Exploration and production (E&P) company
) has entered into an agreement with
Freeport-McMoRan Copper & Gold Inc.
) to acquire 45,500 net acres of Eagle Ford properties. Depending
on regulatory approvals and some necessary closing conditions, the
deal is anticipated to be closed by the last half of second quarter
2014. Encana's share price rose 4.38% after this $3.1 billion deal
Despite being a natural gas E&P firm, Encana's profit was
impacted negatively by a fall in
in the recent past that made the company restructure its asset base
with a focus on oil-producing resources. The latest deal
corroborates this shift.
Encana added that during first-quarter 2014, the to-be acquired
assets − located at primarily Karnes County, TX - produced about
46,000 barrels per day (bbls/d) of liquids, which represents 75.0%
of the total output. The production led to the generation of $327.0
million operating cash flows during the quarter.
The Eagle Ford is North America's one of the most profitable oil
producing resources. Hence, the Encana management believes that the
acquisition will double its oil production, and in turn increase
cash flows and shareholder returns.
Calgary, Alberta-based Encana is the second largest gas producer
in North America, and holds a highly competitive land and resource
position in a number of the region's most promising shale and tight
gas resource plays. This provides the company with a low risk, long
life and sustainable growth profile. We also appreciate Encana's
strategy of disposing assets that do not fit into its long-term
However, Encana's extensive natural gas exposure still raises
its sensitivity to gas price fluctuations, compared to its more
diversified independent peers with higher oil production.
Encana currently holds a Zacks Rank #3 (Hold), implying that it
is expected to perform in line with the broader U.S. equity market
over the next one to three months.
Meanwhile, one can consider better-ranked players in the same
Athlon Energy Inc.
RSP Permian Inc.
). Both the stocks sport a Zacks Rank #1 (Strong Buy).
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ATHLON ENERGY (ATHL): Free Stock Analysis
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RSP PERMIAN INC (RSPP): Free Stock Analysis
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