Ovintiv Inc. (NYSE: OVV) (TSX: OVV) (“Ovintiv” or the “Company”) today announced its third quarter 2023 financial and operating results. The Company plans to hold a conference call and webcast at 10:00 a.m. MT (12:00 p.m. ET) on November 8, 2023. Please see dial-in details within this release, as well as additional details on the Company’s website at www.ovintiv.com under Presentations and Events – Ovintiv.
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Our outstanding third quarter results are a reflection of the momentum we have been building all year,” said Ovintiv President and CEO, Brendan McCracken. “Strong well performance across the portfolio, combined with the seamless integration of our new Permian assets, has allowed us to significantly exceed our oil and condensate guidance, reflecting both enhanced capital efficiency and higher returns on our invested capital.”
Third Quarter 2023 Financial and Operating Results
- The Company recorded net earnings of $406 million, or $1.47 per diluted share of common stock. Included in net earnings were net losses on risk management of $282 million, before tax.
- Cash from operating activities was $906 million, Non-GAAP Cash Flow was $1,112 million and capital investment totaled approximately $834 million, resulting in $278 million of Non-GAAP Free Cash Flow.
- Third quarter capital investment of $834 million was lower than the third quarter guidance range of $840 million to $890 million resulting from capital efficiencies.
- Third quarter average total production volumes were at the high end or above Company guidance on all products at approximately 572 MBOE/d, including 214 Mbbls/d of oil and condensate, 87 Mbbls/d of other NGLs and 1,625 MMcf/d of natural gas.
- Upstream operating expense was $4.48 per barrel of oil equivalent (“BOE”). Upstream transportation and processing costs were $7.40 per BOE. Production, mineral and other taxes were $1.70 per BOE, or 4.3% of upstream revenue. These costs were below the bottom end of guidance on a combined basis.
- Excluding the impact of hedges, third quarter average realized prices were $78.86 per barrel for oil and condensate (96% of WTI), $18.39 per barrel for other NGLs (C2-C4) and $2.33 per thousand cubic feet (“Mcf”) for natural gas (91% of NYMEX) resulting in a total average realized price of $38.95 per BOE. Including the impact of hedges, the average realized prices for oil and condensate was $77.94 (95% of WTI), other NGLs was unchanged, and the average realized price for natural gas was $2.51 per Mcf (98% of NYMEX) resulting in a total average realized price of $39.12 per BOE.
Guidance
The Company issued its fourth quarter 2023 guidance and favorably revised its full year guidance. Full year production guidance was increased due to strong well productivity across the portfolio and faster than expected integration of recently acquired Permian assets. Full year capital efficiency is expected to improve by approximately six percent compared to the guidance issued following the completion of the Permian asset acquisition in June. Full year production volumes are expected to average 550 to 560 MBOE/d, with full year capital investment of $2.745 billion to $2.785 billion.
Ovintiv expects production in the fourth quarter to be the high point for the year resulting from strong well productivity across the portfolio along with the acceleration of acquired Permian wells turned in line (TIL). The Company expects all acquired Permian wells in progress to be on production by year end. Total Company oil and condensate production is expected to average 220 to 227 Mbbls/d in the fourth quarter.
2024 Outlook
In 2024, Ovintiv expects to deliver total Company average oil and condensate production volumes of approximately 200 Mbbls/d with total capital investment of $2.1 billion to $2.5 billion. The Company’s production profile is expected to stabilize at approximately 200 Mbbls/d by the second quarter of 2024, one quarter sooner than originally planned.
Returns to Shareholders
Ovintiv remains committed to its capital allocation framework, which returns at least 50% of post base dividend Non-GAAP Free Cash Flow to shareholders through buybacks and/or variable dividends.
In the third quarter of 2023, the Company returned approximately $127 million to shareholders through share buybacks totaling approximately $45 million and its base dividend of approximately $82 million.
On September 13, 2023, the Company purchased one million shares of Ovintiv common stock from the 15 million shares offered for sale by NMB Stock Trust, a Delaware statutory trust, in a secondary public offering. The total consideration paid was approximately $45 million, or $45.45 per share, and the shares were cancelled during the third quarter of 2023. The share purchase accelerates Ovintiv’s expected fourth quarter share purchases under its existing shareholder return framework. Share buybacks in the fourth quarter are expected to total approximately $53 million.
Continued Balance Sheet Focus
Ovintiv had approximately $3.1 billion in total liquidity as of September 30, 2023, which included available credit facilities of $3,150 million, available uncommitted demand lines of $273 million, and cash and cash equivalents of $3 million, net of outstanding commercial paper of $359 million.
Ovintiv reported Non-GAAP Debt to EBITDA of 1.4 times and Non-GAAP Debt to Adjusted EBITDA of 1.5 times as of September 30, 2023.
The Company remains committed to maintaining a strong balance sheet and is currently rated investment grade by four credit rating agencies. Ovintiv maintains a long-term leverage target of 1.0 times Non-GAAP Debt to Adjusted EBITDA at mid-cycle prices, with an associated long-term total debt target of $4.0 billion.
Dividend Declared
On November 7, 2023, Ovintiv’s Board declared a quarterly dividend of $0.30 per share of common stock payable on December 29, 2023, to shareholders of record as of December 15, 2023.
Asset Highlights
Permian
Permian production averaged 194 MBOE/d (83% liquids) in the third quarter. The Company had 83 net wells TIL. Ovintiv plans to invest approximately $1.43 to $1.47 billion in the play in 2023 to bring on 170 to 180 net wells.
Montney
Montney production averaged 229 MBOE/d (21% liquids) in the third quarter. The Company had 22 net wells TIL. Ovintiv plans to invest approximately $540 to $580 million in the play in 2023 to bring on 75 to 80 net wells.
Uinta
Uinta production averaged 24 MBOE/d (84% liquids) in the third quarter. The Company had ten net wells TIL. Ovintiv plans to invest approximately $415 to $435 million in the play in 2023 to bring on 21 to 26 net wells. Capital investment in 2023 includes drilling and completion expenditures on wells that will not TIL until 2024.
Anadarko
Anadarko production averaged 119 MBOE/d (60% liquids) in the third quarter. The Company had one net well TIL. Ovintiv plans to invest approximately $190 to $210 million in the play in 2023 to bring on 26 net wells.
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