Eclipse 2Q18: Drilled More Long Wells, Progress on Sale/Merger

Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA, is one of the smaller but (in our opinion) more important drillers in our region. Eclipse has drilled the reigning record-holders for longest on-shore lateral wells drilled…in the world (almost 20,000 feet long!). Last week Eclipse issued their second quarter update. Among the items discussed: The company lost $19 million vs. making $11.5 million in 2Q17. They produced an average of 305.5 million cubic feet equivalent per day (MMcfe/d), up a tad from 2Q17’s 287.8 MMcfe/d. Production was 72% natural gas and 28% liquids. They drilled 6 wells with an average lateral length of approximately 15,900 feet. So far the company has drilled 17 “super lateral” wells with an average lateral length of over 18,300 feet–which is why they are an important driller. The company, as we previously reported, is going through a “strategic review process” in which they are looking to combine with, or sell out to, another company (see Eclipse Resources Board Considering Either Merger or Acquisition). Ben Hulburt, CEO, had this to say about progress with the buyout/merger process: “As you all know, we announced that our Board of Directors has initiated a process to evaluate and consider a full range of strategic, operational and financial alternatives to maximize shareholder value. And while we’re pleased to say that substantial progress continues to be made, as we’ve previously stated, there is no definitive timetable for completion of this evaluation nor can there be any assurances that any initiatives will be announced or completed in the future.” In other words, there’s something coming, but we can’t talk about it, so stay tuned…
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News from DUG East: Record-Breaking Wells, Long Laterals & More

One of two major Marcellus/Utica events that happens each year in Pittsburgh, Hart Energy’s DUG East Conference, was held this week. (The other is Shale Insight, held in the fall.) We’ve covered a variety of news coming out of the DUG East event. Unfortunately we could not be there in person this year. By all accounts, a lot of great information was shared. We spotted two articles from different sources that do a good job of rounding up highlights from this week’s DUG. Hart’s own Exploration & Production magazine chronicles news from Eclipse Resources, whose CEO (Ben Hulburt) says the company expects to break more lateral records this year. Dennis Degner from Range Resources also talked about long laterals, and strategy. Degner said Range balances other factors like pipeline takeaway capacity and service costs. Also appearing on the stage were smaller/private M-U operators, like Northeast Natural Energy, who also shared some great insights. Below is a good roundup of the news coming from DUG this week, from a couple of sources…
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Rumor: EnCap Working on Plan to Merge Eclipse & Penn Energy

Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA, announced in March the company is looking for another company to buy, or (more likely) for another company to buy them (see Eclipse Resources Board Considering Either Merger or Acquisition). We have some new news to report, about a potential sale of Eclipse. Or more properly, a potential merger. EnCap Investments is a private equity/investment firm headquartered in Houston. EnCap owns a majority of Eclipse’s common stock. Put another way, Eclipse is considered a “portfolio company” of EnCap–because he who owns the most stock controls the company. EnCap has a number of portfolio companies–other energy companies in which they invest. One of them is PennEnergy Resources, an active driller in the southwest PA Marcellus (see Top 10 Drillers in SWPA, by Number of Permits Issued). According to sources who have spoken to the Pittsburgh Business Times, EnCap is actively pursuing a combination/merger between Eclipse and Penn Energy…
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Eclipse 1Q18: No Comment on Process to Buy or Be Bought

Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA, issued its first quarter 2018 update last week. Eclipse has drilled the longest onshore natural gas wells in the world–in the Ohio Utica. Impressive company. In March the company announced it is looking for someone to buy, or (more likely) for someone else to buy them (see Eclipse Resources Board Considering Either Merger or Acquisition). Eclipse CEO Ben Hulburt began the quarterly analyst phone call last week by anticipating questions about the buy/be bought process. He shut down any questioning before it began by saying: “I hope you can understand, because of the nature of this process, we will not be able to address any questions relating to it or discuss it further during today’s call.” So what did Ben discuss? The company drilled 8 wells in 1Q18. They completed (fracked) the company’s first PA Utica well. And he took time to toot the company’s own horn (deservedly so). Eclipse drilled 8 of Ohio’s 10 most productive Utica oil wells in 4Q17. The company has a talent for drilling very long, and very productive wells…
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BLM Blocks Eclipse from Completing Utica Well in Wayne Natl Forest

