Ovintiv Inc. terminated its 50/50 joint venture (JV) with China’s state-owned PetroChina Co. Ltd. in the Duvernay on Sept. 1, ending an eight year partnership between the companies in the Canadian shale play.

In a release by the Denver-based company, Ovintiv said its subsidiary, Ovintiv Canada ULC, closed an agreement to split the JV assets equally with PetroChina Canada Ltd. in a no-penalty, no-fee transaction.

The partnership dates back to December 2012 when PetroChina agreed to pay Ovintiv, going by Encana at the time, CA$2.18 billion for a 49.9% stake in its Duvernay shale prospect located in west-central Alberta. Ovintiv and PetroChina has since each held an approximate 50% interest across the entire asset with Ovintiv serving as operator.

Following the close of the transaction terminating the JV, each company will independently own and operate their interests going forward. Ovintiv said its net production, proved reserves and acreage in the Duvernay will be unchanged as a result of the transaction.

Enverus noted that although Ovintiv’s JV position has some of the most competitive economics in the Kaybob Duvernay, activity has slowed with challenged commodity pricing not supporting breakevens greater than $50 WTI and amid the company’s pivot to its Lower 48 assets following the move to establish its domicile in the U.S., wrote analyst Amanda Mackey in a Sept. 1 research note.

The Duvernay split leaves Ovintiv with a consolidated interest in approximately 250,000 net acres in the play. The company said net production from the asset averaged roughly 13,000 boe/d (43% liquids) during the second quarter.

Still, analysts with Tudor, Pickering, Holt & Co. (TPH) expect the Ovintiv Duvernay asset will likely not garner much capital allocation over the near-term.

“Going forward, operational focus TPHe remains on the company’s core assets including the Permian (TPHe 3 rigs continue into 2021), Anadarko (TPHe 2 rigs), and Montney (TPHe 2 rigs),” the TPH analysts wrote in a Sept. 2 research note.

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