EX-99.1 2 ecr-ex991_6.htm EX-99.1 ecr-ex991_6.htm

Exhibit 99.1

Eclipse Resources Corporation Announces Fourth Quarter 2016 and Full Year 2016 Financial and Operational Results

STATE COLLEGE, PA- February 28, 2017- (BUSINESS WIRE) - Eclipse Resources Corporation (NYSE:ECR) (the “Company” or “Eclipse Resources”) today announced its fourth quarter and full year 2016 financial and operational results, as well as issued updated guidance for the first quarter of 2017 and full year 2017.

Fourth Quarter 2016 Highlights:

 

•

Average net daily production was 255.3 MMcfe per day, exceeding the high end of the Company’s previously issued production guidance.

 

•

Realized an average natural gas price, before the impact of cash settled derivatives and firm transportation expenses, of $2.88 per Mcf, a $0.16 discount to the average NYMEX natural gas prices during the quarter, exceeding the Company’s previously issued natural gas differential guidance.  

 

•

Realized an average oil price, before the impact of cash settled derivatives, of $44.51 per barrel, a $4.63 per barrel discount to the average WTI oil price during the quarter, exceeding the Company’s previously issued oil differential guidance.

 

•

Realized an average natural gas liquids (“NGL”) price, before the impact of cash settled derivatives, of $21.22 per barrel, or approximately 43% of the average WTI oil price during the quarter, beating the Company’s previously issued NGL price differential guidance.

 

•

Per unit cash production costs (including lease operating, transportation, gathering and compression, production and ad valorem taxes) were $1.54 per Mcfe and includes $0.41 per Mcfe of firm transportation expenses, which was below the Company’s previously issued operating expense guidance.  

 

•

Net loss for the fourth quarter of 2016 was $63.3 million; Adjusted EBITDAX1 for the fourth quarter of 2016 was $41.3 million.

 

•

Capital expenditures were $57.8 million.  These expenditures included $49.6 million for drilling and completions, $1.7 million for midstream expenditures, $6.0 million for land-related expenditures, and $0.5 million for corporate-level expenditures.

 

Full Year 2016 Highlights:

 

•

Average net daily production was 228.6 MMcfe per day, exceeding the midpoint of the Company’s previously issued production guidance.

 

•

Realized an average natural gas price, before the impact of cash settled derivatives and firm transportation expenses, of $2.21 per Mcf, a $0.31 discount to the average NYMEX natural gas prices during the year, exceeding the Company’s previously issued natural gas differential guidance.  

 

•

Realized an average oil price, before the impact of cash settled derivatives, of $37.35 per barrel, a $5.94 per barrel discount to the average WTI oil price during the year, beating the Company’s previously issued oil differential guidance.

 

•

Realized an average natural gas liquids price, before the impact of cash settled derivatives, of $15.62 per barrel, or approximately 36% approximately of the average WTI oil price during the year, exceeding the Company’s previously issued NGL differential guidance.

 

•

Per unit cash production costs (including lease operating, transportation, gathering and compression, production and ad valorem taxes) were $1.48 per Mcfe and includes $0.36 per Mcfe of firm transportation expenses, which was below the Company’s previously issued operating expense guidance.  

 

•

Net loss for the year was $203.8; Adjusted EBITDAX1 for the year was $105.0 million

 

•

Capital expenditures were $176.9 million.  These expenditures included $150.5 million for drilling and completions, $3.9 million for midstream expenditures, $21.5 million for land-related expenditures, and $1.0 million for corporate-related expenditures

 

•

Proved Reserves grew 35% over the previous year to approximately 469 Bcfe at SEC pricing and 108% over the previous year to approximately 1.22 Tcfe at forward NYMEX strip pricing; Finding and Development costs for the year fell to $0.70 per Mcfe, utilizing drilling and completion costs, and to $0.91 per Mcfe including all capital uses.

 

Subsequent to the end of the Fourth Quarter:

 

•

The Company completed its borrowing base redetermination of its revolving credit facility, which resulted in an increase in its borrowing base from $125 million to $175 million, and extended the maturity of its revolving credit facility from January 2018 to January 2020.  The Company remains undrawn on its revolving credit facility, other than for letters of credit.

 

•

The Company added to its natural gas hedge portfolio by executing incremental basis hedges of 60,000 MMBtu per day.

 

o

The Company has approximately 226,000 MMBtu per day of 2017 natural gas production hedged at an average floor price2 of $2.87 and an average ceiling price of $3.35.

 

o

The Company has an average of approximately 3,500 barrels per day of 2017 oil production hedged, or approximately 75% of its expected oil production for 2017, at an average floor price2 of $46.00 and an average ceiling price of $59.79.

