President, Chief Executive Officer & Director, OVINTIV INC
Ovintiv ramps up 'powerhouse' oil production with $3.3B Montney buy: CEO
Ovintiv is ramping up its oil production following a $3.3B buy in Canada's Montney shale, CEO Brendan McCracken tells ...WE'RE JOINED BY BRENDAN MCCRACKEN, PRESIDENT AND CEO OF EVENTS BRENDAN. THANKS VERY MUCH FOR ...
About Brendan Mccracken
Brendan McCracken, President and CEO of Ovintiv, discussed the company's $3.3 billion acquisition of assets in Canada's Montney shale formation in November 2024. He stated that the transaction creates a company with a "powerhouse" position in both the Permian and Montney basinschers. McCracken said the company is selling its Uinta Basin asset in Utah to focus capital on those two plays, which he described as having the largest remaining premium oil resource. He characterized Ovintiv's strategy as generating leading and durable returns for investors through a deep drilling inventory. In a 2022 keynote address, McCracken said Ovintiv was focused on debt reduction and returning cash to shareholders rather than production growth, citing investor sentiment. He noted that the company had met its long-term methane reduction target four years ahead of schedule and was aligned with the World Bank's zero routine flaring initiative. McCracken also said the company's production in British Columbia is electrified with hydroelectricity, resulting in a low carbon footprint, and argued that natural gas can play a significant role in decarbonizing the global energy mix.
Transcript (16 segments)
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Host0:06
Oil and gas producer years ago was called and kinda are climbing. The energy producer plans to buy assets from Power Amount here in Canada. This would be in the months before Montney Formation in Alberta. Deal valued at about 2.4 billion. It adds something like 70,000 barrels of oil equivalent per day of production. We're joined by Brendan McCracken, President and CEO of Ovintiv. Brendan, thanks very much for coming on the show.
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Brendan McCracken0:40
Yeah, glad to be here.
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Host0:40
Start off with the Utah divestiture. If you would want on the assets you're selling, why did you feel that they weren't the best fit for the portfolio?
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Brendan McCracken0:51
Yeah, we're selling our Uinta Basin asset in Utah, which is an oil that we've been a big part of unlocking. And so we really like that asset and it's played an important role for us. In the go-forward uses, we're going to struggle to allocate capital away from our highly valuable positions in the Permian and the Montney and really grow that Uinta asset. So it made sense to us to explore with the market what that might be, and where we wound up was a very competitive buyer that was prepared to pass through the undeveloped value in that play that we just weren't going to get to. So it made sense for us to tax that asset.
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Host1:36
And we're looking now at where you are right now. So you intend will be coming off the map there. You're in the Permian, of course, you're famous for that. But tell us why these Montney assets you're spending about 2.4 billion dollars US.
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Brendan McCracken1:51
Yeah, and we've been in the Montney for a long time. You know, we were one of the first stories on holes in the play back in 2006. So this is not a new basin for us. Really what this set of transactions does is it creates a really unique E&P company in the global context where we've now got a powerhouse in both the Permian and the Montney. When we stand back and look at the North American resource landscape over the next several decades, the two plays that stand out, they really have the largest amount of remaining what we call premium oil resource, are the Permian and the Montney. And so we're excited to build a company around those two assets.
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Host2:34
What does that expression mean? Premium oil resource.
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Brendan McCracken2:39
Yeah, so we're all about returns. Our strategy is to generate and deliver leading and durable returns for investors. And the key to that is to have a really deep and long drilling inventory, so undeveloped oil and real drilling locations with a premium designation on them. So those are our drilling locations that will deliver a leading return to the corporate bottom line. And so for our purposes, a premium return location can deliver a rate of return at the company level in the mid to high teens, which is really leading and ahead of where you can get in an S&P here.
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Host3:21
So you're picking up 70,000 barrels of oil equivalent production a day. How do you try disposition? How much production are you giving up there?
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Brendan McCracken3:31
Yes, we're selling about 30 of the 70, which is made up of 25,000 barrels a day of crude condensate and the remainder in natural gas.
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Host3:44
Where will most of your production come from when the dust settles? Montney or Permian?
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Brendan McCracken3:50
Well, it depends on how you count it. So from an oil production perspective, still be a little bit larger, effectively a little more than double on the oil side in the Permian relative to the Montney. And then we'll also have a big chunk of oil production, 30,000 barrels a day coming from our Oklahoma asset that we call the Anadarko Basin. If you measure on a BOE basis, the BOEs are going to be now dominated by the Montney. So we've really set up this balanced powerhouse in the Permian, because you're getting a lot of gas in them, and then the Montney on the oil side.
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Host4:24
Correct. And we already have a great deal of legacy gas and NGL production in the Montney as well, as well as this effectively doubles our oil production.
While that reported by gas intrigues you, the states was, of course, the Alberta prices below. Are you in the camp that LNG Canada, our backs, barbed laser export launching start-up will improve gas markets in Alberta?
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Brendan McCracken4:52
You know, we're in the where I would characterize being in a short-term cautious camp and long-term bullish camp. And what I mean by that is LNG Canada takeaway, which is due to start up relatively soon here, it's going to be a big help, but it might be a transitory help. Just when you think about the amount of takeaway relative to the overall capacity of the basin. But we're also excited about a number of the follow-on projects that are there in the queue working their way through to final investment decision. And those really represent the potential for Canada to meaningfully participate in the global LNG market and provide a real structural uplift for Canadian gas.
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Host5:34
Thank you very much for joining us today, Brendan.