Melissa Hamsher, Eclipse Resources

Something pretty cool took place yesterday in Washington, D.C. MDN friend Melissa Hamsher, vice president for Health, Safety, Environmental and Regulatory with Eclipse Resources (headquartered in State College, PA), testified before the U.S. House of Representatives’ Resources Committee. Melissa has been a speaker on several panels MDN editor Jim Willis has moderated over the years at the annual Oil & Gas Awards Industry Summit in Pittsburgh. The uncool thing is what Melissa was in D.C. to testify about, which is that the Bureau of Land Management (BLM), after auctioning off parcels in the Wayne National Forest (WNF), is now stopping Eclipse from drilling under those parcels. Eclipse had already bundled some of the BLM parcels they won at auction with neighboring private land, setting up a drill pad on private (not public) land when the BLM stepped in and stopped Eclipse’s first under-construction Utica well in WNF, claiming the BLM needs to conduct a “new environmental analysis” before drilling can continue. At every turn BLM, while pretending to act in good faith by conducting auctions of WNF land, has acted in bad faith to block Eclipse’s progress after winning those auctions. Melissa shined a bright light on the sleazy tactics used by BLM at a Congressional hearing exploring the “unfair weaponization of the National Environmental Policy Act”…
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Eclipse Resources Board Considering Either Merger or Acquisition

Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA, has just done it again. The company has drilled another massively long onshore lateral–19,335 feet long–in the Ohio Utica. It’s not the longest onshore lateral in the world (currently the Eclipse Outlaw well, at 19,600 feet), but this one comes close. Although drilling a new super lateral is big news, there was other news that (for us) is even bigger: Eclipse issued a statement yesterday that says, in part, the company “has initiated a process to evaluate and consider a full range of potential strategic, operational and financial alternatives to maximize shareholder value.” Eclipse hired investment firm Jefferies LLC and international law firm Norton Rose Fulbright to help with the process. Both firms specialize in mergers and acquisitions (M&A). The statement also says, “There is no assurance that the review by the Board will result in a transaction or other strategic alternative,” which we interpret to mean Eclipse is looking either to buy another company (like EQT did with Rice Energy), or sell itself to another company (like Rice Energy did to EQT). That’s our take on this seemingly innocuous announcement. Big news indeed!…
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Eclipse Resources Drilled 2 Marcellus Condensate Wells in OH in ’17

Earlier this week Eclipse Resources, an Ohio Utica-focused driller based in State College, PA, released its fourth quarter and full year 2017 update. Eclipse is one of our personal favorites, known for drilling “super laterals”–wells nearly four miles long. They’ve drilled the three longest onshore horizontal wells in the world–all in Ohio! So what did the Eclipse report reveal? A lot…
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Eclipse 2017 Update: Drilled 29 Utica Wells Avg 13,600 Ft Long

Yesterday Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA, held an analyst day to share an operational/financial update for 2017. Net production in 2017 averaged 310 million cubic feet per day (nearly a third of a billion cubic feet)–a 36% increase over 2016. Proved reserves at the end of 2017–the gas in the ground that is feasible to extract using today’s technology at today’s prices–was 1.46 trillion cubic feet equivalent, more than double the end of 2016. In 2017 Eclipse drilled 29 wells with an astounding lateral (the horizontal part of the well) length averaging 13,600 feet! Eight of those wells have laterals OVER 19,000 feet!! That’s longer than 3.6 miles!!! Eclipse is the reigning champ/record-holder for drilling the longest onshore lateral in the WORLD. Below is yesterday’s 2017 update along with a whopping 84-page PowerPoint used to discuss the update, chock-full of great charts and graphs…
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Eclipse Closes on Deal for JV Partner in OH Utica

