American Oil and Gas Reporter - July 2016 - 62

SpecialReport: Horizontal & Innovative Drilling

Companies Thriving In Marcellus/Utica
By Al Pickett
Special Correspondent
Range Resources began planning for
the future of its Marcellus and Utica development on day one.
Because of that, Range Executive Vice
President and Chief Executive Officer
Ray Walker says his company has been
able to put together a class-leading drilling
program and will be drilling on its extensive Pennsylvania leasehold for "more
years than I will be working."
"There is the experience factor," Walker
avers. "(Company President) Jeff Ventura
and I have been around a while. We saw
this as a great opportunity to do it the
way we wanted. We are setting up for
2017 and beyond with a class-leading
low-cost structure that no one can match."
Unlike many who may have been
amazed when the Marcellus and subsequent Utica horizontal plays took off,
Walker says Range realized the region's
potential immediately.
"We discovered the Marcellus in 2003
when we were going for deeper formations, such as the Lockport and others
below the Utica," he recalls. "That was a
vertical play, and it didn't work. Everyone
was looking for the next Barnett, which
was going strong then. Our geologists
recognized that the Marcellus and Utica
were similar to the Barnett, only better."
Walker says Range did its first vertical
test in the Marcellus in the fall of 2004
and drilled its first horizontal in early
2006.
"Range also drilled its first successful
Utica test in 2009 and went straight to
horizontal drilling," he adds.
Long-Term Approach
Because of that early recognition,
Range began designing pads to facilitate
development. The company has 124 pads
with five or fewer wells and 59 pads
with six to nine wells, but Walker says
most of those pads are designed to accommodate 18-20 wells and have the
flexibility to drill Marcellus, Utica/Point
Pleasant, or Upper Devonian formations.
"Our approach was long term, like a
developer building a master-plan community," he compares. "In 2007 and '08,
we saw a real opportunity to put together
a leasehold at low cost. We picked up
acreage in the core of the core, where
62 THE AMERICAN OIL & GAS REPORTER

there was the most infrastructure. Our
plan was to generate the best overall economics, focusing on the long term.
"We try to do things systematically,"
Walker adds. "We are in a commodity
business, so we know there will be downcycles, but with our size scale and lowcost structure, we are in position to
weather them. Almost all our acreage is
held by production now, so we can focus
our dollars on the very best wells in the
very best areas."
With its pads designed to accommodate
up to 20 wells, Walker predicts Range
will save $850,000 a well drilling off existing pads because of minimal permitting
requirements and reuse of roads, surface
facilities and gathering systems.
The company has 1,540,000 acres
with stacked pays in both Southwest and
Northeast Pennsylvania, giving it multiple
development opportunities, Walker attests.
That leasehold consists of 335,000 wetgas acres and 180,000 dry-gas acres in
the Upper Devonian, 335,000 wet-gas
acres and 290,000 dry-gas acres in the
Marcellus, and 400,000 dry-gas acres in
the Utica/Point Pleasant. In addition, he
says Range has another 280,000 net acres
in Northwest Pennsylvania that are primarily legacy leases held by production,
where it is not drilling currently.
"Ninety-five percent of our activity is
in Southwest Pennsylvania," Walker relates, describing Washington County, Pa.,
as the "crown jewel" of the play.
Range Resources' focus has, understandably, been more on the Marcellus
than the Utica, according to Walker. "By
drilling the Marcellus, we hold all rights,"
he explains. "We have done three Utica
wells on Marcellus pads, but a Utica well
with an 8,500-foot lateral costs $14
million, which is two-and-a-half times
what a Marcellus well costs for the same
amount of gas."
Lowering Costs
Walker says Range has increased its
average lateral lengths since 2012, but it
has lowered per-foot well costs by 63
percent in that same time frame. While
he acknowledges reductions in service
costs have contributed to that savings, he
points out that Range has seen a steady
decline in well costs year after year, including 2012-14, when service costs were
at record highs.

The company has been able to lower
costs in a number of ways besides drilling
on existing pads and drilling longer
laterals. Other improvements he claims
include better bit technology and lowering
fracturing time, which enables more stages
to be completed in a single day.
Walker points out that Range's finding
and development costs were 40 cents a
foot in the first quarter of this year, adding
that he believes that number eventually
can be lowered to 20 cents.
On average, Walker says, Range's lateral lengths were 6,000 feet last year.
This year, they will be 7,000 feet and
next year 8,000 feet. "Ultimately, we will
drill 10,000-foot laterals in our dry gas
wells and a little less than that in the wet
gas," he describes. "Our fracture spacing
is tailored to the specific resource, but
we usually employ 150- to 200-foot spacing."
Walker says Range has one rig operating in Northeast Pennsylvania to honor
commitments on large leases. It has two
big rigs and two little rigs running in
Southwest Pennsylvania, where the company maintains the bulk of its activity.
"We use small air rigs to drill the tophole portion and set the shallow casing,"
he mentions. "Then we bring in the big
rig to drill at the kickoff point."
Multiple Markets
A key-and at one time a hindrance-to
developing the Marcellus and Utica is
the availability of multiple markets for
its products.
"In 2007-08, we decided we wanted
to have multiple outlets so we were not
beholden to any one project," Walker reveals. "We have three ethane outlets, all
priced differently. We are the only producer
on the Mariner East Pipeline with a
unique 15-year deal. We have a lot of
flexibility for our propane, ethane, butane
and condensate.
"By the end of the year, 70 percent of
our gas will be sold in places other than
Appalachia," he continues. "It will be
even more so next year. We have multiple
pipelines and markets, and we found
cheap transportation. We even have exported some liquefied natural gas."
Remarkable Changes
Steve Schlotterbeck laughs when asked
whether 10 years ago he could have en -

American Oil and Gas Reporter - July 2016

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