Company dropping 10 operated rigs immediately and an
additional six rigs in May
DENVER, March 12, 2020 /PRNewswire/ - Ovintiv Inc. (NYSE,
TSX: OVV) today announced plans to immediately reduce second
quarter 2020 capital investments by $300
million and full year cash costs by $100 million. This is the first step in response
to the recent large drop in oil prices. The Company has no
long-term service commitments to fulfill and intends to use its
operational flexibility to maintain balance sheet strength. Ovintiv
is fully prepared to further reduce capital investments and
activity levels as market conditions dictate.
"We are moving quickly and decisively in response to these
volatile and challenging times. It is imperative to take immediate
action and we are dropping roughly two-thirds of our operated rigs
and reducing our cash costs by $100
million," said CEO Doug
Suttles. "Market conditions are changing rapidly, and we
have full operational flexibility to further adjust activity to
maintain our balance sheet strength."
The Company is immediately dropping 10 operated drilling rigs
and plans to drop an additional six operated rigs in May 2020. Following these rig count reductions,
Ovintiv will have three operated rigs in the Permian, two in the
Anadarko and two in the Montney.
Beyond the immediate spending cuts announced today, Ovintiv is
prepared to further reduce capital investments throughout the year
to ensure free cash neutrality and balance sheet strength. The
Company expects to provide an update to its 2020 guidance in
conjunction with first-quarter reporting.
Strong Balance Sheet & Robust Liquidity Through
Mid-2024:
- The credit facilities are fixed at $4
billion until their maturity in July
2024 and commodity prices have zero impact on availability.
They have no reserve-based, cash flow or EBITDA lending covenants
or minimum credit rating requirements. The facilities are based on
book value only (not market capitalization) with a maximum ratio of
60% debt-to-adjusted capitalization (at year-end 2019, ratio was
28%). The capitalization calculation adjustment includes a fixed
$7.7 billion add back to
capitalization. Full terms of the credit facilities can be found as
an exhibit to the Company's Form 10-K. In addition, a table can be
found in this release.
- Current liquidity is approximately $3.5
billion, which represents the $4
billion credit facilities plus cash-on-hand, less the
Company's current commercial paper balance.
- OVV is rated investment grade at BBB.
- Approximately 80% of total long-term debt is due in 2024, or
beyond, with a weighted average bond maturity of approximately 10
years.
- The Company has significant flexibility to manage the late 2021
and 2022 maturities, including the use of the credit
facilities.
Strong Hedging Position Protects Cash Flow:
- More than 70% of 2020 crude oil and condensate production and
2020 natural gas production is hedged at prices significantly above
the current market. The Company utilizes more than a dozen "A"
credit rated hedge counterparties. See hedge table in this
release.
Recent U.S. Shelf Registration Filing:
- A recent U.S. shelf registration filing was made on
March 6, 2020. This shelf was part of
a normal course renewal and the Company has no current intentions
of issuing any debt or equity under the shelf.
Debt to Adjusted Capitalization at December 31, 2019:
($
MM)
|
2019
|
Credit
Facility
Covenant
|
Long-Term Debt,
including current portion
|
$6,974
|
|
Total Shareholders'
Equity
|
9,930
|
|
Equity adjustment for
impairments at December 31, 2011
|
7,746
|
|
Adjusted
Capitalization
|
$24,650
|
|
Debt to Adjusted
Capitalization
|
28%
|
60%
|
Note: Please refer to
the Non-GAAP Definitions and Reconciliations on the Company's
website. Debt to Adjusted Capitalization is a proxy for Ovintiv's
financial covenant under the Company's credit facilities which
require debt to adjusted capitalization to be less than 60 percent.
