According to a recent Wall Street Journal article: Encana Corp. has agreed to acquire Athlon Energy, a Texas based, shale-oil producer to the tune of $5.93 billion USD. Encana is a Canada based firm that will help their position within the state of Texas with this purchase.
While mainly operating within the natural gas sector, Encana is seeking to improve its oil output through the transaction. Within the recent year it has been trading natural gas assets for shale-oil holdings.
The most recent acquisition with Athlons comes at a price per share of $58.50, pricing it at 25% premium to the closing price on September 26. The Initial public offering from Athlon priced at $20 a share, making the sale a 300% increase. The $1.15 billion in senior notes that Encana will absorb makes the final total for the deal $7.1billion. This is the equivalent of buying each barrel of daily production from Athlon for $236,000 per barrel at todays output levels.
Encana’s goal of increasing its oil and natural gas production to half of its output is going to be expedited to reaching the mark by 2017. Athlon, Hold 140,000 acres of property which yields around 30,000 barrels daily. CEO Doug Suttles is optimistic about the possible increase in the Permian production in Texas, expecting output to increase to near 200,000 barrels per day by 2019. In the coming years Encana will plan on spending $1 billion to boost production through drilling in the new shale-oil area.
Suttles has a vision of great potential in the offering of Athlon which he has outlined in support of his buying decision. With his outlined plan, he expects to have Encana’s liquid’s production accounting for 75% of their operating cash flow.