Range Resources to drill more in Appalachia

OREANDA-NEWS. July 28, 2016. Range Resources plans to drill a seven-well pad in the Appalachian shale region this year, and could quickly drill up to 42 more laterals if fundamentals support it.

A few independent natural gas producers in recent days have said they would increase drilling activity on the back of stronger commodity prices and higher weather-related demand. Range Resources differs slightly from its peers by citing the company's cost savings as the main driver of its increase in activity. During the second quarter it achieved a 27pc reduction in drilling costs per lateral foot compared with a year earlier, and it intends to put those funds to use in Appalachia.

The seven-well pad is in a "super rich" area of its footprint, and is expected to be completed early next year.

The company has 124 producing pads with five or fewer wells each, which gives it the option to drill more laterals. Range has all the permits necessary for 42 more laterals if desired.

"We can go back onto those pads as needed and the infrastructure would be ready," chief executive Jeffrey Ventura said during the company's second quarter earnings call today. That means a drilling process that would normally take nine months could take less than half that time for Range, Ventura added.

While Appalachian basis prices remain challenging for the company, its takeaway capacity options should improve soon. In the fourth quarter the 628mn cf/d (18mn m?/d) Spectra Gulf Markets project begins to flow, and at the end of next year the 1.5 Bcf/d Columbia Gas Transmission Leach Xpress project comes on line. Once the Columbia Gas project comes on line, more than 80pc of Range Resources' gas will be sold outside of Appalachia.

The company produced 1.42 Bcf/d of natural gas equivalent (Bcfe/d) during the second quarter, up by 4pc from a year earlier. Range recently brought on line its third dry gas well in the Utica shale, and it expects to average a total of three rigs in Appalachia in the second half of 2016.