Ovintiv Inc. is streamlining its operations with a deal to buy assets in Alberta’s Montney region while off-loading its holdings in Utah.
The oil and gas producer said Thursday it was paying about $3.3 billion in cash for 44,110 hectares in the Montney from Paramount Resources Ltd., while it was selling about 51,000 hectares of largely undeveloped land in Utah’s Uinta Basin for $2.8 billion.
“The Montney is the second largest undeveloped oil resource in North America, and with this acquisition, we have solidified our position as the premier operator in the play,” said Ovintiv chief executive Brendan McCracken in a statement.
The new assets will add about 900 total net well locations and 70,000 barrels of oil equivalent per day of production, while the Uinta holdings produce about 29,000 barrels of oil and condensate production per day.
Ovintiv said the new assets are strategically located near its current operations and have access to midstream infrastructure with available capacity.
The deal, which also includes Ovintiv transferring its Horn River assets in B.C. to Paramount and taking possession of Paramount’s Zama assets in Alberta, will consolidate Ovintiv’s focus on the Montney as well as the Permian Basin and Anadarko Bason in the southern United States.
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The streamlining will lead to about $175 million in annual cost synergies, the company said.
The sale of the Uinta holdings will go toward covering the cost of the Montney acquisition, while Ovintiv has also suspended its share buyback program until it has paid back the cash borrowed for the deal.
Following the closing of the deal, Ovintiv said it plans to run an average of three rigs in the Montney, five in the Permian and one to two rigs on its Anadarko holdings.
The company expects capital spending of about $3.1 billion next year and production to average of about 205,000 barrels a day of oil and condensate.