 

o

The Company has 190,000 MMBtu per day of 2018 natural gas production hedged at an average floor price2 of $2.88 and an average ceiling price of $3.37.

 

 

1

Non-GAAP measure. See reconciliation for details

 

2

For the purposes of calculating three-way floor price, the higher valued put is used

 

Benjamin W. Hulburt, Chairman, President and CEO, commented on the Company’s fourth quarter and full year 2016 results, “During the fourth quarter, we were able to once again set record production levels for the Company while keeping our per unit operating expenses below our previously announced guidance range. This now marks the ninth consecutive reporting period in which the Company has met or exceeded its production and operating expense guidance, representing every reporting period the Company had since our initial public offering in June of 2014.

As we highlighted in our analyst day, we recently increased our type curve expectations in our Utica Shale Condensate and Rich Gas areas as a result of the outperformance we have seen to date on the wells which were completed with our “Gen3” completion design in these areas.  Although we have not yet increased our Utica Shale Dry Gas type curve, our first “Gen3” pad in the Utica Shale Dry Gas area continues to produce at an average rate of approximately 30% above our Utica Dry Gas type curve using our managed pressure drawdown methodology.  Largely as a result of the performance of our “Gen3” producing wells, we have increased our first quarter 2017 production guidance to between 275 and 280 MMcfe per day.

As 2017 continues to unfold, we will again endeavor to lower our cost structure and build on our accomplishments.  During 2017, we plan to drill 24 wells with an average lateral length of approximately 13,300, eleven of which are expected to be “Super-Laterals” with lateral extensions exceeding 15,000 feet.  While leading the industry on lateral lengths should allow us to continue to lower our cost per foot of lateral, we have also taken significant steps to manage our well costs by negotiating lower day rates on our drilling rigs and locking in flat-to-modest increases on our pressure pumping and proppant costs for the next two years.

Despite a significant amount of volatility during the quarter in natural gas prices, we have again been able to deliver a strong natural gas realized price, exceeding our guidance for both the fourth quarter 2016 and the full year 2016. We have also taken advantage of this volatility by adding to our 2018 hedge portfolio as prices allowed, with the goal of retaining upside participation if the natural gas price increases.  Lastly, I’m very happy to announce we have negotiated a new condensate marketing contract which fixes our discount to the West Texas Intermediate price for the period beginning in April of this year through the end of 2018, and as a consequence, we have updated our annual oil price differential guidance resulting in an estimated improvement on our oil differentials of approximately 15%.”

Operational Discussion

The Company’s production for the three months and years ended December 31, 2016 and 2015 is set forth in the following table:

 

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Production:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas (MMcf)

 

 

16,563.9

 

 

 

15,814.0

 

 

 

60,921.9

 

 

 

49,477.6

 

NGL sales (Mbbls)

 

 

721.1

 

 

 

709.9

 

 

 

2,446.2

 

 

 

2,450.3

 

Oil sales (Mbbls)

 

 

433.4

 

 

 

442.3

 

 

 

1,343.8

 

 

 

1,950.5

 

Total (MMcfe)

 

 

23,490.9

 

 

 

22,727.2

 

 

 

83,661.9

 

 

 

75,882.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average daily production volume:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas (Mcf/d)

 

 

180,042

 

 

 

171,891

 

 

 

166,453

 

 

 

135,555

 

NGL sales (Bbls/d)

 

 

7,838

 

 

 

7,716

 

 

 

6,684

 

 

 

6,713

 

Oil sales (Bbls/d)

 

 

4,711

 

 

 

4,808

 

 

 

3,672

 

 

 

5,344

 

Total (Mcfe/d)

 

 

255,336

 

 

 

247,035

 

 

 

228,589

 

 

 

207,897

 

 

Financial Discussion

Revenues for the fourth quarter of 2016 totaled $83.9 million, compared to $65.9 million for the fourth quarter of 2015.  Adjusted Revenues4, which includes the impact of cash settled derivatives and excludes brokered natural gas and marketing revenue, totaled $85.1 million for the fourth quarter of 2016 compared to $74.4 million for the fourth quarter of 2015.  Net loss for the fourth quarter of 2016 was $63.3 million, or $(0.23) per share. Adjusted Net Loss4 for the fourth quarter of 2016 was $5.7 million, or $(0.02) per share.  Adjusted EBITDAX4 was $41.3 million for the fourth quarter of 2016.

