Barnett Shale

Range Resources sets aside $35 million for Oklahoma royalty lawsuit

A class-action lawsuit in Oklahoma that seeks $160 million in alleged royalty underpayments from Range Resources led the Fort Worth-based oil and gas producer to book $35 million in potential expenses during the first quarter, according to a Securities and Exchange Commission disclosure today. "While we believe we have strong defenses to the claims made in this lawsuit," Range said in its filing, it concluded that amount was appropriate  "given our evaluation of the law in Oklahoma, the outcomes in similar litigation and our assessment of the current status of the litigation." Range also said it has appealed a Feb. 19 court ruling certifying a class.

Deductions for post-production expenses "by third parties who transport and process natural gas production" form the basis of the suit, the company said in the filing. Range said that while it believes that "current case law in Oklahoma ... allows operators to deduct value-enhancing costs for treating, compression and other post-production expenses incurred to increase the value of a marketable product," the extent of the deductions could be something a judge or jury must determine. Range generally sells its Oklahoma natural gas production to third parties "which, in many cases, do transport and process the gas," it said. Range Resources-Midcontinent, the subsidiary involved, Range said, "has substantially complied with its royalty payment obligations under its leases and we therefore intend to vigorously defend this litigation."

-- Jim Fuquay

 

 

Range Resources loses $75.6 million as production rises

Fort Worth-based Range Resources said it lost $75.6 million in the first quarter despite a 27 percent jump in revenues. A non-cash charge of $97 million on unrealized derivatives was partly to blame, but the oil and gas producer also reported $38.4 million in lawsuit settlements, which the company did not detail. After adjustments for unusual items, the company said it earned $52.9 million, or 33 cents a share, better than financial analysts' consensus estimate of 28 cents. Range said its production in the quarter rose 32 percent, with oil and condensate showing the biggest gain. Product prices after accounting for hedges  slipped 3 percent to the equivalent of $5.06 per 1,000 cubic feet (mcf) of gas before transportation costs paid to third parties. Those transportation, gathering and compression expenses came to 79 cents per mcf. The company will hold a conference call with analysts Friday morning.

-- Jim Fuquay

Appeals court lets Range's defamation suit against Lipsky continue

A state appeals court said Fort Worth-based Range Resources can pursue a defamation claim against Parker County landowner Steven Lipsky, but it also dismissed several of Range's other counterclaims against Lipsky, his wife and their environmental consultant. The Texas Second Court of Appeals in Fort Worth had been asked by the Lipskys and Wolf to dismiss Range's suit, which followed the Lipskys' lawsuit in 2011 that claimed Range contaminated a water well on the family's property. 

A link to the story in the Star-Telegram is here.

-- Jim Fuquay

Range reports higher first-quarter production

Fort Worth-based Range Resources said today its first-quarter production was the equivalent of 876 million cubic feet of natural gas a day, a record to for the independent producer and driven by rising Marcellus Shale output. Production of crude oil and condensate  was up 52 percent, natural gas was up 34 percent and natural gas liquids were up 22 percent. That put the company's overall production at 79 percent natural gas, 14 percent NGLs and 7 percent crude oil and condensate.

The average price for all products slipped 3 percent to $5.06 per 1,000 cubic feet (mcf) equivalent. Range realized $4.09 an mcf for gas, $35.29 a barrel for NGLs and $85.46 for oil and condensate. Costs for gathering, compression and transportation were estimated at 80 cents per mcf. CEO Jeff Ventura said the company is on track for production growth of 20 to 25 percent in 2013 and "for many years" as it develops about 1 million net acres in the Marcellus in Pennsylvania.

-- Jim Fuquay

Appeals court could return water contamination case to Weatherford court

The Texas Second Court of Appeals today said it may return to Parker County courts the lawsuit of Parker County landowners Steven and Shyla Lipsky against Range Resources in a water contamination case. Former State District Judge Trey Loftin had denied the motion by the Lipskys and their environmental consultant, Alisa Rich, to have Range's counter-suit against them dismissed. In its ruling today, the appeals court said that because Loftin lost his re-election bid last May, it would "abate" its jurisdiction in the case and return the case to Loftin's successor, Judge Craig Towson, if all parties agree. The appeals court gave until April 11 for the parties to tell the court what they want to do.

