The Smith # 1 exploration well was spudded on 4 September 2009. On 12 November 2009, the well reached its target depth of 13,975 ft. (4,260m). Based on open-hole logs indicating approximately 120' (37m) of net pay thickness in three zones with no water, 4 ½" production casing was run to target depth and cemented in place. One of the three zones was perforated and after an interval of just 20' (6.2m) bottom-hole pressure was estimated to be approximately 11,650 psi.

Testing of the Smith #1 well confirmed a commercial discovery in December 2009, with first production and sales occurring in February 2010

Initial production from the middle of the three zones has been flowing naturally. Flow rates indicate that the currently producing zone may not require fracture stimulation.
It is anticipated that the well will be producing from this zone for several months before it will be shut in and a completion rig likely moved in. Once the completion rig is in place, the lower zone is expected to be fracture stimulated and tested, along with the upper zone. All three zones will then be comingled and produced. Each zone is expected to be of similar size.

Hydraulically fracturing the reservoirs is expected to create additional permeability paths from the reservoir to the well bore that should sharply increase initial rates from all zones, which in turn will accelerate payout while improving reserve recovery and overall economics.

To date, Gross production for the quarter from the Smith #1 well has been approximately 73k MMcf of natural gas and 5,350 bbls of oil

Range, through its technical consultants Texas Energy Advisors LLC, engaged Independent Petroleum Engineering firm, Lonquist & Co LLC (“Lonquist”) to compile and provide geological, geophysical and engineering data and provide an Independent Reserves Report and Valuation for the project.

On 11 May 2010, Range announced that Lonquist’s independent reserves report has confirmed the following gross commercially recoverable reserves from the North Chapman Ranch Field:

216 Bcf of natural gas (attributable to Range – 45 Bcf)

16 mmbbl of oil (attributable to Range – 3.3 mmbbls)

15.5 mmbbl of natural gas liquids (attributable to Range – 3.2 mmbbls)

Set out below is Range’s attributable interest in the gross recoverable reserves on 25% of the Smith #1 well and on 20% of the remaining wells assuming the exercise of certain clawback provisions by joint venture partners occurs following the success of the Smith #1 well:

The planned multi-well program is anticipated to move Possible (P3) Reserves into the Probable (P2) and Proved (P1) Reserve categories

The second well on the North Chapman Ranch Project, the Russell-Bevly #1 appraisal well, was spudded on 12 May 2010.

Based on the reserve numbers cited above, Lonquist’s estimated net undiscounted cash flow value to Range, along with PW10 discounted cash flow based on Nymex forward strip prices reported on 31 December 2009, following reductions for royalties, opex, capex, production taxes etc as follows:

A copy of Lonquist’s North Chapman Prospect - Estimated Future Reserves and Revenues for Range can be found on the website and contains further details on the assumptions on which these valuation estimates are based. 

Figure 1: Unit Texas Rig #35 on Smith #1 well

 

Figure 1: Smith #1 well processing facilities