Encana Corporation and Newfield Exploration Company have entered into a definitive agreement whereby Encana will acquire all of the outstanding shares of common stock of Newfield in an all-stock transaction valued at approximately $5.5 billion. In addition, Encana will assume $2.2 billion of Newfield net debt. The strategic combination will create a leading multi-basin company and has been unanimously approved by the Boards of Directors of both companies. Subject to receipt of regulatory and shareholder approvals by both companies, the transaction is expected to close in the first quarter of 2019.

Strategic Rationale: shareholder returns, immediately accretive, asset quality and synergies

• Creates a leading multi-basin company with large, premium positions in three of North Americas highest-quality, oil and liquids weighted plays; the Permian, STACK/SCOOP and Montney
• Intends to raise dividend by 25 percent and expand share buyback program to $1.5 billion following closing of the transaction; funded with expected non-GAAP free cash flow and cash on hand
• Immediately accretive to key elements of Encanas five-year plan including non-GAAP cash flow per share
• Immediate scale and value creation; oil and condensate production up by over 54 percent and proved reserves up by around 85 percent
• Adds a significant premium position in the core of the world-class, oil-rich, STACK/SCOOP in the Anadarko Basin
• Creates North Americas second largest producer of unconventional resources; pro-forma third quarter 2018 production of 577,000 barrels of oil equivalent per day (BOE/d), including liquids production of around 300,000 barrels per day (bbls/d)
• Enhances already strong balance sheet; 2019 non-GAAP net debt to adjusted EBITDA expected to be about 1.5x
• $250 million of expected annual synergies through greater scale, cube development and overhead savings

This strategic combination advances our strategy and is immediately accretive to our five-year plan, said Doug Suttles, Encana President & CEO. Our track record of consistent execution gives us confidence to accelerate and increase shareholder returns. I am very excited to lead the combined company and want to congratulate the team at Newfield on doing a tremendous job building premium positions in the core-of-the-core in each of their assets, particularly in the world-class, oil-rich, STACK/SCOOP. When combined with our cube development model, expected synergies and relentless focus on efficiency, we are positioned to deliver highly efficient growth and quality returns.

Lee K. Boothby, Newfield Chairman, President and CEO, stated,
This transaction is the best path forward for our company. The combination of the two companies provides our investors with the very attributes that should be differentiated in todays energy sectoroperational scale, proven execution in development of large, liquids-rich onshore resource plays, a peer-leading cost structure and an exceptionally strong balance sheet.

We strongly believe that the synergies between these two organizations will create a dominant diversified resource player that is positioned to drive future value. The new organization will be capable of efficiently developing high-value growth assets while delivering significant cash to shareholders. Throughout our 30-year history, Newfield has worked to create a strong portfolio of assets managed by some of the best and brightest people in the business. The merger will accelerate the development of these assets and as a result, capture full value for our owners.

Encana: A leading multi-basin company with premium positions in three top North American plays 
This transaction includes approximately 360,000 net acres in the core-of-the-core of the world-class STACK/SCOOP in the Anadarko Basin. This premium, oil-weighted, stacked-pay asset contains multiple commercial and prospective zones which Encana believes are perfectly suited to its proven cube development model. This asset contains over 6,000 gross risked well locations and about 3 billion BOE of net unrisked resource.

Consistent with our focus on being in the best parts of North Americas best plays, our multi-basin portfolio will include large, premium, liquids weighted positions in three of North Americas highest quality, lowest supply cost basins; the Permian, STACK/SCOOP and Montney, added Suttles. Our multi-basin portfolio provides a powerful competitive advantage, helping us manage risk, provide optionality to direct capital to our highest margin opportunities and transfer learnings across the business.

Encana: Increased liquids mix drives margin expansion and returns 
Following the close of this transaction, Encana expects liquids production will contribute over 50% of total company production, driving continued margin expansion and returns. Combined pro-forma third quarter 2018 production is around 577,000 BOE/d. This includes liquids production of approximately 300,000 bbls/d of which oil and condensate contributed 210,000 bbls/d. This production profile makes Encana North Americas second largest producer of unconventional resources.

Transaction details 

The transaction has been unanimously approved by the Board of Directors of both Encana and Newfield. Newfields Board of Directors has recommended that its shareholders vote their shares in favor of the merger and Encanas Board of Directors has also recommended that its shareholders vote to approve the issuance of Encana common shares under the transaction.

Under the terms of the merger agreement, Newfield shareholders will receive 2.6719 Encana common shares for each share of Newfield common stock. Upon completion of the transaction, Encana shareholders will own approximately 63.5 percent of the combined company and Newfield shareholders will own approximately 36.5 percent. Two directors from the Newfield Board of Directors will join the Encana Board upon closing.

The transaction is subject to the terms and conditions set forth in the merger agreement, including holders of two-thirds of Newfields shares of common stock having voted in favor of the merger, holders of a majority of votes cast by Encana shareholders having voted in favor of the issuance by Encana of its common shares, the waiting period under the U.S. Hart-Scott-Rodino Act having expired or been early terminated, the Toronto Stock Exchange and the New York Stock Exchange each having approved the listing of the Encana common shares to be issued in the transaction and other customary conditions.