In a pair of upstream transactions further shifting its attention to the Permian Basin, Denver-based Ovintiv announced Monday that it has agreed to a $4.275 billion acquisition of oil-related assets from three entities owned by EnCap Investments.
In a separate transaction, Ovintiv has agreed to the $825 million sale of its assets in the Williston Basin of the Bakken region of North Dakota to Grayson Mill Bakken, a portfolio of funds managed by EnCap.
Gibson, Dunn & Crutcher and Kirkland & Ellis are advising Ovintiv on the legal side along with Toronto-based Blake, Cassels & Graydon.
Vinson & Elkins is outside counsel for EnCap on both transactions.
The Gibson Dunn team included partners Cynthia Mabry, Shalla Prichard, Tull Florey and Hillary Holmes and associates Justine Robinson, Malakeh Hijazi and Mason Gauch.
The Kirkland team for the Permian purchase was led by corporate partners David Castro, Rahul Vashi, Lindsey Jaquillard, and Kyle Watson and associates Gabrielle Sumich and Isaac Bate; and tax partners Mark Dundon and Ryan Phelps. On the Bakken sale and disposition, the Kirkland team was led by Castro, Rahul Vashi, RJ Malenfant and associate Jarrod Gamble.
Vinson & Elkins was led on the Permian deal by Houston partner Bryan Loocke, with assistance from counsel Megan Menniti and Joclynn Marsh, senior associate Caroline Kuehn and associates Bradley Oster, Kene Obi, Ben Zeter and Hunter Albritton.
Leading for V&E on the Grayson Mill transaction was partner Danielle Patterson, with assistance from counsel Elena Sauber and associates Zach Parker, Laura Byrd, Hunter Michielson, Brian Broussard, Kene Obi, Rob Vezina, Vestita Kuntz, Sebastian Devora and Darren Fox.
Both teams were assisted by Matt Strock (corporate); partners John Lynch and Todd Way and associates Jeff Slusher, Dan Henderson, Katie Dillard, Ryan Dolmanet and Sarah Coe (tax); partners Jackson O’Maley, Mike Marek, Doug McWilliams and Matt Strock, senior associates David Lassetter and Alex Turner and associates Houston Morgan, Rivers Stephens, Terrance Ogren and Mimi Nguyen (corporate); partners James Longhofer and Guy Gribov (finance); partner Matt Dobbins and associate Kelly Rondinelli (environmental); partners Shane Tucker and David D’Alessandro and associates Cassandra Zarate, Maddison Riddick, Mary Daniel Morgan, Keira Kuntz (executive compensation/benefits) and partner Becky Baker (employment/labor).
Financial advisors include Goldman Sachs, Morgan Stanley, and TPH&Co., the energy business of Perella Weinberg Partners for Ovintiv. Jefferies is financial advisor to EnCap on the Permian transaction.
Ovintiv’s Permian purchase includes assets from three EnCap-controlled companies — Black Swan Oil & Gas, Piedra Resources and PetroLegacy II. Ovintiv said the cash and stock purchase will add approximately 1,050 net 10,000 well locations to the company’s current Permian inventory, as well as 65,000 net acres in the Midland Basin.
Under terms of the agreement, Ovintiv will pay the EnCap entities $3.13 billion in cash along with 32.6 million common shares of Ovintiv. At the opening of markets on Monday, Ovintiv was trading just under $40 per share.
At March 30, 2023 futures strip pricing, the company expects the transactions to drive more than 25 percent higher cash returns per share over the twelve months following the close of the transactions — expected by June 30 — and more than 40 percent higher cash returns per share in 2024. At the opening of markets on Monday, Ovintiv was trading on the NYSE at $38.86 per share, a 10 percent increase over last week reflected generally in other O&G stocks.
Brendan McCracken, president and CEO of Ovintiv, described the Permian purchase as a “unique undeveloped asset” in the Northern Midland Basin. “Located in some of the best rock in the Permian, these assets have demonstrated leading well performance and are a natural fit with our existing Martin County acreage.”
“The sale of our Bakken asset is aligned with our track record of unlocking significant value from non-core assets while high grading our portfolio and extending inventory runway in our core areas,” McCracken said.