Leading Appalachian Oil & Gas Innovator: Eclipse Resources

With an innovation-first mindset, Eclipse Resources strives to be one of the leading Appalachian Basin-based oil and gas companies.

Ben Hulburt founded Eclipse Resources in 2011 to focus on the acquisition, exploration and development of oil and natural gas properties in the Appalachian Basin. The State College, Pa.-based company was launched in partnership with EnCap Investments. It follows the success of its management team’s proven track record in building successful oil and gas enterprises, notes Matt DeNezza, executive vice president and chief financial officer.

“The company had grown to cover close to 200,000 acres by the time we went public in mid-2014,” he says. “Basically, we went from zero production to where we are today. For example, in the first quarter of this year, we produced 290 million cubic feet of predominately natural gas per day. Eclipse is focused primarily on Utica Shale, although we have some Marcellus Shale assets as well.”

All of Eclipse’s acreage is located in southeast Ohio, where the company operates two rigs. “It has a nearly $300 million capital budget that we’re spending this year to drill up our core, which is now 114,000 acres,” DeNezza notes.

Though based in Pennsylvania, Eclipse has customers across the Northeast, Midwest and Gulf Coast. “We drill wells for natural gas, oil and liquid,” DeNezza says. “So when we produce our products we primarily send them through pipelines. Depending on the product, they’ll go to local refineries, power plants or propane customers. Our natural gas is typically distributed to the power companies or industrial users such as chemical companies.”

As a company, Eclipse strives to be a lower-cost producer, DeNezza notes, so that it creates stockholder value. “Whether it’s the natural gas or oil markets, we want to do our jobs and get the best returns possible we can achieve for our shareholders,” he says. “We also want to drill in a way that’s innovative, cost-oriented, and safety and environmentally focused as well.”

Innovation First

Eclipse maintains its status as one of the lowest-cost producers in its area by drilling what it calls “the longest horizontal laterals” in the industry. “Last year we started the process of drilling longer laterals, which were more than 18,500 feet long,” DeNezza explains. “You basically drill downwards and once you get to the depth of the Utica, you then drill horizontally through the shale itself. We did that for well over 18,500 feet.

“Really, no other company has done that lateral length in the world,” DeNezza continues. “We have since continued that innovation with two further laterals that are over 19,000 feet each. So we have drilled horizontally more than 3 miles with those wells, which allows us to access more natural gas and oil resources at a lower cost. It also further allows us to dramatically increase the terms on the wells we drill by doing so.”

DeNezza notes that the company’s operational team is well qualified to complete these jobs. “We are one of the best, if not the best, not only in the play that we are located in, but also in the nation in terms of drilling the horizontal laterals the way we do,” he says proudly. “No one completes them in the way that we do. The employee skillset associated with drilling these record-long laterals, or super laterals, is really industry leading. It requires a lot of thought, planning and hard work on the employee side to ensure it goes well without any problems.”

Eclipse keeps its 140 employees in continual training to ensure they are able to complete their jobs successfully. “On the safety/environmental side, we’re constantly undergoing different trainings and updates to ensure everyone knows the latest requirements,” DeNezza says. “In regards to drilling the actual wells, the guys we have that are drilling these wells are highly experienced, and constantly look at the latest developments in the sector to brainstorm how to improve on the methods that they are working through at any given time. They also keep track of the trends to learn how to do things smarter and faster on a daily basis.”

Although training is a key part of the company’s process for success, safety serves as the foundation of drilling its super laterals, DeNezza notes. “At the end of the day, you have to make sure you have an environment that’s focused on not only doing something quickly, but also safely,” he explains. “For example, if you’re not operating in a thoughtful and safe manner, then just drilling these wells are putting a lot of dollars at risk.

“So we want to make sure that those who are involved in the process are not at risk as they go forward with their day-to-day activities,” he adds. “The No. 1 thing is to stay safe while they are doing their job, and the second thing is to innovate and be outstanding in what they do. The logistics involved in drilling these wells are substantial, which is done in a coordinated and efficient manner.”

Douglas Kris, Eclipse’s head of Investor Relations, agrees. “I think we’ve instilled a culture in the entire team here of being innovative, but also being cognizant of the safety of how we’re drilling these wells,” he says. “Internally, we have put in place some metrics to have as little to no safety incidents as we possibly can. While it’s important to have an economic benefit, we want to do it in the safest environment as possible.”

Looking Ahead

As Eclipse Resources moves forward, the company wants to continue to grow and be “at the forefront” of Appalachian Basin-based oil and gas companies, DeNezza notes. “When and if it becomes appropriate, we will see how we can bring and implement our technological skillset to other areas of the United States,” he says. “Since I joined the company in 2014, we have grown from about 25 employees to 140.

“As one of the members of the senior management team, it certainly makes me proud to see what the team has done, and how we have grown,” he concludes. “As we look forward, we really feel like there’s even more that we can do that will be as, if not more, impressive than the last four years have been.”