-- Jim Fuquay

Bigger operators safer in Pennsylvania, Wall Street Journal finds

The Wall Street Journal crunched the numbers for safety and environmental violations in Pennsylvania portions of the Marcellus Shale and concluded that larger producers generally have better records than smaller producers. It leads its report with the example of Royal Dutch Shell's violation rate of 13 percent per inspection in 2010, compared to a 63 percent rate at East Resources right before the independent sold its Marcellus assets to Shell in 2010. In another example, the newspaper said that following its acquisition by Exxon Mobil, XTO Energy's rate of safety violations "has fallen by half, even though drilling takes place in the same counties, often with the same personnel." (Anyone who has read Steve Coll's recent history of Exxon, Private Empire, will not be surprised, considering Coll's account of the zero-accidents mentality Exxon developed after the Exxon Valdez spill in Alaska.)

Bigger isn't always better. Fort Worth-based Range Resources, an early developer of the field, had a better-than-average record among mid-sized producers, the Journal reported. All operators improved their records in the past two years, according to the newspaper's analysis of state records. For example, Shell has since lowered its violation rate to 5 percent in 2012.

You'll probably run into the Journal's pay wall, but a link to the story is here.

-- Jim Fuquay

2010 Pennsylvania contamination case settled for $750,000

Court documents unsealed in a Pennsylvania lawsuit against Fort Worth-based Range Resources and others show the companies paid $750,000 for the homeowner's property, attorney fees and related claims. The records had been sealed since the July 2011 settlement but two Pennsylvania newspapers had sought to have them made public, which a judge approved on Wednesday.

The case concerns Chris and Stephanie Hallowich, who in June 2005 purchased 10 acres in Hickory, Penn., a rural area. They started building their home there in November 2006. "Unknown to the plaintiffs, the prior owner, Nancy Stewart, had subdivided the property and then sold a portion to defendant Range Resources Corp. for the purpose of drilling natural gas wells," according to court documents. Stewart also signed a mineral rights lease on the property, the documents say. By 2008 the Hallowich home was in the proximity of four natural gas wells drilled by Range, as well as a compressor station and a gas treatment facility operated by other companies, who were also defendants in the suit. The Hallowich family and another neighboring landowner soon complained of water contamination. The family sued Range, MarkWest Energy Partners, Williams Gas/Laurel Mountain Midstream and the Pennsylvania Department of Environmental Protection in 2010. The state regulator had found high concentrations of some compounds, including manganese, in the landowners' water but could not say Range or the other companies were responsible.

According to a copy of the settlement released Thursday, the companies agreed to pay a total of $750,000. Of that, $594,820.37 went to the family, including trust accounts of $10,000 for each of the couple's two small children. The settlement says the children's "alleged claims involve nuisance and personal injury. There is presently no medical evidence that support that these claims are related to any exposure to the activities of defendants as set forth in plaintiff's complaint." The family's legal counsel received 20 percent of the settlement, or $150,000, plus $5,179.63 in expenses.

Range spokesman Matt Pitzarella, in an e-mailed statement, said: "The family began building their home after several early Marcellus wells and associated infrastructure was starting to be developed near them. The family was in a unique situation and one that was not ideal for them or for Range. Range believed that the right thing to do was to allow both sides to move forward." He said the company "does not have concerns with the judge's decision, which we greatly respect, to make the court file public. This information combined with the vast public data accessible through the DEP's extensive investigations should provide the public with even greater clarity that shale gas is being developed safely and responsibly."

A link to the documents, posted online by State Impact Pennsylvania, can be found here.

-- Jim Fuquay

 

Pennsylvania contamination case to be unsealed

A Pennsylvania ruled the settlement of a water contamination case between drillers, including Fort Worth-based Range Resources, and two homeowners should be unsealed. According to a Bloomberg News report, "Chris and Stephanie Hallowich, told National Geographic magazine in 2010 that their water was polluted by the wells, pipelines, processing operations and truck traffic that came into the rural area where they had built their home. They also said they suffered burning eyes, sore throats and other symptoms when gas was released into the air."

