Range Resources Corp. (NYSE: RRC) announced Dec. 15 that its first Utica/Point Pleasant well had become the most productive well to date in the play’s dry gas window. The well, located in Washington County, Pa., achieved a 24-hour test rate of 59 million cubic feet per day (Mmcf), according to a news release.
“The well was drilled and cased to a true vertical depth of 11,693 ft with the 5,420-ft horizontal lateral completed with 32 frack stages,” the Fort Worth, Texas-based company said. “Initial calculations indicate a 0.88 psi/ft pressure gradient. This initial production (IP) rate equates to a 10.9 Mmcf per day IP rate per 1,000 foot of lateral.”
A report from KeyBanc Capital Markets noted the well’s IP rate compared favorably to other wells in the play, including:
- Magnum Hunter Resources Corp.’s (NYSE: MHR) Stewart Winland well (IP 46.5 Mmcf/d) and Stalder 3UH well (IP 32.5 Mmcf/d);
- Gastar Exploration Ltd.’s (NYSE: GST) Simms U-5H well (IP 29.4 Mmcf/d);
- Gulfport Energy Corporation's (Nasdaq: GPOR) Irons 1-4H well (IP 30.3 Mmcf/d);
- Chevron’s (NYSE:CVX) Connor well (IP 25 Mmcf/d); and
- Eclipse Resources Corp.'s (NYSE:ECR) Tippens 6HS well (IP 24 Mmcfe/d) and Shroyer wells (average IP 21.3 Mmcf/d).
“The impressive Utica result should move the play farther east from offsetting results in the dry gas window in Ohio and West Virginia and greatly derisk nearby acreage,” according to the report. “Given RRC's 400,000 net acre position in the Utica play, results could create a sizable re-rating opportunity as our current NAV ascribes roughly 20% credit to its potential Utica inventory. Including offset peer activity, we expect RRC’s Utica catalysts could unlock another $5-$10 in value in our $113/share RNAV by the end of 2015.”
Other analysts were more cautious.
“The rate was calculated using simulated pipeline pressure, so we don’t know what impact the methodology has,” according to a note from Wells Fargo Securities. “Also, no well cost was provided.”
However, the well results were released at the same time as the company’s 2015 budget, which shows a 20%-25% growth target despite an 18% decrease in spending.
“Overall, in our view, it’s a positive press release in what has been a steady stream of less favorable industry news flow,” Wells Fargo said.
Morgan Stanley also noted the well cost was undisclosed, but predicted it cost more than $15- or $20 million “due to being a very deep, single well test with significant science work.” The firm estimated the well would deliver a 25-35% pre-tax return at a $4.24 MMBtu Henry Hub price at a $20 million well cost.
Other Utica operators were gaining favor with analysts as Range announced its news. SunTrust Robinson Humphrey increased its rating for Eclipse to Buy on Dec. 15.
“Our confidence is based on the company (and various Utica peers) having some of the most economic wells in the U.S. at today’s commodity prices and the fact that Eclipse has ‘Big Brother’ that is likely to come to the rescue, reducing potential funding issues,” according to SunTrust. “Further, the company has limited rig or lease obligations next year ensuring that liquidity stays at a solid level.”
SunTrust also named Gulfport Energy Corp. (NYSE: GPOR) a Top Pick on Dec. 15 despite a lowered price deck (from $81 to $75).
“Gulfport has about 71% of its 184,000 Utica acres in the highly economical wet and dry gas windows,” SunTrust said. “These wells are best in the Utica and our estimates show these wells to have the best returns of any wells in the U.S. based on today’s oil and natural gas strip prices, along with some eye-popping well results.”
The only negative was the news of Magnum Hunter losing control of its Stalder 3UH well as it was being brought online. As of Dec. 14, all field personnel are accounted for, and no injuries had been reported, according to MHR.
“Without the first well under control and online, the three remaining Utica wells and one Marcellus well cannot be produced, which makes MHR’s 32.5 Mboe/d 2014 exit rate guidance much less likely at this point,” according to a separate Dec. 15 report from SunTrust.
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