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Why Eclipse Resources Corp.'s Stock Is Getting Scorched Today

By Matthew DiLallo - Mar 5, 2015 at 1:58PM

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Poorly received fourth-quarter results are sending Eclipse Resources Corp's stock down more than 12% on Thursday.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Eclipse Resources Corp. (NYSE: ECR) were down nearly 14% by midafternoon. Today's sell-off was inspired by the company's less-than-inspiring fourth-quarter results as well as a reduction in the company's 2015 guidance.

So what: Eclipse Resources reported a wider loss than analysts were expecting. The company lost $33 million, or $0.21 per share, in the fourth quarter. However, after adjustments, the loss was trimmed to just $0.13 per share, which was still greater than the $0.09-per-share loss analysts were expecting.

In addition to reporting a deeper-than-expected loss, the company also pulled back on its guidance for 2015, citing the lower-than-expected commodity price environment. As of the end of last year, the company was expecting to spend $640 million in 2015, which was a 20% reduction from last year. However, because the markets are so volatile, the company is cutting its spend a bit more. It didn't give a concrete number as it's aggressively seeking cost reductions as well as pursuing a potential joint venture to accelerate its drilling. Once it has a better idea of where things will end up, it will update the market on its new capital plan.

Now what: Despite the wider loss and reduction in capital plans for 2015, Eclipse is in a good position. It recently raised capital and now has plenty of liquidity, which is something many other peers lack right now. Furthermore, it has upside should it be able to secure a drilling partner that could provide it with additional capital that won't weigh down its balance sheet.

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