Apollo Buys Encana's Bighorn Properties for $1.8 billion

On Friday, New York-based private-equity firm – Apollo Global Management, LLC (APO) entered into a deal with Canada’s largest natural gas producer – Encana Corporation (ECA) to buy the latter’s Bighorn properties in Alberta for about C$2 billion ($1.8 billion). The transaction is anticipated to close by the end of third-quarter 2014, subject to certain regulatory approvals.

The deal includes the purchase of about 360,000 net acres, which mainly produces natural gas and Encana's working interests in all pipelines and production facilities along with service arrangements. Notably, Apollo has struck a deal to buy Bighorn assets through Jupiter Resources Inc. of Calgary, a private Canadian oil and gas exploration company managed by Apollo affiliates.

RBC Capital Markets, a unit of Royal Bank of Canada (RY) and Burnet, Duckworth & Palmer LLP acted as advisors to Encana, while Evercore Partners Inc. (EVR) served Apollo and Jupiter as advisors.

Since the last few months, Apollo has been engaged in buying natural-gas assets. The firm looks forward to Jupiter Resources’ acquisition of Bighorn assets in the core of the Deep Basin and anticipates further development of the huge resources available, thereby enhancing returns.

Recently, Apollo funded oil and gas producer – Zenergy LLC with $700 million for developing properties in the U.S. In May, the firm contracted to aid with $500 million funds for the growth of CSV Midstream Solutions Corp., a Canadian natural-gas gathering and processing company.

On the other hand, to increase earnings, Encana aims to focus more on attractive oil and natural-gas liquids and thereby vend natural gas properties due to the downturn in prices of natural gas. Notably, the deal follows Encana’s plans announced in November to divest assets to pay down debt and centers on higher margin resources.

Jupiter Resources look forward to the acquisition of Bighorn assets along with Apollo’s support and foresees advantage from the latter’s proficiency in natural resources. Further, Apollo anticipates triumph over its energy investment management efforts as Jupiter Resources has an experienced managerial team, skilled resources and good track record.

As an investment management firm, Apollo has grown through meaningful acquisitions, strategic alliances and divestures. The company’s interest lies not only in the energy sector but in varied spaces including chemicals, commodities, mining, agriculture, financial services and manufacturing. We look forward to the company’s greater involvement in such attractive deals that augur well for its growth. Apollo Global currently carries a Zacks Rank #3 (Hold).

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