Range's Gas Output Temporarily Outstripping Infrastructure Here

Washington PA  Observer Reporter
28 April 2011

Range Resources said Monday that because of the outstanding performance of its natural gas wells in the Marcellus Shale, it has temporarily outgrown existing infrastructure in Southwestern Pennsylvania.

The comment came as part of the Fort Worth, Texas, oil and gas exploration company's first-quarter results, which were reported after the close of Monday's stock market.

Range, which has its Appalachian divison headquartered in Southpointe, said its adjusted net income comparable to analysts' estimates, was $35.2 million or $0.22 per diluted share for the quarter ended March 31. It reported a net loss of $25 million, or 16 cents per share, while net cash from operating activiites totaled $140.6 million.

The company also reported a 17 percent increase in production over its fourth-quarter results that ended Dec. 31.

John Pinkerton, Range's chairman and chief executive officer, said the figures show the company's strong performance toward its strategy of consistent growth at low cost.

"While partially obscured by the accounting treatment of the Barnett sale and the non-cash charges, first-quarter results reflect a strong performance toward Range's strategy of consistent growth at low cost.

Production rose 17 percent during the first quarter and also increased 17 percent on a per-share basis."

Pinkerton said the company also saw a 10 percent reduction in unit costs for its five largest categories combined. Pinkerton also said that Range's Barnett sale, scheduled to close later this week, will be a significant catalyst to help fuel the company's future performance.

"Upon completion of the sale, we will have the strongest balance sheet in our history with cash on hand and no amount outstanding on our $1.5 billion bank credit facility," he said, adding that the company expects to grow full-year production 10 percent and make up all the production sold from the Barnett by the end of third quarter.

For the quarter, production averaged 545.5 million cubic feet per day, comprised of 429.9 Mmcf per day of gas (79 percent), 14,338 barrels per day of natural gas liquids (16 percent) and 4,924 barrels per day of oil (5 percent).

Realized prices, including all cash-settled derivatives, averaged $5.45 per mcfe, a 2 percent decrease versus the prior-year quarter but a 2 percent increase as compared to the fourth quarter 2010.The average realized gas price was $4.41 per mcf, an 8 percent decrease from the prior-year quarter. The natural gas liquids price increased 11 percent to $47.96 a barrel versus the prior-year quarter. The average oil price rose 14 percent to $79.48 a barrel over the prior-year quarter. Reported GAAP natural gas, NGL and oil sale revenues for the quarter were $226.9 million, an increase of 21 percent as compared to the prior year excluding sales from the Barnett properties shown as discontinued operations.

First-quarter drilling expenditures of $267 million funded the drilling of 63 wells and the completion of wells drilled last year. A 100 percent drilling success rate was achieved. At March 31, 51 wells drilled during the quarter were in various stages of completion or waiting on pipeline connection. As of March 31, Range had drilled 244 horizontal Marcellus wells to date of which 49 are awaiting completion and 24 are awaiting pipeline hook up. In the first quarter, $19 million was expended on acreage, $6 million on gas gathering systems and $26 million for exploration expense.

The company said it finished the first quarter at approximately 260 Mmcfe per day net from the Marcellus Shale, up from approximately 200 Mmcfe per day at year-end 2010. During the first quarter, the Marcellus Division brought online 26 horizontal wells in southwest Pennsylvania, 15 of which are located in the liquids-rich area of the play. An additional 16 wells were completed in southwest Pennsylvania during the first quarter and are awaiting connection to the gathering system.

Range said that because of the outstanding performance of its existing wells combined with the initial performance of the newly connected wells, its Marcellus production has temporarily outgrown the existing infrastructure. In Southwestern Pennsylvania, the third expansion of the MarkWest gas processing facilities has been completed and is in the testing phase.

The company said that the 200 Mmcf per day of additional processing capacity is expected to begin operation shortly and will expand Range's total processing capacity to 350 Mmcf per day.