Ovintiv Inc. is making a number of M&A moves with the acquisition of Alberta Montney assets from Paramount Resources Ltd. for US$2.38 billion (CA$3.33 billion) in an all-cash transaction, the companies announced in Nov. 14 press releases.

The transaction will be partially funded by the sell-off of substantially all of Ovintiv’s Uinta Basin assets to FourPoint Resources LLC, together with partners Quantum Capital Group and Kayne Anderson, for approximately US$2 billion. The rest of the deal will be funded with cash on hand and borrowings under the company’s credit facility.

Last month, Ovintiv was looking to sell some Permian assets as speculations rose on who and where its next buy would be. The divestiture is currently pending.

The Paramount deal includes 109,000 net acres (80% undeveloped) in Alberta, Canada, and adds 70,000 boe/d of production (approximately 25,000 bbl/d of oil and condensate) to its portfolio. As of Dec. 31, 2023, the assets include 114 MMboe of proved developed producing reserves, 270 MMboe of proved reserves and 523 MMboe of proved plus probable reserves.

The assets are strategically located near Ovintiv’s current operations and include access to midstream infrastructure with available capacity for optionality, Ovintiv President and CEO Brendan McCracken said in the deals’ announcement.  

"We are acquiring top decile rate of return assets in the heart of the Montney oil window," said McCracken. "This acquisition is the targeted result of our in-depth technical and commercial analysis of the basin to identify the highest value undeveloped oil resource. The acquired assets have demonstrated leading well performance and are a natural fit with our operating advantage and our existing acreage.”

As part of the deal, Ovintiv will swap its Horn River unconventional gas asset in British Columbia with Paramount and take ownership of Paramount's Zama, Karr and Wapiti assets and their processing and transportation commitments.

Paramount will take over Ovintiv's 50% operated interest in the companies’ joint venture together at the Two Island Lake field and a 50% operated interest at the Kiwigana field.  Both assets were producing over 40 MMcf/d of natural gas prior to being shut-in March 2024.

The Ovintiv-Paramount deal was unanimously approved by both companies’ board of directors.

Ovintiv’s sale to privately-held FourPoint includes 126,000 net acres of largely undeveloped land and production of 29 MMbbl/d.

The deals will increase Ovintiv’s Non-GAAP free cash flow by $300 million.

In 2025, Ovintiv will 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, according to Ovintiv’s press release.

Ovintiv also expects to deliver 2025 total average oil and condensate production volumes of approximately 205,000 bbl/d and total volumes of approximately 620,000 boe/d, with capital investment of approximately $2.2 billion—about $100 million less than previously expected.

Both of Ovintiv’s transactions are effective Oct. 1 and expected to close by the end of first-quarter 2025, subject to customary closing conditions and adjustments.

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are serving as financial advisers to Ovintiv on the Montney transaction. Jefferies LLC (lead) and BofA Securitiesc Inc. are serving as financial advisers on the Uinta transaction. Blake, Cassels & Graydon LLP is serving as Ovintiv's legal counsel on the Montney transaction, Kirkland & Ellis LLP is serving as Ovintiv's legal counsel on the Uinta sale and Gibson, Dunn & Crutcher LLP is serving as Ovintiv's legal counsel on financing matters related to the transactions.

BMO Capital Markets and Peters & Co. Ltd. are acting as lead financial advisers to Paramount in connection with the Transaction. Norton Rose Fulbright Canada LLP is acting as legal counsel to Paramount. Scotiabank, RBC Capital Markets and ATB Capital Markets acted as strategic advisers.

Wells Fargo Securities LLC served as the exclusive financial adviser to FourPoint Resources. Wells Fargo Bank NA provided committed financing and Wells Fargo Securities LLC served as sole bookrunner and lead arranger for FourPoint. Vinson & Elkins LLP served as legal counsel to FourPoint and Quantum. Latham & Watkins LLP acted as legal adviser to Kayne Anderson in connection with this transaction.

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