What happened

Shares of Eclipse Resources (NYSE: ECR) surged on Friday morning, up more than 18% by 11:00 a.m. EDT after reporting robust first-quarter results.

So what

Eclipse Resources produced an average of 290 MMcfe per day during the first quarter, which blew past its guidance range that output would be between 275-280 MMcfe per day. Fueling that outperformance was the strong results of the company's Utica dry gas wells, which are exceeding expectations. The company noted that its new Gen3 completion design had increased the estimated ultimate recovery of its latest wells by 13% above the expected result.

Drilling rig among agricultural fields.

Image source: Getty Images.

In addition to that robust production result, Eclipse Resources' kept a firm lid on costs. Overall, per unit cash production costs were $1.43 per Mcfe, which was well below its guidance range of $1.65 to $1.70 per Mcfe. That combination of lower expenses and the higher output enabled Eclipse Resources to earn $26.8 million, or $0.10 per share during the quarter. Not only was that a substantial improvement from the year-ago loss of $45.5 million, or $0.20 per share, but it blew well past the analysts' consensus that Eclipse would lose $0.01 per share during the quarter.

Eclipse's strong first-quarter showing put the company on pace to deliver higher production and lower costs than its initial guidance. The company now expects production to average 315-320 MMcfe/d for the year, up from the prior expectation that output would be between 305-315 MMcfe/d. Meanwhile, the company now sees cash production costs in the range of $1.40 to $1.50 per MMcfe, which is less than the $1.45 to $1.55 per MMcfe it initially expected.

Now what

Eclipse Resources' latest well completion design is yielding excellent results, enabling the company to produce more gas per well. Because of that, and its ability to push down costs, the company can make money even in the currently choppy commodity price environment. Meanwhile, it has more tests underway, including a Gen4 completion design and a "super-lateral" well, which have the potential to fuel results well past the revised guidance.