Calgary-based natural gas exploration and production company Encana Corporation (TSE:ECA, Mkt cap 18.35B, P/E 51.52, Div/yield 0.08/1.21, EPS 0.48, Shares 740.96M) has announced that it has signed a deal with a syndicate of underwriters to sell its stake in PrairieSky Royalty Ltd.
The deal is said to be worth C$2.6 billion to Encana and the secondary offering is expected to close around 26 September, the company outlined in a statement.
The remaining 54% stake in PrairieSky is to be purchased by the underwriters, which will then be offered in shares to investors. The stake representing 70.2 million common shares, at C$36.50 per share, is approximately 30 percent higher than what investors paid in the initial public offering (IPO) in June.
Encana generated C$1.67 billion in the IPO, nearly twice as much as was originally anticipated. The shares sold at C$28 each and immediately spiked. The deal was the largest initial public offering in Canada in over a decade.
According to the latest data, Canadian energy companies sold roughly C$3.7 billion worth of equity in the second quarter of 2014. A figure that stands at more than three times higher than what companies raised in the same quarter in 2013.
PrairieSky operates by generating revenues through royalties obtained from other oil and gas exploration firms that function in its properties.
Encana did not give any clues as to how the proceeds will be used, but it is likely, given the company’s present strategy to move away from natural gas, that the funds will likely be used expand oil-driven operations.
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