Ovintiv is extending its reach in Western Canada with a roughly $890 million deal to buy Alberta-based Logan Energy.
The bolt-on acquisition is expected to add about 266,000 net acres and 420 10,000-foot equivalent oil well locations to the Denver-based energy company's existing assets in the Montney basin.
Ovintiv said it would buy all of Logan's outstanding shares in an all-cash transaction valued at 1.26 billion Canadian dollars, equivalent to about $890 million, including debt.
Logan's assets are located near Ovintiv's existing Montney operations and include two new oil batteries and additional natural gas processing capacity. Current production from the acquired assets is about 20,000 barrels of oil equivalent a day.
The deal comes amid heightened interest in oil assets in low-risk countries that has been sparked by the war in the Middle East.
Logan said Ovintiv's Canadian subsidiary is offering C$1.40 a share. As part of the transaction, Logan is forming a new wholly owned subsidiary, Logan Oil, which will be spun off to its shareholders with an initial equity value of about C$0.08 a share, lifting the total consideration to C$1.48 for each Logan share.
Logan's shares last closed on the junior TSX Venture exchange at C$1.45, up roughly 70% so far this year.
The move boosts Ovintiv's core land position in the Montney in Alberta and British Columbia to about 720,000 net acres, and includes some 60,000 net acres with exposure to the Duvernay shale. The Denver-based company said it expects the transaction to generate cost savings of about $60 million annually.
Ovintiv said it would maintain a strong balance sheet with net debt below $4 billion when the deal closes, which is expected in the first quarter of next year. It expects to fund the acquisition through cash on hand, borrowings under its credit facility and its commercial paper program.
The acquisition comes after Ovintiv earlier in the year agreed to sell about 360,000 net acres in Oklahoma's Anadarko Basin for $3 billion.
Logan Oil, which will own undeveloped lands in northwest Alberta, has agreed to buy Andora Energy which holds the Sawn Lake steam-assisted gravity drainage project in the Peace River region of Alberta, from CanAsia Energy for C$30 million. Logan Oil also entered into a pre-acquisition agreement to buy Woodcote and its Clearwater oil assets in the Nipisi area of Alberta for C$110 million in cash and shares of the new Logan Oil.
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