Eclipse Resources is following an aggressive development program for the land it acquired in the shale plays of eastern Ohio over the past three years to become a significant player in the industry by 2016.
“We are really transforming from a company that had little production in 2013 to becoming a significant regional player by 2016,” CFO Matt DeNezza says. “Today we are running four rigs and we are looking to increase that to six and run that through 2015. It’s a very active pace and we expect over a 200 percent compound annual growth rate in production over the next three years.”
The State College, Pa.-based company began in 2011 by acquiring acreage based on an analytical evaluation of the shale properties within the Utica and Marcellus formations. Eclipse Resources concentrated its efforts in an area spanning five counties in Ohio that it believed would be the most prolific region.
Eclipse Resources owns more than 225,000 acres in the Utica and Marcellus shales. About 99,000 acres are located in the Utica Shale in areas where the company sees its highest returns. “When we look at our acreage concentration, 60 percent of our acreage is in the top-two drilling areas and not just in the Appalachian Basin, but in the country,” DeNezza says. “We see returns in excess of 50 percent in 94 percent of our locations.”
The northeast United States used to be a major import market for natural gas, but that has all turned on its head as the area becomes a major export market, DeNezza explains. “The area turned from an import-driven region to an export-driven region, which added significant complexities and opportunities,” he adds.
To take advantage of this change, Eclipse Resources is supplying gas locally, but also ensuring it can move gas into the Midwest, the Gulf Coast and Canada markets. The company exports about half-a-billion cubic feet of natural gas per day and continues negotiations with interstate pipeline companies to move more natural gas.
Eclipse Resources has hit the ground running as its executive management team has its sights set on growing rapidly over its first five years in business. “We focused on gathering the acreage that we have today in 2011 and as we moved into 2013 and 2014, we shifted focus from acreage acquisitions to development,” he explains. “We continue to be interested in acquisitions, but it’s really the acreage development that includes all aspects of drilling and completing the wells.”
With an aggressive development plan to achieve a 200 percent compound annual growth rate in production in 2016, Eclipse Resources realizes it has to grow smart.
“It can be difficult to manage the growth that we are talking about, but we have a management team and group of operation folks that are knowledgeable and have the capability and expertise to manage that growth trajectory,” DeNezza adds. “We see the company executing what we have laid out in our initial public offering in June and we hope people see that.”