1/3/18 Update: We received a cordial call from Eclipse Resources’ vice president Douglas Kris to alert us that our original headline and interpretation below misses the mark. We are happy to issue this correction. MDN’s interpretation of Eclipse’s JV news can be summed up in two points: (1) Eclipse got less than originally announced for this deal, and (2) the deal took longer than announced to get done. Both points need clarifying. Doug said on the first point, the original announcement quoted a range for the investment by Sequel, with the high end being $325 million. Due to the complicated structure of the deal, this first part of the deal which just happened (for $285 million) is less than the high end, but well within the originally quote range. AND the deal is not completely done, yet. By the time it is done, the total deal may be $325 million. As for the second point we made about a delay in the deal, Doug said the deal actually was done by September as originally forecast, but got held up by a delay with the Securities and Exchange Commission. A big “thank you” to Doug for alerting us. We like to make sure the information you read on MDN is correct! – Jim Willis, Editor

Original Post: It costs a lot of money to drill new shale wells in the Marcellus and Utica. Depending on the layer and how deep it is, Marcellus wells cost in the neighborhood of $7 million each to drill. Utica wells cost several million dollars more because the Utica layer is deeper–nearly twice as deep as the Marcellus. The latest trend, pioneered by Eclipse Resources, is drilling really long laterals (the horizontal part of the well), which also increases the cost per well. Long lateral wells are called “super laterals”–typically defined as being a lateral longer than 15,000 feet (nearly 3 miles!). Eclipse is the reigning champ of drilling super laterals, having drilled the three longest onshore horizontal wells in the WORLD, each of them 3.5 miles or longer. Eclipse wants to keep drilling super laterals and needs money to do it. Last August during a conference call with stock analysts to discuss second quarter 2017 results, Eclipse CEO Ben Hulburt revealed the company has brokered a new deal with Sequel Energy Group LLC, an affiliate of GSO Capital Partners (see Eclipse Res. 2Q17: $325M JV to Keep Drilling, Wants More Acreage). The deal with Sequel is a joint venture (JV) in which Sequel ponies up $325 million in return for partial ownership of the wells drilled (and a requisite share of the profits). The deal was supposed to be signed, sealed and delivered by last September. That didn’t happen. Two days after Christmas Eclipsed announced the deal has finally closed–but the final amount is $285 million, not the previously announced $325 million. That’s $40 million less than the originally announced deal…
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Eclipse Buys 44.5K “Core” Utica Acres for $93.7M…in Central PA!

Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA, drills almost exclusively in the Ohio Utica. That is, until now! Yesterday Eclipse announced it has purchased 44,500 acres of oil and gas leases and producing wells in Tioga and Potter counties in north central Pennsylvania for $93.7 million–which works out to be ~$1,900/acre (very low cost). The aim of the purchase is to drill in the Pennsylvania Utica Shale. For the past few years MDN has heard about/highlighted stories of drillers going after the Utica Shale in PA–particularly in Tioga County (see Another Impressive Utica Well Pops Up…in Pennsylvania!). Eclipse cut a deal to buy the land and wells from Travis Peak Resources. We wrote about Travis Peak in December 2015 (see The 411 on New Driller Firing Up Rig in Tioga County, PA). Travis Peak, based in Austin, TX, was founded in November 2013 by a group of experienced guys who previously worked for companies like Amoco, Exxon, Pioneer Natural Resources and Newfield Exploration. A small company consisting of industry pros with financial backing from EnCap Investments. The best part of this deal for Eclipse? No money changed hands. Eclipse issued shares of stock in the company in return for picking up the acreage/wells. Also part of yesterday’s announcement by Eclipse is that they have picked up “outstanding equity interests” in small Marcellus/Utica pipeline company Cardinal Holdings–paying $18.3 million in cash. We have the full announcement below, a copy of the Eclipse presentation with lots of pretty maps and charts, and commentary about the Eclipse purchase…
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OH Landowner Loses Lawsuit to Stop Eclipse Drilling New Wells

