Range Resources Corp. has increased its leasehold in the Marcellus Shale by 20% to 850,000 net acres (1.4 million gross) and said it plans to drill 40 horizontal wells in the play by the end of this year.

About 60% of Range’s leasehold is located in the southwestern part of the play, mostly Pennsylvania; the remaining 40% is in the northeastern part of the play. Range plans to develop its Pennsylvania acreage first because the pipeline infrastructure is “better developed” there, it said.

Range and MarkWest Energy Partners LP in June agreed to develop infrastructure in the area, and Range noted that work is under way on three infrastructure projects. Range said it has secured firm transportation capacity for 150 MMcf/d and “is holding discussions to expand this capacity as the play develops,” it said.

With more than 100 wells drilled in the Marcellus Shale already, including 20 horizontal wells, “we believe we have developed a solid understanding of the play’s technical aspects and are moving from the testing phase to the development stage,” said CEO John Pinkerton.

Range now has three rigs operating in the play, and later this year it expects to add two fit-for-purpose rigs. Range said it could increase to eight rigs in 2009. Wells are being drilled, completed and tested, “after which they are shut in awaiting pipeline buildout,” said the producer. The initial phase of the pipeline and processing infrastructure is expected to be completed in early 2009. Production start-up is expected to be phased in and Range estimates that it will be around 30 MMcf/d in 1Q2009. “As additional wells are connected and drilled, production is anticipated to increase throughout 2009.”

Gas-in-place in Range’s core holdings is estimated to range from 70 Bcf to 150 Bcf per section, “with variation attributable to thickness, depth, porosity, reservoir pressure and total organic carbon of the shales.” Using geological, engineering and production data obtained from the wells drilled throughout the Marcellus fairway, Range revised upward its estimate of the unrisked reserve potential of its leasehold position to 15-22 Tcfe.

SunTrust Robinson Humphrey/the Gerdes Group analysts said in a note to clients that the last 10 reported horizontal Marcellus Shale wells (from various operators) had an average peak initial production of 45.1 MMcfe/d. Before Range made its announcement, “we estimated Marcellus Shale horizontal wells should recover 2.5 Bcfe in reserves for a drill/complete cost of $3 million; we now view 3 Bcfe for a drill/complete cost of $3.5 million as more likely, which suggests a modest improvement in per well economics.”

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