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The shale formation, a 50,000-square-mile (32-million acre) area spanning northern Alberta and British Columbia, is considered one of Canada’s most attractive oil and gas-producing regions due to its strong economics.
“The assets come with ample midstream capacity, unlocking optionality for mid-single digit growth in our Montney volumes… with this acquisition, we have solidified our position as the premier operator in the play,” CEO Brendan McCracken said in a statement.
The assets are located near Ovintiv’s current operations and will add nearly 70,000 barrels of oil equivalent per day of production at the Montney formation in Alberta, along with about 900 net well locations.
Upon the deal’s completion, Ovintiv expects overall total annual production volumes of about 620,000 boepd as well as oil and condensate production volumes of 205,000 barrels per day.
The company said it will also sell its Uinta Basin assets in Utah to FourPoint Resources for $2 billion.
Both transactions, which are expected to close by the first quarter of 2025, are likely to be immediately accretive for Ovintiv, increasing its adjusted free cash flow by about $300 million in 2025.
Ovintiv will allocate about 85% to 90% of its total capital to operations in the Permian and Montney shale plays, the company said.
It will finance the Montney acquisition through a combination of cash proceeds received from the sale of its Uinta assets, cash on hand and borrowings under its credit facility or temporary financing, Ovintiv said, adding that it has paused its share buyback program until the cash borrowed under the temporary financing is recovered.
The company expects to resume the buybacks in the second quarter of 2025.
(Reporting by Vallari Srivastava in Bengaluru; Editing by Pooja Desai)
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