Revenues for the full year 2016 totaled $235.0 million, compared to $255.3 million for the full year 2015.  Adjusted Revenues4, which includes the impact of cash settled derivatives and excludes brokered natural gas and marketing revenue, totaled $261.7 million for the full year 2016 compared to $271.7 million for the full year 2015.  Net loss for the full year 2016 was $203.8 million, or $(0.84) per share. Adjusted Net Loss4 for the full year 2016 was $61.6 million, or $(0.26) per share.  Adjusted EBITDAX4 was $105.0 million for the full year 2016.

 

4

Adjusted Revenue, Adjusted Net Loss and Adjusted EBITDAX are non-GAAP financial measures. Tables reconciling Adjusted Revenue, Adjusted Net Loss and Adjusted EBITDAX to the most directly comparable GAAP measures can be found at the end of the financial statements included in this press release.

 

Average realized price calculations for the three months and years ended December 31, 2016 and 2015 are set forth in the table below:

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Average Sales Price (excluding cash settled derivatives)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas ($/Mcf)

 

$

2.88

 

 

$

2.32

 

 

$

2.21

 

 

$

2.62

 

NGLs ($/Bbl)

 

 

21.22

 

 

 

14.50

 

 

 

15.62

 

 

 

12.32

 

Oil ($/Bbl)

 

 

44.51

 

 

 

32.03

 

 

 

37.35

 

 

 

38.38

 

Total average prices ($/Mcfe)

 

 

3.50

 

 

 

2.69

 

 

 

2.67

 

 

 

3.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Sales Price (including cash settled derivatives)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas ($/Mcf)

 

$

3.00

 

 

$

2.98

 

 

$

2.69

 

 

$

3.27

 

NGLs ($/Bbl)

 

 

20.78

 

 

 

14.50

 

 

 

15.55

 

 

 

12.32

 

Oil ($/Bbl)

 

 

46.97

 

 

 

38.25

 

 

 

44.66

 

 

 

40.92

 

Total average prices ($/Mcfe)

 

 

3.62

 

 

 

3.27

 

 

 

3.13

 

 

 

3.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Sales Price (including firm transportation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas ($/Mcf)

 

$

2.29

 

 

$

1.99

 

 

$

1.71

 

 

$

2.31

 

NGLs ($/Bbl)

 

 

21.22

 

 

 

14.50

 

 

 

15.62

 

 

 

12.32

 

Oil ($/Bbl)

 

 

44.51

 

 

 

32.03

 

 

 

37.35

 

 

 

38.38

 

Total average prices ($/Mcfe)

 

 

3.09

 

 

 

2.46

 

 

 

2.30

 

 

 

2.89

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Sales Price (including cash settled derivatives and firm transportation)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas ($/Mcf)

 

$

2.42

 

 

$

2.65

 

 

$

2.19

 

 

$

2.95

 

NGLs ($/Bbl)

 

 

20.78

 

 

 

14.50

 

 

 

15.55

 

 

 

12.32

 

Oil ($/Bbl)

 

 

46.97

 

 

 

38.25

 

 

 

44.66

 

 

 

38.38

 

Total average prices ($/Mcfe)

 

 

3.21

 

 

 

3.04

 

 

 

2.76

 

 

 

3.38

 

 

 

 

The Company’s primary operating expenses per Mcfe for the fourth quarter of 2016 decreased by 39% compared to the prior year’s quarter and are shown in the table below.  Per unit cash production costs (includes lease operating, transportation, gathering and

compression, production and ad valorem taxes) were $1.54 per Mcfe for the fourth quarter 2016 and includes $0.41 per Mcfe of firm transportation expenses.

 

The Company’s primary operating expenses per Mcfe for the year ended December 31, 2016 decreased by 42% compared to the prior year’s and are shown below.  Per unit cash production costs (includes lease operating, transportation, gathering and compression, production and ad valorem taxes) were $1.48 per Mcfe for the full year 2016 and includes $0.36 per Mcfe of firm transportation expenses.

 

 

  

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Operating expenses (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating

 

$

1,912

 

 

$

3,757

 

 

$

9,023

 

 

$

13,904

 

Transportation, gathering and compression

 

 

30,947

 

 

 

27,950

 

 

 

109,226

 

 

 

85,846

 

Production and ad valorem taxes

 

 

3,251

 

 

 

3,268

 

 

 

4,998

 

 

 

11,621

 

Depreciation, depletion and amortization

 

 

28,661

 

 

 

74,505

 

 

 

92,948

 

 

 

244,750

 

General and administrative

 

 

9,719

 

 

 

8,039

 

 

 

39,431

 

 

 

46,409

 

Operating expenses per Mcfe:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating

 

$

0.08

 

 

$

0.17

 

 

$

0.11

 

 

$

0.18

 

Transportation, gathering and compression

 

 

