Ovintiv Reports Fourth Quarter and Year-End 2023 Financial and Operating Results
Strong 2023 Operational Execution; Enhanced Capital Efficiency Expected in 2024
Highlights:
Full Year 2023
- Generated net earnings of $2.1 billion, cash from operating activities of $4.2 billion, Non-GAAP Cash Flow of $3.9 billion and Non-GAAP Free Cash Flow of $1.2 billion after capital expenditures of $2.7 billion
- Exceeded high end of full year production guidance on every product with average total volumes of 566 thousand barrels of oil equivalent per day ("MBOE/d"), including 202 thousand barrels per day ("Mbbls/d") of oil and condensate, 90 Mbbls/d of other NGLs (C2 to C4) and 1,642 million cubic feet per day ("MMcf/d") of natural gas
- Returned $733 million to shareholders through the combination of base dividend payments and share buybacks
- Acquired and seamlessly integrated high-quality Permian assets comprising approximately 65,000 net acres of largely undeveloped land directly adjacent to the Company's existing Permian operations
- Closed the sale of the Company's Bakken assets, representing Ovintiv's exit from the play
- Announced the Company's inclusion on the S&P 400 index effective June 20, 2023
Fourth Quarter 2023
- Generated fourth quarter net earnings of $856 million, cash from operating activities of $1.4 billion, Non-GAAP Cash Flow of $1.2 billion and Non-GAAP Free Cash Flow of $577 million after capital expenditures of $660 million
- Delivered average quarterly production volumes of 605 MBOE/d, including 240 Mbbls/d of oil and condensate, 91 Mbbls/d of other NGLs and 1,645 MMcf/d of natural gas; all exceeding the high end of Company guidance
- Reduced total debt by $426 million
2024 Outlook
- Announced 2024 capital program of approximately $2.2 to $2.4 billion, which is expected to deliver total production volumes of 545 to 575 MBOE/d, including oil and condensate volumes of 202 to 208 Mbbls/d
DENVER, Feb. 27, 2024 /PRNewswire/ - Ovintiv Inc. (NYSE:OVV) (TSX: OVV) ("Ovintiv" or the "Company") today announced its fourth quarter and year-end 2023 financial and operating results. The Company plans to hold a conference call and webcast at 8:00 a.m. MT (10:00 a.m. ET) on February 28, 2024. 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.
"2023 marked a year of exceptionally strong execution for our Company," said President and CEO, Brendan McCracken. "Our focus on operational excellence led to multiple quarters of positive guidance revisions, as we repeatedly outperformed our production targets without increasing spending. From volumes, to capital, to per unit costs, we beat our 2023 targets and enhanced the capital efficiency of the business. Our durable-returns strategy is set to deliver again in 2024, as we plan to produce higher oil and condensate volumes with less capital and generate about $450 million more free cash flow than 2023."
Full Year and Fourth Quarter 2023 Financial and Operating Results
- The Company recorded full year net earnings of $2,085 million, or $7.90 per diluted share of common stock. Included in net earnings were income tax expense of $425 million and net gains on risk management of $151 million, before tax.
- Fourth quarter net earnings totaled $856 million, or $3.11 per diluted share of common stock. Included in net earnings were income tax expense of $211 million and net gains on risk management of $344 million, before tax.
- Full year capital investment of $2,744 million was below the full year 2023 guidance range of approximately $2,745 million to $2,785 million.
- Fourth quarter capital investment of $660 million was at the low end of the guidance range of approximately $660 million to $700 million.
- Full year upstream operating expense was $4.03 per barrel of oil equivalent ("BOE"). Upstream transportation and processing costs were $7.76 per BOE. Production, mineral and other taxes were $1.66 per BOE, or 4.4% of upstream revenue. These costs were below the bottom end of guidance on a combined basis.
- Fourth quarter upstream operating expense was $4.09 per BOE. Upstream transportation and processing costs were $6.89 per BOE. Production, mineral and other taxes were $1.67 per BOE, or 4.2% of upstream revenue. These costs were below the bottom end of guidance on a combined basis.
- Excluding the impact of hedges, full year average realized prices were $75.19 per barrel for oil and condensate (97% of WTI), $18.09 per barrel for other NGLs (C2-C4) and $2.74 per thousand cubic feet ("Mcf") for natural gas (100% of NYMEX) resulting in a total average realized price of $37.67 per BOE.
