Ovintiv (OVV) to Sell Shale Assets, Accelerate Share Repurchase

The Denver-based independent energy producer — Ovintiv Inc. OVV — recently declared that it has signed agreements with undisclosed entities for the sale of portions of its oil and gas assets situated in the Uinta and Bakken Basins in the United States for a total consideration of roughly $250 million.

OVV’s Uinta Basin assets, which are being sold, include about 3,000 gross vertical wells. These are said to be mature waterflood assets, with operating expenses of approximately $35.00 per barrel of oil equivalent. The Bakken assets, however, comprise approximately 88 wells, primarily located in Richland County, MT, nearly 30 miles from the company’s primary Bakken position.

Ovintiv mentioned that as a result of these deals, along with robust financial and operational results, it has chosen to accelerate the doubling of its cash returns to shareholders. Starting immediately from the third quarter, the company will augment its returns to shareholders to 50% of the last reported quarter's non-GAAP free cash flow after base dividends. Earlier, OVV had planned to boost cash returns to the 50% level, commencing on Oct 1. The share repurchase is expected to be used to deliver cash returns in the third quarter.

Ovintiv CEO, Brendan McCracken, mentioned that these transactions continue OVV’s track record of portfolio optimization and that it means the company will be able to double cash returns to shareholders right away. "This enables our shareholders to directly benefit from these non-core asset sales and our continuing strong performance," he added.

Per Ovintiv, the divested assets have a combined volume of roughly 5,000 barrels of oil equivalent per day, including 4,900 barrels per day of oil and condensate, as of April 2022.

The deals, which are anticipated to be closed in the third quarter of 2022, are subject to regulatory consent, closing conditions and other adjustments.

Ovintiv Inc. explores and churns out oil and natural gas from diverse assets located in the United States and Canada. Previously known as Encana, the company rebranded and shifted its corporate domicile from Calgary, Canada to Denver, CO.

Ovintiv currently has a Zacks Rank #3 (Hold). Investors interested in the energy space might look at the following companies — Crescent Point Energy CPG, Valero Energy VLO and Enerplus ERF — each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Crescent’s 2022 earnings per share (EPS) has been revised upward by about 73.7% over the past 60 days from $1.56 to $2.71.

The Zacks Consensus Estimate for CPG’s 2022 earnings is pegged at $2.71 per share, up 276.4% from the year-ago earnings of 72 cents.

The Zacks Consensus Estimate for Valero’s 2022 earnings stands at $19 per share, up about 576.3% from the year-ago earnings of $2.81.

VLO beat the Zacks Consensus Estimate for earnings in all the trailing four quarters, the average being around 84.3%.

The Zacks Consensus Estimate for Enerplus’ 2022 earnings is pegged at $3.31 per share, up 241.4% from the year-ago earnings of 97 cents.

The Zacks Consensus Estimate for ERF’s 2022 EPS has been revised upward by about 25.4% over the past 60 days from $2.64 to $3.31.

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