Adjusted Capitalization includes debt, total shareholders' equity
and an equity adjustment for cumulative historical ceiling test
impairments recorded as of December 31, 2011 in conjunction with
the Company's January 1, 2012 adoption of U.S. GAAP.
|
Hedge Volumes as of December 31,
2019:
Natural Gas
Hedges
|
2020
|
|
Oil &
Condensate Hedges
|
2020
|
Total Benchmark
Hedges
|
1,188
MMcf/d
|
|
Total Benchmark
Hedges
|
165
Mbbls/d
|
Benchmark Hedges
($/Mcf)
|
|
Benchmark Hedges
($/bbl)
|
NYMEX
Swaps Swap Price
|
803 MMcf/d
$2.65
|
|
WTI
Swaps Swap Price
|
70
Mbbls/d $57.56
|
NYMEX 3-Way
Options
Short Call Long Put
Short Put
|
330
MMcf/d $2.72 $2.60 $2.25
|
|
WTI 3-Way
Options
Short Call Long Put
Short Put
|
80
Mbbls/d $61.68 $53.44 $43.44
|
NYMEX Costless
Collars Short Call Long
Put
|
55
MMcf/d $2.88 $2.50
|
|
WTI Costless
Collars Short Call Long
Put
|
15
Mbbls/d $68.71 $50.00
|
Basis Hedges
($/Mcf)
|
|
Basis Hedges
($/bbl)
|
AECO Basis
Swaps Swap Price
|
349
MMcf/d ($0.88)
|
|
WTI / Midland
Swaps Swap Price
|
8
Mbbls/d ($1.20)
|
WAHA Basis
Swaps Swap Price
|
105
MMcf/d ($0.91)
|
|
|
|
"NEW" Price Sensitivities for Oil Hedge Gains/Losses by
Quarter for 2020 ($ MM):
Period
|
$20
|
$30
|
$40
|
$50
|
$60
|
1Q
2020
|
353
|
276
|
198
|
73
|
(23)
|
2Q
2020
|
353
|
276
|
198
|
73
|
(23)
|
3Q
2020
|
357
|
279
|
201
|
74
|
(23)
|
4Q
2020
|
357
|
279
|
201
|
74
|
(23)
|
2020
|
$1,420
|
$1,109
|
$798
|
294
|
($93)
|
"NEW" Price Sensitivities for Gas Hedge Gains/Losses by
Quarter for 2020 ($ MM)
Period
|
$1.00
|
$1.25
|
$1.50
|
$1.75
|
$2.00
|
$2.25
|
1Q
2020
|
138
|
119
|
100
|
81
|
62
|
43
|
2Q
2020
|
143
|
123
|
103
|
83
|
63
|
44
|
3Q
2020
|
145
|
125
|
104
|
84
|
64
|
44
|
4Q
2020
|
141
|
121
|
102
|
82
|
63
|
43
|
2020
|
$566
|
$488
|
$409
|
$331
|
$252
|
$174
|
Note: Sensitivities
do not include gains or losses related to differential
hedges.
Note: Company has
additional hedges on Butane and Propane not
included.
|
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS – This news
release contains certain forward-looking statements or information
(collectively, "FLS") within the meaning of applicable securities
legislation, including the United States Private Securities
Litigation Reform Act of 1995. FLS include: anticipated reductions
in capital investment, drilling and completion activity and cash
costs; maintaining free cash neutrality; strength of balance sheet;
value of hedge book and quality of counterparties; ability to
adjust as market conditions dictate; efficiency of operations;
anticipated production; price sensitivities; impacts to guidance;
ability to draw on credit facilities and other forms of liquidity;
and intentions regarding issuing debt or equity under the shelf.
These assumptions include: future commodity prices and
differentials; data contained in key modeling statistics;
enforceability of risk management program; assumptions contained in
guidance; and expectations and projections made in light of the
Company's historical experience. Risks and uncertainties include:
ability to generate sufficient cash flow to meet obligations;
commodity price volatility; ability to secure adequate
transportation and potential pipeline curtailments; business
interruption or unexpected technical difficulties; counterparty and
credit risk; impact of changes in credit rating and access to
liquidity; risks in marketing operations; and other risks and
uncertainties as described in the Company's Annual Report on Form
10-K and as described from time to time in its other periodic
filings as filed on SEDAR and EDGAR. Although the Company believes
such FLS are reasonable, there can be no assurance they will prove
to be correct. The above assumptions, risks and uncertainties are
not exhaustive. FLS are made as of the date hereof and, except as
required by law, the Company undertakes no obligation to update or
revise any FLS.
Further information on Ovintiv Inc. is available on the
Company's website, www.ovintiv.com, or by contacting:
Investor
contact:
(888)
525-0304
|
Media
contact:
(281)
210-5253
|
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SOURCE Ovintiv Inc.