First oil

We’re constantly bombarded with bad news. So, it is with pleasure that I bring to you a “feel good” story of the discovery of the Marcellus featuring Range Resources, a small but intrepid U.S. independent oil company. The story was told by Range President & CEO Jeff Ventura at the recent AAPG 2013 conference. This annual session was held May 19-22, for the first time in Pittsburgh, in recognition of the growing importance of the Marcellus shale play, now the largest U.S. gas field at 9 Bcfd.

The Range story began in 2003 with a shift in the Fort Worth, Texas, company’s strategy from conventional high-risk, high-reward projects in the Gulf of Mexico, Appalachia and Permian, to large-scale, lower-risk, repeatable projects that are typical of shale plays. Ventura credited Bill Zagorsky, the Range geologist, who first proposed the plan of exploring the Marcelllus shale, but also said it was a team effort.

“When the Marcellus was proposed internally, George Mitchell had already cracked the code for the Barnett play in North Texas,” Ventura explained. “Zagorsky had a Eureka moment when looking at the Marcellus, which covered a lot more area than the Barnett and the shale thickness was much greater. Even decades-old wells had good gas shows through the shale. However, smart people pushed back, ‘Are the gas shows commercial? Since the Marcellus is water sensitive, will a Barnett-style frac work?”

This was the first decision point, where Ventura decided to go ahead with a large frac at the Renz #1 well in Washington County. “This well had acceptable results with high-BTU gas. Since there was no infrastructure to produce the gas, we rested the well for about a year. When we went back in, the pressure gradient was 0.7/ft. That’s when we realized we had something special in a wet-gas window,” Ventura revealed.

The next decision point was to make the play work horizontally. During 2005-6, Range drilled and fraced three horizontal wells. However, all three wells had low production—20 Mcfd, 250 Mcfd and 600 Mcfd. “Now, there was local pressure to stop the horizontal drilling program and treat the Marcellus as a vertical play,”  Ventura explained.

Ventura remembers going to Fort Worth to discuss funding for the Marcellus with his executive team. “We had invested $150 million in the horizontal well program. The most we could go was $200 million till year end,” Ventura remembered. “So, we had $50 million and eight months to go and hadn’t yet cracked the Marcellus code. We weren’t Exxon and couldn’t beat on it forever, in order to make it work.”

Ventura described a subsequent meeting in Pittsburgh to decide the course of action. “There were about 20 people in the conference room to figure out, ‘what do we need to do’. Pump at a higher rate, build more stages, or use different perforating charges? That’s when Zagorsky presented his now-famous three-point correlation that plotted max. flowrate vs. max. vertical height above the Onondaga Limestone for wells drilled in the Marcellus shale. The first well landing 40 ft above did not produce, 60 ft was better and 70 ft was the best.”

Based on Zagorsky’s recommendation, Range drilled the Gulla #9h well about 70 ft above the Onondaga in Aug. 2007. “This was the breakthrough. The well produced 3.2 MMcfd, equivalent to a good Barnett well,” Ventura revealed. “Basically, we cracked the code by landing the well in the right spot. Since then, we’ve been able to optimize the drilling and production. If we drilled these early wells now, they would be producing 10 to 15 MMcfd.”

In the Fall of 2007, Range drilled three more successful wells, with production rates of 3.7 MMcfd, 4.3 MMcfd and 4.7 MMcfd. The 8th well produced 14 MMcfd. The rest, as they say, is history. But, what would the history have been, had Range drilled through its last $50 million with only marginal gas production?