- Including the impact of hedges, full year average realized prices for oil and condensate was $74.88 (96% of WTI), other NGLs was unchanged, and the average realized price for natural gas was $2.71 per Mcf (99% of NYMEX) resulting in a total average realized price of $37.46 per BOE.
- Excluding the impact of hedges, fourth quarter average realized prices were $75.66 per barrel for oil and condensate (97% of WTI), $18.85 per barrel for other NGLs (C2-C4) and $2.50 per Mcf for natural gas (87% of NYMEX) resulting in a total average realized price of $39.66 per BOE.
- Including the impact of hedges, fourth quarter average realized prices for oil and condensate was $75.46 (96% of WTI), other NGLs was unchanged, and the average realized price for natural gas was $2.65 per Mcf (92% of NYMEX) resulting in a total average realized price of $39.99 per BOE.
2024 Guidance
The Company issued the following first quarter and full year 2024 guidance:
2024 Guidance | 1Q 2024 | Full Year 2024 | ||
Total Production (MBOE/d) | 560 – 575 | 545 – 575 | ||
Oil & Condensate (Mbbls/d) | 208 – 212 | 202 – 208 | ||
NGLs (C2 - C4) (Mbbls/d) | 86 – 89 | 85 – 90 | ||
Natural Gas (MMcf/d) | 1,575 – 1,625 | 1,550 – 1,650 | ||
Capital Investment ($ Millions) | $580 – $620 | $2,200 – $2,400 |
Ovintiv expects production in the first quarter to be the high point for the year, with oil and condensate volumes expected to average 208 to 212 Mbbls/d. This includes the impacts of refinery turnarounds in Salt Lake City, weather and planned maintenance, which are expected to reduce first quarter volumes by approximately 8 Mbbls/d. Oil and condensate production is expected to stabilize in the second quarter and remain largely flat through the end of the year for an annual average of 202 to 208 Mbbls/d. The Company expects to realize a greater than 18% improvement in capital efficiency for its oil and condensate production versus its original 2023 guidance.
Inventory Renewal
Since 2021, Ovintiv has added approximately 1,650 net premium drilling locations to its inventory through the combination of the Permian acquisition in 2023, low-cost strategic bolt-on transactions and its organic inventory appraisal and assessment programs. This represents an addition of more than seven years of drilling inventory based on the number of wells the Company expects to drill in 2024. Approximately two thirds of the inventory additions, or about 1,100 net locations, are located in the Permian.
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 fourth quarter of 2023, the Company returned approximately $135 million to shareholders through share buybacks totaling approximately $53 million and its base dividend of approximately $82 million.
Full year shareholder returns totaled approximately $733 million, consisting of share buybacks of approximately $426 million, or approximately 10 million shares of common stock, and base dividend payments of approximately $307 million.
Share buybacks in the first quarter of 2024 are expected to total approximately $248 million.
Continued Balance Sheet Focus
Ovintiv had approximately $3.5 billion in total liquidity as of December 31, 2023, which included available credit facilities of $3,486 million, available uncommitted demand lines of $234 million, and cash and cash equivalents of $3 million, net of outstanding commercial paper of $270 million. Ovintiv reported total debt of $5.7 billion at year-end.
Non-GAAP Debt to EBITDA was 1.2 times and Non-GAAP Debt to Adjusted EBITDA was 1.3 times as of December 31, 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 February 27, 2024, Ovintiv's Board declared a quarterly dividend of $0.30 per share of common stock payable on March 28, 2024, to shareholders of record as of March 15, 2024.
Asset Highlights
Permian
Permian production averaged 220 MBOE/d (84% liquids) in the fourth quarter. The Company had 60 net wells turned in line (TIL). Ovintiv plans to invest approximately $1.35 billion to $1.45 billion in the play in 2024 to bring on 120 to 130 net wells.
Montney
Montney production averaged 234 MBOE/d (22% liquids) in the fourth quarter. The Company had 15 net wells TIL. Ovintiv plans to invest approximately $425 million to $475 million in the play in 2024 to bring on 60 to 70 net wells.
Uinta
Uinta production averaged 34 MBOE/d (86% liquids) in the fourth quarter. The Company had eight net wells TIL. Ovintiv plans to invest approximately $300 million to $350 million in the play in 2024 to bring on 25 to 30 net wells.
