Range Resources 3Q12: 24 New Wells in ‘Super-Rich’ Marcellus
Range Resources posted its financial and operating update for the third quarter of 2012 yesterday. MDN has pulled out the operational report for the Marcellus Shale and includes it below. Of particular interest in the Range update are two items: 1) Range’s continued focus on what they call their “super-rich” area of the Marcellus—an area they define as having wet gas present with 1,350 Btus or higher; 2) Range had a “significant step-out well” in the super-rich area that tested at 1,044 barrels per day of natural gas liquids.
MDN has also included (below) a copy of a map Range published as part of a presentation earlier this year outlining where the super-rich area for them is located.
Here’s the Range update for 3Q12:
Southern Marcellus Shale Division
During the third quarter, the division brought online 68 horizontal wells in southwest Pennsylvania, with 24 wells in the super-rich area, 40 wells in the wet area and four wells in the dry area utilizing generally five rigs. The initial 24-hour production rates of the new 68 wells averaged 5.3 Mmcf per day of gas and 412 barrels per day of liquids (160 barrels of condensate and 252 barrels of NGLs), or 7.8 (6.4 net) Mmcfe per day. The majority of these wells are producing under constrained conditions since the facilities are designed for cost efficiencies and are intentionally designed not to cover the initial peak production rates of the wells. The initial 24-hour production rates by area are:
|Area||# of Wells||Mmcf/d||bbl/d||bbl/d||bbl/d|
In the southwest Marcellus, the Company drilled and cased 25 wells in the third quarter as compared to 39 wells drilled and cased in the second quarter. Sixty-eight wells were turned to sales in the third quarter which was more than double the 33 wells turned to sales in the second quarter. The Company’s backlog of 106 uncompleted wells and wells waiting on pipeline connection at the end of the second quarter in southwest Marcellus declined to 63 wells at the end of the third quarter. At September 30, 2012, there were 36 wells waiting on completion and 27 wells waiting on pipeline tie-ins to sales. The division expects to utilize six rigs in the fourth quarter 2012.
In the super-rich area, we had a significant step-out well from our core area that tested at 1,044 barrels per day of liquids (267 barrels of condensate and 777 barrels of NGLs) and 10.3 Mmcf per day of gas, or 16.5 (14.0 net) Mmcfe per day. With ethane recovery, the well would have tested at 2,053 barrels per day of liquids (267 barrels of condensate and 1,786 barrels of NGLs) and 8.7 Mmcf per day of gas, or 21.1 (17.9 net) Mmcfe per day. The lateral length on this test was 3,797 feet and was completed using a 20-stage reduced cluster spacing (“RCS”) completion. We expect to bring this well online in late 2013 or early 2014 and drill additional wells in the area starting in 2013. Range’s second Upper Devonian super-rich well continued to clean-up following our August announcement and ultimately had a peak 24-hour rate of 552 barrels per day of liquids (172 barrels of condensate and 380 barrels of NGLs) and 4.7 Mmcf per day of gas, or 8.0 (6.8 net) Mmcfe per day. With ethane recovery, the well would have tested at 998 barrels per day of liquids (172 barrels of condensate and 826 barrels of NGLs) and 4.0 Mmcf per day of gas, or 10.0 (8.5 net) Mmcfe per day.
Northern Marcellus Shale Division
In the northeast Marcellus, Range drilled and cased 13 wells in the third quarter as compared to 22 wells in second quarter while running five rigs. We expect to exit the year at one rig and plan to have one rig running most of next year to maintain the continuous drilling commitments under the leases. Sixteen wells were turned to sales in the third quarter which was the same as the second quarter. The Company’s backlog of 35 uncompleted and wells waiting on pipeline connection at the end of the second quarter in the northeast Marcellus declined to 31 wells at the end of the third quarter. At September 30, 2012 there were 12 wells waiting on pipeline and 19 wells waiting on completion.
Significant production results included three wells with initial 24-hour rates of 17.9 (15.3 net) Mmcf per day, 11.3 (9.7 net) Mmcf per day and 9.9 (8.5 net) Mmcf per day. The average lateral length for these three wells was 4,100 feet with an average of 14 frac stages per well.
The third phase of the Lycoming 30-inch trunkline and associated gathering system began late in the second quarter and is scheduled to be ready for sales in fourth quarter 2012. The trunkline will provide 350 Mmcf per day of capacity, net to Range, flowing into the Transco system moving gas into and out of the Leidy storage complex. Range expects to tie-in an additional 18 wells by year-end 2012 in Lycoming County.
In addition to Marcellus drilling, the division drilled and successfully completed the industry’s first wet Utica test in northwestern Pennsylvania where the Company has 190,000 net acres of leasehold. The well is currently shut in waiting testing. A second wet Utica test is scheduled to spud in the fourth quarter.
In the Bradford County participating area with Talisman, there were a total of 15 (2.8 net) wells producing, 12 (2.3 net) wells waiting on completion and 24 (4.5 net) wells waiting on pipeline.
Marcellus Shale Infrastructure
As the anchor shipper under the 15-year Mariner East Project, Range has firm transportation of 40,000 barrels per day (20,000 barrels of ethane and 20,000 barrels of propane) of liquids transport from the MarkWest Houston processing plant to the Sunoco Marcus Hook terminal and dock facilities. Under the agreements, Range has access to a very significant pro rata share of the 1 million barrels of propane storage at the facility and could utilize its full capacity commitment for propane deliveries until the ethane facilities are in place. The Mariner East Project is expected to commence pipeline deliveries of propane in the second half of 2014. Ethane deliveries are forecasted to start in the first half of 2015 after additional ethane facilities are constructed at Marcus Hook. In the interim, MarkWest is transporting on behalf of Range a portion of its propane sourced from the Houston plant to the Marcus Hook facilities by rail for sales to domestic and international customers.
Range also executed a 15-year ethane sales agreement with INEOS Europe AG for delivery at Sunoco’s Marcus Hook dock facilities. The agreement is effective upon FERC formal approval of the Mariner East Project. INEOS is a global manufacturer of petrochemicals, specialty chemicals and oil products and currently plans to utilize its own ship fleet to take delivery of the ethane at the Marcus Hook dock facilities. Contracted sales volumes will start at 10,000 barrels per day in the first half of 2015 and increase over time to 20,000 barrels per day.
Range’s three liquids transportation (Mariner East, Mariner West and ATEX) and sales agreements are expected to provide the Company substantial operational and marketing flexibility. If the full contractual volumes under these three contracts were currently being delivered using current prices with a portion of its propane being exported, Range estimates these projects would add $0.35 to $0.45per mcf of incremental value in the liquids-rich area.
Range expects these agreements will provide long-term assurance of meeting pipeline gas quality standards by removing ethane from the gas stream and allowing for potential increased development in the liquids-rich, stacked pay area of southwest Pennsylvania. With minimum ethane extraction to meet pipeline quality specifications, Range estimates that it has the potential to grow its Marcellus natural gas production, solely from the liquids-rich area in southwest Pennsylvania, to approximately 1.8 Bcf per day. With typical ethane extraction, the Company estimates that these contracts would require approximately 800 Mmcf per day inlet gross production by 2016. Currently, Range estimates the Company would be capable of producing approximately 24,000 barrels per day of ethane and 10,000 barrels per day of propane under normal recovery. Having multiple transportation and marketing outlets, including international export, combined with the ethane and propane storage is expected to increase Range’s flexibility and reduce future development risk.*
*Range Resources (Oct 24, 2012) – Range Announces Third Quarter 2012 Results
Here’s the slide showing the Range “super-rich” area of the Marcellus Shale: