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Encana, Canada's second-largest natural gas producer, is paying $58.50 a share for the Fort Worth, Texas-based independent oil exploration and production company. That's a 25% premium to Athlon's closing price on Friday. Also included in the deal is the assumption of $1.5 billion in long-term debt, bringing the total deal value to $7.1 billion.
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Athlon shareholders applauded the deal, and Encana investors also appeared pleased. ECA shares jumped 3.3% intraday to $21.93.
Encana touts the deal as a radical move that shifts the company's structure and focus.
"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," said Encana Chief Executive Officer Doug Suttles in a statement. "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, meanwhile, says the deal opens up new opportunities.
"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," Bob Reeves, Athlon's chairman, president, and CEO, said in a statement. "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 realize the full potential of the deep inventory of premier projects."
Indeed, the move gives Athlon the muscle and means to expand.
And, it gives Encana a key position in the most lucrative U.S. oil-producing region by adding a top oil play to its portfolio. Here's exactly what Encana stands to gain from this deal...