Page 5 - NorthAmOil Week 14 2023

NorthAmOil COMMENTARY NorthAmOil

Once the transactions
are complete, Ovintiv
will have a presence in
four basins, only three
of which it considers to
be core growth assets.

Reuters. The deal is the company’s first since year, Encana also purchased Athlon Energy for
2021, when McCracken became CEO. $5.9bn, giving the company its first stake in the
“We are acquiring a unique undeveloped Permian.
asset in the Northern Midland Basin,” he said in But this came as oil prices started trending
a statement. “Located in some of the best rock downward amid a global glut of crude. The price
in the Permian, these assets have demonstrated of US oil benchmark West Texas Intermediate
leading well performance and are a natural fit (WTI) fell from a high of almost $110 per barrel
with our existing Martin County acreage. The in 2013 to a low of $27.45 in 2016.
acreage is in an area where we have a compet- Even so, in 2018 Encana went on to buy New-
itive operating advantage, and it significantly field Exploration for $5.5bn, undeterred by the
increases our premium Permian well inventory.” latter’s net debt of $2.2bn, giving it a stake in the
Anadarko Basin.
Four basins Not surprisingly, Encana’s own debt also
Following the transactions, Ovintiv said that its rose. The company moved to the US in 2020,
portfolio would be focused on four “premier” rebranding itself Ovintiv. The next year, Ovintiv
North American basins. In each, the company sold all of its Eagle Ford assets to Validus Energy
now has more than 125,000 net acres (505.9 for just $880mn – the same assets it had bought
square km) of assets. for $3.1bn in 2014. The deal is the
According to Ovintiv’s website, its three core
growth assets are the West Texas portion of What next? company’s first
the Permian Basin, the black oil window of the This latest Permian acquisition balances Ovin- since 2021,
SCOOP and STACK formations in west-central tiv’s portfolio, McCracken told Reuters. The
Oklahoma’s Anadarko Basin and the gas-rich Midland Basin is oil-rich, while the com- when McCracken
Montney play in northern Alberta and British pany produces natural gas liquids (NGLs) in
Columbia. Ovintiv also has assets in the Uinta the SCOOP and STACK plays and gas in the became CEO.
Basin in Utah. Montney.
Over the years, Ovintiv has seen various pur- The deal “addresses one of the most signifi-
chases and sales while weathering volatile com- cant concerns with Ovintiv, which was the rel-
modity prices. atively short runway of core locations”, Enverus
As Encana, the company was Canada’s largest Intelligence Research’s director, Andrew Ditt-
producer of gas. Indeed, it had sold all of its oil mar, told Reuters.
assets to Cenovus in 2009, but then saw the US “Ovintiv is changing the narrative around
shale gas boom come to dominate the North the company by materially boosting corporate
American market, depressing gas prices. inventory life,” he said in separate comments to
With a new CEO, Doug Suttles, the com- Natural Gas Intelligence. “Since investors are
pany shifted its focus to oil-rich formations in closely scrutinising inventory life” of oil-ori-
the US, and in 2014 it bought into the Eagle ented E&Ps, “adding the additional locations
Ford play in Texas for $3.1bn, purchasing assets should help the company improve its equity
from Freeport-McMoRan Oil & Gas. The same multiple and rerate higher”.™

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