Ovintiv Inc. agreed on July 6 to sell portions of its assets located in the Bakken and Uinta basins for total proceeds of roughly $250 million, which will be used to accelerate doubling of shareholder returns.
“These transactions continue our track record of portfolio optimization, and this means we will double our cash returns to shareholders starting now,” Ovintiv CEO Brendan McCracken commented in a company release.
Starting immediately for the third quarter, Ovintiv will increase its returns to shareholders to 50% of the previous quarter’s non-GAAP free cash flow after base dividends. Cash returns in the third quarter are anticipated to be delivered through share buybacks.
Previously, the company had planned to increase cash returns to the 50% level starting Oct. 1.
“This enables our shareholders to directly benefit from these noncore asset sales and our continuing strong performance,” McCracken added in the release.
As of an April 2020 investor presentation, Ovintiv held about 72,000 net acres in the Bakken and 222,000 net acres in the Unita Basin. Both regions are located outside of what the company considers core operating areas, which include the Anadarko, Permian and Montney shale basins.
The Bakken assets being sold include approximately 88 wells, located mainly in Richland County, Montana, approximately 30 miles from Ovintiv’s primary Bakken position.
The Uinta Basin assets are mature waterflood assets with operating expenses of approximately $35 per boe. The assets include about 3,000 gross vertical wells.
As of April, the combined volumes from the assets being sold totaled approximately 5,000 boe/d, including 4,900 bbl/d of oil and condensate, according to the company release.
Post the transaction, Ovintiv said it will retain approximately 130,000 largely contiguous net acres in the horizontal oil-rich shale portion of the Uinta play.
The agreements, made with “two counterparties,” are expected to close in the third quarter. The effective date of both sales is April 1. Total proceeds received are subject to customary closing adjustments.
Ovintiv plans to update its 2022 production and total cost guidance to reflect the impact of the asset sales with its second quarter results. The company said its 2022 capital guidance will remain unchanged.
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