Nov 14 (Reuters) - Shale producer Ovintiv (OVV.N) , opens new tab said on Thursday it was acquiring oil assets from Paramount Resources (POU.TO) , opens new tab for $2.38 billion in cash, expanding its presence in Canada's Montney shale play.

At the same time, Ovintiv said it had agreed to offload its existing operations in the Uinta formation in Utah to privately owned FourPoint Resources for $2 billion, with the proceeds used to help pay for the Montney purchase alongside cash and debt.

The moves help Ovintiv to further concentrate its oil and gas exploration and production operations in the Montney and the Permian Basin in Texas and New Mexico, the key shale basins in Canada and the United States.

While Ovintiv has sought to expand its exposure to the Permian - including through buying oil-focused assets for $4.3 billion last year - the company said the cost of buying in the basin had increased significantly.

"This asset stands on its own as the most valuable undeveloped acreage in North America, but part of the reason why it is so accretive for us is the cost of entry is priced right," Chief Executive Brendan McCracken said.

He added the deal was "extraordinary value creation" for the company and its shareholders, adding its location next to Ovintiv's existing assets in the region would aid integration efforts. Following both deals, Ovintiv's free cash flow would increase by $300 million in 2025.

In mid-afternoon trading, shares of Ovintiv were 3.6% higher while Paramount's shares rose 16.9%. The Ovintiv gain came even as the company suspended its share buyback program until it had repaid any borrowings to accomplish the purchase - expected in the second quarter of next year.

"While a greater position in the Montney could potentially weigh on the valuation, the assets come at a low entry cost, have the potential to grow oil production," Siebert Williams Shank analysts said in a note, adding they expected markets to react well to both transactions.

The Montney assets will add 70,000 barrels of oil equivalent per day of production, nearly doubling Ovintiv's existing production in the shale formation, according to a statement.

Both deals are expected to close by the end of the first quarter, the Ovintiv statement said. FourPoint's all-cash purchase of Ovintiv's Uinta position was supported by investment firms Quantum Capital and Kayne Anderson, according to a FourPoint statement.

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https://www.reuters.com/markets/deals/ovintiv-buy-montney-oil-assets-238-billion-2024-11-14/