PITTSBURGH—One of the names most synonymous with the Appalachian Basin is Range Resources Corp. (NYSE: RRC), which pioneered and discovered the Marcellus Shale with Barnett-style fracking in the early part of this century. When the company released extensive production data from its Marcellus drilling in December 2007, it caused a sensation in the industry because of how impressive the IP rates were from these wells. This early entry into the play helped the company secure prime acreage in the basin, which continues to prove beneficial to Range in the current price environment.
“At Range, we have a saying: the rock rules,” Elie Atme, the company’s vice president of marketing and midstream, said at Hart Energy’s recent Marcellus-Utica Midstream Conference & Exhibition.
“We have a wonderful stronghold, perhaps the best in the basin. [Currently], we’re focused on being a low cost producer and will push forward with our capital program for 2016 while leveraging the great assets we have,” Atme added. This position allows for repeatable projects that provide good returns that further drive down costs. As more production is brought online it has encouraged tremendous growth in the midstream. Atme noted that Range Resources is improving its capital efficiency thanks in no small part to the increasing amount of takeaway capacity that has been built in the region and the increased demand this capacity is creating.
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In addition to being a first mover on the production side of the Marcellus Shale, Range has also been a first mover in supporting pipeline projects to new markets. The company has a mutually beneficial relationship with midstream operators, as both help fuel each other’s growth.
In order to take advantage of the strongest basis differentials available, Range supports projects connecting to various markets. “We’ve found a lot of value by being able to access markets, both domestic and international. There’s tremendous value to be found in having optionality in your portfolio by being able to optimize where your production is going,” Atme said.
The anticipated takeaway projects being developed in the Northeast should improve future basis differentials in the Appalachian Basin and help support future growth.
“We’ve grown enough to support a lot of different projects. One of those near and dear to me is Spectra Energy’s Uniontown-to-Gas City Pipeline. This is a great project that has added significant value to Range by shipping to markets in the Midwest,” Atme said. “Another wonderful project we are supporting is Sunoco Logistics’ Mariner East project. We are the only producer with firm capacity on this project and we currently export propane out of Marcus Hook and will soon be exporting ethane from the facility.”
The market may be in a downcycle, but there is tremendous demand coming online in the next few years. This makes it very important for companies to be able to work through the next year or two before this demand starts to take hold of the market.
Source: Range Resources
By 2020, Range anticipates up to 20 billion cubic feet per day (Bcf/d) of additional gas demand and an additional 15 Bcf/d by 2025.
“We need price signals to respond to the demand that is coming. The good news is, we expect to see some recovery in prices soon, starting in the middle of this year. The oil markets will rebalance and gas markets will respond to meet the demand coming on,” Atme said.
The industry growth rate has been decreasing rapidly, which should help improve prices as supply and demand balances. “There is an overall decline in production out of the dry and wet gas areas of the Appalachian Basin,” Atme said. “I think we’ll continue to see overall growth in the play flatten for a little while until we see some recovery in prices. The industry is robust and strong and we will be able to work through this downturn in prices to meet future demand head on.”
Frank Nieto can be reached at email@example.com.
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