Eclipse Resources Corporation (NYSE:ECR) (the “Company” or
“Eclipse Resources”) today, in advance of the Company’s 2018
Analyst Day, provided an update on its fourth quarter and full year
2017 production and announced its year-end 2017 proved reserves,
2018 capital budget, and first quarter and full year 2018
guidance.
Highlights of the release include:
- Net production for the fourth quarter
2017 averaged 311.7 MMcfe per day, a 22% increase over fourth
quarter 2016 production
- Net production for the full year 2017
averaged 310.7 MMcfe per day, 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
- Preliminary 2017 drill bit only finding
and development costs are estimated to be $0.26 per Mcfe and all
sources finding and development costs are estimated to be $0.31 per
Mcfe
- 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, updating
service cost assumptions and adjusting its initial flow assumption
on its Utica Shale Dry gas wells, which the Company expects will
accelerate production over its previous expectations
- Subsequent to year-end, the Company
executed an amendment to one of its gas gathering agreements
covering the majority of its Dry Gas Utica Shale wells in Ohio
which, among other provisions, resulted in a reduction to the
gathering rate of approximately 20%
- 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 per day to 355 MMcfe per day,
and estimated year- over-year condensate growth of approximately
42%, which reflects the Company’s objective of increasing its oil
and liquids exposure as a percentage of its total production for
2018
Production
The Company reported fourth quarter 2017 average net production
of 311.7 MMcfe per day. The Company also reported full year 2017
average net production of 310.7 MMcfe per day, 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 (“NGLs”) 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, Benjamin W. Hulburt,
Eclipse Resources Chairman, President and CEO, said the following,
“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.”
Proved Reserves
The Company has recently received its annual reserve report as
prepared by its independent reservoir engineering firm, 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 driven mainly by 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. The Company’s longer lateral development and enhanced
completion design has been instrumental in adding value and we
believe will provide for progressively larger reserve additions.
SEC prices for reserves were calculated as of December 31, 2017 and
among other items calibrated for quality, energy content and market
differentials with the average adjusted product price weighted by
production over the remaining lives of the properties being $51.34
per Bbl for oil, $2.98 per Mcf for natural gas, and $21.83 per Bbl
of NGLs.
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.
Utilizing forward New York Mercantile Exchange (“NYMEX”) pricing
as of December 31, 2017, the PV101 value would be approximately
$738 million and the proved reserve volumes would be 1.46 Tcfe.
This represents a value increase of $130 million, or approximately
21%, and a volume increase of approximately 237 Bcfe, or 19%,
relative to the Company’s reserves at year-end 2016 using year-end
2016 NYMEX forward prices.
For the year 2017, the Company estimates that its drill bit only
finding and development cost, excluding revisions, was $0.26 per
Mcfe while the all sources finding and development cost for
estimated proved reserve additions, including revisions was $0.31
per Mcfe. The finding and development costs are based on the
Company’s preliminary and unaudited 2017 capital costs. Final
capital costs will be provided in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2017 and may differ
materially from the Company’s estimates.
1
Non-GAAP measure. See reconciliation at the end of the press
release for details
2018 Capital Budget
The Company has established an initial capital budget for 2018
of between $300 - $320 million, allocated approximately 84% for
drilling and completions activities, 8% for midstream activities,
6% for land activities and 2% for other capital requirements. This
budget incorporates the Company’s drilling joint venture with
Sequel Energy, in which the Company made a pre-carry working
interest election of 50% in the first 16 well program and a
pre-carry working interest election of 30% in the second 17 well
program. The initial capital budget assumes the drilling of 17 net
(33 gross) horizontal Utica Shale wells and the completion of 18
net (35 gross) horizontal Utica Shale wells, including the drilling
and completion of 1 net (1.0 gross) Flat Castle area well. The
wells to be drilled in 2018 are expected to average over 16,800
feet in lateral length.
Guidance
The Company issued the following first quarter and full year
2018 guidance in the table below:
Q1 2018 FY 2018 Production MMcfe/d 295
- 305 335 - 355 % Gas 74% - 76% 73% - 77% % NGL 13% - 15% 12% - 16%
% Oil 10% - 12% 10% - 12% Gas Price Differential ($/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
Analyst Day
Eclipse Resources will host its 2018 Analyst Day on Wednesday,
January 31st at the JW Marriot Hotel in Houston, Texas. A live
audio webcast of the event will begin at 9:00 am (Central Time) and
can be accessed via the “Investors” section of Eclipse Resources’
website at www.eclipseresources.com. The Company plans to post the
Analyst Day Presentation to the “Investors” section of the
Company’s website prior to the event.
Non-GAAP Disclosure
Year-end pre-tax PV10 value is a non-GAAP financial measure as
defined by the SEC. Eclipse Resources believes that the
presentation of pre-tax PV10 value is relevant and useful to the
Company’s investors because it presents the discounted future net
cash flows attributable to Eclipse Resources’ reserves prior to
taking into account corporate future income taxes and the Company’s
current tax structure. Eclipse Resources further believes investors
and creditors use pre-tax PV10 value as a basis for comparison of
the relative size and value of the Company’s reserves as compared
with other companies.
