Eclipse Resources Corporation (NYSE:ECR) (the “Company” or
“Eclipse Resources”) today, in advance of the Company’s Analyst
Day, provided an update on its fourth quarter and full year 2016
production, year-end 2016 proved reserves, its 2017 capital budget
and its spring borrowing base redetermination. In addition, Eclipse
provided an update to Company type curve assumptions.
Highlights of the release include:
- Net production for the fourth quarter
2016 averaged 255 MMcfe per day, which was above the high end of
our previously issued guidance range
- Net production for the full year 2016
averaged 229 MMcfe per day, which was above the midpoint of our
previously issued guidance range
- Year-End 2016 proved reserves increased
by 35% to 469 Bcfe based on SEC pricing, and by 108% to 1.2 Tcfe
based on forward strip pricing
- The Company’s Board of Directors
established an initial capital budget for the full year 2017 of
approximately $300 million1, which is expected to be funded
substantially from the Company’s cash balance and cash flows
- The Company has updated its Utica
Condensate and Utica Rich Gas type curve assumptions, resulting in
an increase of EUR’s approximately 16% and 22% respectively based
on the results of recently completed wells using the Company’s
“Gen3” completion design
- The Company recently received
commitments subject to final documentation supporting an increase
in its borrowing base to $175 million from $125 million, while
extending the maturity of the credit facility to January of
2020
1.
Excludes potential acquisitions and
payments for land leased in 2016 and expected to be paid in
2017.
Production
The Company achieved fourth quarter 2016 average net production
of 255 MMcfe per day, above the high end of the Company’s guidance
range. The Company also achieved full year 2016 average net
production of 229 MMcfe per day, above the midpoint of the
Company’s guidance range. For the fourth quarter of 2016, the
Company’s production mix was 71% natural gas, 18% natural gas
liquids and 11% oil, while the production mix for the full year
2016 was 73% natural gas, 17% natural gas liquids and 10% oil.
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, 2016 to be 469.4 Bcfe, a 35% increase
compared to proved reserves at December 31, 2015. This increase in
reserves was driven mainly by an increase in proved developed
producing reserves related to new wells coming on production during
2016 and from the addition of incremental proved undeveloped
reserves. SEC prices for reserves were calculated as of December
31, 2016 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 $34.57 per Bbl for oil, $2.195 per Mcf for natural
gas, and $13.43 per Bbl of NGLs.
Using SEC prices, which are not indicative of current forward
prices, the pre-tax present value discounted at 10% of the December
31, 2016 proved reserves (“PV10”) was $206.0 million, an
approximate 3% decrease over the year-end 2015 reported value of
PV10 of $212.9 million. This decrease in PV10 is primarily the
result of substantially lower commodity prices used in the
calculation of 2016 proved reserves using SEC pricing as compared
to the calculation of 2015 proved reserves which utilized $38.20
per bbl for oil, $2.52 per mcf for natural gas and $12.88 per bbl
of NGLs.
Utilizing forward New York Mercantile Exchange (“NYMEX”) pricing
as of December 31, 2016, the PV10 value would be approximately
$608.3 million and the proved reserve volumes would be 1.2 Tcfe.
This represents a value increase of $327.7 million, or over 117%,
and a volume increase of over 634.7 Bcfe, or 108%, relative to our
reserves at year end 2015 using year-end 2015 NYMEX forward
prices.
For the year 2016, the Company estimates that its drill bit only
finding and development cost, including revisions, was $0.70 per
Mcfe while the all sources finding and development cost for
estimated proved reserve additions, including revisions was $0.91
per Mcfe. The finding and development costs are based on the
Company’s preliminary and unaudited 2016 capital costs. Final
capital costs will be provided in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2016.
2017 Capital Budget
The Board of Directors has approved an initial capital budget
for 2017 of approximately $300 million1. This budget includes
approximately $261 million for drilling and completions activities,
$33 million for land activities and $6 million for other capital
requirements. The initial capital budget assumes the drilling of 19
net (22 gross) horizontal Utica Shale wells, and completion of 19
net (20 gross) horizontal Utica Shale wells. The budget also
includes the drilling and completion of 1.9 net (2.0 gross)
Marcellus wells. The wells to be drilled in 2017 are expected to
average approximately 13,300 feet in lateral length. Included in
this well count are eleven “Super-Lateral” wells with lateral
extensions planned to be in excess of 15,000 feet, three of which
will be located in the Company’s Utica Dry gas acreage area, and
eight in the Company’s Utica Condensate acreage area. The 2017
Capital Budget is expected to be substantially funded through
internally generated cash flows and the Company’s current cash
balance.
1.
Excludes potential acquisitions and
payments for land leased in 2016 and expected to be paid in
2017.
