NEW YORK (AP) — Oil and natural gas company Encana is buying Athlon Energy Inc. for $5.93 billion in an effort to boost is oil production by tapping into Texas's booming Permian Basin.
Canada's Encana Corp. will also assume $1.15 billion in debt, bringing the transaction's total value to approximately $7.1 billion.
Encana, a major natural gas producer, has been shifting its focus from natural gas to more lucrative oil production in recent months. The Permian Basin, which stretches from Texas to New Mexico and has long been an important oil source for U.S. drillers, is undergoing a revival thanks to new drilling techniques. It is one of the biggest new sources of oil production in the U.S., along with the Eagle Ford shale in South Texas and the Bakken formation in North Dakota.
"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," said Doug Suttles, Encana President & CEO, in a statement.
Encana will receive access to about 140,000 net acres in the Permian Basin. The company said it plans to invest at least $1 billion of capital in the Permian Basin in 2015 and ramp up from three to at least seven rigs by the end of 2015.
Athlon shareholders will receive $58.50 per share, a 25 percent premium to its Friday closing price of 46.73. Shares of Athlon, which is based in Fort Worth, Texas, jumped more than 24 percent in premarket trading.
The deal is expected to close by the end of the year.