Ovintiv Shakes Up Portfolio With $2.38 Billion Montney Acquisition And $2 Billion Uinta Basin Sale, Pauses Buyback

Ovintiv Inc. OVV shares are trading higher after the company inked a definitive purchase agreement to acquire certain Montney assets from Paramount Resources Ltd. PRMRF, in an all-cash transaction valued at around $2.377 billion (C$3.325 billion).

Post closure, the acquisition is expected to add about 70 MBOE/d of production (approximately 25 Mbbls/d of oil and condensate), 900 net 10,000 foot equivalent well locations, and approximately 109,000 net acres (approximately 80% undeveloped), in the core of the oil-rich Alberta Montney.

The assets are strategically located near the company’s current operations and have access to midstream infrastructure with available capacity.

Apart from this, Ovintiv agreed to sell nearly all of its Uinta Basin assets in Utah to FourPoint Resources, LLC, for around $2.0 billion in cash.

Both transactions are anticipated to close by the end of the first quarter of 2025, pending customary closing conditions and adjustments.

Together, these transactions are projected to boost Ovintiv’s 2025 non-GAAP free cash flow by about $300 million, raising 2025 free cash flow per share by approximately 20% over prior expectations.

Following the transactions, Ovintiv will operate three rigs in Montney, five in Permian, and one to two in Anadarko, allocating 85%-90% of its 2025 capital to Permian and Montney.

Synergies: The combined transactions are projected to yield annual cost synergies of about $125 million through well cost savings, overhead reductions, and Canadian cash tax benefits.

Ovintiv expects per well cost savings of over $1.5 million on the acquired assets, aligning with its current Montney well costs of approximately $550 per foot due to operational efficiencies and scale advantages.

Buyback Paused: Ovintiv has temporarily paused its share buyback program to recover approximately $377 million borrowed for the Montney asset purchase, representing the net difference after the Uinta assets sale.

The company has allocated roughly $181 million from the buyback pause to debt reduction in the fourth quarter.

Ovintiv anticipates resuming buybacks in the second quarter of 2025 and has paused further acquisitions until then. The base dividend is expected to remain unchanged.

Outlook: The company projects 2025 oil and condensate production at 205 Mbbls/d and total production at 620 MBOE/d, with capital spending of $2.2 billion, $100 million below prior estimates.

As of October 31, the company’s non-GAAP net debt was $5.65 billion.

Investors can gain exposure to the stock via Invesco Energy Exploration & Production ETF PXE and Texas Capital Funds Trust Texas Capital Texas Oil Index ETF OILT.

Price Action: OVV shares are up 3.55% at $43.71 at the last check Thursday.

Photo via Shutterstock

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