Encana agreed to buy Newfield Exploration in an all-stock deal valued at about $5.5 billion, creating North America’s second-largest producer of oil and natural gas from shale.
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Encana (ECA) agreed to buy Newfield Exploration (NFX) in an all-stock deal valued at about $5.5 billion, creating North America's second-largest producer of oil and natural gas from shale.
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The company pledged significant investor benefits from the deal, including a 25% increase in the dividend and expanding its share buyback program to $1.5 billion, to be funded from cash flow.
The transaction gives Encana a means to grow further beyond the pipeline constraints affecting oil prices and production in Canada and the Permian region of Texas and New Mexico.
The combined entity will now have the ability to expand into the Stack-Scoop shale play in Oklahoma, the Bakken in North Dakota and Uinta in Utah.
The combination also signals a reversal within the North American oil industry. For the last two years, executives have wanted to show they're building pure-play Permian producers, betting all in the hottest oil region in the U.S.
Now they are building multi-basin companies, able to offset any growth constraints in one region with expansion elsewhere.
Newfield rose as much as 19% in premarket trading in New York while Encana was little changed.
Effect Of Shale Merger
The combined companies will have pro-forma third quarter 2018 production of 577,000 barrels of oil equivalent a day, including liquids production of around 300,000 barrels a day.
The deal will boost Encana's oil and condensate production by over 54% and proved reserves by about 85%.
Subject to receipt of regulatory and shareholder approvals by both companies, the transaction is expected to close in the first quarter of 2019.
The post North America's No. 2 Shale Producer To Rise From This Merger appeared first on Investor's Business Daily.
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