Ovintiv to acquire certain Montney assets from Paramount for $2.38B

Ovintiv (OVV) announced it has entered into a definitive purchase agreement to acquire certain Montney assets from Paramount Resources, in an all-cash transaction valued at approximately $2.38B. Upon closing, the acquisition will add approximately 70 MBOE/d of production, 900 net 10,000 foot equivalent well locations, and approximately 109,000 net acres, in the core of the oil-rich Alberta Montney. The assets are strategically located near the company’s current operations and have access to midstream infrastructure with available capacity. The transaction has been unanimously approved by Ovintiv’s board of directors. Ovintiv has also entered into a definitive agreement to sell substantially all its Uinta Basin assets located in Utah, to FourPoint Resources, for total cash proceeds of approximately $2B. The company expects the combined transactions to increase 2025 non-GAAP free cash flow by approximately $300M, driving 2025 Non-GAAP free cash flow per share approximately 20% higher than previously expected. The Montney acquisition is expected to be funded through a combination of cash proceeds received from the pending sale of the Uinta assets, cash on hand, as well as borrowings under the company’s credit facility and/or temporary financing. Ovintiv has received fully committed bridge financing from JPMorgan Chase Bank, N.A. and Morgan Stanley Senior Funding. The company has temporarily paused its share buyback program until the cash borrowed under the temporary financing, totaling approximately $377M, has been recovered. This represents the net difference between the purchase price for the Montney assets and the expected divestiture proceeds from the Uinta assets. In the fourth quarter, approximately $181M has been redirected to debt reduction from the buyback pause. Ovintiv estimates that share buybacks will resume in the second quarter of 2025. The company’s bolt-on acquisition activity has effectively been paused until the share buyback program has resumed. The base dividend is expected to remain unchanged. The combined transactions are expected to be immediately and long-term accretive across key operational and financial metrics including return on capital employed, non-GAAP cash flow per share, and non-GAAP free cash flow per share. Ovintiv has entered into a definitive agreement to sell substantially all its Uinta Basin assets for total cash proceeds of approximately $2B. The divestiture includes approximately 126 thousand net acres of largely undeveloped land. Ovintiv’s third quarter Uinta oil and condensate production was approximately 29 Mbbls/d. Following the closing of the transactions, Ovintiv plans to run an average of three rigs across its combined Montney acreage, five rigs on its Permian acreage and one to two rigs on its Anadarko acreage. Approximately 85% to 90% of 2025 total capital is expected to be allocated to the Permian and the Montney. The company expects to deliver 2025 total average oil and condensate production volumes of approximately 205 Mbbls/d and total volumes of approximately 620 MBOE/d, with capital investment of approximately $2.2B, or about $100M less than previously expected.