Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF OVINTIV INC.
On June 12, 2023, Ovintiv Inc. (Ovintiv) completed the acquisition (the Permian Acquisition) to purchase the outstanding equity
interests of six Delaware limited liability companies including Black Swan Permian, LLC and Black Swan Operating, LLC (together, Black Swan Combined), PetroLegacy Energy II, LLC, PearlSnap Midstream, LLC, Piedra Energy III, LLC and
Piedra Energy IV, LLC and associated subsidiaries (collectively, the Permian LLCs) from NMB Seller Representative, LLC, representing the respective sellers including, Black Swan Oil & Gas, LLC, PetroLegacy II Holdings, LLC,
Piedra Energy III Holdings, LLC and Piedra Energy IV Holdings, LLC (collectively the Sellers), which are portfolio companies of funds managed by EnCap Investments L.P (EnCap). The Company paid aggregate cash consideration of
approximately $3.2 billion and issued 31.8 million shares of Ovintiv common stock, representing a value of the consideration of approximately $1.2 billion, subject to final closing adjustments. The cash portion of the consideration
was funded through a combination of net proceeds from the Companys issuance of senior notes offered on May 31, 2023, net proceeds from the sale of the Companys Bakken assets, cash on hand and proceeds from short-term borrowings. The
Permian Acquisition is strategically located in close proximity to Ovintivs current Permian operations and adds approximately 1,050 net well locations to Ovintivs existing Permian inventory and approximately 65,000 net acres.
The Permian Acquisition has been accounted for under the acquisition method and as a single transaction because the purchase agreement was entered into at the
same time with EnCap and in contemplation of one another to achieve an overall economic effect. As the Permian Acquisition was completed on June 12, 2023, the effects from the issuance of the senior notes and short-term borrowings
(financing transaction) and the consideration paid in Permian Acquisition were included in the Ovintivs unaudited historical condensed consolidated balance sheet as of June 30, 2023; therefore, a pro forma balance sheet is not
included herein. In addition, Ovintivs unaudited historical condensed consolidated statement of earnings for the six months ended June 30, 2023 include the results from the Permian Acquisition and the financing transaction from
June 12, 2023 through June 30, 2023.
The unaudited pro forma condensed combined statements of earnings, included herein, for the six months
ended June 30, 2023 and for the year ended December 31, 2022 were prepared as if the Permian Acquisition and the financing transaction had occurred on January 1, 2022. The unaudited pro forma condensed combined statements of earnings
are derived from the historical consolidated financial statements of Ovintiv and the Permian LLCs, adjusted to reflect the combination of Ovintiv and the Permian LLCs. Certain of the Permian LLCs historical amounts have been reclassified to conform
to Ovintivs financial statement presentation.
The unaudited pro forma condensed combined financial statements reflect the following pro forma
adjustments, based on available information and certain assumptions that Ovintiv believes are reasonable:
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consideration consisting of i) the issuance of approximately 31.8 million shares of Ovintiv common stock and
ii) $3.2 billion in cash; |
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the effects of debt financing including the Companys revolving credit facility and the senior unsecured
notes issued on May 31, 2023. Ovintiv issued the senior unsecured notes at varying fixed interest rates and maturities with a weighted average interest rate of 6.06%. The proceeds from the senior notes issued and the Companys revolving
credit facility was used to fund the cash consideration of the Permian Acquisition; |
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recognition of expenses for transaction-related costs; and |
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the recognition of estimated tax impacts of the pro forma adjustments. |
The unaudited pro forma condensed combined financial statement of earnings for the year ended December 31, 2022 do not reflect a pro forma adjustment
related to the proceeds and sale of Ovintivs Bakken oil and gas properties (Bakken Assets), which closed on June 12, 2023. The Bakken Assets were purchased by Grayson Mill Bakken, LLC, also a portfolio company of funds managed
by EnCap, under a separate purchase agreement. The Bakken Assets were determined to not be significant and comprise less than five percent of the Companys total assets and revenue. However, the proceeds received from the sale of the Bakken
Assets were to be $706 million, after closing adjustments, and were used to fund the Permian Acquisition. As a result, the issuance of senior unsecured debt financing used to fund the Permian Acquisition was $2.3 billion and
$250 million from incremental borrowings under the credit facility and short-term borrowings as compared to the $3.125 billion of debt financing reflected in the unaudited pro forma condensed combined statement of earnings.
The unaudited pro forma condensed combined financial statements of earnings have been derived from and should be read together with Ovintivs audited
historical consolidated financial statements and related notes included in its Annual Report on Form 10-K as of and or the year ended December 31, 2022 and its unaudited historical condensed
consolidated financial statements and related notes included in its Quarterly Report on Form 10-Q as of and for the six months ended June 30, 2023, and with the respective Permian LLCs
audited historical consolidated financial statements as of and for the year ended December 31, 2022, unaudited historical consolidated financial statements for the periods ended January 1, 2023 to March 31, 2023 and statements of
revenues and direct operating expenses, which are incorporated by reference, and unaudited historical consolidated financial information for the periods ended April 1, 2023 to June 11, 2023, as applicable.
The unaudited pro forma condensed combined financial statements of earnings are provided for illustrative purposes only and are not intended to represent what
Ovintivs results of operations would have been had the Permian Acquisition actually been consummated on the assumed dates, nor is it indicative of Ovintivs future results of operations. The unaudited pro forma condensed combined
financial statements of earnings does not reflect future events that may occur after the Permian Acquisition, including, but not limited to, the anticipated realization of ongoing savings from potential operating efficiencies, asset dispositions,
cost savings or economies of scale that the combined company may achieve with respect to the combined operations. As a result, future results may vary significantly from the pro forma results reflected herein.