Eclipse Resources acquires Flat Castle acreage in Utica

By Patrick C. Miller | December 12, 2017

Pennsylvania-based Eclipse Resources Corp. has entered into an agreement to purchase 44,500 acres of oil and gas leases in the Utica shale play for $93.7 million from Travis Peak Resources LLC.

The two companies entered into a definitive purchase and sale agreement—the Flat Castle acquisition—to acquire leases, wells and other oil and gas rights and interests located in Tioga and Potter counties in north central Pennsylvania. The purchase price for the acquisition will be paid in shares of Eclipse Resources’ common stock.

Eclipse Resources anticipates that the Flat Castle acquisition will add approximately 87 net drilling locations—based on a 16,000-foot lateral length—while increasing the company’s Utica dry gas acreage by approximately 85 percent.

Eclipse Resources also announced that it and Eclipse Resources Midstream LP—a wholly owned subsidiary—entered into an agreement in which the midstream company will purchase all outstanding equity interests of Cardinal NE Holdings LLC for $18.3 million in cash. Both transactions were approved by a special committee of the Eclipse Resources board of directors. The Flat Castle acquisition is expected to close in January 2018.

Cardinal owns midstream infrastructure with associated gathering rights on the Flat Castle acreage. Eclipse Resources said it expects the proximity of this infrastructure to Dominion’s gathering system will enable it to build, own and operate the gathering system as wells are drilled, reducing per unit gathering costs and improving returns.

According to Benjamin Hulburt, Eclipse Resources chairman, president and CEO, the agreements enable the company to acquire strategic Utica acreage in north central Pennsylvania. This is expected to significantly increase the company’s inventory of economic drilling locations. In addition, he said Eclipse Resources would continue to leverage its drilling and completions techniques while remaining focused on the Appalachian Basin.

"We believe that the location of the Flat Castle project area, which is significantly west of the more currently constrained northeastern Pennsylvania peers, will support our ability to reliably move gas out of the Flat Castle project area for the foreseeable future,” Hulburt said.

The first well to spud in the project area is expected in the first quarter of 2018 and full-scale development is anticipated to begin in the fourth quarter of 2018.

Hulburt said the additional scale from the largely contiguous acreage acquisition will be enhanced through the efficiency gains generated by Eclipse Resources’ “super-lateral” development applied through operational and technical learnings from the Ohio dry gas Utica to the Flat Castle project area

“From a geological perspective, this area is similar in depth to our Ohio dry gas acreage and is well delineated with a meaningful number of offset results, while lying within what we believe to be the highest gas in place of the prospect area,” he explained.