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UPDATE 2-Energen to sell Alabama utility for $1.28 bln to repay debt

* Laclede to assume about $320 mln of Alagasco's debt

* Deal will also let Energen fund Permian basin drilling

* Deal to help Laclede move beyond Missouri into Alabama

* Energen shares up as much as 4 pct, Laclede falls as much as 3 pct

(Adds conference call details, analyst comment, share movement)

April 7 (Reuters) - Energen Corp will sell its 150-year old natural gas utility Alabama Gas Corp (Alagasco) to Laclede Group Inc for $1.28 billion in cash, helping it repay debt and fund drilling for oil and gas in the Permian basin.

The purchase of the largest natural gas utility in Alabama will help Laclede move beyond its home state of Missouri into the Southeast and increase its customer count to 1.55 million from 1.13 million.

Shares of Laclede, which will assume about $320 million of Alagasco's debt, fell as much as 3 percent. Shares of Energen, which will become a pure exploration and production company after the sale, rose as much as 4 percent.

"This (deal) ... will enhance our financial capacity such that we will be positioned to outspend cash flow for the next several years," Energen Chief Executive Officer James McManus said on a conference call on Monday.

Energen has debt of $1.11 billion and reported negative working capital of $682.7 million as of Dec. 31.

Energen said it expects after-tax proceeds of $1.1 billion from the sale and McManus said the company could boost its spending by $200-$250 million, helping it step up production in its oilfields in the Permian basin in Texas and New Mexico.

"Strong pricing, in terms of gross and net proceeds, will provide Energen liquidity to accelerate its Permian Basin rig count, possibly even by late 2014," Sterne Agee analysts led by Tim Rezvan wrote in a note to clients.

Energen said it would pay a lower dividend, while Laclede said the purchase supported additional dividend growth.

Laclede said it expects the purchase to strongly add to net economic earnings per share in the first full year.

Laclede said it had a fully committed $1.35 billion bridge facility with Credit Suisse and Wells Fargo Bank, N.A. To fund the deal.

The companies said they expect the deal to close this year.

J.P. Morgan Chase & Co advised Energen while Bradley Arant Boult Cummings LLP acted as legal counsel.

Moelis & Co LLC advised Laclede and Akin Gump Strauss Hauer & Feld LLP was its legal counsel.

Energen's shares were down under 1 percent at $80.86, while Laclede was down 2 percent at $45.29 in afternoon trading on the New York Stock Exchange on Monday.

(Reporting By Sneha Banerjee and Swetha Gopinath in Bangalore; Editing by Don Sebastian and Savio D'Souza)