A Harrison County, OH landowner signed a lease back in 2006 granting a driller “broad rights” to extract oil and gas on and beyond his property. The lease was signed for $1 plus royalty payments. Obviously the landowner (frankly, nobody) at the time had any idea the Utica Shale miracle would happen just a few years later. The lease signed by the landowner was, in retrospect, a bad one. But that doesn’t excuse the landowner from living up to the obligations under that lease, which the landowner has learned the hard way. The lease was sold to Eclipse Resources and Eclipse wanted to, under the terms of the lease, drill new wells which would not only drain that landowner’s property (136 acres), but also drill under neighboring properties where Eclipse also owned the lease rights. That is, the well would be located on the landowner’s property but access gas under other properties–yielding royalties to others but not the landowner. The landowner objected to new wells on his property without a new lease (can’t blame him). However, first a district court and now the U.S. Sixth Circuit Court of Appeals decided for Eclipse against the landowner. Below is a summary of Eclipse Res. Ohio, LLC v. Madzia, followed by a copy of the full decision from the Sixth Circuit…
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Longer Laterals Major Trend in 2017 Marcellus-Utica Drilling

Yesterday MDN updated you on Eclipse Resources’ program of drilling looooong laterals–the horizontal part of shale wells (see Eclipse Res. 3Q17: Super-Laterals Proving to be Super Productive). Eclipse is the reigning champ, having drilled the three longest onshore horizontal wells–in the WORLD. Upward of 3.5 miles underground! All three of Eclipse’s record-breakers are Utica wells. However, Eclipse isn’t the only driller hopping on the long lateral bandwagon. In June, Range Resources reported drilling the longest Marcellus lateral well (see Range Resources Drills Longest Marcellus Well Ever – in Washington Co.). If you compare the lateral length of Range’s wells from 3Q17 with 3Q16, they are drilling laterals 90% longer than they were just one year ago! EQT and Antero Resources are also experimenting with longer laterals. All of which leads us to christen 2017, “the year of the longer lateral”…
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Eclipse Res. 3Q17: Super-Laterals Proving to be Super Productive

Last week Eclipse Resources, the “super-lateral” Marcellus/Utica driller, turned in its third quarter 2017 update. Eclipse is a Marcellus/Utica pure play driller headquartered in State College, PA that drills mostly in the Ohio Utica. Eclipse has drilled the top three longest onshore oil/gas wells in the world. What do we glean from the 3Q17 update? Two of their world’s longest onshore wells–the Great Scott 3H and Outlaw C11H–are now online and pumping. They are pumping record-setting amounts of condensate. Each is averaging 3,300 barrels of oil equivalent (BOE) to date on a restricted choke, consisting of almost 50% condensate and 68% in total liquids. Gushers! During 3Q17 Eclipse drilled 10 wells in all, including four super-laterals with an average lateral length of over 17,500 feet. So far the company has drilled 11 super-lateral wells with an average lateral length of ~18,000 feet–averaging just 16 days from spud to total depth. Incredible! The company had average daily production of 353 million cubic feet equivalent per day (MMcfe/d). On an analyst phone call, Eclipse’s top brass said they are working to create a “reputable” super-lateral program, meaning (our words) building a successful program of long laterals that also makes big money. Here’s the 3Q17 update, along with portions of the analyst phone call and the latest slide deck…
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PA’s Deep Well Services Helped Drill World’s Longest Shale Well

In June MDN brought you the news that Eclipse Resources had drilled yet another world record-breaking shale well in the Ohio Utica (see Eclipse Breaks Record Again – New Longest Shale Well in World!). Eclipse drilled the Outlaw C 11H in Guernsey County, a Utica well that is an incredible 19,588 feet long horizontally (total measured depth of 27,739 feet). That’s 3.7 miles long–all nearly two miles deep underground. It is an engineering marvel. And it’s not the first record-breaking well they’ve drilled. Eclipse holds the previous two records for world’s longest horizontal wells, drilling the Purple Hayes, 18,500 feet long (see Eclipse Res. 1Q16: Drills Longest Shale Well Ever! “Purple Hayes”), and then the Great Scott 3H well, 19,300 feet long (see Great Scott! Eclipse Drills New Longest Lateral in World – in Utica). All three of Eclipse’s “longest ever” shale wells are located in Guernsey County. Eclipse didn’t drill those wells all by itself. The company had help. One of the key partners assisting in all three world record-breaking projects is Deep Well Services, a Pennsylvania-based “snubbing” company. We’ve written about DWS before (see our stories here). DWS has just issued a press release to talk about their “significant role” in Eclipse’s record-breaking Outlaw well…
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Eclipse Res. 2Q17: $325M JV to Keep Drilling, Wants More Acreage

