Wednesday, April 9, 2008

Range Resources (RRC) at Howard Weil

Range Resources

Tenth most active driller in U.S. – will drill 1000 wells this year – 2.7 million acres net under lease and 11,400 drilling locations in inventory.

Company has a record of strong production growth at low cost - $1.64 all in cost – 424% reserve replacement through the drillbit in 2007. Selling off low growth plays to focus on higher growth. Range needs 30% of cash flow to keep production flat – one of lowest in industry.

Hedging currently don’t look so good since gas prices spiked, but they hedge to protect capital program so they won’t have to access capital markets.

2.2 TCF in proved reserves at end of 2007 – and company believes another 3.1 TCF in inventory.

Emerging plays – Marcellus Shale, Huron Shale, Barnett, Woodford Shale.

Huron Shale – Nora/Haysi field – 300K acres – 1800 producing wells on current spacing - 3000 sites to drill left. These are Coal Bed Methane wells at depth of 2800 feet. Wells have multiple horizons available – Huron Shale is at 5,000-6,000 feet. The Big Sandy field is across the border in Kentucky, which is a naturally fractured shale play from the 1940’s. Bad news is that Huron Shale is not naturally fractured. Company drilled one Huron Shale well and it cost $1.2 million for 1 BCF. Huron Shale is thicker than Big Sandy and higher pressure. Ten Huron Shale wells to be drilled in 2008.

Marcellus Shale
– project has most long term impact on range – view this play the way Mitchell Energy viewed the Barnett Shale – Range knows the play very well. They have drilled some “really good” horizontals in shale. Plans in 2008 are to drill delineation wells (60 wells) to find out more about the play. This will tell them where to lease land since play is so big. They are also building infrastructure and they are in the middle of “land grab” in the area.

Marcellus Shale is 63 million acres – 20 times the size of the Barnett – play is very early however. Depth is 5,000-8,000 feet deep, most gas still in place. Play needs to be fractured.

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