Ovintiv acquires EnCap oil and gas assets in Permian basin for $4.3 billion

(Bloomberg) — Ovintiv Inc. will acquire oil and gas assets in the Permian Basin from private equity firm EnCap Investments for about $4.3 billion, expanding its reach in the most productive U.S. shales.

Ovintiv will pay $3.1 billion cash and provide 32.6 million shares for leasehold interest and assets held by three EnCap portfolio companies, according to a statement Monday. Bloomberg News reported the talks on Sunday.

The agreement comes as U.S. shale output growth slows as drillers run out of top-tier acreage, stoking concern they won’t be able to fill the void created by OPEC production cuts and sanctions on Russian supply. Ovintiv boosted its 2023 output guidance in light of the Encap deal, saying the pact will expand its premium inventory in the Permian.

The deal for the assets held by EnCap’s Black Swan Oil & Gas, PetroLegacy Energy and Piedra Resources will add about 1,000 well locations to Ovintiv’s operations in the Permian, which covers part of West Texas and New Mexico, and about 65,000 acres in the Permian’s Midland Basin. Ovintiv’s board has already approved the sale.

“We are acquiring a unique undeveloped asset in the Northern Midland Basin,” Ovintiv Chief Executive Officer Brendan McCracken said in the statement. “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.”

Ovintiv rose as much as 5.5% before the start of regular trading in New York.