Encana to acquire shale oil producer Newfield for $5.5bn

1st November 2018 By: Bloomberg

LONDON – After years of slimming down its oil and gas holdings, Canada’s Encana is reversing course with a $5.5-billion acquisition of a US shale producer in what will be the company’s biggest-ever deal.

Encana agreed to purchase Newfield Exploration, which will give it positions in the Stack and Scoop shale fields in Oklahoma, the Bakken region of North Dakota and the Uinta play in Utah. The all-stock deal also will create North America’s second-largest shale explorer, the companies said in a statement on Thursday. Encana’s stock plunged the most on record.

The acquisition signals a sea-change for North American oil producers that spent the last few years building so-called pure-play drillers focused on a single shale region such as the Permian basin on West Texas and New Mexico. For its part, Encana had spent years whittling its holdings to a core group of fields: the Permian, Eagle Ford, Montney and Duvernay.

Since its 2009 spinoff of oil producer Cenovus Energy, Encana has sought to reduce its reliance on gas, and the Newfield acquisition represents the biggest step so far in that direction.

The transaction will enhance Encana’s opportunities for growth outside western Canada, where pipeline constraints have pressured crude prices. Encana pledged significant investor benefits from the deal, including a 25% dividend increase and an expansion of buybacks.

Newfield soared as much as 14% in New York. Encana shares fell as much as 18% to C$11.03 in Toronto.

Encana joins BP, Concho Resources Inc. and Chesapeake Energy Corp. in acquiring assets or entire companies to expand after oil markets emerged from the deepest slump in a generation.