1.32

 

 

 

1.23

 

 

 

1.31

 

 

 

1.13

 

Production, severance and ad valorem taxes

 

 

0.14

 

 

 

0.14

 

 

 

0.06

 

 

 

0.15

 

Depreciation, depletion and amortization

 

 

1.22

 

 

 

3.28

 

 

 

1.11

 

 

 

3.23

 

General and administrative

 

 

0.41

 

 

 

0.35

 

 

 

0.47

 

 

 

0.61

 

 

Capital Expenditures

Fourth quarter 2016 capital expenditures were $57.8 million. These expenditures included $49.6 million for drilling and completions, $1.7 million for midstream expenditures, $6.0 million for land-related expenditures, and $0.5 million for corporate-related expenditures.

Full Year 2016 capital expenditures were $176.9 million. These expenditures included $150.5 million for drilling and completions, $3.9 million for midstream expenditures, $21.5 million for land-related expenditures, and $1.0 million for corporate-related expenditures.

Financial Position and Liquidity

Subsequent to the end of the fourth quarter of 2016, the Company completed its semi-annual borrowing base redetermination process with the lending group under its revolving credit facility.  Through that process, the lending group determined that the Company’s borrowing base will increase from $125 million to $175 million, and extended the maturity of the Company’s revolving credit facility to January of 2020.    

As of December 31, 2016, the Company’s pro forma liquidity was $341.7 million consisting of $201.2 million in cash and cash equivalents and available borrowing capacity under the Company’s revolving credit facility of $140.5 million (after giving effect to outstanding letters of credit issued by the Company of $34.5 million and pro forma the borrowing base redetermination).

Matthew R. DeNezza, Executive Vice President and Chief Financial Officer, commented, “With the closing of the asset divestiture late in the fourth quarter and our recent borrowing base redetermination, which resulted in a 40% borrowing base increase, we continue to maintain a strong liquidity position. At year end and pro forma for this recent redetermination, our liquidity was  approximately $342 million, and included a cash position of approximately $201 million and undrawn revolver availability of approximately $141 million, after giving effect to outstanding letters of credit.  We believe this liquidity position, as well as our  internally generated cash flows, will allow us to fund our 2017 drilling program, which we anticipate will provide the groundwork for a 25% compound annual growth rate in production over the next three years.”

Commodity Derivatives

The Company engages in a number of different commodity trading program strategies as a risk management tool to attempt to mitigate the potential negative impact on cash flows caused by price fluctuations in natural gas, NGL and oil prices. Below is a table that illustrates the Company’s hedging activities as of December 31, 2016:

 

Natural Gas Derivatives

Description

 

Volume

(MMBtu/d)

 

 

Production Period

 

Weighted Average

Price ($/MMBtu)

 

Natural Gas Swaps:

 

 

 

 

 

 

 

 

 

 

 

 

 

10,000

 

 

January 2017 – December 2017

 

$

2.98

 

 

 

 

10,000

 

 

March 2017 – December 2017

 

$

3.21

 

Natural Gas Collars:

 

 

 

 

 

 

 

 

 

 

Floor purchase price (put)

 

 

130,000

 

 

January 2017 – December 2017

 

$

2.85

 

Ceiling sold price (call)

 

 

130,000

 

 

January 2017 – December 2017

 

$

3.24

 

Floor purchase price (put)

 

 

20,000

 

 

January 2017 – December 2018

 

$

2.90

 

Ceiling sold price (call)

 

 

20,000

 

 

January 2017 – December 2018

 

$

3.25

 

Floor purchase price (put)

 

 

40,000

 

 

January 2018 – December 2018

 

$

2.75

 

Ceiling sold price (call)

 

 

40,000

 

 

January 2018 – December 2018

 

$

3.27

 

Natural Gas Three-way Collars:

 

 

 

 

 

 

 

 

 

 

Floor purchase price (put)

 

 

30,000

 

 

January 2017 – December 2017

 

$

2.75

 

Ceiling sold price (call)

 

 

30,000

 

 

January 2017 – December 2017

 

$

3.57

 

Floor sold price (put)

 

 

30,000

 

 

January 2017 – December 2017

 

$

2.25

 

Floor purchase price (put)

 

 

30,000

 

 

April 2017 – March 2019

 

$

3.00

 

Ceiling sold price (call)

 

 

30,000

 

 

April 2017 – March 2019

 

$

3.40

 

Floor sold price (put)

 

 

30,000

 

 

April 2017 – March 2019

 

$

2.20

 

Floor purchase price (put)

 

 

80,000

 

 

January 2018 – December 2018

 

$

2.90

 

Ceiling sold price (call)

