Encana, Newfield merge to create No. 2 unconventional producer

By Luke Geiver | November 05, 2018

Encana has become the second largest unconventional oil producer in North America with its all-stock merger with Newfield Exploration. The Calgary-based exploration and production company will now hold core-of-the-core assets in three major North American shale basins, including the Permian, SCOOP/STACK and the Montney. The value of the merger is roughly $5.5 billion, according to Encana.

“When combined with our cube development model, expected synergies and relentless focus on efficiency, we are positioned to deliver highly efficient growth and quality returns,” said Doug Suttles, president and CEO of Encana who will assume the same role of the combined companies.

Encana’s cube development program combines above-surface strategies with below ground operations. The strategy involves multiple drilling rigs working on massive multiwell pads. The system utilizes crew and infrastructure to create more efficient above ground operations. Below ground, Encana is able to use more horsepower and complete more wells while on the pad. According to the company, there is a major benefit to drilling and completing an entire cube pattern of wells positioned in multiple zones at once. “Historically, our industry was slow to identify the optimal well spacing for unconventional plays,” said Mike McAllister, Encana’s COO. “This has led to large infill drilling programs years later to try and boost recovery factors.”

Following the completion of the deal—expected in early 2019—Encana intends to raise its dividends to shareholders by 25 percent and complete a $1.5 billion share buyback program. The combination of the two E&P’s creates a new version of Encana that will produced more than 577,000 barrels of oil equivalent per day

Lee Boothby, president and CEO of Newfield, said Encana will now be able to develop Newfield’s assets at a faster rate. Suttles told investors that the new assets will allow Encana to transfer learnings from one basin to another and that with more assets, the company can now remain fluid with its capital, deploying in the basin’s that offer the best returns.

Encana will now own roughly 63 percent of the new company, with Newfield owning the remainder.