Platts 3 rd Annual Midstream Development & Management Conference - Houston, Texas

Transcription

1 Platts 3 rd Annual Midstream Development & Management Conference - Houston, Texas Rodney L. Waller Senior Vice President May 21, 2010 Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 1

2 Appalachia Marcellus Shale For E&P, midstream and transmission pipeline companies The Marcellus is a dream come true on a blank sheet of paper Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 2

3 Appalachia Marcellus Shale For E&P, midstream and transmission pipeline companies The Marcellus is a dream come true on a blank sheet of paper But where do you start with a blank sheet of paper? Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 3

4 Appalachia Marcellus Shale For E&P, midstream and transmission pipeline companies The Marcellus is a dream come true on a blank sheet of paper But where do you start with a blank sheet of paper? When you have only 40 wells over 63 million acres? Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 4

5 Appalachia Marcellus Shale For E&P, midstream and transmission pipeline companies The Marcellus is a dream come true on a blank sheet of paper But where do you start with a blank sheet of paper? When you have only 40 wells over 63 million acres? Sometimes, dreams can turn into nightmares! Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 5

6 Marcellus is Going to Have Huge Impact Changing the historical pattern on where gas is purchased for premium NE markets Changing the historical flow pattern on where firm transportation is secured Changing the historical market dynamics on propane and other natural gas liquid purchases, especially in non-gulf Coast areas Need to change the historical pattern on how midstream assets are built and shared by industry Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 6

7 Potential Regionalization of Gas Purchases NE premium markets will tend to favor Marcellus and Gulf Coast production Market differentiation will depend on cost of transportation NE Markets Chicago Markets NE Markets California NW Markets Gulf Coast Swing GAS Florida Markets Petrochemical Markets Marcellus gas should always have a premium due to economic reality of the cost of transportation Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 7

8 Potential for Regionalization of Firm Transportation Pipeline System Capacity Potential Expiration in Next 3 Years Columbia Gas 3.0 Bcf/day 1.6 Bcf/day Dominion 5.7 Bcf/day 3.0 Bcf/day Tennessee Gas 6.7 Bcf/day 3.9 Bcf/day Texas Eastern 6.2 Bcf/day 1.2 Bcf/day TransContinental Gas 7.7 Bcf/day 2.0 Bcf/day 29.3 Bcf/day 11.7 Bcf/day 40% of transportation contracts subject to renewal in next 3 years Trend is to drop the southern segments Source: Rex tag Interstate Natural Gas Infrastructure Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 8

9 Range Resources Midstream Model Partner with independent midstream partner to bring in necessary infrastructure with expertise recognizable by all producers Commit acreage and development to reduce risk of project to midstream partner Upsize development to allow third parties to share in the benefit of the size and scale; i.e. lower costs Achieve for all the parties Lower costs Faster development Less impact to environment Less regulatory issues Better gas flow efficiencies Better aggregation of supply for marketing Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 9

10 Marcellus Rich-Gas Area How do you bring cost effective midstream infrastructure to such a large area? Rich Gas Legend New Permitted Wells RANGE ANADARKO ATLAS CABOT CHESAPEAKE CHIEF/AB CNX EAST EOG EQT FORTUNA TURM ULTRA XTO/EXXON OTHERS Has to be cooperation or we will price ourselves out of the market. Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 10

11 High - Value, Rich - Gas in the Marcellus Value of 1 Mcf Produced Rich Gas vs. Dry Gas $/Mcf $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 $7.28 $2.93 NGL In the Marcellus, a typical rich-gas well will generate up to 70% more in economic value than a typical drygas well. (Gross Value) $4.27 $4.35 $4.27 Residue Dry Gas Rich Gas Well Dry gas assumes 1,030 Btu/cf. Rich gas assumes 1,300 Btu/cf. Assumes TCO gas and NGL prices on April 14, NGL Value deducts typical processing, fractionation and transportation fees. Dry Gas Well Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 11

12 Marcellus Area Pipelines Each has a Challenge Tennessee Corridor Transco Corridor SW Corridor C Counties Corridor Columbia Gas Transmission/Columbia Gulf Texas Eastern Transmission Tennessee Gas Pipeline Dominion Transmission Transcontinental Gas Pipeline Marcellus Fairway Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 12

13 Marcellus Area Pipelines Each has a Challenge Tennessee Corridor Transco Corridor Rich/lean gas processing and gathering with MarkWest Energy Partners, L.P. SW Corridor C Counties Corridor Columbia Gas Transmission/Columbia Gulf Texas Eastern Transmission Tennessee Gas Pipeline Dominion Transmission Transcontinental Gas Pipeline Marcellus Fairway Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 13

14 Marcellus Area Pipelines Each has a Challenge Tennessee Corridor Transco Corridor Dry gas gathering with Penn Virginia Midstream Partners, L.P. Rich/lean gas processing and gathering with MarkWest Energy Partners, L.P. Rich/lean gas processing and gathering with MarkWest Energy Partners, L.P. SW Corridor C Counties Corridor Columbia Gas Transmission/Columbia Gulf Texas Eastern Transmission Tennessee Gas Pipeline Dominion Transmission Transcontinental Gas Pipeline Marcellus Fairway Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 14

