Page 4 - NorthAmOil Week 14 2023

NorthAmOil COMMENTARY NorthAmOil

Ovintiv expands in Permian

with $4.3bn purchase

Denver-based Ovintiv is purchasing oil and gas acreage in the Permian

Basin while offloading its Bakken assets

US DENVER-BASED shale producer Ovintiv has
agreed to acquire $4.3bn of oil and gas assets in
WHAT: the Permian Basin in Texas from private equity
Ovintiv has bought firm EnCap Investments .
Permian Basin assets for The acreage comprises almost all the assets
$4.3bn from EnCap while owned by Black Swan Oil & Gas, PetroLeg-
also selling its Bakken acy Energy and Piedra Resources, which are
assets. all portfolio companies of funds managed by
EnCap.
WHY: At the same time, Ovintiv has announced the
The producer is now pending sale of all of its assets in the Bakken for-
expanding in the US’ mation in North Dakota for $825mn to Gray-
most productive oil-rich son Mill Bakken, which is also EnCap-affiliated.
regions.
US focus
WHAT NEXT: Ovintiv – which was formerly known as Encana
Ovintiv is aiming to and based in Calgary – has been increasingly
generate more free concentrating on highly productive US shale
cash flow and improve plays, with the company’s only remaining Cana- Ovintiv added that its land position in the
shareholder returns. dian assets located in the Montney. Ovintiv is Permian would increase to around 179,000 net
now looking at whether it can generate more acres (724.4 square km), and that 97% of the
free cash flow and achieve higher shareholder acquired acreage was held by production with
returns. an average operated working interest of 82%.
The transaction is also interesting because The company’s pro forma Permian oil and
it comes as shale drillers are running out of condensate production is expected to nearly
top acreage. The Permian Basin is the most double to around 125,000 barrels per day (bpd).
productive oilfield in the world and remains The company said it expected to realise signifi-
popular thanks to its stacked pays and favour- cant well cost savings across its combined Per-
able economics. By contrast, the Bakken for- mian assets because of optimised operations
mation, part of the Williston Basin, is mature. and economies of scale.
The formation’s oil and gas production growth The Permian sellers will receive around
continues to be flat or almost so, according to 32.6mn shares of Ovintiv common stock and
data from the US Energy Information Admin- $3.125bn in cash. The cash portion of the trans-
istration (EIA). action will be funded through a combination of
Ovintiv’s Permian purchase adds around cash on hand, the $825mn received from Ovin-
65,000 net acres (263 square km ) of largely tiv’s pending sale of its Bakken assets, as well as
undeveloped resource in Martin and Andrews borrowings under the company’s credit facility
counties in the northern Midland sub-basin, and/or proceeds from new debt financing.
the company said. The land is “highly comple- At March 30, 2023 strip pricing, Ovintiv
mentary” with the company’s existing Permian expects the transactions to drive cash returns
Basin position, also in Martin County, Ovintiv that are more than 25% higher per share over
added. the next year following the close of the deals and
Upon closing, the purchase will add around cash returns that are more than 40% higher per
1,050 net 10,000-foot (3,048-metre) well loca- share in 2024.
tions to Ovintiv’s inventory . “As shale hits its middle innings, we believe
The 1,050 wells include around 800 “pre- high-return drilling inventory locations are
mium return” locations and around 250 “high going to be more valuable than ever,” Ovintiv’s
potential upside” locations, said the company. president and CEO, Brendan McCracken, told

P4 www. NEWSBASE .com Week 14 06•April•2023