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With Production Climbing, Eclipse Focused on Growth

Appalachian pure-play Eclipse Resources Corp. produced 42 MMcfe/d in the second quarter, a sixty-fold increase from the 679 Mcfe/d it reported last year at the same time.

Established in 2011, the company's second quarter earnings release was its first since debuting on the New York Stock Exchange in June in an initial public offering (IPO) that sold more than 30 million shares and raised $545.4 million (see Shale Daily, June 9; June 23).

Although Eclipse completed and tied into sales just three wells during the quarter, it highlighted a three-year drilling program that has it poised for growth. The company's acreage position is concentrated entirely in Ohio, with its core in Noble, Guernsey, Monroe, Belmont and Harrison counties growing by 3,060 net acres to 99,300 net acres with acquisitions during the quarter (see Shale Daily, May 9).

The company said it placed its three-well Herrick Utica Shale pad into sales in Monroe County at a combined 30-day sales rate of 35 MMcf/d on restricted choke in June. Eclipse tested different concentrations of slick water, crosslink gel and sand in each of the wells as part of a horizontal hydraulic fracturing (fracking) design testing program. One of those wells is "outperforming the others, providing the company with valuable insight toward its goal of developing an optimized frack design as expeditiously as possible," Eclipse said in its earnings release without giving further details.

The first month of production from the Herrick pad, however, was curtailed by downtime on the Eureka Hunter and Dominion gathering systems due to equipment installations for increased volumes.

Eclipse has joint operating agreements with Antero Resources Corp. in Noble County and with Magnum Hunter Resources Corp. in Monroe County. It said that during the second quarter it also participated in 16 gross nonoperated wells and placed into sales 12 of them.

Like other operators in Appalachia, Eclipse appears focused on firm transportation. It secured a combined 355,000 Dth/d of firm sales on Energy Transfer Partners LP's ET Rover pipeline (see Shale Daily, June 26) and Columbia Pipeline Group's Utica Access project, both beginning by 2017. Another 100,000 Dth/d was secured on Texas Eastern Transmission Co.'s (TETCO) Team 2014 project, giving it access to the East Coast (Tetco M3), Gulf Coast and Midwestern markets.

"Based on our results this quarter and year to date, I continue to believe we are on pace for record-setting growth through the end of this year and next," said CEO Benjamin Hulburt. "Our quarterly production exceeded our internal estimates; our drilling pace is running ahead of schedule and our proved reserves have continued to grow at a rapid pace."

Eclipse plans to drill 53 operated wells this year. It is currently running five rigs in Ohio, with plans for two others in the fourth quarter.

The company reported a net loss of $18.1 million, or 8 cents/share, in the second quarter, compared to a net loss of $5.7 million in the year-ago period when it was a private company. Those losses stemmed from one-time charges, particularly a tax charge of $94.5 million related to its IPO in June.

Commodity price realizations were also down in the quarter, with natural gas, natural gas liquids and oil, including hedges, averaging $6.82/Mcfe, a 26% decrease from 2Q2013. 

The company’s stock slid by more than 7% on Thursday, closing down by $1.54/share to finish at $19.23. On its first day of trading in June, when the stock opened at $27.00/share, it fell by more than 4% to $25.75 and has mostly continued to fall since then as natural gas prices have fallen.

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