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Bloomberg
Encana Corp. agreed to buy US shale producer Newfield Exploration Co. in its largest-ever acquisition, inflaming investors’ ire by reversing course on a strategy of slimming down its oil and gas portfolio. The $5.5 billion purchase will give Encana positions in the Stack and Scoop shale fields in Oklahoma, the Bakken region of North Dakota and the Uinta play in Utah, creating North America’s second-largest shale explorer, the companies said in a statement.
Yet Encana’s stock plunged over concerns the all-stock deal will dilute investors and saddle the driller with unfamiliar assets after years of whittling the portfolio to a handful of US and Canadian fields. The shares slid as much as 18 percent to C$11.03 in Toronto, the biggest intraday plunge on record, erasing about C$2 billion ($1.5 billion) in market value.
“While we see the strategic and financial merits in the acquisition, we suspect it will take some time for the market to digest this transaction and the addition of a new play to the company’s portfolio,†Chris Cox, an analyst at Raymond James & Associates Inc., said. The acquisition signals a sea change for North American oil producers that spent the last few years building so-called pure-play drillers focused on a single shale region such as the
Permian Basin in West Texas and New Mexico.