Eclipse Q4 2017 Production Averaged 311.7 MMcfe/day

The wells to be drilled in 2018 are expected to average over 16,800 feet in lateral length

Preempting the company’s upcoming analyst day, Eclipse Resources Corporation (ticker: ECR) has provided an update on its fourth quarter and full year 2017 production and year-end 2017 proved reserves, 2018 capital budget and first quarter and full year 2018 guidance.

Highlights

  • Net production for the fourth quarter 2017 averaged 311.7 MMcfe/d, a 22% increase over fourth quarter 2016 production. Net production for the full year 2017 averaged 310.7 MMcfe/d, a 36% increase over 2016 full year production
  • Year-end 2017 proved reserves increased by 211% to 1.46 Tcfe based on SEC pricing, and by 19% to 1.46 Tcfe based on forward strip pricing, in each case, as compared to year-end 2016 proved reserves
  • During the full year 2017, the company drilled 29 gross wells with an average lateral length of approximately 13,600 feet, which included eight wells with a lateral length greater than 19,000 feet
  • The company has updated its “type well” assumptions for 2018, including extending the average lateral length for all of its Utica Shale wells to 16,000 feet
  • A new agreement has reduced gas gathering by 20%. This particular gas gathering system covers the majority of Eclipse’s dry gas Utica Shale wells in Ohio
  • The company has established an initial capital budget for the full year 2018 of approximately $300 – $320 million. Eclipse Resources has elected to retain 30% of its pre-carry working interest in the second program of its Utica Shale drilling joint venture agreement with Sequel Energy
  • The company issued first quarter 2018 and full-year 2018 guidance, including a production guidance range for the full-year 2018 of 335 MMcfe/d to 355 MMcfe/d, and estimated year-over-year condensate growth of approximately 42%

Production up 36% over 2016

The company reported fourth quarter 2017 average net production of 311.7 MMcfe/d. The company also reported full year 2017 average net production of 310.7 MMcfe/d, which represents 36% growth on a year-over-year basis.

For the fourth quarter of 2017, the company’s production mix was 74% natural gas, 15% natural gas liquids and 11% oil, while the production mix for the full year 2017 was 77% natural gas, 14% NGLs and 9% oil.

Commenting on the operational activity, Eclipse Resources Chairman, President and CEO Benjamin W. Hulburt said, “Our full year 2017 average net production of approximately 311 MMcfe per day was slightly below the low end of our previously revised higher guidance. This was the result of shut-in or curtailed production during offsetting completion operations, as well as the conscious decision to reorder our drilling schedule towards our condensate wells (which can have a negative effect on an Mcfe basis using the traditional 6:1 ratio, but results in higher cash flow).

“Given our heavy condensate weighted turn to sales schedule in the early portion of 2018, we believe our increased liquids exposure as part of our commodity mix will allow us to increase revenue on a per unit basis despite the backwardation of the natural gas strip. With the closing of the Sequel joint venture during the fourth quarter of 2017, we believe we will continue to capture the operational efficiencies gained from our current two gross rig development program.

“We anticipate the 2018 capital budget of $300 – $320 million will allow Eclipse to achieve production growth targets of approximately 8% to 14% on an Mcfe basis and over 40% growth in oil (condensate) production in 2018, in each case as compared to 2017 production, while maintaining the operational flexibility as we move into the second half of the year to lower capital expenditures by approximately $50-$75 million if commodity prices do not support this level of spending.

“In addition, the company recently began the process of turning to sales two operated Marcellus wells on its ‘stacked pay’ pad composed of three Utica dry gas and the two Marcellus wells. Based on the initial results of these wells, this area could be a focus area for incremental condensate rich activity and contains 78 potential drilling locations with an anticipated return profile that could be highly competitive with the rest of our portfolio. The company will continue to evaluate these wells as it looks to develop multi-formation pads in this area of its acreage,” Hulburt said.

Proved reserves

The company recently received its annual reserve report prepared by Netherland, Sewell & Associates, Inc., which estimated the company’s proved reserves at December 31, 2017 to be 1.46 Tcfe, a 211% increase compared to proved reserves at December 31, 2016.

This increase in reserves was mainly due to an increase in proved developed producing reserves related to new wells coming into production during 2017 and from the addition of incremental proved undeveloped reserves.

Utilizing SEC pricing as of December 31, 2017, the PV101 value would be approximately $730 million and the proved reserve volumes would be 1.46 Tcfe. This represents a value increase of $524 million, or approximately 254%, and a volume increase of approximately 990 Bcfe, or 211%, relative to the company’s reserves at year-end 2016 using year-end 2016 SEC prices.

Drill it, complete it – 84% of 2018 CapEx directed towards 10’k long laterals

Eclipse Resources: 2017 Proved Reserves Jumped 211% to 1.46 Tcfe; Q4 2017 Production Averaged 311.7 MMcfe/day

ECR 2018 Development Plan, Feb. 2018

The company has established an initial capital budget for 2018 of between $300 – $320 million, allocated approximately 84% for drilling and completions activities, 8% for midstream activities, 6% for land activities and 2% for other capital requirements.

This budget incorporates the company’s drilling joint venture with Sequel Energy, in which the company made a pre-carry working interest election of 50% in the first 16 well program and a pre-carry working interest election of 30% in the second 17 well program.

Eclipse Resources: 2017 Proved Reserves Jumped 211% to 1.46 Tcfe; Q4 2017 Production Averaged 311.7 MMcfe/day

ECR $93.7 MM Flat Castle Acquisition, Feb. 2018

The initial capital budget assumes the drilling of 17 net (33 gross) horizontal Utica Shale wells and the completion of 18 net (35 gross) horizontal Utica Shale wells, including the drilling and completion of 1 net (1.0 gross) Flat Castle area well. The wells to be drilled in 2018 are expected to average over 16,800 feet in lateral length.

Guidance

The company issued the following first quarter and full year 2018 guidance in the table below:

Q1 2018 FY 2018
Production MMcfe/d 295 – 305 335 – 355
% Gas 74% – 76% 73% – 77%
% NGL 13% – 15% 12% – 16%
% Oil 10% – 12% 10% – 12%
Gas Price Differential ($/Mcf)1,2 $(0.10) – $(0.20) $(0.25) – $(0.35)
Oil Differential ($/Bbl)1 $(6.25) – $(6.75) $(6.25) – $(7.25)
NGL Prices (% of WTI)1 45% – 48% 35% – 40%
Cash Production Costs ($/Mcfe)3 $1.50 – $1.55 $1.55 – $1.60
Cash G&A ($mm)4 $9.5 – $10.0 $38 – $40
CAPEX ($mm) ~$300 – $320
1 Excludes impact of hedges
2 Excludes the cost of firm transportation
3 Includes lease operating, transportation, gathering and compression, production and ad valorem taxes
4 Non-GAAP measure which excludes non-cash compensation, see reconciliation to the most comparable GAAP measure at the end of the press release

 


Legal Notice