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Canada's oil and gas producer Encana has agreed to buy Newfield Exploration Company as part of a $ 5.5 billion stock deal that will create the second-largest shale producer in North America.
The agreement, which is supported by the two companies' board of directors, will give the combined company an oil and gas production of 577,000 barrels of oil equivalent per day, with Encana's production increasing by more than 50 % through the acquisition. This will place it second only to EOG Resource in unconventional space.
Encana is committed to Newfield as oil prices have risen nearly 40% over the past 12 months, giving companies the opportunity to start new deals while still bringing money back to investors.
Encana said it plans to increase its dividend by 25% and extend its stock repurchase program to $ 1.5 billion after the deal is finalized, specifying that the company will continue to sell its shares. operation was "immediately accretive".
"Our consistent execution experience gives us confidence to accelerate and increase returns for shareholders," said Doug Suttles, President and CEO of Encana.
"I am very pleased to lead the combined company, and I congratulate the Newfield team for doing an outstanding job in creating high-end jobs at the heart of each of their assets."
Thursday's agreement follows Chesapeake Energy's $ 4 billion deal to acquire the WildHorse Resource development earlier this week, and more are expected to enter the shale field in the coming weeks.
By buying Newfield, Encana gets a position in the Anadarko Basin, which borders Texas and western Oklahoma, diversifying its resources and increasing its proven reserves by 85%. Newfield occupies a position in the oil-rich area of the basin, where companies compete for acreage.
Encana already has a position in the Permian basin in Texas as well as unconventional resources in the Montney shale in British Columbia.
As part of this transaction, Encana will assume a net newfield debt of $ 2.2 billion. The companies said they expect annual synergies of $ 250 million.
Encana's shareholders will own approximately 63.5% of the amalgamated company and Newfield shareholders approximately 36.5%.
"We strongly believe that the synergies between these two organizations will create a dominant player in diversified resources," said Lee K. Boothby, Chairman of the Newfield Board, calling it "the best way forward for our company." ".
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