Last week Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA that drills mostly in Ohio, released their second quarter 2017 update. Eclipse has been on a roll, drilling a series of longest-ever onshore lateral wells–in the world. It began last year when Eclipse drilled what they call their first “super lateral” Utica well in Guernsey County, OH–the Purple Hayes, at 18,500 feet long (see Eclipse Res. 1Q16: Drills Longest Shale Well Ever! “Purple Hayes”). Since that time, the Purple Hayes well has consistently been the #1 oil producing well in the state. In May of this year, Eclipse drilled a new longest-ever well, also in Guernsey County, the Great Scott 3H well at 19,300 feet long (see Great Scott! Eclipse Drills New Longest Lateral in World – in Utica). Barley a month later, in June, Eclipse drilled yet another record-breaker in Guernsey County–the Outlaw C 11H, a Utica well that is an incredible 19,500 feet long horizontally, some 3.7 miles long (see Eclipse Breaks Record Again – New Longest Shale Well in World!). Eclipse wants to keep on drillin’, but they need money to do so. Given the volatile nature of the commodity price of gas (and oil), and given the volatile nature of funding from Wall Street, Eclipse decided to form a $325 million joint venture (jv) with Sequel Energy Group LLC, an affiliate of GSO Capital Partners. That was last week’s really big news coming from Eclipse. They expect to close the jv deal in September and keep the drill bits turning on new super laterals. Meanwhile, Eclipse is partly done with completing (i.e. fracking) both the Great Scott and Outlaw wells. During the conference call, Eclipse CEO Ben Hulburt hinted that they may try super laterals in the Marcellus, given their success in the Utica. Hulburt also indicated the company is still in the market to lease new acreage–IF they can get it for $3,000-$5,000 per acre…
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Utica Super Lateral Wells Now Catching on in Other Plays

Click for larger version

What is a “super lateral” as opposed to a “long lateral” when it comes to shale drilling? And who is drilling these really long wells? That’s the topic of a recent post by energy expert Richard Zeits on the Seeking Alpha investors website. We’ll give you our definition. But first, some brief background. When you read about a “lateral” in shale wells, it refers to the part of the well that is horizontal. When drilling a new well, you first (of course) drill vertically–more or less straight up and down. But at a certain depth, when you hit the shale layer you are targeting, you gradually turn the hole so that it becomes horizontal, running through the rock layer (see the illustration). The horizontal part is the lateral. In the early days of Marcellus (and Utica) shale wells, laterals were perhaps a maximum of 2,000 feet in length. Today? The longest on-shore lateral in the world (all three of them, actually) are located in Ohio–drilled by Eclipse Resources. Eclipse’s wells–first the Purple Hayes, then the Great Scott and most recently the Outlaw–are considered “super laterals” because they exceed 15,000 feet. In the case of the Outlaw C 11H well in Guernsey County, OH, the lateral is a staggering 19,500 feet long (see Eclipse Breaks Record Again – New Longest Shale Well in World!). If we use the metric that a “super lateral” is 15,000 feet or longer, there is one Marcellus well that qualifies (see Range Resources Drills Longest Marcellus Well Ever – in Washington Co.). While Mr. Zeits doesn’t use the exact metric of 15,000 feet, he does talk about super laterals, and predicts they will soon become common. He notes some new news for us: Chesapeake Energy has drilled an Eagle Ford oil well with a 17,000 foot lateral. Zeits says we should expect to see this in other plays too. We found his musings over super laterals, and the economics behind them, interesting…
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