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(Bloomberg) — Ovintiv Inc. agreed to buy NuVista Energy Ltd in a deal valued at about $2.7 billion that expands the shale explorer’s operations in Canada.
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The cash-and-stock acquisition for Calgary-based NuVista will give Ovintiv about 930 well locations and 140,000 net acres in the core of Alberta’s oil-rich Montney basin, according to a statement Tuesday. The deal is expected to generate about $100 million in annual cost savings.
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“This transaction boosts our free cash flow per share,” Ovintiv Chief Executive Officer Brendan McCracken said in the statement. “The NuVista assets were identified as part of an in-depth technical and commercial analysis to identify the highest value undeveloped oil resource in North America.”
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US shale companies are increasingly buying rivals as they push to gain scale and secure future drilling sites in aging basins. The assets Ovintiv is buying through NuVista are directly adjacent to its current operations in the Montney and include access to processing and refining infrastructure.
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Ovintiv, formerly Encana Corp., underwent a corporate overhaul with a name change and a headquarters move from Canada to Denver more than five years ago. Its shares rose as much as 1.2% after the deal was announced. The company, which already owned about 9.6% of NuVista’s outstanding shares, will fund the cash portion of the deal through a combination of cash on hand, the company’s credit facility and a term loan.
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Western Canada is a growing source of gas and light crude. Liquefied natural gas exports off British Columbia’s coast is boosting demand for gas, while a new crude pipeline to the Pacific is propelling growth in the oil sands.
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Like their US counterparts, Canadian oil and gas producers have sought consolidation as a way to to boost output and increase efficiency amid lower commodity prices.
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Oil sands producer Cenovus Energy Inc is in the process of buying MEG Energy Corp., a deal scheduled to be finalized this week with a shareholder vote. Last year, Tourmaline Oil Corp., Canada’s biggest gas producer, agreed to buy Crew Energy Inc. for C$1.3 billion.
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Morgan Stanley and JP Morgan Securities served as financial advisers to Ovintiv, while Blake Cassels & Graydon LLP, Paul Weiss Rifkind Wharton & Garrison LLP, and Gibson Dunn & Crutcher LLP were legal advisers. For NuVista, Peters & Co. and RBC Capital Markets were financial advisers and Burnet Duckworth & Palmer LLP and Vinson & Elkins LLP served as legal advisers.
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(Adds comment from Ovintiv CEO in the third paragraph)
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English (US)