 

 

80,000

 

 

January 2018 – December 2018

 

$

3.31

 

Floor sold price (put)

 

 

80,000

 

 

January 2018 – December 2018

 

$

2.12

 

Floor purchase price (put)

 

 

20,000

 

 

October 2017 – December 2018

 

$

2.90

 

Ceiling sold price (call)

 

 

20,000

 

 

October 2017 – December 2018

 

$

3.50

 

Floor sold price (put)

 

 

20,000

 

 

October 2017 – December 2018

 

$

2.20

 

Natural Gas Call/Put Options:

 

 

 

 

 

 

 

 

 

 

Call sold

 

 

40,000

 

 

January 2018 – December 2018

 

$

3.75

 

Call sold

 

 

10,000

 

 

January 2019 – December 2019

 

$

4.75

 

Basis Swaps:

 

 

 

 

 

 

 

 

 

 

TCO - Columbia

 

 

20,000

 

 

January 2017 – December 2017

 

$

(0.19

)

Oil Derivatives

Description

 

Volume

(Bbls/d)

 

 

Production Period

 

Weighted Average

Price ($/Bbl)

 

Oil Swaps:

 

 

 

 

 

 

 

 

 

 

Floor purchase price (put)

 

 

2,000

 

 

January 2017 – September 2017

 

$

46.00

 

Ceiling sold price (call)

 

 

2,000

 

 

January 2017 – September 2017

 

$

59.50

 

Floor sold price (put)

 

 

2,000

 

 

January 2017 – September 2017

 

$

38.00

 

Floor purchase price (put)

 

 

2,000

 

 

January 2017 – December 2017

 

$

46.00

 

Ceiling sold price (call)

 

 

2,000

 

 

January 2017 – December 2017

 

$

60.00

 

Floor sold price (put)

 

 

2,000

 

 

January 2017 – December 2017

 

$

38.00

 

Oil Call/Put Options:

 

 

 

 

 

 

 

 

 

 

Call sold

 

 

1,000

 

 

January 2018 – December 2018

 

$

50.00

 

NGL Derivatives

Description

 

Volume

(Gal/d)

 

 

Production Period

 

Weighted Average

Price ($/Gal)

 

Propane Swaps:

 

 

 

 

 

 

 

 

 

 

 

 

 

84,000

 

 

January 2017 – December 2017

 

$

0.60

 

 

Subsequent to December 31, 2016, the Company entered into the following derivative instruments:

Description

 

Volume

(MMbtu/d)

 

 

Production Period

 

Weighted Average

Price ($/MMbtu)

 

Natural Gas Call/Put Options:

 

 

 

 

 

 

 

 

 

 

Call sold

 

 

60,000

 

 

January 2018 – March 2018

 

$

3.75

 

Call purchased

 

 

60,000

 

 

January 2018 – March 2018

 

$

3.25

 

Put sold

 

 

60,000

 

 

January 2018 – December 2018

 

$

2.40

 

Put purchased

 

 

60,000

 

 

January 2018 – December 2018

 

$

2.10

 

Call sold

 

 

50,000

 

 

April 2017 - December 2018

 

$

3.40

 

Call purchased

 

 

50,000

 

 

April 2017 - December 2018

 

$

3.20

 

Put sold

 

 

70,000

 

 

April 2017 - December 2018

 

$

2.25

 

Basis Swaps:

 

 

 

 

 

 

 

 

 

 

Appalachia - Dominion

 

 

20,000

 

 

May 2017 – November 2017

 

$

(1.04

)

Appalachia - Dominion

 

 

40,000

 

 

June 2017 – November 2017

 

$

(1.01

)

Guidance

The Company issued the following first quarter and full year 2017 guidance in the table below:

 

 

Q1 2017

 

FY 2017

Production MMcfe/d

 

275 - 280

 

305 - 315

% Gas

 

72% - 76%

 

77% - 82%

% NGL

 

14% - 16%

 

9% - 14%

% Oil

 

10% - 12%

 

7% - 11%

Gas Price Differential ($/Mcf)1,2

 

$0.05 - $(0.05)

 

$(0.25) - $(0.35)

Oil Differential ($/Bbl)1

 

$(7.50) - $(8.50)

 

$(6.50) - $(7.50)

NGL Prices (% of  WTI)1

 

42% - 46%

 

33% - 38%

Cash Production Costs ($/Mcfe)3

 

$1.65 - $1.70

 

$1.45 - $1.55

Cash G&A ($mm)4

 

$8.5 - $9.5

 

$35 - $37

CAPEX ($mm)5

 

 

 

~$300

 

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.

