End of a short, eventful era for Athlon Energy

A. Lee Graham lgraham@bizpress.net

Athlon Energy Inc. is expected to be wiped from Fort Worth’s energy landscape and replaced with Encana Corp. by year’s end. Under terms of the $7.1 billion acquisition, the Fort Worth firm will shed its moniker just four years after it was formed and a year after going public. The meteoric rise of Athlon, a company with oil tycoons Jon Brumley and Bob Reeves in its history, turned many heads in late September on news that Canada-based Encana would acquire the firm in a $5.93 billion deal unanimously recommended by Athlon’s board of directors to its shareholders. Both Athlon’s and Encana’s boards of directors unanimously approved the deal. Encana will also assume Athlon’s $1.5 billion of senior notes for a total transaction value of $7.1 billion.

Reeves, Athlon chairman, president and CEO, did not return phone calls from the Fort Worth Business Press seeking comment, but his Encana counterpart praised what the deal means for his company’s growing Texas presence. “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 Encana President and CEO Doug Suttles in a news release. He was referring to the Midland Basin, part of the larger Permian Basin. The deal deepens Encana’s holdings in that West Texas shale play, adding 140,000 net acres that could be just the beginning of more production at the location. “This is going to give us positions in two of the biggest plays in the U.S.: the Eagle Ford [formation in South Texas] and the Permian Basin,” said Doug McIntyre, an Encana spokesman. All Athlon employees – about 100 – will retain their jobs and continue working in the firm’s Fort Worth office at 420 Throckmorton St. Also continuing operation will be Athlon’s Midland field office. No Encana employees are expected to move to Fort Worth from company headquarters in Calgary or from Denver, its primary U.S base of operations, but that could change. “That would be determined once we get on the ground running,” McIntyre said. Encana is no stranger to Texas. It shed its Barnett Shale holdings in 2011, selling those properties to EnerVest Ltd. It also shuttered its Irving offices two years ago.

The newly announced acquisition of Athlon followed a 2013 Encana strategic review, in which the firm identified four mineral resource plays meriting focus. They were the Eagle Ford and Permian in Texas and the Montney and Duvernay plays in Canada. Athlon has deep Fort Worth roots. Among its founders were Reeves, who joined other executives in launching the firm in 2010. Brumley is part of the lineage, as well; the veteran oilman and current Bounty Minerals chief also founded Encore Acquisition before selling the firm to Denbury Resources in 2010. “I am so proud of those guys,” Brumley said. “They hit the ground running and worked really hard.” Brumley knew many Athlon executives when he ran Encore Acquisition. Asked whether the Athlon acquisition caught him off guard, Brumley said, “Yes, totally surprised. I hadn’t heard anything about it.” Encana’s Athlon acquisition confirms its recent interest in oil production, concentrating less on natural gas. Encana said it sees the potential for about 5,000 horizontal well locations with potential recoverable resource totaling about 3 billion barrels of oil equivalent.

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Encana said it plans to sink at least $1 billion into the Midland Basin in 2015 and go from three to at least seven horizontal drilling rigs by the end of that year. “The Permian will play an important part within Encana’s growth portfolio, contributing significantly to companywide projected total liquids production of around 250,000 barrels per day by 2017,” according to a company news release. Athlon shareholders will receive $58.50 per share in the deal. Athlon shares jumped more than 24 percent on premarket trading Sept. 29, the day the deal was announced. Shares stood at $58.29 at 9 a.m. Sept. 30 after opening at $58.30.