(Reuters) – Ovintiv Inc is looking to sell its Eagle Ford acreage in south-central Texas, several people familiar with the matter said on Friday, the latest debt-laden oil and gas producer to put assets on the block to raise cash during this year’s coronavirus-fueled oil slump.
The Denver-based company’s Eagle Ford position, which it bought in 2014 from Freeport-McMoRan Inc for $3.1 billion, could help it pay off some of the $7.14 billion in long-term debt it had as of the end of September.
The coronavirus pandemic caused a worldwide slump in fuel demand. Recovery has begun but is threatened by the surge in infections in the United States, Europe and elsewhere. The crash in oil prices made investors turn their backs on the shale industry and pushed companies to look at asset sales and mergers for survival.
Shale production has dropped sharply in response to the falloff in demand, with U.S. output down to 10.5 million barrels per day from nearly 13 million bpd at the end of 2019.
The assets could fetch around $600 million to $700 million, one of the sources said. The divestiture plan is at an early stage, the sources said, requesting anonymity while discussing a confidential process.
Ovintiv said it does not comment on questions related to potential transactions.
Numerous companies have gone into bankruptcy while others have combined to survive the downturn. When asked about that activity, Ovintiv top boss Doug Suttles told analysts on a quarterly earnings call that the company is “where we need to be” and that its focus will be on debt reduction.
At the end of last year, the company held 517 producing wells with total oil output of 25,300 bpd in the Eagle Ford.
Ovintiv cut its workforce by 25% earlier this year and slashed 2020 capital investment by $500 million. The company posted a second straight quarterly loss in the three months ended Sept. 30, with oil production down 22%.