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Eclipse likes geological similarities to Ohio Utica in its $93.7M Pa. pickup

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Eclipse likes geological similarities to Ohio Utica in its $93.7M Pa. pickup

Eclipse Resources Corp.'s $93.7 million planned acquisition of acreage in the Utica Shale could provide the company its best returns yet, company officials said Dec. 11.

Eclipse reached an agreement with Travis Peak Resources, LLC to purchase 44,500 net acres in Tioga and Potter counties in northern Pennsylvania for an average of $1,900 per acre. The company expects the new acreage to be prospective for large amounts of dry gas.

Eclipse Chairman, President and CEO Benjamin Hulburt said the acreage is highly contiguous, allowing for longer laterals. The area, which Eclipse has dubbed the Flat Castle play, is also farther west than much of the Marcellus activity in northeast Pennsylvania and to the east of the principle Utica production zone in Ohio and West Virginia.

"This is a dry gas Utica development with substantial potential for equal or better returns than our Ohio dry gas position," Hulburt said during a call detailing the agreement. The CEO said the geologic similarities to Eclipse's existing holdings made the acreage attractive to the company.

"The Flat Castle project is in a different Utica sub-basin than our Ohio assets but with geology and drilling depths similar to our existing Ohio Utica acreage," he said. "It's very similar, if not superior, geological characteristics and even higher gas in place."

The acquisition will be funded with outstanding shares of Eclipse stock, an agreement that Hulbert said allows the company to grow significantly while "not straining our balance sheet."

"We have consistently said we would only buy property that is competitive for capital and would not be dilutive to our existing holdings. I'm excited to share that we have found an opportunity that meets or exceeds our criteria," he said.

In its review of the deal, Capital One Securities Inc. said that if Eclipse is right and its existing drilling methods translate well to the Flat Castle project, the deal will be valuable. "Eclipse believes its 'type well' estimates for the new acreage meet or exceed those of its existing southeast Ohio Utica assets. If those estimates prove true, and [estimated ultimate recoveries] on the super-long laterals range between 30 and 40 Bcf, then the $1,900 per acre purchase price seems attractive to us," the firm said.

Eclipse said the deal should close in the first quarter of 2018.