The Montney shale formation, encompassing an extensive area of 50,000 square miles (32 million acres) across northern Alberta and British Columbia, is widely recognized as one of Canada's most promising regions for oil and gas production. This region offers favorable economic conditions, making it an attractive investment opportunity for Ovintiv.
CEO Brendan McCracken stated, “The assets come with significant midstream capacity, providing options for mid-single digit growth in our Montney volumes… with this acquisition, we have reinforced our status as the leading operator in the play.”
The newly acquired assets are situated close to Ovintiv’s existing operations and are expected to contribute nearly 70,000 barrels of oil equivalent per day to production in the Montney formation in Alberta, along with approximately 900 net well locations.
Upon finalizing the deal, Ovintiv anticipates total annual production volumes to reach around 620,000 boepd, including oil and condensate production of 205,000 barrels per day.
Additionally, the company plans to divest its Uinta Basin assets in Utah to FourPoint Resources for $2 billion.
Both transactions, projected to close by the first quarter of 2025, are expected to be immediately beneficial for Ovintiv, potentially boosting its adjusted free cash flow by approximately $300 million in 2025.
Ovintiv intends to allocate around 85% to 90% of its total capital towards operations in the Permian and Montney shale plays.
The financing for the Montney acquisition will come from a mix of cash proceeds from the sale of its Uinta assets, available cash, and borrowings under its credit facility or temporary financing. The company has also paused its share buyback program until the borrowed cash from the temporary financing is recovered, with plans to resume buybacks in the second quarter of 2025.