In an all-stock deal valued at approximately $5.5 billion, Encana Corporation will acquire all the outstanding shares of common stock of Newfield Exploration Company. Encana photo.
Newfield Exploration deal makes Encana one of the top shale producers in North America
On Thursday, Encana announced an all-stock $5.5 billion deal that would see the Calgary-based company buy The Woodlands-based Newfield Exploration Co.
Upon completion of the deal, Encana’s presence in the United States shale play will be greatly bolstered, especially in Oklahoma and North Dakota and Encana would immediately become one of the largest shale producers in North America.
Encana’s Chief Executive Doug Suttles says the deal is designed to create a combined company with the best mix of shale oil assets in the US and Canada.
Along with announcing the merger, Encana also reported it is raising its dividend to pay out investors by 25 per cent and will grow its share buy back program to appease company shareholders.
Lee Boothby, CEO of Newfield calls the deal the best path forward for the company. Along with selling at a premium and returning more value to its shareholders, Encana will also assume $2.2 billion in Newfield debt.
“Throughout our 30-year history, Newfield has worked to create a strong portfolio of assets managed by some of the best and brightest people in the business,” Boothby told the Houston Chronicle. “The merger will accelerate the development of these assets and as a result, capture full value for our owners.”
Newfield’s prime operations are concentrated in an area of about 360,000 net acres in the Oklahoma oil-rich areas SCOOP and STACK shale plays. The deal will see Encana, which has been more focussed on natural gas production, lean more towards valuable crude oil production.
As part of the deal, Newfield Exploration shareholders will receive 2.7 Encana shares for each Newfield stock. Encana shareholders will own 63.5 per cent of the combined company and Newfield stockholders will hold 36.5 per cent of the company.
Newfield will also hold two seats on the Encana board.
The sale is expected to close by the end of March, 2019.