FORT WORTH, Texas, Jan. 27, 2017 (GLOBE NEWSWIRE) — RANGE RESOURCES CORPORATION (NYSE:RRC) announced today that proved reserves as of December 31, 2016 were 12.1 Tcfe.
- Proved reserves increased 11%, excluding acquisitions and divestitures
- Proved developed reserves increased 14%, excluding acquisitions and divestitures
- Drill-bit development cost with revisions is expected to be $0.34 per mcfe
- Future development costs for proved undeveloped reserves are estimated to be $0.42 per mcfe; Marcellus costs are estimated to be $0.37 per mcfe
- Unhedged recycle ratio improves to over 3x based on future development costs of $0.42 per mcfe
Commenting on Range’s 2016 proved reserves, Jeff Ventura, Range’s CEO, said, “Range had another solid year of reserve growth, replacing 292% of production from drilling activities with drill-bit development costs of $0.34 per mcfe when considering pricing and performance revisions. Positive performance revisions continued in 2016 as we extended laterals, improved targeting and drove efficiencies throughout our developed leasehold and infrastructure. The strong reserve additions from drilling activity were driven primarily by our development in the Marcellus, as our acquisition of North Louisiana assets closed in late 2016. Future development costs for proven undeveloped locations are estimated to be $0.42 per mcfe, which is outstanding and should improve our top tier unhedged recycle ratio to over 3x. Importantly, Range added 1.65 Tcfe of reserves, excluding acquisitions, reflecting our large inventory of low-risk, high- return projects in the Marcellus shale and in North Louisiana.”
“In North Louisiana, performance in 2016 was in line with our acquisition economics and the properties recorded a slight performance increase, while drilling added 79 Bcfe of reserves post-acquisition. Looking forward, we see capital efficiencies continuing as we drive down well costs while optimizing targeting. Our reserve booking philosophy on the newly acquired assets is consistent with our approach in the Marcellus. As a result, a relatively small portion of the Company’s future development capital, only $2.2 billion over the next five years, is allocated to proven locations, while the remainder of capital delineates our extensive acreage position, still classified as unproven. In fact, less than 0.5 offset proven undeveloped locations are currently recorded in the Marcellus and North Louisiana for each horizontal producing well. We believe this will generate consistent SEC reserve growth over time as additional acreage is classified as proven and capital is allocated to offset locations. As an example, Range has approximately 740 Bcfe of additional reserves in the Terryville area that would be included as SEC proved reserves if included within the five-year development plan. Our economic resilience is further demonstrated in the year-end SEC PV10 reserve value of $9.0 billion using future strip prices and current sales contracts. With 56% of SEC reserves being proved developed (PD), our PD reserve life and debt per PD reserve ratios remain exceptionally strong.”
Range’s estimate of costs incurred during 2016, excluding acquisition costs is approximately $570 million. This is on target with Range’s previously announced capital budget of $495 million, prior to the Memorial acquisition.
|SUMMARY OF CHANGES IN PROVED RESERVES|
|Balance at December 31, 2015||9,892|
|Extensions, discoveries and additions||1,394|
|PUD improved recovery||393|
|Total Performance revisions||547|
|Reclassification of PUD to unproved under SEC 5-year rule||( 269||)|
|Sales of proved reserves||(165||)|
|Balance at December 31, 2016||12,072|
During 2016, Range added 1,394 Bcfe of proved reserves through the drill-bit, driven by 1,315 Bcfe from the Company’s Marcellus development. The “extensions, discoveries, and additions” amount excludes 393 Bcfe of Marcellus reserves associated with undrilled locations that now have increased recovery estimates as a result of longer laterals, better lateral targeting and increased frac stages. This improved recovery estimate is included in the “revision” category. The lateral lengths for existing proved undeveloped locations increased to 7,162 feet in the 2016 report from 6,301 feet in the 2015 report, while newly added proved undeveloped locations in the Marcellus incorporate an average lateral length of approximately 7,900 feet.
To provide more clarity, the 2016 reserve revisions category is segregated into four components. First, as mentioned above, the improved recovery component has a positive revision of 393 Bcfe. Second, field level performance increased reserves by 154 Bcfe due primarily to the continued improvement in the well performance of existing Marcellus producing wells. Third, as a result of Range’s continued success in drilling longer laterals, the future development plan has been re-optimized which results in some previously planned wells not being drilled within five years from their original booking date. Accordingly, Range removed from its Securities and Exchange Commission (“SEC”) proved reserves 269 Bcfe of proved undeveloped reserves that now fall outside the five-year window. The Company expects these proved undeveloped reserves can be added back in future years as field development continues. The wells that remain have longer laterals, greater estimated ultimate recoveries (“EURs”) and lower per foot drilling and completion costs which result in expected improved economics. The resulting corporate proved undeveloped development cost of $0.42 per mcfe is based on 2016 well costs and consists of Marcellus cost of $0.37 per mcfe and North Louisiana cost of $0.68 per mcfe. Lastly, the lower SEC price for 2016 as compared to 2015 resulted in a minimal downward revision in proved reserves of 23 Bcfe, reflecting the Company’s low-cost reserve base.
