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Athlon Energy (ATHL) Up Big On Buyout News

Athlon Energy- EncanaAthlon Energy (ATHL) was a pre-market mover with heavy volume candidate because the company has a $57.0 million average dollar-volume and in pre-market hours, traded 490,100 shares, which represents 50% of its average daily volume. At the noon trading hour is up 24.61% to $58.23 and has sustained the volume trading well over 31 million shares.

Athlon Energy (ATHL) is an independent exploration and production company. The primary focus of endeavors is on the exploitation of unconventional liquids-rich natural gas reserves and oil, as well as development in the Permian Basin. Currently, the company has a PE ratio of 79.5 and according to 13 analysts, it is rated as a buy not a sale, while TheStreet Quant Ratings rates it a hold.

For the past 30 days, Athlon Energy’s average volume has been 1.1 million shares per day. The market cap is $4.5 billion, part of the energy industry and basic materials sector. As of Thursday’s close of trading, year-to-date shares are up 50.5%.

While there are a few concerns, overall analysts believe the company offers a number of strengths to include strong revenue growth, healthy stock price performance, and hardy cash flow from operations.

Revenue growth saw a strong increase above the 3.0% industry average. From last year in the same quarter, a 109.5% jump was recorded. However, things are expected to improve even more thanks to Athlon Energy being purchased by Encana Corp (TSX:ECA) for $7.1 billion. This friendly takeover will give the Canadian gas producer access to significant Texas play but also expedite a move more towards liquids production.

Based in Calgary, Encana Corp will pay close to $6 billion in cash and take on approximately $1.15 billion of Athlon Energy’s deb. Because of low prices for natural gas, this company’s production has been shifting to oil and gas liquids for some time. Shareholders of Athlon Energy are being offered a per share cash price of $58.50, for a total of $5.93 billion.

Because of the acquisition, shares of Athlon Energy increased approximately $0.24, boosting price to $58.22 from $11.49. In Canada, shares for Encana Corp also experienced a gain of 3%, pushing price up $0.83. According to president and CEO of Encana Corp, Doug Suttles, acquiring Athlon Energy will help the company deliver its promise to produce 75% of its cash flow from liquids by next year, a target date ahead of the proposed 2017 time period.

As stated by Athlon Energy’s president and chief executive, Bob Reeves in a joint statement with Suttles, Encana Corp provides outstanding resources and collective expertise. Therefore, the next phase will focus on accelerating development to reveal the company’s full potential of premium deep inventory.

Because of the transaction, about 30,000 additional barrels of oil will be produced per day, specifically in a part of the Permian formation known as the Midland Basin. However, there is potential that the equivalent of three billion barrels of oil can be produced in the future. To ramp up production for a minimum of seven horizontal rigs, about $1 billion will be invested by the end of 2015.

Suttles adds that Encana Corp’s portfolio is now in alignment with the company’s vision of being the leading play company in North America. In the United States, the two top resource plays are Permian and Eagle Ford and for Canada, Duvernay and Montney

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