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Eclipse Targeting More Appalachian Condensate, Even Longer Laterals in 2018

As the year gets into full swing, Appalachia-focused Eclipse Resources Corp. is turning back to its condensate acreage in Ohio, where it plans to keep drilling longer laterals.

However, Eclipse missed its full-year 2017 guidance, partly because management reordered the drilling schedule toward condensate wells as the year came to a close.

“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,” CEO Benjamin Hulburt said in an update ahead of the analyst day held late last month. 

Eclipse is guiding for 2018 production of 335-355 MMcfe/d this year, or about 11% year/year growth at the midpoint. Condensate growth is forecasted at 42%. In the fourth quarter, Eclipse produced 311.7 MMcfe/d, a 22% increase from the year-ago period. Full-year production was 310.7 MMcfe/d, or 36% higher than 2016.

Last year’s volumes missed the company’s 315-320 MMcfe/d guidance, while 4Q2017 production dropped sequentially from the 353 MMcfe/d produced in the third quarter. The declines were also attributed to shut-in or curtailed production to complete offset wells.

Eclipse has been focused on drilling so-called super laterals, horizontals longer than 15,000 feet. Last year was its second drilling the monster wells, shattering previous records in the third quarter when it drilled the Mercury 5BH in the Utica Shale condensate window to a lateral length of 20,800 feet in 13 days from spud to total depth.

Lateral lengths averaged 13,600 feet in 2017, with eight more than 19,000 feet. When Eclipse began operating in Ohio about six years ago, average laterals were 6,000 feet. The company said 2018 lateral lengths would average 16,800 feet. 

The company has budgeted $300-320 million for 2018, flat from the 2017 capital plan. The budget includes a joint venture with GSO Capital Partners LP affiliate Sequel Energy Group LLC. Eclipse said 84% would be allocated to drilling and completions, while the remainder would go toward midstream activities, land and other expenses.

Eclipse also is in the process of turning two operated Marcellus Shale wells to sales at a multi-well pad in Monroe County, OH. The company has 114,000 net acres in the state, including 14,000 acres overlaying the liquids-rich Marcellus. Eclipse operates only one producing Marcellus well in Ohio.

“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,” Hulburt said.

The company’s plans also include the drilling and completion of one well in its newly acquired Flat Castle area, a 44,500 net acre acquisition in north-central Pennsylvania. The deal marked Eclipse’s first step outside of Ohio.  

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