CALGARY - Encana Corp. has signed a deal to acquire Newfield Exploration Co. in an all-stock offer it said was worth about US$5.5 billion.
Under the deal announced Thursday, Newfield shareholders will receive 2.6719 Encana shares for each share of Newfield common stock.
Encana will also assume US$2.2 billion of Newfield debt.
"This strategic combination advances our strategy and is immediately accretive to our five-year plan," Encana chief executive Doug Suttles said in a statement.
Newfield shares closed at US$20.20 on the New York Stock Exchange on Wednesday, while Encana shares closed at C$13.44 on the Toronto Stock Exchange.
The deal requires the support of a two-thirds majority vote of Newfield shareholders and a majority vote by Encana shareholders.
Lee Boothby, Newfield's chairman, president and CEO, said it is the best path forward for the company.
"The combination of the two companies provides our investors with the very attributes that should be differentiated in today's energy sector-operational scale, proven execution in development of large, liquids-rich onshore resource plays, a peer-leading cost structure and an exceptionally strong balance sheet," Boothby said in a statement.
Once the deal is completed, Encana shareholders will own approximately 63.5 per cent of the combined company and Newfield shareholders will own about 36.5 per cent.
Two directors from the Newfield board will join the Encana board upon closing.
Encana also said it plans to raise its dividend by 25 per cent and increase its share buyback program to US$1.5 billion once the deal closes.
News of the acquisition came as Encana, which keeps its books in U.S. dollars, reported a profit of US$39 million or four cents per share for the quarter ended Sept. 30.
The result compared with a profit of US$294 million or 30 cents per share in the same quarter last year.
Revenue totalled US$1.26 billion, up from US$861 million.
Production in the quarter totalled 378,200 barrels of oil equivalent per day, up from 284,000 in the third quarter of 2017.
Companies in this story: (TSX:ECA)
The Canadian Press