Ovintiv to add Montney assets, simultaneous Uinta divestiture makes for minimal cash outlay
Ovintiv Inc., Denver, has agreed to acquire certain Montney assets from Paramount Resources Ltd., Calgary, in an all-cash deal valued at about $2.377 billion (C$3.325 billion) and has offset the deal with another to divest Uinta assets for $2 billion.
Ovintiv will acquire Paramount's Karr, Wapiti, and Zama properties for $3.325 billion in cash plus the transfer of its ownership in the Horn River basin asset in British Columbia to Paramount Resources.
Through the deal with Paramount, Ovintiv will acquire about 109,000 net acres and about 70,000 boe/d in the Alberta Montney, adding some 900 total net well locations, potentially extending ‘premium’ Montney oil and condensate inventory life to about 15 years, the company said release. The deal also includes related gathering systems and other field infrastructure.
The Horn River basin properties to be transferred to Paramount Resources as part of the deal include Ovintiv's 50% operated interest within the current joint venture with Paramount at Two Island Lake field and a 50% operated interest at Kiwigana field. Two Island Lake field and Ovintiv's interest in Kiwigana field were producing over 40 MMcfd prior to being shut-in in March 2024.
Uinta divestiture
Ovintiv has also agreed to sell substantially all its Uinta basin assets in Utah to FourPoint Resources LLC for total cash proceeds of about $2 billion. The deal includes about 126,000 net acres of largely undeveloped land. Ovintiv’s third-quarter 2024 Uinta oil and condensate production was about 29,000 b/d.
Despite a recent increase in industry interest in the Uinta, Ovintiv didn’t view the play competing for growth capital with its Montney and Permian assets, and "pairing the deals looks like a favorable exchange for Ovintiv to improve its inventory quality and free cash flow profile at a minimal cash outlay," said Andrew Dittmar, principal analyst at Enverus Intelligence Research.
"Trading out the Uinta for a larger asset in one of those two plays was a likely strategic move for the company. And, given the current sky-high pricing of inventory in the Permian compared to relative discounts in the Montney, it looks like an easy decision for Ovintiv to jump on the opportunity to acquire the Paramount assets," he said.
Gabe Daoud, managing director, TD Cowen, said Ovintiv's move is "a fantastic swap," though not entirely as expected. Calling the acquisition a surprise bolt-on, Daoud said it comes "at a fair price relative to asset quality and prior Montney deals."
Both analysts said the deal likely takes additional Permian basin acquisition activity by Ovintiv off the table, including that of Double Eagle IV. The company's Midland basin assets have been rumored acquisition targets.
2025 operations outlook
Following the completion of both deals—expected before second-quarter 2025 subject to customary conditions—Ovintiv plans to run an average of three rigs across its combined Montney acreage, five rigs on its Permian basin acreage, and one to two rigs on its Anadarko acreage. About 85-90% of 2025 total capital is expected to be allocated to the Permian basin and the Montney, the company said.
Total 2025 average oil and condensate production volumes of about 205,000 b/d are expected, with total volumes of about 620,000 boe/d through capital investment of about $2.2 billion ($100 million less than previously expected).
Mikaila Adams | Managing Editor - News
Mikaila Adams has 20 years of experience as an editor, most of which has been centered on the oil and gas industry. She enjoyed 12 years focused on the business/finance side of the industry as an editor for Oil & Gas Journal's sister publication, Oil & Gas Financial Journal (OGFJ). After OGFJ ceased publication in 2017, she joined Oil & Gas Journal and was named Managing Editor - News in 2019. She holds a degree from Texas Tech University.
