Encana Corporation and Athlon Energy Inc. have entered into a definitive merger agreement for Encana to acquire all of the issued and outstanding shares of common stock of Athlon by means of an all-cash tender offer for US$ 5.93 billion.
Encana will also assume Athlon's US$ 1.15 billion of senior notes; the total transaction value is approximately US$ 7.1 billion. The Athlon board of directors has unanimously recommended to its shareholders that they tender to the offer.
The acquisition will add Athlon's land position of approximately 140,000 net acres focused in the Midland Basin to Encana's portfolio, giving the company a seventh growth area.
Encana President and CEO, Doug Suttles, commented: "This transformative acquisition further accelerates our strategy and provides us with a prime position in what is widely acknowledged as one of North America's top oil plays.
"The Athlon team has built an exceptional asset with massive running room that includes greater than 10 years of drilling inventory with up to 11 potential productive horizons of high-margin liquids."
Athlon Chairman, President and CEO, Bob Reeves, added: "With a commitment to excellence and an unwavering focus on results, the Athlon team has established a track record of acquiring high-quality assets, applying extensive technical expertise as a top-tier operator and creating tremendous value for our shareholders.
"Through tireless dedication and hard work, our team has built a high rate-of-return oil manufacturing process in the heart of the world-class Midland Basin. With Encana's exceptional resources and the collective expertise of both teams, the next phase will accelerate development and ultimately realise the full potential of the deep inventory of premier projects."
Encana expects that the transaction will add current production of approximately 30,000 barrels of oil equivalent per day (boepd) based on Athlon's current estimated production including recent acquisitions. Encana sees the potential for approximately 5000 horizontal well locations with potential recoverable resource of approximately 3 billion boe.
In 2015, Encana intends to invest at least US$ 1 billion of capital in the play and ramp up from three to at least seven horizontal rigs by year-end 2015. The Permian will play an important part within Encana's growth portfolio, contributing significantly to projected total liquids production of approximately 250,000 bpd by 2017.
North American potential
"During our strategic review last year, we carefully studied North America's premier basins and identified the massive horizontal, multi-zone, development potential in the Permian," added Suttles. "Our strong balance sheet gave us the ability to act and capture this highly value-accretive opportunity. It is early days in the horizontal development of the Permian play and we see tremendous opportunity to enhance and accelerate value by applying our proven resource play model."
Following this oil-rich acquisition, Encana now expects to achieve its initial 2017 target to reach 75% of operating cash flow from liquids production in 2015, marking a major strategic milestone. In the past year, the company has significantly realigned its portfolio through divestitures of natural gas-weighted assets and the acquisition and development of higher-margin oil and natural gas liquids (NGLs) opportunities.
Suttles concluded: "We're delivering on the portfolio promises we made for 2017, today. We believe this acquisition, when combined with other recent portfolio changes, is highly accretive to our long-term cash flow per share projections and our goal of sustainably growing shareholder value. Our portfolio now aligns with our vision of being a leading North American resource play company. Our growth areas now include the top two resource plays in Canada, the Montney and Duvernay, and the top two resource plays in the United States, the Eagle Ford and the Permian."
Adapted from press release by Katie Woodward
Read the article online at: https://www.oilfieldtechnology.com/exploration/29092014/encana-to-acquire-athlon-energy-1522/