Type Curve Assumptions
Based primarily on the results generated through the
implementation of its Generation 3 completion design, the Company
has increased its Utica Condensate and Utica Rich Gas type curve
EURs. The Utica Condensate type curve EUR has increased to 1.1 Bcfe
per 1,000 foot of lateral from 0.9 Bcfe per 1,000 foot of lateral
or approximately 16%, while the Rich Gas type curve EUR has
increased to 2.2 Bcfe per 1,000 foot of lateral from 1.8 Bcfe per
1,000 foot of lateral, or approximately 22% at year-end 2016 strip
pricing. These type wells are both estimated to generate IRR’s in
excess of 60% assuming current forward NYMEX strip pricing and the
Company’s 2017 expected well costs. The Company now estimates it
has over 16 years of highly economic drilling inventory at its
planned 2017 pace of development. As part of this type curve
revision process, the Company has adjusted the location of each
type curve area and recalculated the associated acreage in each
type curve band while incorporating all recent acreage acquisitions
and divestitures. The Company’s current acreage footprint of
112,000 net acres, an increase from 105,000 net acres previously
reported, consists of acreage which is 41% in the Utica Dry Gas
type curve area, 38% in the Utica Condensate area, 13% in the
Marcellus Condensate area1 and 8% in the Utica Rich gas area.
In December, the Company began the process of turning to sales
its first Generation 3 Dry Gas Utica wells. These five wells have
exhibited similar performance improvements as the Generation 3
Utica Condensate wells, and are flowing above current type curve
expectations at the Company’s target weekly pressure decline rate.
The Company plans to continue to evaluate these wells for an
additional three to six months before making an assessment on their
implication to the Company’s existing Dry Gas type curve
assumptions.
1.
Marcellus area lies up-hole from Dry Gas
area
Financial Update
The Company is pleased to announce that it recently completed
its spring borrowing base redetermination process and has received
commitments subject to final documentation supporting an increase
in its borrowing base from $125 million to $175 million. As part of
this process, the Company and bank group agreed to extend the
maturity of the revolving credit facility to January 2020. Assuming
this transaction closes under the terms as currently anticipated,
the Company estimates that it exited the year with $342 million in
liquidity, which consisted of cash on hand of approximately $202
million and this undrawn revolver net of $34 million of letters of
credit.
Guidance
The Company issued the following first quarter and full year
2017 guidance in the table below:
Q1 2017 FY 2017
Production MMcfe/d 260 - 275 305 - 315 % Gas 72% - 76% 77% - 82% %
NGL 14% - 16% 9% - 14% % Oil 10% - 12% 7% - 11% Gas Price
Differential ($/Mcf)1 $0.05 - $(0.05) $(0.30) - $(0.40) Oil
Differential ($/Bbl)1 $(7.50) - $(8.50) $(7.50) - $(8.50) NGL
Prices (% of WTI)1 38% - 42% 33% - 38% Cash Production Costs
($/Mcfe)2 $1.65 - $1.70 $1.45 - $1.55 Cash G&A ($mm)3 $8.5 -
$9.5 $35 - $37 CAPEX ($mm)4 ~$300
1.
Excludes impact of hedges and cost of firm
transportation
2.
Includes lease operating, transportation,
gathering and compression, production and ad valorem taxes.
3.
Non-GAAP measure which excludes non-cash
compensation, see reconciliation.
4.
Excludes potential acquisitions and
payments for land leased in 2016 and expected to be paid in
2017.
Analyst Day
Eclipse Resources will host its 2017 Analyst Day on Wednesday,
February 8th at the Intercontinental Barclay Hotel in New York
City. A live audio webcast of the event will begin at 9:00 am
(Eastern) and can be accessed on the “Investors” section of the
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 just 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 is not yet able
to provide a reconciliation of pre-tax PV10 to Standardized Measure
because the discounted future income taxes associated with the
Company’s reserves is not yet calculable. 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, 2016.
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.
For the Three MonthsEnding March
31,2017
For the Year EndingDecember 31,
2017
General and administrative expenses, estimated to be reported
$10.5-$12.5 million $43.5-$47.5 million Stock-based compensation
expense (2)-(3) million (8.5)-(10.5) million Cash general and
administrative expenses $8.5-$9.5 million $35-$37 million
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 4, 2016 (the “2015 Annual
Report”), and in “Item 1A. Risk Factors” of Eclipse Resources’
Quarterly Reports on Form 10-Q.
Forward-looking statements may include 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, NGLs 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; pending legal
matters relating to its leases; 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 these forward-looking
statements are subject to all of the risks and uncertainties, most
of which are difficult to predict and many of which are beyond its
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 2015 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20170207006320/en/
Eclipse Resources CorporationDouglas Kris, 814-325-2059Investor
Relationsdkris@eclipseresources.com
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