Encana, a Canadian oil and gas firm, announced Thursday it will spend about $5.5 billion to acquire a company that’s made its living in Oklahoma’s STACK, SCOOP and Arkoma STACK plays.
Encana said it and Newfield Exploration Co.’s boards both have approved an all-stock deal worth $5.5 billion to close the transaction. Encana also has agreed to pick up another $2.2 billion in debt held by Newfield.
Encana calls the acquisition strategic, saying it will create a multi-basin company that’s highly active in both nations.
“This transaction creates a leading North American unconventional company,” Douglas James Suttles, Encana’s CEO and president, told analysts Thursday morning.
“The STACK and SCOOP adds a third material, high-quality asset to our complement of high-quality positions in the Permian and the Montney,” he said. “It is consistent with our multi-basin strategy focused on the best parts of the best basins.”
Suttles said Encana believes Oklahoma’s STACK and SCOOP plays are world-class resources, and that Newfield’s positions are within their best parts.
He also observed that the combination of Encana’s and Newfield’s assets would create North America’s second-largest unconventional company.
“On a combined basis, we see significant opportunities for efficiencies and synergies. We expect to apply our multi-basin model, deploying rapid learning and innovation, to further drive efficiencies in the STACK and SCOOP. The strong liquids production from Newfield further builds on our focus to grow liquids,” Suttles said.
“Our balance sheet gets even stronger, and our increased scale will benefit all of our assets and our corporate returns.”
To that end, Suttles stated Encana’s confidence in the deal translates into plans it has to boost its dividends to shareholders, post-closing, by 25 percent and to increase its share buyback program from $400 million this year to $1.5 billion in 2019.
Lee Boothby, Newfield’s chairman, president and CEO, said he believes the proposed acquisition is “the best path forward” for his company.
“The combination of the two companies provides our investors with the very attributes that should be differentiated in today’s energy sector — operational scale, proven execution in development of large, liquids-rich onshore resource plays, a peer-leading cost structure and an exceptionally strong balance sheet.”
The deal still must be approved by shareholders of both companies and by regulators. Encana expects the transaction to close sometime during the first quarter of 2019.
Newfield, which has a staff of 100 in Oklahoma, has been a major player in Oklahoma’s oil and natural gas fields for some time.
It holds more than 500,000 net acres in the Anadarko and Arkoma basins combined, with 80 percent of that within Oklahoma’s SCOOP and STACK fields.
Newfield executives this year have said the company would undertake multi-well developments in those plays using various spacing parameters and had expected to invest as much as $1 billion in the Anadarko Basin while operating between nine and 11 drilling rigs.
Newfield’s consolidated daily net production in the third quarter of 2018 was more than 202,000 barrels of oil equivalent, with 38 percent of that oil and the remainder liquids.
Daily average production in the Anadarko basin in the third quarter grew to 143,700 barrels, up 11 percent, compared to the second quarter of the year. Newfield reported a net income in the third quarter of $224 million.
The announcement of the pending sale prompted reaction from the Oklahoma Oil and Gas Association.
“Newfield’s contributions to the advancement and development of Oklahoma’s oil and gas industry cannot be overstated,” said Chad Warmington, president of the association. “Their commitment to the communities where they operate and their laserlike focus on operating safely and responsibly is why they are such a well-regarded company here in Oklahoma.
“This state owes a huge debt of gratitude to Newfield’s leadership and their entire team for believing in and investing heavily in Oklahoma, and we look forward to welcoming Encana to the Oklahoma oil and natural gas family in the coming months.”
Newfield spokeswoman Cindy Hassler said Thursday the announcement won’t change the company’s ongoing efforts to develop its resources in Oklahoma.
Hassler said the Sooner State remains Newfield’s major focus.
“It is our foundational asset and where we are spending most of our capital,” Hassler said. “We do not see things changing.
“We are going to stay on plan, and on target, through the end of 2018.”
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