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Eclipse Planning to De-Risk Ohio Marcellus This Year

Eclipse Resources Corp. is monitoring results from two Marcellus Shale condensate wells in southeastern Ohio, where few others like them have been drilled, which could de-risk the company’s other locations.

The company drilled and completed the wells in Monroe County last year and placed them to sales in late January. While Eclipse holds 155,725 net acres in Ohio and Pennsylvania, only 15,456 are prospective for the Marcellus. Ohio records show that the company operates only two other producing Marcellus wells in the state.

“The Marcellus in this area of southeast Ohio is condensate-rich, and we remain excited for the prospect of it becoming a more meaningful part of our drilling program in the future, as we can now co-develop both the Utica and Marcellus off of the same pad,” CEO Benjamin Hulburt said Thursday during a year-end earnings call.

“The company has put forth a significant effort in this stacked pay area to assemble acreage where we can drill laterals from 15,000-20,000 feet in each formation, further lowering our cost structure,” he added of the so-called super lateral program. “In addition, with approximately 78 additional Marcellus locations based on our current assumptions, we continue to see this as a value driver that the market has not yet focused on.”

Eclipse hasn’t budgeted for any other Marcellus wells this year, Hulburt said, but it plans to continue analyzing initial production results and to finalize a plan for gathering and processing. The wells were developed on an existing Utica pad and right now it appears as though drilling longer laterals in the Ohio Marcellus is viable.

“What we’re finding is that geologically, in this area, Marcellus is fairly quiet, it’s very comparable to drilling Point Pleasant condensate in Ohio,” Hulburt said, adding the company currently expects to drill 14,000- to 15,000-foot laterals in the play. 

The wells tie into a 2018 program that is heavily focused on condensate production as commodity prices have improved. Eclipse is guiding for 2018 production of 335-355 MMcfe/d, or about 11% year/year growth at the midpoint. Condensate production is forecast to increase by 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.

Eclipse missed its full-year 2017 guidance of 315-320 MMcfe, partly because management reordered the drilling schedule toward condensate wells as 2017 came to a close. Fourth quarter production also dropped sequentially from 353 MMcfe/d produced in 3Q2017.

Hulburt said that within “the next couple of weeks” Eclipse also plans to spud its first Utica Shale well in the Flat Castle area of north-central Pennsylvania, where it recently acquired 44,500 net acres. “Our enthusiasm for the project area has continued to increase based on the recent industry wells in the immediate area of our acreage, as well as our analysis of a full core we’ve acquired in the project area very recently.”

Eclipse reported a net loss of $13.1 million (minus 5 cents/share) for the fourth quarter, compared with a net loss of $62.1 million (minus 24 cents) in the year-ago period.  For the full-year, Eclipse reported net income of $8.5 million (3 cents/share), compared to a net loss of $206.7 million (minus 86 cents) for 2016.

Average realized prices, including cash settled derivatives and firm transportation costs, increased to $2.99/Mcfe in 2017 from $2.76/Mcfe in 2016. Revenue was up to $383.7 million in 2017 from $235 million in the prior year.

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