Nov. 01–Canada’sEncana Corp. said Thursday it will buy The Woodlands-based Newfield Exploration Co. for $5.5 billion in an all-stock deal.
The deal greatly bolsters Encana’sU.S. presence with Newfield’s strengths in oil-producing regions, especially in Oklahoma and North Dakota. The expanded Encana would immediately become one of the top handful of shale producers in North America.
While Encana is Calgary-based, the company actually has more oil and gas activity in Texas than Newfield with operations in both the Permian Basin and the Eagle Ford shale.
The goal is to create a combined company with the best mix of shale oil assets in the U.S. and Canada combined, said Encana Chief Executive Doug Suttles.
In announcing the merger, Encana also said it is raising its dividend payout to investors by 25 percent and growing its share buyback program in order to appease shareholders.
Newfield CEO Lee Boothby called the deal the best path forward for the company, selling at a premium and returning more value to shareholders. The acquisition also includes the assumption of $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 said. “The merger will accelerate the development of these assets and as a result, capture full value for our owners.”
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Newfield’s prime operating area is about 360,000 net acres in Oklahoma’s oil-rick SCOOP and STACK shale plays. Encana was a little more balanced toward natural gas production while Newfield is oil-focused, so the combination weights the expanded Encana more toward the more valuable crude oil.
Newfield shareholders will receive 2.67 Encana shares for each share of Newfield stock. Encana shareholders will own 63.5 percent of the combined company and Newfield investors will hold 36.5 percent. Newfield will gain two spots on the Encana board.
The deal is expected to close by the end of March.
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