Athlon’s production and the acres it owns
According to analysts at Sterne Agee, the top beneficiaries were Diamondback and Energen.
The acquisition, which also included more than $1 million in debt, implied a value of $98 for Diamondback, a 33% upside from Friday’s close. For Energen, Encana’s price implied a value of $102 a share, a 40% premium over Friday’s close, the analysts added.
Analysts at Raymond James calculated that, based on Athlon’s production and the acres it owns, Encana is paying about $33,000 an acre. While that price seems high, it’s not excessive for the area, they said.
The Calgary-based Encana will get a firmer foothold in the Permian, and it could end up getting a good deal. Sentiment toward the Permian Basin-focused stocks, however, has wavered recently.
The Permian is a top oil-producing U.S. region, with an output of 1.7 million barrels a day, according to the Energy Information Administration.
But pipeline bottlenecks and recent refinery outages have pushed Permian oil prices lower in relation to oil from other U.S. regions, the EIA said last week. Such price differences are likely to narrow later this year and into the next as more pipelines carry the oil to refiners along the Gulf Coast.