Ovintiv Inc. has completed the divestment of substantially all its assets in the onshore Uinta Basin in Utah to FourPoint Resources LLC for about $2 billion in cash.
“The Uinta sale builds on our track record of unlocking significant value from our non-core assets while focusing our portfolio and extending inventory runway in our core areas”, president and chief executive Brendan McCracken said in an online statement Wednesday.
The sale includes around 126,000 largely undeveloped net acres. The assets contributed approximately 29,000 barrels per day (bpd) to Ovintiv’s production in the third quarter of 2024, according to the Denver, Colorado-based company.
The divestment is one of two transactions it announced November 14, 2024. The other, a $2.38 billion acquisition in the Canadian province of Alberta from Paramount Resources Ltd., is expected to close this quarter, Ovintiv said Wednesday. Proceeds from the sale to FourPoint Resources will help pay the Paramount purchase.
Ovintiv expects the Paramount assets, in the core of the Montney Formation, to contribute about 70,000 barrels of oil equivalent a day (boed) of production, comprising about 25,000 bpd of oil and condensate; 900 net 10,000 foot equivalent well locations; and about109,000 net acres, of which about 80 percent is undeveloped.
“The Montney transaction will expand Ovintiv’s premium oil and condensate inventory in the play to approximately 15 years with the addition of approximately 600 premium return locations, acquired for less than $1 million each, and approximately 300 upside locations”, the company said. “Ovintiv’s core land position in the Montney is expected to increase to approximately 369 thousand net acres.
“At closing, the Company’s pro forma Montney oil and condensate production is expected to be approximately 55 Mbbls/d [thousand barrels per day]”.
The Paramount assets are near Ovintiv’s current operations and have access to midstream infrastructure, Ovintiv said.
McCracken said, “The acquired assets have demonstrated leading well performance and are a natural fit with our operating advantage and our existing acreage”.
“The assets come with ample midstream capacity, unlocking optionality for mid-single digit growth in our Montney oil and condensate volumes”, McCracken added.
“The Montney is the second largest undeveloped oil resource in North America, and with this acquisition, we have solidified our position as the premier operator in the play”.
Also as part of the agreement with Paramount, Ovintiv will transfer its Horn River asset in British Columbia to Paramount and Paramount will transfer its Zama asset in Alberta to Ovintiv.
Taking into account the acquisition and divestment transactions, Ovintiv expects its 2025 oil and condensate production to average about 205,000 bpd and total production to total 620,000 boed.
Ovintiv expects the two transactions to raise its 2025 free cash flow by about $300 million, which is 20 percent higher than previously expected.
“The combined transactions are expected to generate cost synergies of approximately $125 million annually, comprised primarily of well cost savings, overhead reductions and Canadian cash tax savings”, Ovintiv said. “Per well cost savings are estimated at greater than $1.5 million across the acquired assets, consistent with Ovintiv’s current Montney well costs of about $550 per foot, resulting from optimized operations and economies of scale”.
Ovintiv said it has secured bridge financing from JPMorgan Chase Bank NA and Morgan Stanley Senior Funding Inc. to help pay the Alberta purchase.
After closing both transactions Ovintiv plans to run an average of three rigs across its Montney acreage, five in the United States Permian Basin and one to two rigs in the Anadarko Basin in the U.S. It expects to allot 85 to 90 percent of its total capital this year to the Permian and the Montney.
Source: by Jov Onsat for Rigzone Staff