Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ovintiv Inc (OVV, Financial) reported net earnings of $340 million and cash flow of just over $1 billion, beating consensus estimates.
- The company generated free cash flow of $403 million, with 60% returned to shareholders through dividends and share buybacks.
- Ovintiv Inc (OVV) raised its annual production guidance and remains on track to generate approximately $1.9 billion of free cash flow for the year.
- The company has added about 1,650 premium drilling locations to its portfolio, enhancing full-cycle returns and business durability.
- Ovintiv Inc (OVV) achieved significant operational efficiencies, with drilling and completion speeds improving by 10% and 30% respectively compared to 2023.
Negative Points
- Despite strong performance, Ovintiv Inc (OVV) faces lower realized prices for oil and natural gas compared to the previous quarter.
- The company has a $600 million debt maturity coming up next year, which may impact its financial flexibility.
- Ovintiv Inc (OVV) experienced a one-time royalty adjustment in the Montney, which contributed to a temporary boost in production figures.
- The company’s LOE (Lease Operating Expenses) per unit is expected to increase in the second half of the year due to lower production volumes.
- Ovintiv Inc (OVV) continues to hedge a significant portion of its production, which may limit upside potential in a rising commodity price environment.
Q & A Highlights
Q: Could you talk about the performance of the 42 second-quarter wells in the Permian and any differences in D&C (Drilling & Completions) approaches?
A: We brought on over twice as many wells in the second quarter versus the first quarter, maintaining a consistent D&C approach. The wells are geographically scattered across our acreage, both legacy and acquired. We are confident in delivering our type curve for the rest of the year and beyond. – Gregory Givens, Chief Operating Officer
Q: What percentage of completions in the Permian use trimulfrac, and are you fully utilizing the sand conveyor system?
A: In the Permian, over half of our completions this year use trimulfrac, and we are utilizing the wet sand and sand conveyor system. This focus on efficiency and innovation is driving industry-leading results. – Gregory Givens, Chief Operating Officer
Q: What are you baking in terms of drilling and completion efficiency gains, and would you produce more if cycle times outperform expectations?
A: Our guidance reflects all known efficiency gains to date. Future efficiency gains will be addressed in future guidance. We are focused on maintaining current production levels with the efficiencies we have captured. – Brendan McCracken, President & CEO
Q: How do you think about future A&D (Acquisitions & Divestitures) in the Permian post the uncap transactions?
A: We are focused on executing our current portfolio and reducing leverage. We have added significant inventory through various actions and are focused on getting better, not just bigger. – Brendan McCracken, President & CEO
Q: How are you positioning for the improving outlook in Canadian condensate and AECO pricing with the startup of TMX and LNG Canada?
A: We continue to allocate capital to the condensate window, believing in the strong fundamentals for condensate. For AECO, we remain cautious and continue to diversify our gas pricing away from AECO. – Brendan McCracken, President & CEO
Q: Can you talk about the base decline rates in your portfolio and their sustainability?
A: Our base decline rate is in the mid-30s across the portfolio, with the Anadarko well under 20%. This is due to active base production management and the maturing production base. – Brendan McCracken, President & CEO
Q: What are the puts and takes for 2025 capital, considering your current CapEx?
A: We are currently assessing service sector pricing and continued efficiency gains. Our outlook for 2025 capital remains at $2.3 billion, maintaining 205,000 barrels a day of crude and condensate production. – Brendan McCracken, President & CEO
Q: How do you plan to address the $600 million maturity coming up next year, and will it impact the current shareholder return profile?
A: We have enough free cash flow to handle the maturity within our existing framework. We remain committed to our capital allocation framework, using free cash to drive down leverage. – Corey Code, Chief Financial Officer
Q: Can you provide more color on the Permian and whether the current equipment level holds volumes flat?
A: We are on track for the same number of TILs (Turn-In-Lines) as guided. The Permian production will stabilize just under 120,000 barrels a day over time. – Gregory Givens, Chief Operating Officer
Q: What is the impact of the Matterhorn pipeline starting up this quarter?
A: The most immediate impact will be on Waha pricing, where we have some exposure. Overall, it is good to see more infrastructure in the Permian. – Brendan McCracken, President & CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
