Ovintiv to acquire PetroLegacy Energy, Piedra Resources for $4.28B

Ovintiv announced it has entered into a definitive purchase agreement to acquire substantially all leasehold interest and related assets of Black Swan Oil & Gas, PetroLegacy Energy and Piedra Resources, which are portfolio companies of funds managed by EnCap Investments, in a cash and stock transaction valued at approximately $4.28B. Upon closing, the acquisition will add approximately 1,050 net 10,000 foot well locations to Ovintiv’s Permian inventory and approximately 65,000 net acres in the core of the Midland Basin, strategically located in close proximity to Ovintiv’s current Permian operations. The transaction has been unanimously approved by Ovintiv’s board of directors. Under the terms of the agreement, the NMB sellers will receive approximately 32.6M shares of Ovintiv common stock and $3.13B of cash. The cash portion of the transaction is expected to be funded through a combination of cash on hand, cash proceeds received from the company’s pending sale of its Bakken assets located in North Dakota to Grayson Mill Bakken, a portfolio company of funds managed by EnCap, totaling approximately $825M, as well as borrowings under the company’s credit facility and/or proceeds from new debt financing. Ovintiv has received fully committed bridge financing from Goldman Sachs Bank USA and Morgan Stanley. Ovintiv remains committed to its capital allocation framework which returns at least 50% of post base dividend non-GAAP free cash flow to shareholders through buybacks and/or variable dividends. At March 30, 2023 strip pricing, the company expects the transactions to drive more than 25% higher cash returns per share over the next twelve months following the close of the transactions and more than 40% higher cash returns per share in 2024.