During the year, Range sold 165 Bcfe of proved reserves primarily in Oklahoma and non-operated areas in Pennsylvania.
Year-end 2016 proved reserves by volume were 65% natural gas, 31% natural gas liquids and 4% crude oil and condensate. Proved developed reserves represents 56% of the Company’s reserves. The Company’s Appalachia reserves were audited by Wright & Company, Inc. and were within 1% of the aggregate estimates prepared by Range’s petroleum engineering staff and the Company’s North Louisiana reserves were audited by Netherland, Sewell and Associates, Inc. and were within approximately 2% of Range’s estimates.
|2016 SEC and Strip Pricing:|
|2016 Year-End||2015 Year-End|
|SEC Pricing (a)||Strip Pricing||SEC Pricing (b)||Strip Pricing|
|WTI Oil Price ($/Bbl)||$||42.68||$||56.49||$||50.13||$||52.14|
|Natural Gas Price ($/Mmbtu)||$||2.48||$||3.14||$||2.59||$||3.25|
|Proved Reserves PV-10 ($ Billions)||$||3.7||$||9.0||$||3.0||$||6.8|
|(a) SEC benchmark prices adjusted for energy content, quality and basis differentials were $2.07 per Mmbtu, $13.44 per barrel of natural gas liquids and $37.41 per barrel of crude oil, respectively.|
|(b) SEC benchmark prices adjusted for energy content, quality and basis differentials were $2.07 per Mmbtu, $11.74 per barrel of natural gas liquids and $35.06 per barrel of crude oil, respectively.|
Range’s net unrisked unproved resource potential at year-end 2016, for Appalachia quantifying only the potential Marcellus and Upper Devonian future development, increased to approximately 93 Tcfe, including 4.8 billion barrels of NGLs and crude oil/condensate, consisting of over 4,700 locations in the Marcellus and 2,800 locations in the Upper Devonian, based on average lateral lengths of 8,000 feet. A resource estimate has not yet been provided for the Utica, though Range has 400,000 net acres in southwest Pennsylvania. This acreage position has three existing producing wells, one of which is considered a top producer in the play, and multiple operators with offset Utica activity. As a result, the Company expects to increase its resource potential in Appalachia in the future. Range’s unrisked unproved resource potential at year-end 2016 for North Louisiana was 6.7 Tcfe, consisting of 670 high-graded drilling locations, based on average lateral lengths of 7,500 feet. These locations consist of Upper and Lower Red targets, predominantly in the Terryville area.
North Louisiana Extension Wells
Range has completed three wells in the extension area of North Louisiana, south of Terryville. These three wells were drilled on the north, east and west sides of the Vernon Field. Each of the wells encountered significant amounts of gas in multiple zones across the Upper and Lower Red intervals, similar to the prolific Vernon Field that was productive out of both horizons.
The well to the west of Vernon logged pay in three Upper Red zones that have an estimated 210 Bcf per square mile in place. The same well logged pay in three zones in the Lower Red with an estimated 188 Bcf per square mile, for a combined total of almost 400 Bcf per square mile. For reference, this total gas in place is more than 2.5 times Terryville. The well was completed in one of the Upper Red zones and had an initial flowing pressure of 6,500 psi and a peak constrained 24-hour production rate of 12.4 Mmcf per day. Based on managed cumulative production of 660 Mmcf after 79 days and an effective lateral length of 5,050 feet, the well is expected to have a normalized gas EUR that is in line with Terryville Upper and Lower Red wells.
The eastern well also logged pay in three Upper Red zones and three Lower Red zones. The Upper Red zones had a total of 153 Bcf per square mile and the Lower Red totaled 263 Bcf per square mile, for a combined total of over 400 Bcf per square mile. The well was completed in one of the Lower Red zones and had an initial flowing pressure of 6,700 psi and a peak constrained 24-hour production rate of 23.3 Mmcf per day. Based on managed cumulative production of 641 Mmcf after 67 days and an effective lateral length of 4,250 feet, the well also appears to have a normalized gas EUR that is in line with Terryville Upper and Lower Red wells.
The well to the north of Vernon field does not have the same amount of production history, though initial production results were below the two other tests. The well was completed in one of the Lower Red zones and had an initial flowing pressure of 5,600 psi and a peak constrained 24-hour production rate of 5 Mmcf per day.
Commenting on the results, Jeff Ventura, Range’s CEO, said “Range is very encouraged by the early success the team has had in North Louisiana. We saw several opportunities to create value when we acquired the assets in late 2016. The team is already generating value in Terryville through operational improvements that are resulting in significantly lower well costs and improved targeting, which should result in better well performance. This will remain our focus in North Louisiana for 2017, driving better returns and potentially increasing our drilling inventory throughout the acreage.”
“We also saw the opportunity to create value over time through improved marketing and potentially developing additional horizons within Terryville. In addition we saw long-term potential for development of new fields in the extension areas. The initial production results from outside of Terryville are encouraging. These initial three tests confirm that the Lower Cotton Valley pay section thickens as we move towards the Vernon Field, the gas in place increases and there are multiple stacked-pay targets. While remaining very focused on our core assets in the Marcellus and Terryville, we will look to expand on the initial results from the extension area by methodically testing additional targets throughout this year.”