5.            Excludes potential acquisitions and payments of approximately $17 million for land leased in 2016 and expected to be paid in 2017.

Conference Call

A conference call to review the Company’s financial fourth quarter 2016 and full-year 2016 earnings is scheduled for Wednesday, March 1, 2017, at 9:00 a.m. (Eastern). To participate in the call, please dial 877-709-8150, or 201-689-8354 for international callers, and reference Eclipse Resources Fourth Quarter and Full Year 2016 Earnings Call. A replay of the call will be available through May 3, 2017. To access the phone replay dial 877-660-6853 or 201-612-7415 for international callers. The conference ID is 13653954. A live webcast of the call may be accessed through the “Investors” section of the Company’s website at www.eclipseresources.com.

 

 

ECLIPSE RESOURCES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

December 31,

2016

 

 

December 31,

2015

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

201,229

 

 

$

184,405

 

Accounts receivable

 

 

43,638

 

 

 

27,476

 

Assets held for sale

 

 

468

 

 

 

21,971

 

Other current assets

 

 

4,295

 

 

 

35,532

 

Total current assets

 

 

249,630

 

 

 

269,384

 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT AT COST

 

 

 

 

 

 

 

 

Oil and natural gas properties, successful efforts method:

 

 

 

 

 

 

 

 

Unproved properties

 

 

526,270

 

 

 

720,159

 

Proved oil and gas properties, net

 

 

414,482

 

 

 

265,838

 

Other property and equipment, net

 

 

6,748

 

 

 

7,971

 

Total property and equipment, net

 

 

947,500

 

 

 

993,968

 

 

 

 

 

 

 

 

 

 

OTHER NONCURRENT ASSETS

 

 

 

 

 

 

 

 

Other assets

 

 

729

 

 

 

2,520

 

Deferred taxes

 

 

—

 

 

 

540

 

TOTAL ASSETS

 

$

1,197,859

 

 

$

1,266,412

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

   CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$

44,049

 

 

$

34,717

 

Accrued capital expenditures

 

 

11,083

 

 

 

10,956

 

Accrued liabilities

 

 

64,150

 

 

 

25,462

 

Accrued interest payable

 

 

21,098

 

 

 

23,809

 

Liabilities held for sale

 

 

245

 

 

 

18,898

 

Total current liabilities

 

 

140,625

 

 

 

113,842

 

 

 

 

 

 

 

 

 

 

NONCURRENT LIABILITIES

 

 

 

 

 

 

 

 

Debt, net of unamortized discount and debt issuance costs

 

 

492,278

 

 

 

527,248

 

Asset retirement obligations

 

 

4,806

 

 

 

3,401

 

Other liabilities

 

 

13,434

 

 

 

1,367

 

Total liabilities

 

 

651,143

 

 

 

645,858

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Preferred stock, 50,000,000 authorized, no shares issued and outstanding

 

 

—

 

 

 

—

 

Common stock, $0.01 par value, 1,000,000,000 authorized, 260,591,893

   and 222,674,270 shares issued and outstanding, respectively

 

 

2,607

 

 

 

2,227

 

Additional paid in capital

 

 

1,958,731

 

 

 

1,829,082

 

Treasury stock, shares at cost; 72,704 shares at December 31, 2016

 

 

(61

)

 

 

—

 

Accumulated deficit

 

 

(1,414,561

)

 

 

(1,210,755

)

Total stockholders' equity

 

 

546,716

 

 

 

620,554

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

1,197,859

 

 

$

1,266,412

 

ECLIPSE RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

  

 

For the Three Months Ended December 31,

 

 

For the Year Ended December 31,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

REVENUES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas, oil and natural gas liquids sales

 

$

82,275

 

 

$

61,075

 

 

$

223,015

 

 

$

234,601

 

Brokered natural gas and marketing revenue

 

 

1,608

 

 

 

4,807

 

 

 

12,019

 

 

 

20,720

 

Total revenues

 

 

83,883

 

 

 

65,882

 

 

 

235,034

 

 

 

255,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating

 

 

1,912

 

 

 

3,757

 

 

 

9,023

 

 

 

13,904

 

Transportation, gathering and compression

 

 

30,947

 

 

 

27,950

 

 

 

109,226

 

 

 

85,846

 

Production and ad valorem taxes

 

 

3,251

 

 

 

3,268

 

 

 

4,998

 

 

 

11,621

 

Brokered natural gas and marketing expense

 

 

664

 

 

 

6,116

 

 

 

12,268

 

 

 

26,173

 

Depreciation, depletion and amortization

 

 

28,661

 

 

 

74,505

 

 

 

92,948

 

 

 

244,750

 

Exploration

 

 

