Exclusive: Energy producer Ovintiv approaches $4 billion in Permian oil deal
April 2 (Reuters) – Ovintiv Inc ( OVV.N ) is nearing a deal to buy oil exploration and production assets in the Permian Basin controlled by private equity firm EnCap Investments for about $4 billion including debt, people familiar with the matter said with the matter. on Sunday.
The agreement represents a doubling of Ovintiv in Perm, where exploration in many areas still promises lucrative returns. The company already planned to spend more money drilling in the region this year than in any other US or Canadian basin where it operates.
The assets being purchased are located in the Midland section of the Permian in Texas and are currently owned by three companies controlled by EnCap: Black Swan Oil & Gas, Piedra Resources and PetroLegacy II.
Ovintiv will pay in cash and also use some of the shares as currency for the deal, the sources said.
If the negotiations are successful, a deal could be announced as early as this week, the sources said, warning that no deal is certain.
Ovintiv and EnCap did not immediately respond to requests for comment.
The transaction will be Ovintiv’s first major acquisition since it bought Newfield Exploration in February 2019 for $5.5 billion in stock. The Newfield transaction gave Ovintiv a greater presence in the natural gas liquids market, but drew criticism for its timing and cost, including from activist investor Kimmeridge. Kimmeridge later challenged Ovintiv’s rule, but then split in early 2021.
Since then, Ovintiv has been focused on reducing its debt pile, which fell to $3.6 billion last year from $6.6 billion at the end of 2020, including by selling assets.
The agreement will increase the proportion of Ovintiv’s production that comes from oil, at a time of low natural gas prices. It also gives the company more inventory in a central pool, reasoning that has inspired other public oil and gas companies in their acquisition activity in recent months.
Black Swan was backed by $500 million in equity from EnCap and management, according to Black Swan’s website.
PetroLegacy II controls about 25,000 net acres in Martin County, much of which was acquired from Pioneer Natural Resources ( PXD.N ) in 2017.
EnCap has supported Robert Beecherl and Chip Smith, the leaders behind Piedra Resources, in a number of ventures.
The deal comes as EnCap tries to raise a new fund focused on investments in oil and gas production, its first since 2017, sources told Reuters in November.
Reporting by David French in New York and Shariq Khan in Bengaluru Editing by Matthew Lewis
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