400-net acre leasehold in the Ardmore-Woodford region.

In a note Canaccord Genuity analysts said Range’s quarterly production was 3% above their expectations. Gas price realizations including hedges “were $5.73/Mcfe, modestly below our expectation due to lower gas/oil pricing. Net, we view this announcement as a push on value given gas production beat is offset by lower price realizations.”

Tudor, Pickering Holt & Co. also weighed in, saying that operationally Range is “firing on all cylinders through infrastructure build-out, marketing contracts being put in place and its drilling program…”