Paramount Resources completes C$3.3bn asset sale to Ovintiv

Calgary, AB – January 31, 2025 – Paramount Resources Ltd. has completed its previously announced sale of key assets to Ovintiv Inc., securing approximately C$3.3 billion in cash proceeds. The transaction represents a strategic shift in Paramount’s operations, allowing the company to streamline its portfolio, enhance financial flexibility, and provide a special cash distribution to shareholders. In addition to the asset sale, Paramount has amended its C$500 million credit facility, reinforcing its liquidity position as it advances future development plans.

What Does Paramount’s C$3.3 Billion Asset Sale Mean for Shareholders?

The completion of the Paramount asset sale marks a significant milestone for the company. By divesting its Karr, Wapiti, and Zama properties, Paramount has unlocked substantial capital, enabling a refined focus on high-growth opportunities. The deal includes the transfer of 70,000 barrels of oil equivalent per day (Boe/d) in production and 109,000 net acres of Montney assets to Ovintiv, strengthening its regional footprint.

As part of the agreement, Paramount Resources has retained a 50% operated interest in both the Two Island Lake and Kiwigana fields, located in the Horn River Basin. This move ensures the company maintains exposure to strategic natural gas reserves while refining its asset base.

How Will the C$15 Special Cash Distribution Impact Investors?

Following the completion of the Paramount asset sale, the Board of Directors has approved a special cash distribution of C$15.00 per common share, delivering a substantial payout to investors. The distribution is structured with C$12.00 per share classified as a return of capital, while C$3.00 per share is designated as an eligible dividend for Canadian tax purposes.

The special distribution will be payable on February 14, 2025, to shareholders on record as of February 10, 2025. To facilitate the payout, the Toronto Stock Exchange (TSX) has implemented a “due bill” trading mechanism. This ensures that all shares sold between the record date and the payment date retain the entitlement to the special cash distribution, maintaining share value throughout the period. Investors should note that shares will not trade on an ex-distribution basis until after the payout has been completed.

Why Did Paramount Adjust Its C$500 Million Credit Facility?

In line with its post-transaction financial restructuring, Paramount has amended its credit facility update, reducing the revolving bank credit facility from C$1.0 billion to C$500 million. This adjustment, backed unanimously by its banking syndicate, reflects the company’s strengthened financial position and reduced capital requirements following the Paramount asset sale.

Export Development Canada has extended its C$90 million unsecured demand revolving letter of credit facility guarantee until June 30, 2026, further enhancing the company’s liquidity position. With no outstanding borrowings under the newly adjusted credit facility update, Paramount Resources is now operating with greater financial flexibility, positioning itself for future growth.

What Are Paramount’s Development Plans for 2025?

Looking ahead, Paramount Resources has outlined a capital expenditure budget of C$760 million to C$790 million for 2025, with a strong emphasis on high-growth assets such as Willesden Green Duvernay and Kaybob North Duvernay. The company plans to bring new production online at its Alhambra natural gas processing plant, with the first phase set to launch in Q4 2025. Paramount also expects to drill 22 Duvernay wells and bring 23 wells into production at Willesden Green Duvernay. The second phase of the Alhambra Plant has been accelerated, with a targeted launch in Q4 2026.

At Kaybob North Duvernay, Paramount Resources is planning further development by drilling eight wells and bringing nine wells into production. This activity is designed to offset declining legacy production, ensuring continued growth in the region. Additionally, early-stage appraisal activities will be conducted at the Sinclair region, reinforcing the company’s long-term asset pipeline.

How Will Paramount’s Production Volumes Change After the Sale?

Paramount has revised its production forecast following the Paramount asset sale. In Q4 2024, the company reported an average production of 102,500 Boe/d, with the divested assets accounting for 71,000 Boe/d of this total. For 2025, production is expected to range between 37,500 and 42,500 Boe/d, with a year-end exit rate exceeding 45,000 Boe/d.

January 2025 production estimates suggest an average of 103,500 Boe/d, with temporary fluctuations expected between February and September as new wells offset natural declines. Production is projected to increase in Q4 2025, coinciding with the completion of the Alhambra Plant. This strategic approach ensures that Paramount Resources maintains a steady production outlook while benefiting from operational efficiencies.

What Is Paramount’s Hedging Strategy for 2025?

Paramount Resources has secured additional commodity hedges to protect against market volatility. In January 2025, the company hedged 5,000 barrels per day (Bbl/d) of liquids at a WTI price of C$105.00 per barrel. In total, 10,000 Bbl/d have been hedged for the remainder of 2025 at an average WTI price of C$105.00 per barrel.

Additionally, Paramount has structured its natural gas market diversification contracts to ensure that over 70% of post-transaction 2025 natural gas sales volumes will benefit from exposure to markets outside of AECO. This diversification is expected to stabilize cash flow and mitigate risks associated with regional pricing fluctuations.

What Changes Are Being Made to Paramount’s Monthly Dividend?

In addition to the special cash distribution, Paramount Resources has revised its regular monthly dividend to align with its updated capital strategy. Effective February 28, 2025, the company will issue a C$0.05 per share dividend, classified as an eligible dividend for Canadian tax purposes. This adjustment reflects Paramount’s commitment to sustainable shareholder returns while maintaining the flexibility needed for continued investment in growth projects.

How Does This Asset Sale Reshape the Canadian Energy Sector?

The completion of the Paramount asset sale represents a significant transaction within the Canadian energy landscape. By finalizing this C$3.3 billion deal, Paramount has repositioned itself with a strengthened cash position, a streamlined portfolio, and a refined focus on high-potential assets. For Ovintiv, the acquisition expands its Montney operations, further solidifying its presence in the region.

With an emphasis on capital efficiency, disciplined growth, and shareholder value, Paramount Resources is well-prepared for the evolving energy market. The company’s adjusted credit facility update, strategic reinvestment plans, and production forecasts all point toward a long-term vision aimed at sustaining profitability while capitalizing on industry opportunities.