The GAAP financial measure most directly comparable to pre-tax
PV10 is the standardized measure of discounted future net cash
flows ("Standardized Measure"). Eclipse Resources expects to
include a full reconciliation of pre-tax PV10 to Standardized
Measure in its Annual Report on Form 10-K for the year ended
December 31, 2017.
Year Ended December 31, SEC Pricing
Strip Pricing
(In
thousands)
2017 2016 2017
2016 Future net cash flows $ 1,538,529 $ 300,430 $
1,557,589 $ 1,189,923 Present value of future net cash flows:
Before income tax (PV-10) $ 729,687 $ 205,981 $ 740,764 $ 608,306
Income taxes — — — — After income tax
(standardized measure) $ 729,687 $ 205,981 $ 740,764 $ 608,306
Cash General and Administrative
Expenses
Cash General and Administrative Expenses is a non-GAAP financial
measure used by the Company in the Guidance Table to provide a
measure of administrative expenses used by many investors and
published research in making investment decisions and evaluating
operational trends of the Company. See the table below for a
reconciliation of Cash General and Administrative Expenses and
General and Administrative Expenses.
Guidance (In thousands)
For the Three MonthsEnding March
31, 2018
For the Year EndingDecember 31,
2018
General and administrative expenses, estimated to be
reported
$10,500-$13,000 $46,500-$50,500 Stock-based compensation expense
(1,000-3,000) (8,500-10,500) Cash general and administrative
expenses $9,500-$10,000 $38,000-$40,000
About Eclipse Resources
Eclipse Resources is an independent exploration and production
Company engaged in the acquisition and development of oil and
natural gas properties in the Appalachian Basin, including the
Utica and Marcellus Shales. For more information, please visit the
Company’s website at www.eclipseresources.com.
Forward-Looking
Statements
This press release contains “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”) and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).
All statements, other than statements of historical fact included
in this press release, regarding Eclipse Resources’ strategy,
future operations, financial position, estimated revenues and
income/losses, projected costs and capital expenditures, prospects,
plans and objectives of management are forward-looking statements.
When used in this press release, the words “plan,” “endeavor,”
“will,” “would,” “could,” “believe,” “anticipate,” “intend,”
“estimate,” “expect,” “project” and similar expressions are
intended to identify forward-looking statements, although not all
forward-looking statements contain such identifying words. These
forward-looking statements are based on Eclipse Resources’ current
expectations and assumptions about future events and are based on
currently available information as to the outcome and timing of
future events. When considering forward-looking statements, you
should keep in mind the risk factors and other cautionary
statements described under the heading “Risk Factors” in Eclipse
Resources’ Annual Report on Form 10-K filed with the Securities
Exchange Commission on March 3, 2017 (the “2016 Annual
Report”), and in “Item 1A. Risk Factors” of Eclipse Resources’
Quarterly Reports on Form 10-Q.
Forward-looking statements may include, but are not limited to,
statements about Eclipse Resources’ business strategy; reserves;
general economic conditions; financial strategy, liquidity and
capital required for developing its properties and timing related
thereto; realized natural gas, natural gas liquids and oil prices;
timing and amount of future production of natural gas, NGLs and
oil; its hedging strategy and results; future drilling plans;
competition and government regulations, including those related to
hydraulic fracturing; the anticipated benefits under its commercial
agreements; marketing of natural gas, NGLs and oil; leasehold and
business acquisitions; the costs, terms and availability of
gathering, processing, fractionation and other midstream services;
general economic conditions; credit markets; uncertainty regarding
its future operating results, including initial production rates
and liquid yields in its type curve areas; and plans, objectives,
expectations and intentions contained in this press release that
are not historical.
Eclipse Resources cautions you that all these forward-looking
statements are subject to risks and uncertainties, most of which
are difficult to predict and many of which are beyond the Company’s
control, incident to the exploration for and development,
production, gathering and sale of natural gas, NGLs and oil. These
risks include, but are not limited to, legal and environmental
risks, drilling and other operating risks, regulatory changes,
commodity price volatility and the recent significant decline of
the price of natural gas, NGLs, and oil, inflation, lack of
availability of drilling, production and processing equipment and
services, counterparty credit risk, the uncertainty inherent in
estimating natural gas, NGLs and oil reserves and in projecting
future rates of production, cash flow and access to capital, the
timing of development expenditures, and the other risks described
under the heading “Risk Factors” in the 2016 Annual Report and in
“Item 1A. Risk Factors” of Eclipse Resources’ Quarterly Reports on
Form 10-Q.
All forward-looking statements, expressed or implied, included
in this press release are expressly qualified in their entirety by
this cautionary statement. This cautionary statement should also be
considered in connection with any subsequent written or oral
forward-looking statements that Eclipse Resources or persons acting
on the Company’s behalf may issue. Except as otherwise required by
applicable law, Eclipse Resources disclaims any duty to update any
forward-looking statements to reflect events or circumstances after
the date of this press release.
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version on businesswire.com: http://www.businesswire.com/news/home/20180131005678/en/
Eclipse Resources CorporationDouglas Kris, Investor Relations,
814-325-2059dkris@eclipseresources.com
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