Ovintiv released its second quarter 2021 earnings report showing $750 million in cash generated from operating activities, a more than $1 billion reduction in debt and a 50% increase in its quarterly dividend payment.
“Our track record of free cash flow generation continued in the second quarter with another $350 million of free cash, bringing us to a total of $890 million year-to-date,” said Ovintiv CEO, Doug Suttles who will retire in August from the company.
Even with a second quarter net loss of $205 million or 79 cents per diluted share of common stock, the company leaders expect their original $4.5 billion net debt target before year-end to be reached a year ahead of the original timeline.
Suttles said the achievement will mark nearly $3 billion of net debt reduction since the second quarter 2020. A new net debt target of $3 billion by year-end 2023 was also set.
“Our business continues to perform exceptionally well with operational efficiency gains and supply chain management more than offsetting cost inflation year-to-date. Ovintiv is positioned to thrive on the road ahead,” said Suttles.
On July 27, 2021, Ovintiv’s Board declared a dividend of $0.14 per share of common stock payable on September 30, 2021 to common stockholders of record as of September 15, 2021. This represents an increase of approximately 50% from the previous level.
Ovintiv has been successful in drilling in Oklahoma’s STACK play as OK Energy Today has reported with its large wells in Kingfisher County. The company also pointed to its STACK operations in its second quarter earnings report.
Asset Highlights
The Company continued to demonstrate industry-leading capital efficiencies across its Core 3 assets during the second quarter.
Permian
Permian production averaged 126 MBOE/d (82% liquids) in the quarter. The Company averaged three gross rigs, drilled 21 net wells, and had 33 net wells turned in line (TIL).
Permian drilling and completion (D&C) costs have averaged $480 per foot year-to-date and are 11% lower than the 2020 program average. Both drilling and completion efficiency records were achieved in the quarter, including an average drilling cost of $170 per foot, 17% lower than the 2020 average. Among wells rig released in the quarter, the average lateral length drilled was 12,050 feet, approximately 20% longer than the 2020 average. Underpinned by Simul-frac operations, the Company completed 3,500 lateral feet per day and pumped 9.5 million pounds of sand per day on a single pad, its most efficient well set to date. During the quarter, 30 out of the 33 net wells were completed using Simul-frac. Ovintiv also began sourcing in-basin, wet sand from a Howard County mine during the quarter.
Anadarko
Anadarko production averaged 133 MBOE/d (62% liquids) in the quarter. The Company averaged two gross rigs, drilled 16 net wells, and had 22 net wells TIL, of which 21 were operated by Ovintiv.
STACK D&C costs have averaged $430 per foot year-to-date, and are 10% lower than the 2020 program average. During the quarter, 17 wells were completed in the STACK, with two wells drilled and completed for $3.5 million. All the STACK wells were completed using Simul-frac operations, where the Company pumped an average of 150,000 bbls per day, 40% more than the 2020 program average. Ovintiv also achieved a new spud-to-rig release drill time pacesetter of 5.9 days. The team has now recorded faster average drilling times in the STACK for the third consecutive quarter.
In SCOOP, four net Woodford/Caney oil wells were brought on-line in the quarter with an average D&C cost of $5.3 million.
Montney
Montney production averaged 235 MBOE/d (25% liquids) in the quarter. The Company averaged four gross rigs, drilled 18 net wells and had 30 net wells TIL.
Montney year-to-date D&C costs have averaged $410 per foot and are 9% lower than the 2020 program average. All the quarterly wells TIL targeted the volatile oil and liquids-rich condensate fairway of the play with an expected liquids composition of 30-70%. Ovintiv drilled five wells at or below $100 per foot, 20% of the total quarter rig releases. Six wells were drilled faster than the previous pacesetter and all six wells achieved drilling rates greater than 2,050 feet per day.
Base Assets
Bakken production averaged 24 MBOE/d (79% liquids) in the quarter. The company drilled one net well and had two net wells TIL. The two net wells brought online in the quarter exhibited strong production performance, achieving an average 60-day initial production rate of 1,235 bbls of oil per well. D&C costs from 2020 to 2021 have averaged $510 per foot, 14% lower than the 2019 average.
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