Range Resources
From Wikimarcellus
Range Resources Corp. (NYSE: RRC) of Ft. Worth, TX is the biggest gas producer in Pennsylvania, and it is one of the largest drillers in the U.S. Reportedly, the company had invested $500 million alone in its Marcellus shale leasehold. Between 2005 and 2008, counting all drilling and infrastructure costs, its total investment in the play approached $700 million. It had the distinction of having started the Marcellus shale play when it first drilled a Marcellus well in southwest Pennsylvania's Washington County. This well began producing in 2005. By July, 2009 Range was reporting that its Marcellus investment had exceeded $1 billion.
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Latest operating results
A July, 2009 update from the company indicated that the company had drilled and completed 46 horizontal Marcellus shale wells. 41 of these were on production. Of those, 24 had been on production anywhere from four months to as long as two years with an overall average yield (EUR) forcasted of 4.4 Bcf of natural gas over the lifetime of each well. The cost of drilling and completing these well was estimated to be around $3.5 million each. Range stated that after deducting an average royalty paid to the landowner of 15%, the company's net exploration and development costs ran less than $1.00 per mcfe.
The same report noted thus far that Range's overall Marcellus shale production had exceeded 50 Mmcfe/d net and was planned to reach 80 to 100 Mmcfe/d net by year-end 2009. The company had also upped its target number of Marcellus wells to be drilled from 60 to 70, and it noted that all of these were to be drilled as horizontal wells. It planned to complete 50 of the 70 wells during 2009. Three rigs were operating in the Marcellus shale area, and rig count was expected to double by year-end 2009. As previously discussed, by year-end or at the very latest by the end of January, 2010, the company planned to have the capability of processing 200 Mmcf/d using its newly-built midstream pipeline and processing infrastructure.
2008 Development Timeline
As the granddaddy of Marcellus shale drilling, Range invested $426 million in Appalachia during 2008. By April, 2008, it had drilled 12 horizontal wells. Once completed, six of these had produced an average of 5 Mmcf/day. That compares quite favorably with drilling results from the Barnett shale play in North Texas, recognized to date as being the largest natural gas-producing field in the U.S. The Marcellus shale formation is strategically located close to America's gas-consuming east coast cities. The formation's advantageous location translates into very favorable market prices for its gas.
In April, 2008 it was reported that Range had drilled three wells in Lycoming County, Pennsylvania and planned a fourth one there.
Expanding Marcellus shale leasehold
By October, 2008 the company was reporting that it had drilled one hundred-thirty wells in the Appalachian Basin. One hundred had been vertical and thirty were horizontal ones. This same report indicated Range had leased drilling rights on 900,000 acres of land in Pennsylvania.
- 550,000 acres in southwest PA
- 350,000 in northeast
The company's total Appalachian Basin leasehold is 2.3 million net acres with 1.4 million of it prospective for Marcellus shale drilling. Its acreage is located in southwest Pennsylvania, northeast Pennsylvania and southern New York State.
Northeastern Pennsylvania activities
In September, 2008, Range was reported to be actively drilling in the Susquehanna Basin of Pennsylvania. It paid a fine to the Susquehanna River Basin Commission of $475,000 for failing to comply with water withdrawal limits for wells in the Basin.
According to an October, 2008 report the company had recorded 172 leases during 2008 with the Bradford County Registrar of Deeds. Bradford County is located in northeastern Pennsylvania.
Appalachian fall colors backdrop Range rig
Image courtesy of Range Resources
Southwestern Pennsylvania activities
Also in September, 2008, Range had been actively leasing drilling rights in Greene County located in the southwest corner of Pennsylvania.
Another October, 2008 report indicated that Range was heavily involved in Washington County in southwestern Pennsylvania. In 2003, it had drilled a test well in the County's 2,700-acre Cross Creek Park that had been successful. By 2008, three gas wells in the park were producing 30 Mmcf/d.
In November, 2008, Range was reported drilling on the John Dunn farm near Houston, Pennsylvania in Washington County. Two gas processing plants were under construction on State Route 519, three miles north of Houston. These plants are discussed below.
2009 Development Timeline
A few miles to the northwest of Houston, PA in rural Mt. Pleasant Township, it was reported in March, 2009 that Range had drilled 68 wells. For example, Range had drilled on the 133 acre Joyce Mitchell farm in nearby Hickory, PA. In July, 2009, a company spokesman noted that Range had been responsible for making five millionaires--presumably royalty owners--in Mr. Pleasant.
Range was also evaluating a test well in Jefferson County, Ohio located roughly forty miles west of Pittsburgh, PA.
In March, 2009 Range conducted seismic testing in collaboration with Conquest Seismic Services to the north of Pittsburgh in Beaver County, Pennsylvania. According to the report filed, Conquest had wired 13 miles of state road west of the Beaver Valley Expressway with acoustic sensors.
Outstanding drilling results
Also in March, 2009 Range reported several Marcellus shale operating highlights which included:
- One well with a flow rate to sales of 10.3 Mmcfe/d.
- Four out of the last eleven wells drilled had initial flow rates in excess of 9.9 Mmcfe/d.
- The best well had an initial rate of 24.5 Mmcfe/d.
- Two vertical wells in the northeastern section of the Marcellus play with initial flow rates of 2.3 Mmcfe/d and 6.3 Mmcfe/d. The latter was the highest initial rate ever recorded for a vertical Marcellus well.
- Since October, 2008 13 new wells had been brought online to the gas processing facility. These wells averaged 6.9 Mmcfe/d.
- 14 wells had been completed--seven were horizontal and already fraced. All 14 were awaiting hook-up to the gas processing facility.
- Range had planned to drill 60 new Marcellus wells during 2009. (see July, 2009 update below).