7,592

 

 

 

93,271

 

 

 

52,775

 

 

 

116,211

 

General and administrative

 

 

9,719

 

 

 

8,039

 

 

 

39,431

 

 

 

46,409

 

Rig termination and standby

 

 

3

 

 

 

2,075

 

 

 

3,846

 

 

 

9,672

 

Impairment of proved oil and gas properties

 

 

—

 

 

 

691,334

 

 

 

17,665

 

 

 

691,334

 

Accretion of asset retirement obligations

 

 

116

 

 

 

426

 

 

 

391

 

 

 

1,623

 

(Gain) loss on sale of assets

 

 

7,880

 

 

 

446

 

 

 

6,936

 

 

 

(4,737

)

Gain on reduction of pension obligations

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total operating expenses

 

 

90,745

 

 

 

911,187

 

 

 

349,507

 

 

 

1,242,806

 

OPERATING LOSS

 

 

(6,862

)

 

 

(845,305

)

 

 

(114,473

)

 

 

(987,485

)

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on derivative instruments

 

 

(43,931

)

 

 

24,494

 

 

 

(52,338

)

 

 

56,021

 

Interest expense, net

 

 

(12,496

)

 

 

(13,204

)

 

 

(50,789

)

 

 

(53,400

)

Gain (loss) on early extinguishment of debt

 

 

—

 

 

 

—

 

 

 

14,489

 

 

 

(59,392

)

Other income (expense)

 

 

(12

)

 

 

—

 

 

 

(149

)

 

 

400

 

Total other expense, net

 

 

(56,439

)

 

 

11,290

 

 

 

(88,787

)

 

 

(56,371

)

LOSS BEFORE INCOME TAXES

 

 

(63,301

)

 

 

(834,015

)

 

 

(203,260

)

 

 

(1,043,856

)

INCOME TAX BENEFIT (EXPENSE)

 

 

(6

)

 

 

20,146

 

 

 

(546

)

 

 

72,446

 

NET LOSS

 

$

(63,307

)

 

$

(813,869

)

 

$

(203,806

)

 

$

(971,410

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS PER COMMON SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.23

)

 

$

(3.66

)

 

$

(0.84

)

 

$

(4.46

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE COMMON SHARES

   OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

258,812

 

 

 

222,534

 

 

 

241,434

 

 

 

217,897

 

Adjusted Revenue

Adjusted Revenue is a non-GAAP financial measure.  The Company defines Adjusted Revenue as follows: total revenues plus net cash receipts settled derivative instruments less brokered gas and marketing revenue.  The Company believes Adjusted Revenue provides investors with helpful information with respect to the performance of the Company's operations and management uses Adjusted Revenue to evaluate its ongoing operations and for internal planning and forecasting purposes. See the table below which reconciles Adjusted Revenue and total revenues.

                                                                                                                                                                                                                                                                

 

 

For the Three Months Ended

December 31,

 

 

For the Year Ended

December 31,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Total revenues

 

$

83,883

 

 

$

65,882

 

 

$

235,034

 

 

$

255,321

 

Net cash receipts (payments) on derivative

   instruments

 

 

2,826

 

 

 

13,320

 

 

 

38,696

 

 

 

37,074

 

Brokered natural gas and marketing revenue

 

 

(1,608

)

 

 

(4,807

)

 

 

(12,019

)

 

 

(20,720

)

Adjusted revenue

 

$

85,101

 

 

$

74,395

 

 

$

261,711

 

 

$

271,675

 

 

Adjusted Net Loss

 

Adjusted net loss represents loss before income taxes adjusted for certain non-cash items as set forth in the table below less income taxes.  We believe adjusted net loss is used by many investors and published research in making investment decisions and evaluating operational trends of the Company and its performance relative to other oil and gas producing companies.  Adjusted net loss is not a measure of net income as determined by GAAP.  See the table below for a reconciliation of adjusted net loss and net loss.

 

 

  

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Loss before income taxes, as reported

 

$

(63,301

)

 

$

(834,015

)

 

$

(203,260

)

 

$

(1,043,856

)

(Gain) loss on derivative instruments

 

 

43,931

 

 

 

(24,494

)

 

 

52,338

 

 

 

(56,021

)

Net cash receipts (payments) on derivative instruments

 

 

2,826

 

 

 

13,320

 

 

 

38,696

 

 

 

37,074

 

Rig termination and standby

 

 

3

 

 

 

2,075

 

 

 

3,846

 

 

 

9,672

 

Impairment of proved oil and gas properties

 

 

-

 

 

 

691,334

 

 

 

17,665

 

 

 

691,334

 

Dry hole and other

 

 

