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Ovintiv (OVV) to Acquire Midland Basin Assets for $4.275B
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Ovintiv Inc. (OVV - Free Report) , an independent energy company with operations in North America, recently announced that it will acquire the leasehold interest and related assets of Black Swan Oil & Gas, PetroLegacy Energy and Piedra Resources. These companies are portfolio enterprises of funds managed by EnCap Investments L.P. The cash and stock deal is worth approximately $4.275 billion.
Ovintiv has a strong presence in the Permian Basin, where it has been actively exploring and producing oil and gas for many years. With the acquisition of Core Midland Basin Assets, the company is set to strengthen its position in the Permian Basin and increase its overall production capacity.
The abovementioned acquisition will provide Ovintiv with several benefits, including:
Increased production: The acquisition will enable the company to increase its production in the Permian Basin, which is one of the most productive oil and gas regions in the world.
Improved cost efficiency: By acquiring Midland's assets, OVV will be able to achieve greater cost efficiency through economies of scale and optimized operations.
Enhanced portfolio diversification: The acquisition will enable the company to diversify its asset portfolio and reduce its dependence on any one region or asset type.
The deal is expected to add about 1,050 well locations to Ovintiv's Permian inventory and about 65,000 net acres to the Midland Basin's core region, which is ideally located close to the company’s existing Permian operations.
Per the terms of the agreement, the sellers will receive approximately 32.6 million shares of Ovintiv common stock and $3.125 billion of cash. The cash portion of the transaction is expected to be funded through a combination of cash on hand, cash proceeds from OVV’s pending sale of its Bakken assets in North Dakota (announced on the same day as the acquisition), as well as borrowings under the company's credit facility and/or proceeds from new debt financing.
Due to additional assets and increased operational efficiency resulting from the acquisition, Ovintiv has raised its projected production for fiscal 2023 to a range of 520,000-545,000 barrels of oil equivalent per day. This signifies a notable increase from its previous outlook of 500,000-525,000 bbl/day. The company's anticipated capital spending has also been revised upward to $2.6-$2.9 billion, up from its prior guidance of $2.15-$2.35 billion.
The acquisition is a positive move for the company as it adds to its inventory of Permian assets and strengthens its position in the Midland Basin. The company has been focused on delivering shareholders’ value through a disciplined approach to capital allocation, cost management and profitable growth. The acquisition is expected to increase Ovintiv's cash returns per share and fortify its position as a leader in the North American energy market.
On Apr 2, Ovintiv's board of directors also announced a 20% increase in the company's annualized base dividend payment, bringing the quarterly dividend to 30 cents per share of common stock. The dividend is payable on Jun 30, to shareholders of record as of Jun 15. It's noteworthy that this is the second dividend hike announced by Ovintiv in the last 12 months.
The company and its subsidiaries explore, develop, produce and sell natural gas, oil, and natural gas liquids in Canada and the United States.
Zacks Rank and Key Picks
Currently, Ovintiv carries a Zacks Rank #4 (Sell). Investors interested in the energy sector might look at some better-ranked stocks like NGL Energy Partners (NGL - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Liberty Energy (LBRT - Free Report) and Ranger Energy Services (RNGR - Free Report) , each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
NGL Energy Partners: The company is worth approximately $367.70 million. Its shares have risen 19.5% in the past year.
NGL is a limited partnership company that operates a vertically-integrated propane business with three segments — retail propane, wholesale supply and marketing, and midstream.
Liberty Energy: The company is valued at around $2.28 billion. It delivered an average earnings surprise of 81.53% for the last four quarters and its current dividend yield is 1.55%.
LBRT currently has a forward P/E ratio of 3.76. In comparison, its industry has an average forward P/E of 11.60, which means the company is trading at a discount to the group.
Ranger Energy Services: The company is valued at around $242.99 million. In the past year, its shares have fallen 4.7%.
RNGR currently has a forward P/E ratio of 5.30. In comparison, its industry has an average forward P/E of 11.60, which means the company is trading at a discount to the group.
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Ovintiv (OVV) to Acquire Midland Basin Assets for $4.275B
Ovintiv Inc. (OVV - Free Report) , an independent energy company with operations in North America, recently announced that it will acquire the leasehold interest and related assets of Black Swan Oil & Gas, PetroLegacy Energy and Piedra Resources. These companies are portfolio enterprises of funds managed by EnCap Investments L.P. The cash and stock deal is worth approximately $4.275 billion.
Ovintiv has a strong presence in the Permian Basin, where it has been actively exploring and producing oil and gas for many years. With the acquisition of Core Midland Basin Assets, the company is set to strengthen its position in the Permian Basin and increase its overall production capacity.
The abovementioned acquisition will provide Ovintiv with several benefits, including:
The deal is expected to add about 1,050 well locations to Ovintiv's Permian inventory and about 65,000 net acres to the Midland Basin's core region, which is ideally located close to the company’s existing Permian operations.
Per the terms of the agreement, the sellers will receive approximately 32.6 million shares of Ovintiv common stock and $3.125 billion of cash. The cash portion of the transaction is expected to be funded through a combination of cash on hand, cash proceeds from OVV’s pending sale of its Bakken assets in North Dakota (announced on the same day as the acquisition), as well as borrowings under the company's credit facility and/or proceeds from new debt financing.
Due to additional assets and increased operational efficiency resulting from the acquisition, Ovintiv has raised its projected production for fiscal 2023 to a range of 520,000-545,000 barrels of oil equivalent per day. This signifies a notable increase from its previous outlook of 500,000-525,000 bbl/day. The company's anticipated capital spending has also been revised upward to $2.6-$2.9 billion, up from its prior guidance of $2.15-$2.35 billion.
The acquisition is a positive move for the company as it adds to its inventory of Permian assets and strengthens its position in the Midland Basin. The company has been focused on delivering shareholders’ value through a disciplined approach to capital allocation, cost management and profitable growth. The acquisition is expected to increase Ovintiv's cash returns per share and fortify its position as a leader in the North American energy market.
On Apr 2, Ovintiv's board of directors also announced a 20% increase in the company's annualized base dividend payment, bringing the quarterly dividend to 30 cents per share of common stock. The dividend is payable on Jun 30, to shareholders of record as of Jun 15. It's noteworthy that this is the second dividend hike announced by Ovintiv in the last 12 months.
The company and its subsidiaries explore, develop, produce and sell natural gas, oil, and natural gas liquids in Canada and the United States.
Zacks Rank and Key Picks
Currently, Ovintiv carries a Zacks Rank #4 (Sell). Investors interested in the energy sector might look at some better-ranked stocks like NGL Energy Partners (NGL - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Liberty Energy (LBRT - Free Report) and Ranger Energy Services (RNGR - Free Report) , each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
NGL Energy Partners: The company is worth approximately $367.70 million. Its shares have risen 19.5% in the past year.
NGL is a limited partnership company that operates a vertically-integrated propane business with three segments — retail propane, wholesale supply and marketing, and midstream.
Liberty Energy: The company is valued at around $2.28 billion. It delivered an average earnings surprise of 81.53% for the last four quarters and its current dividend yield is 1.55%.
LBRT currently has a forward P/E ratio of 3.76. In comparison, its industry has an average forward P/E of 11.60, which means the company is trading at a discount to the group.
Ranger Energy Services: The company is valued at around $242.99 million. In the past year, its shares have fallen 4.7%.
RNGR currently has a forward P/E ratio of 5.30. In comparison, its industry has an average forward P/E of 11.60, which means the company is trading at a discount to the group.