DBRS Maintains Encana Corporation’s Under Review with Developing Implications Status upon Closing of the Strategic Combination with Newfield Exploration Company

DBRS Limited (DBRS) notes that on February 12, 2019, Encana Corporation (Encana or the Company) received shareholder approval for the strategic combination with Newfield Exploration Company (Newfield); and satisfied the remaining customer closing conditions on February 13, 2019. When Encana initially announced the acquisition on November 1, 2018, DBRS placed Encana’s BBB (low) Issuer Rating and its BBB (low) Medium-Term Notes & Debentures and Unsecured Senior Notes ratings Under Review with Developing Implications.

As noted in the press release “DBRS Places Encana Corporation Under Review–Developing Following Agreement to Acquire Newfield Exploration Company” dated November 1, 2018 (see below under Related Documents), DBRS views the addition of Newfield’s assets as having a positive impact on Encana’s business risk profile. The transaction (1) adds scale, creating North America’s second-largest producer of unconventional resources; (2) enhances geographic diversification by supplementing Encana’s four current core areas with four additional resource plays; and (3) improves capital flexibility. Moreover, Encana anticipates that synergies can be realized from the transaction because of scale, employment of the cube development model and overhead savings. DBRS also anticipates the combined entity’s credit metrics should strengthen.

DBRS views the transaction overall as being moderately credit positive. Pending review of Encana’s year-end results and revised outlook expected in the next few weeks, DBRS anticipates resolving its Under Review with Developing Implications status and may confirm the ratings or possibly take a positive rating action.

Notes:
The principal methodology is Rating Companies in the Oil and Gas and Oilfield Services Industries (August 2018), which can be found on dbrs.com under Methodologies & Criteria.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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