Through the deal, Ovintiv will add around 65,000 net acres of largely undeveloped resource and around 1,050 net well locations across the Martin and Andrews counties, which are said to be highly complementary with its existing position in the Permian Basin
Ovintiv to expand its Permian Basin inventory through a cash and stock deal worth $4.3bn with certain portfolio companies of EnCap. (Credit: Simon J from Pixabay)
Ovintiv has agreed to acquire almost all leasehold interest and associated assets of Black Swan Oil & Gas, PetroLegacy Energy, and Piedra Resources located in the northern Midland Basin in the US for $4.27bn.
Black Swan Oil & Gas, PetroLegacy Energy, and Piedra Resources are portfolio companies of funds managed by EnCap Investments.
Through the deal, Ovintiv will add nearly 65,000 net acres of the largely undeveloped resources located across the Martin and Andrews counties, which are said to be highly complementary with its existing position in the Permian Basin.
The company will gain nearly 1,050 net well locations. These include around 800 premium return well locations and roughly 250 high potential upside locations, said Ovintiv.
Ovintiv’s acreage in the Permian Basin is anticipated to go up to around 179,000 net acres. The company stated that 97% of the acreage added through the deal is held by production with an average operated working interest of 82%.
At the closing of the deal, the pro forma oil and condensate production of the company in the Permian Basin is likely to almost double to around 125 thousand barrels per day (Mbbls/d).
Ovintiv president and CEO Brendan McCracken said: “Located in some of the best rock in the Permian, these assets have demonstrated leading well performance and are a natural fit with our existing Martin County acreage.
“The acquisition checks all the boxes on our disciplined durable returns strategy – it will be immediately and long-term accretive across all key financial metrics, the acreage is in an area where we have a competitive operating advantage, and it significantly increases our premium Permian well inventory.
“This will expand free cash flow per share and enhance our ability to deliver durable returns to our shareholders.”
As per the terms of the deal, the sellers of the Midland Basin assets will be issued nearly 32.6 million shares of Ovintiv alongside $3.12bn of cash.
Ovintiv has also announced the sale of all its Bakken assets in the Williston Basin of North Dakota to Grayson Mill Bakken, a portfolio company of funds managed by EnCap Investments for nearly $825m.
As of 31 December 2022, the landholdings of Ovintiv in the play totalled 46,000 net acres. Production from the Bakken assets in the first quarter is forecast to be around 37 million barrels of oil equivalent per day (MBOE/d).
Recently, an affiliate of EnCap Flatrock Midstream agreed to sell Lotus Midstream Operations, a midstream company in the Permian Basin, to Energy Transfer for $1.45bn.