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Canada's Encana Corporation to Acquire Texas-based Athlon Energy

Date:30-09-2014

Encana Corporation, one of Canada’s largest producers of oil and natural gas, agreed to purchase Athlon Energy Inc for $5.9 billion, in a move to gain a foothold in one of North America’s most oil-rich regions.

This is Encana‘s biggest deal since its creation in 2002. By buying Athlon Energy, the Canadian driller will add 140,000 net acres in the Permian basin in part of New Mexico and West Texas.

The upcoming deal is an effort by Encana to continue moving away from natural gas, which has been beset by consistently low prices, and into more lucrative oil production.

The deal is expected to add around 30,000 barrels of oil equivalent a day to Encana’s production capabilities. Encana added that it expected the Permian basin to become an important part of its growth strategy.

Chief executive of Encana, Doug Suttles said that this transformative acquisition further accelerates their strategy and provides them with a prime position in what is widely acknowledged as one of North America’s top oil plays. According to Suttles, the Athlon team has built a brilliant asset with massive running room that includes more than ten years of drilling inventory with up to 11 potential productive horizons of high-margin liquids.

Under the terms of deal, Encana will pay $58.50 per share, 25 percent more Athlon’s closing price on Friday. The Encana Corporation will also assume Athlon’s $1.5 billion in debt.

Athlon’s biggest investor is Apollo Global Management, the private equity giant, which formed a partnership with the energy company four years ago and still retains a stake of approximately 25 percent.

Barclays, Pickering, Tudor, Holt & Company advised Encana. Legal advice to Encana was provided by Rifkind, Paul, Weiss, Wharton & Garrison, Vinson & Elkins, and Blake, Cassels & Graydon. Goldman Sachs, Evercore Partners advised Athlon and legal advice was provided by Latham & Watkins.

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