US shale producer Ovintiv has acquired $4.3bn of oil and gas assets in the Permian Basin in Texas from private equity firm EnCap.  

The acreage comprised almost all the assets of Black Swan Oil & Gas, PetroLegacy Energy and Piedra Resources, affiliated with EnCap Investments.

At the same time, Ovintiv announced the pending sale of all of its assets in the Bakken shale formation in North Dakota. The $825mn divestment is to Grayson Mill Bakken, also EnCap-affiliated.

Ovintiv, formerly Calgary-based Encana, has been increasingly concentrating on highly productive US shale plays, with the company’s only remaining Canadian assets being in the Montney. At issue is whether Ovintiv can now generate more free cash flow and higher shareholder returns.

The transaction is also especially interesting because shale drillers are running out of top acreage. The Permian shale play is the most productive oilfield in the world, with its oil-rich Midland Basin being especially sought after.

By contrast, the Bakken formation, part of the Williston Basin, is mature. The formation’s oil and gas production growth continues to be flat or almost so, according to data from the Energy Information Administration (EIA).

Ovintiv’s Permian purchase adds around 65,000 net acres (263 square kilometres) of largely undeveloped resource in Martin and Andrews Counties in the northern Midland Basin, the company said. The land is “highly complementary” with the company’s existing Permian Basin position, also in Martin County, Ovintiv said. 

Upon closing, the purchase will add around 1,050 net 10,000-foot (3,048-metre) well locations to Ovintiv's inventory, and around 65,000 net acres in the core of the Midland Basin.

The 1,050 wells include around 800 “premium return” locations and around 250 “high potential upside” locations, said the Denver-based company.

Ovintiv said that its land position in the Permian should increase to around 179,000 net acres (724.4 square kilometres), and that 97% of the acquired acreage is held by production with an average operated working interest of 82%.

 

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