156

 

 

 

365

 

 

 

1,029

 

 

 

511

 

Stock based compensation

 

 

1,049

 

 

 

1,241

 

 

 

6,216

 

 

 

4,635

 

Impairment of unproved properties

 

 

1,744

 

 

 

88,492

 

 

 

29,824

 

 

 

95,573

 

Other (income) expense

 

 

12

 

 

 

-

 

 

 

149

 

 

 

(400

)

Gain on early extinguishment of debt

 

 

-

 

 

 

-

 

 

 

(14,489

)

 

 

59,392

 

(Gain) loss on sale of assets

 

 

7,880

 

 

 

446

 

 

 

6,936

 

 

 

(4,737

)

Loss before income taxes, as adjusted

 

 

(5,700

)

 

 

(61,236

)

 

 

(61,050

)

 

 

(206,823

)

Income tax benefit (expense)

 

 

(6

)

 

 

20,146

 

 

 

(546

)

 

 

72,446

 

Adjusted net loss

 

$

(5,706

)

 

$

(41,090

)

 

$

(61,596

)

 

$

(134,377

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per Common Share

 

$

(0.23

)

 

$

(3.66

)

 

$

(0.84

)

 

$

(4.46

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net loss per Common Share

 

$

(0.02

)

 

$

(0.18

)

 

$

(0.26

)

 

$

(0.62

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding

 

 

258,812

 

 

 

222,534

 

 

 

241,434

 

 

 

217,897

 

 

Adjusted EBITDAX

Adjusted EBITDAX is a supplemental non-GAAP measure that is used by the Company to evaluate its financial results. The Company defines Adjusted EBITDAX as net loss before interest expense; income taxes; impairments; depreciation, depletion and amortization (“DD&A”); gain (loss) on derivative instruments, net cash receipts (payments on settled derivative instruments, and premiums (paid) received on options that settled during the period); non-cash compensation expense; gain or loss from sale of interest in gas properties; exploration expenses; and other unusual or infrequent items set forth in the table below. Adjusted EBITDAX is not a measure of net income as determined by GAAP.  See the table below for a reconciliation of Adjusted EBITDAX to net loss.

 

  

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2016

 

 

2015

 

 

 

2016

 

 

2015

 

Net loss

 

$

(63,307

)

 

$

(813,869

)

 

$

(203,806

)

 

$

(971,410

)

Depreciation, depletion and amortization

 

 

28,661

 

 

 

74,505

 

 

 

92,948

 

 

 

244,750

 

Exploration expense

 

 

7,592

 

 

 

93,271

 

 

 

52,775

 

 

 

116,211

 

Rig termination and standby

 

 

3

 

 

 

2,075

 

 

 

3,846

 

 

 

9,672

 

Impairment of proved oil and gas properties

 

 

—

 

 

 

691,334

 

 

 

17,665

 

 

 

691,334

 

Stock-based compensation

 

 

1,049

 

 

 

1,241

 

 

 

6,216

 

 

 

4,635

 

Accretion of asset retirement obligations

 

 

116

 

 

 

426

 

 

 

391

 

 

 

1,623

 

(Gain) loss on derivative instruments

 

 

43,931

 

 

 

(24,494

)

 

 

52,338

 

 

 

(56,021

)

Net cash receipts (payments) on settled derivatives

 

 

2,826

 

 

 

13,320

 

 

 

38,696

 

 

 

37,074

 

Interest expense, net

 

 

12,496

 

 

 

13,204

 

 

 

50,789

 

 

 

53,400

 

(Gain) loss on sale of assets

 

 

7,880

 

 

 

446

 

 

 

6,936

 

 

 

(4,737

)

Gain (loss) on early extinguishment of debt

 

 

—

 

 

 

—

 

 

 

(14,489

)

 

 

59,392

 

Other (income) expense

 

 

12

 

 

 

-

 

 

 

149

 

 

 

(400

)

Income tax (benefit) expense

 

 

6

 

 

 

(20,146

)

 

 

546

 

 

 

(72,446

)

Adjusted EBITDAX

 

$

41,265

 

 

$

31,313

 

 

$

105,000

 

 

$

113,077

 

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 Months Ending December 31, 2016

 

 

For the Year Ending December 31, 2016

 

General and administrative expenses, estimated to be reported

 

$

9,719

 

 

$

39,431

 

Stock-based compensation expense

 

 

(1,049

)

 

 

(6,216

)

Cash general and administrative expenses

 

$

8,670

 

 

$

33,215

 

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.

Contact:

Eclipse Resources Corporation

Douglas Kris, Investor Relations

814-325-2059

dkris@eclipseresources.com