Range Resources Corporation (RRC) on Wednesday provided its third quarter production results. Total volumes were 437 MMcfe (millions of cubic feet equivalent) per day, up 13% year over year. Despite selling its Fuhrman Mascho Field (production of 15 MMcfe per day) in West Texas at the end of June, the company recorded a 0.8% sequential production increase in the reported quarter. Notably, it was 27th consecutive quarter of sequential production increase.
Production results in the quarter were driven by excellent drilling performance in the Barnett and the Marcellus shale plays. Range’s Marcellus Shale production is currently about 80 MMcfe/d and the company is heading towards a target of 90 MMcfe/d to 100 MMcfe/d by the end of this year. Production in Barnett Shale averaged at 123 MMcfe/d.
Range is currently running four horizontal Marcellus rigs and is expected to enter 2010 with six custom-built horizontal rigs. During the fourth quarter of the current year, the company expects to drill approximately 20 additional horizontal wells and carry over 20 wells for completion in 2010.
While we expect Barnett and Marcellus shale production to grow significantly over the next two years, other assets including the Mid-Continent, Permian, the Nora field and the Gulf Coast will remain relatively flat.
We like Range’s Marcellus Shale exposure and believe that it is appropriately reflected in its valuation. With the company’s sound operating track record and large inventory of potential, we think it should continue to trade at a premium to the group. As such, we recommend a Neutral rating for the stock.
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