Range spokesman Matt Pitzarella said the company, which had opposed the unsealing, is fine with it now. In an e-mail, he told Bloomberg that unsealed documents "should provide the public with even greater clarity that shale gas is being developed safely and responsibly." The National Geographic story, posted online on Oct. 17, 2010, recounts the Hallowich family's  experience buying 10 acres in southwestern Pennsylvania in 2007, then finding themselves in the middle of natural gas development.  "From a nuisance perspective, I will tell you they have a legitimate concern," the online report quotes Pitzarella as saying of the Hallowich family of four. Range drilled a well "that produces gas beneath the Hallowich site," the report says, and the "company and others say the bulk of their operations—the well sites themselves—are short-term disruptions and that the land is restored, as the state of Pennsylvania requires, within nine months after drilling is complete." It says there are unresolved disputes over water quality from a well on the family's property, which was drilled after Range commenced its own drilling operations.

Bloomberg News has a report on the judge's ruling here.

-- Jim Fuquay

Range Resources earns $53 million in fourth quarter, announces asset sale

Fort Worth-based Range Resources said it earned $53 million in the fourth quarter on sharply higher revenues of $458 million. The oil and gas producer also said it agreed to sell properties in West Texas and New Mexico for $275 million, a transaction it expects to close in April. For the year, Range earned $13 million on $1.46 billion in revenue. The results included $55.5 million in impairments taken during the quarter and more than $160 million in impairments for the year. . After adjusting for unusual items, Range earned $73 million, or 46 cents a share, in the quarter, easily topping financial analysts' consensus estimate of 29 cents. It finished the year with nearly $2.9 billion in long-term debt, up from $1.97 billion a year earlier.

CEO Jeff Ventura, in a prepared release, said the company had "outstanding operational results" last year. As previously reported, the company said it had record production in 2012. It spent $234 million to drill 64 wells in the quarter and $1.36 billion for 298 wells in the year. He said the company expects total production to increase by 20 percent to 25 percent in 2013 and liquids production to grow more than that. 

Range said the Permian Basin properties it is selling include 7,000 acres producing the equivalent of about 18 million cubic feet a day, approximately 70 percent natural gas and 30 percent liquids. The company sold about $170 million worth of properties in all of 2012.

-- Jim Fuquay

 

Court documents in Range-Lipsky case resurface in EnergyWire report

In January 2012, the Star-Telegram reported (Download Richter testimony) that a former Texas Railroad Commission engineer offered an explanation into how Fort Worth-based Range Resources could have contaminated a Parker County resident's well. That information resurfaced Wednesday when EnergyWire cited petroleum engineer Thomas H. Richter's affidavit as a piece of evidence ignored by the Environmental Protection Agency when it withdrew an emergency order against Range over the wells.

The EPA's sudden and largely unexplained withdrawal of its order last March has continued to attract news coverage. The Associated Press reported last month that the EPA had a confidential report that said methane in Lipsky's well "could have originated from Range's wells," but still dropped its action. Earlier this month, EnergyWire, an online news service covering energy and environmental topics, reported that former Pennsylvania Gov. Ed Rendell lobbied EPA Administrator Lisa Jackson on Range's behalf. The latest EnergyWire report largely recounts Richter's theory, but in the context of the EPA dropping its order against Range.

Range spokesman Matt Pitzarella called the EnergyWire story "a retread of a story fully addressed two years ago" when the Texas Railroad Commission held a hearing on the Parker County wells. Neither the EPA nor Lipsky participated in the hearing, and  the Railroad Commission found that Range was not responsible for Lipsky's contaminated well. While Richter didn't make his affidavit until December 2011, months after the commission's hearing, the points he raised were brought up and considered by the agency's examiners, Pitzarella said.

In short, Richter's affidavit, made on Lipsky's behalf, concludes that Range's wells should have been cemented deeper than they were, and that flaw was allowing natural gas from shallower formations to migrate upward into the water table. Railroad Commission examiners also found that the gas in Lipsky's well was from one of those shallower formations called the Strawn. But they ruled that Range's wells were not leaking and were not the source of the gas in the well.

Pitzarella points out that the EPA and the confidential report cited by the Associated Press both said the gas in Lipsky's well came from the Barnett, while Richter's says it came from other formations. They can't both be right, he said.

-- Jim Fuquay