Encana enters STACK-SCOOP with $7.7-billion Newfield deal

Nov. 12, 2018
Encana Corp., Calgary, has agreed to an all-stock transaction valued at $7.7 billion—including the assumption of $2.2 billion net debt—to combine with Newfield Exploration Co., The Woodlands, Tex., entering the oil-rich STACK-SCOOP in the Anadarko basin.

Mikaila Adams

Editor-News

Encana Corp., Calgary, has agreed to an all-stock transaction valued at $7.7 billion—including the assumption of $2.2 billion net debt—to combine with Newfield Exploration Co., The Woodlands, Tex., entering the oil-rich STACK-SCOOP in the Anadarko basin.

The deal creates North America’s second-largest producer of unconventional resources; proforma third-quarter production of 577,000 boe/d, including liquids production of 300,000 b/d, of which oil and condensate contributed 210,000 b/d, Encana said. The company currently holds assets in the Permian, Eagle Ford, Montney, and Duvernay.

“There are significant benefits from becoming a larger North American player with multi-basin exposure. Against the backdrop of Permian headwinds such as takeaway capacity constraints, cost inflation and geological risks related to parent-child wells, the Midcontinent complements the Eagle Ford as an attractive alternative investment option,” said Roy Martin, senior analyst, corporate upstream, at Wood Mackenzie.

Assets to be acquired include 360,000 net acres in the “core-of-the-core” of the Anadarko basin containing multiple commercial and prospective zones well-suited to its cube development model, Encana said, adding the asset contains more than 6,000 gross risked well locations and about 3 billion boe of net unrisked resource.

Newfield has focused on its resources in the Anadarko and Arkoma basins of Oklahoma, the Williston basin of North Dakota, and the Uinta basin of Utah. It also has producing oil assets offshore China. The company reported stronger than expected production in this year’s third quarter, largely attributed to the Anadarko basin, which grew 11% over the year’s second quarter and averaged more than 143,700 boe/d.

During the third quarter, Newfield continued STACK cube development, beginning row drilling operations across multiple drilling units in order to optimize operations, test simultaneous cube development of the Meramec, Osage, and Woodford, utilize permanent water infrastructure, and reduce downtime associated with offset activities.

Newfield’s consolidated net production in the quarter was more than 202,000 boe/d (38% oil, 62% liquids). US net production was 199,000 boe/d. US net oil production was 74,300 b/d. Oil and natural gas liquids comprised 37% and 24% of total US production, respectively.

With the deal, Encana expects oil and condensate production to be up by more than 54%, proved reserves up by 85%, and annual synergies of $250 million through scale, cube development in the SCOOP-STACK, and overhead savings.

As part of the deal, Encana will expand its buyback program to $1.5 billion from the current $400 million.

Upon closing, Encana shareholders will own 63.5% of the combine, Newfield shareholders will own 36.5%, and two directors from the Newfield board will join the Encana board. Subject to terms and conditions, the transaction is expected to close in first-quarter 2019.