Washington County gas processing infrastructure
Mark West Energy built and maintains a gas gathering system as well as compression facilities for Range's Marcellus production. This infrastructure also includes refrigeration and cryogenic processing plants. One of these plants is located in Chartiers Township in Washington County. On the outskirts of Hickory, located about 15 miles north of Chartiers, there is a three-acre reservoir for drilling water, a gas compressor station, and a liquid extraction plant. As of April, 2009 Range's Washington County wells were starting to come on stream with these plants which had capacity to process 60 Mmcf/d. The company continues to expand its processing capability in Washington County and expected to produce 200 Mmcf/d by year-end 2009 or early 2010.
Crawler rigs
In an operational update provided in April, 2009 the company mentioned that it was in the process of acquiring six new custom-designed Marcellus shale drilling rigs. Two had already been delivered and were in use. These rigs have crawlers that can traverse a drilling pad in a few hours compared to several days taken by older rigs. Range typically drills several laterals on a single pad, so these new rigs are much for efficient.
In a separate April, 2009 report it was mentioned that Range will be introducing the so-called Drake Rig built by National Oilwell Varco for Marcellus shale drilling in Pennsylvania. It was not clear from the report whether these are the same new rigs referred to in the above paragraph.
It was mentioned in yet another April update that Range had two new horizontal Marcellus wells. The first had an initial flow rate of 7.9 Mmcfe/d and the second had initial flow of 10.7 Mmcfe/d.
Bradford County plans
An April, 2009 update from the company indicated that Range had 40,000 acres under lease in Bradford County, but had not yet started drilling there. Instead, it was focusing on developing its leases in southwestern Pennsylvania where it had better pipeline infrastructure. A company rep expressed doubt that drilling would begin in Bradford Co. during 2009, but said it eventually would once the company had built up its pipeline infrastructure in this area. A subsequent report indicated that Range planned to begin a drilling program in 2010 with three rigs operating in both Bradford and Lycoming Counties. This drilling was to supersede Ranges's existing vertical drilling program in northeastern PA.
Cross Creek Park contamination issues
Cross Creek Park again appeared in the news in June, 2009 when the Pennsylvania Department of Environmental Protection (DEP) was considering a possible enforcement action against Range over apparent toxic drainage from a leaky coupling on a six inch waste water pipe that ran from a recently drilled well to an impoundment area. Reportedly, there had been a fish, salamander, crayfish and aquatic insect kill in about three-quarters of a mile of stream leading into Cross Creek Lake. DEP was taking water samples both above and below the point where drainage from the leaky coupling entered the stream in order to be analyzed as one aspect of their investigation. A company spokesperson indicated a vandal may have been to blame for the problem.
Cecil Township office facility
According to a July, 2009 report, Range had first opened an office with only one employee in January, 2007 in Washington County's Cecil Township. By the summer of 2009, the office had grown to 130 people. It is located about four miles north of Cannonsburg, PA.
Range's Appalachian Division Headquarters is located in Southpointe Office Park in Cecil, Washington County, Pennsylvania.
Leasing in Pittsburgh's suburbs
In the late spring of 2009 reports began circulating that Range had been actively leasing in the western suburban areas of Greater Pittsburgh. This came to light in August, 2009 when Allegheny County's Collier Township had voted to advertise an ordinance restricting drilling to only three areas:
- The Campbell's Run corridor
- The hollow by Lane Block in Fort Pitt
- The industrial district on Meyer St. in Kirwn Heights
This ordinance had not passed, but rather was referred back to the township planning commission for additional review. An earlier report from May, 2009 noted that courts had been ruling against ordinances to restrict drilling such as happened in Salem Township in Westmoreland County. Blaine Township in Washington County had also been involved in a federal lawsuit brought by a gas company for passing an ordinance that attempted to regulate drillers. The Pennsylvania Department of Environmental Protection has generally been held as the agency to be in charge of permitting gas wells and monitoring drilling.
Huron shale developments
Range has also been actively drilling in the Huron shale formation in Virginia. It had recently drilled four horizontal wells in Virginia's Nora Field. As of April, 2009, It had a total of eight producing horizontal wells in the play with average production of 1.1 Mmcf/d. The company planned to drill 20 horizontal Huron shale wells in the Nora field. Range owns a 50% working interest there. It had been drilling a combination of coal-bed methane and tight gas wells in this field. According to its July, 2009 update, the company had drilled three more horizontal Huron shale wells during the second quarter of 2009.
In April, 2009 Range announced its best Huron well ever which had averaged 3.0 MMCf/d for the previous 30 days.
Spotlighted Issues
- Range has had tremendous production results from its southwestern Pennsylvania Marcellus leasehold. With three rigs operating, 2010 will begin to demonstrate how productive the company can be in the northeastern Pennsylvania Counties of Bradford and Lycoming.
- The company endeavored to build up its pipeline and processing capability in southwestern Pennsylvania in partnership with MarkWest, and that appears to be coming together on schedule.
- As the price of natural gas hovered near historic lows during the third quarter of 2009, the company began encountering some resistance in the form of local ordinances to its leasing program in suburban Pittsburgh.
Executive Contacts
- John H. Pinkerton is Chairman and CEO of Range Resources.
- Jeffrey L. Ventura is President and COO.
- Rodney Waller is Senior Vice President of Appalachia Shale.
- Bill Zagorski is Vice President of Geology
- Ray N. Walker, Jr. is Vice President of Appalachia Shale.
- Carl J. Carlson is Director of Government Affairs.
- Matt Pitzarella is Director of Public Affairs.
- Dave Schieck is a geophysicist with the company.
- Mike Forgione is Senior Engineer, Appalachian Basin Office.
- Steve Rupert, Ralph Tijerina and Carl Carlson are Pittsburgh area spokesmen for Range.
