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With the completion of drilling at the Smith 2 and Albrecht 1 wells, Range Resources Corp. (RRC - Analyst Report) witnessed operational success at the North Chapman Ranch Field, onshore Texas.

Range Resources, which holds approximate 20% to 25% interest in the prospect, drilled the Smith 2 well about 1,350 feet southeast of the Smith 1 discovery well. Soon after, moving more toward the southeast of Smith 2 (almost 1,500 feet), the Albrecht 1 was drilled that confirmed traces of the Howell Hight reservoir. The exploration of these wells expanded Range’s Proved Reserves in the region.

The Smith 2 well’s initial flow rates, coming from the uppermost pay zone, touched more than 3 million cubic feet of gas and 125 barrels of oil. The company stated that this is one of four principle pay zones in the well.

Range Resources plans to carry on work to eradicate all the plugs below the upper pay zone and join the lower pay zones. This will enable the well to accomplish maximum rate and recovery.

Following the drilling of four wells in the field, management expects that more than 80% of the structural closure at the Howell Hight reservoir will come under the proved and probable (2P) category.

Although Range Resources is currently evaluating the reserve potential of the North Chapman Ranch, it will provide the final figure upon the start-up of the Albrecht 1 well. This well is slated to be completed and fracture stimulated within the next four to six weeks.

Net production and cash flow from the project is expected to improve by more than 200% from the current levels, once the Smith 2 and Albrecht 1 wells come online.

We are maintaining a long-term Neutral recommendation on Range Resources, reflecting its well-diversified asset portfolio, impressive cost structure and high production growth target. These positives are somewhat shadowed by the volatile natural gas prices, inflationary industry situations and operational disturbances.

Range Resources, which competes with EQT Corporation (EQT - Analyst Report), SM Energy Company (SM - Analyst Report) and Ultra Petroleum Corp. (UPL - Analyst Report), holds a Zacks #3 Rank that translates into a Hold rating for a period of one to three months.

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