15 Cooperation is Essential Lessons learned from Barnett E&P s do not have expertise to build midstream Systems have to flow together to achieve operational efficiencies and economies of scale First pipes were too small Special Marcellus Issues Processing is the easy part, what do you do with the liquids? Multiple transmission lines, but most are full. (Can not flow more gas on interstates without increase in consumption or displacement of other gas.) Terrain issues, stream crossings, environment Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 15

16 Where Do We Need To Cooperate? 1) Producers need to block up acreage to concentrate the value of gas being gathered from each delivery point 6 to 10 wells per drilling pad 2) Cooperative marketing of Natural Gas Liquids and ethanes in particular 3) Gathering and Compression need larger systems to reduce cost, minimize ROW issues, air quality issues and environmental impact 4) Preserving the environment and quality of life is essential for the industry to move to full development 5) Community and public education many of us are guests in the Commonwealth 6) Need to join forces to expand the demand for natural gas Need to understand the service needs and gas quality these new markets actually require Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 16

17 How can we work together to increase demand for natural gas? 1) Need to promote awareness of this clean burning American fuel 2) Need to standardize the natural gas product to expand its uses. (Heating content and quality) Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 17

18 How can we work together to increase demand for natural gas? 1) Need to promote awareness of this clean burning American fuel 2) Need to standardize the natural gas product to expand its uses. (Heating content and quality) >>>>>>>> BIG VISION <<<<<<<< Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 18

19 How can we work together to increase demand for natural gas? 1) Need to promote awareness of this clean burning American fuel 2) Need to standardize the natural gas product to expand its uses. (Heating content and quality) >>>>>>>> BIG VISION <<<<<<<< Wellhead Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 19

20 How can we work together to increase demand for natural gas? 1) Need to promote awareness of this clean burning American fuel 2) Need to standardize the natural gas product to expand its uses. (Heating content and quality) >>>>>>>> BIG VISION <<<<<<<< Wellhead + Midstream Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 20

21 How can we work together to increase demand for natural gas? 1) Need to promote awareness of this clean burning American fuel 2) Need to standardize the natural gas product to expand its uses. (Heating content and quality) >>>>>>>> BIG VISION <<<<<<<< Wellhead + Midstream + Transmission Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 21

22 How can we work together to increase demand for natural gas? 1) Need to promote awareness of this clean burning American fuel 2) Need to standardize the natural gas product to expand its uses. (Heating content and quality) >>>>>>>> BIG VISION <<<<<<<< Wellhead + Midstream + Transmission Power Generation Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 22

23 How can we work together to increase demand for natural gas? 1) Need to promote awareness of this clean burning American fuel 2) Need to standardize the natural gas product to expand its uses. (Heating content and quality) >>>>>>>> BIG VISION <<<<<<<< Wellhead + Midstream + Transmission Power Generation Need to bundle the wellhead with the midstream and the transmission lines to deliver a total natural gas product at a reasonable cost to natural gas-fueled electrical power generation on a multiple year basis Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 23

24 Forward-Looking Statements Statements concerning future capital expenditures, production volumes, reserve volumes, reserve values, resource potential, number of development and exploration projects, finding costs, operating costs, overhead costs, cash flow and earnings are forward-looking statements. These statements are based on assumptions concerning commodity prices, recompletions and drilling results, lease operating expenses, administrative expenses, interest and other financing costs that management believes are reasonable based on currently available information; however, management s assumptions and the Company s future performance are both subject to a wide range of business risks and there is no assurance that these results, goals and projections can or will be met. This presentation includes certain non-gaap financial measures. Reconciliation and calculation schedules for the non-gaap financial measures can be found on our website at The SEC permits oil and gas companies, in filings made with the SEC, to disclose proved reserves, which are estimates that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Beginning with year-end reserves for 2009, the SEC permits the optional disclosure of probable and possible reserves. Range has elected not to disclose the Company s probable and possible reserves in its filings with the SEC. Range uses certain broader terms such as "resource potential," or "unproven resource potential" or "upside" or other descriptions of volumes of resources potentially recoverable through additional drilling or recovery techniques that may include probable and possible reserves as defined by the SEC's guidelines. Range has not attempted to distinguish probable and possible reserves from these broader classifications. The SEC s rules prohibit us from including in filings with the SEC these broader classifications of reserves. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of being actually realized. Unproved resource potential refers to Range's internal estimates of hydrocarbon quantities that may be potentially discovered through exploratory drilling or recovered with additional drilling or recovery techniques and have not been reviewed by independent engineers. Unproved resource potential does not constitute reserves within the meaning of the Society of Petroleum Engineer's Petroleum Resource Management System and does not include proved reserves. Area wide unproven, unrisked resource potential has not been fully risked by Range's management. Actual quantities that may be ultimately recovered from Range's interests will differ substantially. Factors affecting ultimate recovery include the scope of Range's drilling program, which will be directly affected by the availability of capital, drilling and production costs, commodity prices, availability of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals, field spacing rules, recoveries of gas in place, length of horizontal laterals, actual drilling results, including geological and mechanical factors affecting recovery rates and other factors. Estimates of resource potential may change significantly as development of our resource plays provides additional data. Platts 3 rd Annual Midstream Development & Management Conference l May 20, 2010 l 24