This week’s buyers: Encana, Athlon, Dover

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Encana and Athlon merger

29th September 2014 – Encana Corporation (Encana) (TSX: ECA) (NYSE: ECA) and Athlon Energy Inc. (Athlon) (NYSE: ATHL) today jointly announced that the two companies have entered into a definitive merger agreement for Encana to acquire all of the issued and outstanding shares of common stock of Texas-based Athlon by means of an all-cash tender offer (the “Offer”) for US$5.93 billion (US$58.50 per share), as well as Encana assuming Athlon’s US$1.15 billion of senior notes, for a total transaction value of approximately US$7.1 billion. The Athlon board of directors has unanimously recommended to its shareholders that they tender to the offer.

The acquisition will add Athlon’s land position of approximately 140,000 net acres focused solely in the heart of the oil-rich Midland Basin to Encana’s portfolio, giving the company a seventh growth area.

“This transformative acquisition further accelerates our strategy and provides us with a prime position in what is widely acknowledged as one of North America’s top oil plays,” says Doug Suttles, Encana President & CEO. “The Athlon team has built an exceptional asset with massive running room that includes greater than 10 years of drilling inventory with up to 11 potential productive horizons of high-margin liquids.”

“With a commitment to excellence and an unwavering focus on results, the Athlon team has established a track record of acquiring high-quality assets, applying extensive technical expertise as a top-tier operator and creating tremendous value for our shareholders,” says Bob Reeves, Chairman, President & CEO of Athlon. “Through tireless dedication and hard work, our team has built a high rate-of-return oil manufacturing process in the heart of the world-class Midland Basin. With Encana’s exceptional resources and the collective expertise of both teams, the next phase will accelerate development and ultimately realize the full potential of the deep inventory of premier projects.”

Encana expects that the transaction will add current production of about 30,000 barrels of oil equivalent per day (boe/d) based on Athlon’s current estimated production including recent acquisitions. Encana sees the potential for approximately 5,000 horizontal well locations with potential recoverable resource of approximately 3 billion barrels of oil equivalent. In 2015, Encana intends to invest at least $1 billion of capital in the play and ramp up from three to at least seven horizontal rigs by year-end 2015. The Permian will play an important part within Encana’s growth portfolio, contributing significantly to company-wide projected total liquids production of around 250,000 barrels per day (bbls/d) by 2017.

“During our strategic review last year, we carefully studied North America’s premier basins and identified the massive horizontal, multi-zone, development potential in the Permian,” adds Suttles. “Our strong balance sheet gave us the ability to act and capture this highly value-accretive opportunity. It is early days in the horizontal development of the Permian play and we see tremendous opportunity to enhance and accelerate value by applying our proven resource play model.”

Following this oil-rich acquisition, Encana now expects to achieve its initial 2017 target to reach 75 percent of operating cash flow from liquids production in 2015, marking a major strategic milestone. In the past year, the company has significantly realigned its portfolio through divestitures of natural gas-weighted assets and the acquisition and development of higher-margin oil and natural gas liquids (NGLs) opportunities.

“We’re delivering on the portfolio promises we made for 2017, today,” says Suttles. “We believe this acquisition, when combined with other recent portfolio changes, is highly accretive to our long-term cash flow per share projections and our goal of sustainably growing shareholder value. Our portfolio now aligns with our vision of being a leading North American resource play company. Our growth areas now include the top two resource plays in Canada, the Montney and Duvernay, and the top two resource plays in the United States, the Eagle Ford and the Permian.”

Dover buys Accelerated Companies

2nd October 2014 – Dover (NYSE: DOV) announced that it has acquired Accelerated Companies LLC (“Accelerated”), a leading supplier of artificial lift and fluid handling solutions to oil and gas production markets, for a purchase price of $430 million, subject to a customary adjustment for working capital. Headquartered in The Woodlands, Texas, Accelerated’s core offerings include electric submersible pumps (“ESP”), hydraulic jet pump systems, gas lift systems, surface pumping and modular process systems for filtration, separation, heating and other fluid handling operations. Accelerated will become part of Dover Artificial Lift, a business unit within Dover’s Energy segment.

Accelerated’s innovative offerings in ESP and jet pump technologies complement Dover Artificial Lift’s well-established position in systems, components and automation for rod lift, gas lift, plunger lift, progressing cavity pump applications and surface production. With this acquisition, Dover establishes a leading position in the fast-growing US shale well development market and is positioned for future growth in domestic and international markets.

“We are excited about the acquisition of Accelerated,” said Robert A. Livingston, President & Chief Executive Officer of Dover. “The technology Accelerated brings to our portfolio, combined with our existing rod lift products, allows us to offer our customers the right artificial lift solutions for the complete life of their wells. Accelerated’s strong double-digit growth over the past few years has been driven by the company’s culture of innovation and customer engagement. Together, Dover Artificial Lift and Accelerated are very well positioned to capitalize on strong production market dynamics.”

Soma Somasundaram, President & CEO of Dover’s Energy segment, said, “The acquisition of Accelerated will allow us to benefit from the emerging North American trend of installing ESP systems early in the well completion cycle of high flow unconventional oil wells. With Accelerated, Dover will not only participate in the fastest growing segment of the artificial lift market, but we will also establish an earlier touch point with our customer. Overall, the products, service presence and talent mix Accelerated brings will help us better serve our customers.”

Accelerated’s 2014 revenue is estimated to be approximately $225 million. Dover expects this acquisition to be approximately $0.03 dilutive to fourth quarter 2014 continuing earnings per share due to normal transaction-related costs, including purchase accounting amortization. In 2015, Accelerated is expected to be $0.05 to $0.06 accretive to continuing earnings per share.

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