Range Resources sees higher prices from Rover

US independent producer Range Resources' realized natural gas prices received a boost during the third quarter from the startup of the 3.25 Bcf/d (92mn m³/d) Rover pipeline.

Range's third quarter prices including hedges averaged at 15¢/mmBtu below Nymex, narrowing from a 51¢/mmBtu discount a year earlier. The company forecasts its fourth quarter differential will narrow further to a 12¢/mmBtu discount to Nymex.

Energy Transfer Partners' Rover pipeline in August commenced service on key laterals allowing Appalachian shale gas to flow on the line and be delivered to markets in Ohio, Michigan, Ontario and the Gulf coast. The project is still gradually bringing facilities on line as it works towards its full design capacity.

Range has capacity on Rover of about 400mn cf/d, which is "on track to fill by this year-end", chief executive Jeffrey Ventura said.

The producer also had "significantly improved in-basin pricing compared to last year as the Appalachian gas market is benefiting from new pipeline capacity additions in both northeast and southwest Pennsylvania," Ventura said. One of those projects is the 1.7 Bcf/d Atlantic Sunrise expansion, which allows northeast Pennsylvania gas to reach more lucrative demand markets on the Atlantic Coast.

"With Atlantic Sunrise on, basis has come in significantly," Ventura said.

The improved pricing drove a 27pc increase in cash flow compared with the third quarter of 2017.

The producer earlier this month said it had sold a 1pc royalty interest on some of its existing leasehold in Washington County, Pennsylvania, for $300mn. The royalty interest sale reflects a unique approach to debt reduction in an industry that often instead turns to asset sales.

"There is clearly an interest in our royalties as an investment opportunity," chief financial officer Mark Scucchi said in a response to a question on how much demand exists for royalty interests. "It is a high-quality asset that has cash flow-generating ability; that is a growth component. There is a viable and healthy market there as it relates to the royalty."

The producer's capital spending is on track to remain within 2018 guidance of $941mn with $725mn spent so far this year. The company plans to connect 22 wells to sales during the fourth quarter, bringing its total number of wells connected to sales this year to 92. Range will focus its fourth quarter drilling on its wet acreage near the new Harmon Creek processing plant in Washington County, Pennsylvania, which is scheduled to begin service by the end of this year.

"This will help us fill our firm capacity into the Rover pipeline," Ventura said.

Range produced 2.27 Bcf/d of natural gas equivalent (Bcfe/d) during the third quarter, up by 14pc from the third quarter of 2017. The company's southwest Pennsylvania third quarter production was about 29pc higher than a year earlier at about 1.9 Bcfe/d.