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 $100 million," said CEO Doug Suttles. "Market conditions are changing rapidly, and we have full operational flexibility to further adjust activity to maintain our balance sheet strength."
The Company is immediately dropping 10 operated drilling rigs and plans to drop an additional six operated rigs in May 2020. Following these rig count reductions, Ovintiv will have three operated rigs in the Permian, two in the Anadarko and two in the Montney.
Beyond the immediate spending cuts announced today, Ovintiv is prepared to further reduce capital investments throughout the year to ensure free cash neutrality and balance sheet strength. The Company expects to provide an update to its 2020 guidance in conjunction with first-quarter reporting.
Strong Balance Sheet & Robust Liquidity Through Mid-2024:
Strong Hedging Position Protects Cash Flow:
Recent U.S. Shelf Registration Filing:
Debt to Adjusted Capitalization at December 31, 2019:
Long-Term Debt, including current portion
Total Shareholders' Equity
Equity adjustment for impairments at December 31, 2011
Debt to Adjusted Capitalization
Note: Please refer to the Non-GAAP Definitions and Reconciliations on the Company's website. Debt to Adjusted Capitalization is a proxy for Ovintiv's financial covenant under the Company's credit facilities which require debt to adjusted capitalization to be less than 60 percent. Adjusted Capitalization includes debt, total shareholders' equity and an equity adjustment for cumulative historical ceiling test impairments recorded as of December 31, 2011 in conjunction with the Company's January 1, 2012 adoption of U.S. GAAP.
Hedge Volumes as of December 31, 2019:
Natural Gas Hedges
Oil & Condensate Hedges
Total Benchmark Hedges
Total Benchmark Hedges
Benchmark Hedges ($/Mcf)
Benchmark Hedges ($/bbl)
NYMEX 3-Way Options
WTI 3-Way Options
NYMEX Costless Collars
WTI Costless Collars
Basis Hedges ($/Mcf)
Basis Hedges ($/bbl)
AECO Basis Swaps
WTI / Midland Swaps
WAHA Basis Swaps
"NEW" Price Sensitivities for Oil Hedge Gains/Losses by Quarter for 2020 ($ MM):
"NEW" Price Sensitivities for Gas Hedge Gains/Losses by Quarter for 2020 ($ MM)
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:
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SOURCE Ovintiv Inc.