Encana, Newfield merger OK'd
Encana Corp. took its worldclass portfolio of assets and made it better Tuesday by adding some of Oklahoma's best. Its shareholders agreed early Tuesday with counterpart investors in Newfield Exploration Co. to merge the two firms in a deal worth an estimated $7.7 billion, which includes Encana's assumption of about $2.2 billion of Newfield debt. The deal will pay each Newfield investor about 2.67 shares of Encana stock for every stock they own in Newfield when the deal closes Wednesday. On Tuesday, Encana's stock closed at $6.11 a share, while Newfield's closed at $16.32. Newfield's leadership has said investors will benefit from the merger through reduced costs involving efficiencies in scale, plus the strong balance sheet that Encana, based in Calgary, Canada, brings to the new company. Investors in the new company, meanwhile, are looking forward to benefits promised by Encana's top executives. Those include an accelerated return of cash through improved margins, expected to be generated in part by the liquids-based assets Newfield brings to the bigger firm's combined portfolio of holdings. Before the merger, Encana was developing assets in the Montney Shale and Permian Basin. The acquisition brings it 360,000 acres of resources in Oklahoma's STACK and SCOOP plays in the Anadarko Basin, as well as resources Newfield holds
in the Unita Basin of Utah and the Williston Basin of North Dakota. In November, when the merger plan was announced, Encana predicted those resources would boost its oil and condensate production by more than 54 percent and its proved reserves by about 85 percent. “This transaction creates a leading North American unconventional company,” Douglas James Suttles, Encana's CEO and president, told analysts after the proposed merger was announced. He also said Encana believed Oklahoma's STACK and SCOOP plays are world-class resources, that Newfield's holdings within those plays were among the best and that Encana believed the merger set up significant opportunities for efficiencies and synergies that could save the combined firm $250 million annually in general and administrative and drilling and completion costs. Newfield's consolidated daily net production in the third quarter of 2018 was more than 185,000 barrels of oil equivalent, with 71 percent of that coming from Anadarko Basin wells, according to an investors presentation the two firms prepared in November. Newfield reported a net income in the third quarter of $224 million. On Tuesday, Newfield officials said 10 rigs were actively drilling locations in Oklahoma. Encana officials provided no information Tuesday whether they plan to accelerate, keep in place or reduce ongoing activities in Oklahoma. They also didn't say what they planned to do with the Newfield office in The Woodlands, Texas, or a smaller regional office it has in Oklahoma City to support employees here. An Encana spokesman said the company will come out with an operational update for 2019 likely before the end of this month that should answer those questions. When the deal closes Wednesday, officials expect Encana shareholders will own about 63.5 percent of the combined company, while previous Newfield stockholders will own the remainder.