Anadarko
Anadarko production averaged 113 MBOE/d (59% liquids) in the fourth quarter. The Company had four net wells TIL. Ovintiv plans to invest approximately $100 million to $125 million in the play in 2024 to bring on seven to ten net wells.
Year-End 2023 Reserves
SEC proved reserves at year-end 2023 were 2.2 billion BOE, of which approximately 48% were liquids and 62% were proved developed. Total proved reserves replacement including the impact of commodity prices and acquisitions was 106% of 2023 production. Ovintiv's reserve life index at year-end was approximately 11 years.
For additional information, please refer to the Fourth Quarter and Year-end 2023 Results Presentation available on Ovintiv's website, www.ovintiv.com under Presentations and Events – Ovintiv. Supplemental Information, and Non-GAAP Definitions and Reconciliations, are available on Ovintiv's website under Financial Documents Library.
Conference Call Information
A conference call and webcast to discuss the Company's fourth quarter and year-end 2023 results will be held at 8:00 a.m. MT (10:00 a.m. ET) on February 28, 2024.
To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/3Segm9H to receive an instant automated call back. You can also dial direct to be entered to the call by an Operator. Please dial 888-664-6383 (toll-free in North America) or 416-764-8650 (international) approximately 15 minutes prior to the call.
The live audio webcast of the conference call, including slides and financial statements, will be available on Ovintiv's website, www.ovintiv.com under Investors/Presentations and Events. The webcast will be archived for approximately 90 days.
Refer to Note 1 Non-GAAP measures and the tables in this release for reconciliation to comparable GAAP financial measures.
Capital Investment and Production
(for the period ended December 31) | 4Q 2023 | 4Q 2022 | 2023 | 2022 |
Capital Expenditures (1) ($ millions) | 660 | 358 | 2,744 | 1,831 |
Oil (Mbbls/d) | 194.1 | 132.0 | 158.9 | 131.6 |
NGLs – Plant Condensate (Mbbls/d) | 46.1 | 42.7 | 42.9 | 44.0 |
Oil & Plant Condensate (Mbbls/d) | 240.2 | 174.7 | 201.8 | 175.6 |
NGLs – Other (Mbbls/d) | 90.9 | 88.7 | 90.2 | 85.5 |
Total Liquids (Mbbls/d) | 331.1 | 263.4 | 292.0 | 261.1 |
Natural gas (MMcf/d) | 1,645 | 1,561 | 1,642 | 1,494 |
Total production (MBOE/d) | 605.2 | 523.6 | 565.6 | 510.0 |
(1) Including capitalized directly attributable internal costs. |
Financial Summary
(for the period ended December 31) ($ millions) | 4Q 2023 | 4Q 2022 | 2023 | 2022 |
Cash From (Used In) Operating Activities Deduct (Add Back): Net change in other assets and liabilities Net change in non-cash working capital | 1,362
156 | 875 (15) (5) | 4,167 (62) 330 | 3,866 (57) (187) |
Non-GAAP Cash Flow (1) | 1,237 | 895 | 3,899 | 4,110 |
Non-GAAP Cash Flow (1) | 1,237 | 895 | 3,899 | 4,110 |
Less: Capital Expenditures (2) | 660 | 358 | 2,744 | 1,831 |
Non-GAAP Free Cash Flow (1) | 577 | 537 | 1,155 | 2,279 |
Net Earnings (Loss) Before Income Tax Before-tax (Addition) Deduction: Unrealized gain (loss) on risk management Non-operating foreign exchange gain (loss) | 1,067 326 (9) | 1,110 530 10 | 2,510 194 (2) | 3,560 741 (14) |
Adjusted Earnings (Loss) Before Income Tax Income tax expense (recovery) | 750 103 | 570 342 | 2,318 508 | 2,833 1,064 |
Non-GAAP Adjusted Earnings (1) | 647 | 228 | 1,810 | 1,769 |
(1) Non-GAAP Cash Flow, Non-GAAP Free Cash Flow and Non-GAAP Adjusted Earnings are non-GAAP measures as defined in Note 1. |
(2) Including capitalized directly attributable internal costs. |
Realized Pricing Summary (Including the impact of realized gains (losses) on risk management)
(for the period ended December 31) | 4Q 2023 | 4Q 2022 | 2023 | 2022 |
Liquids ($/bbl) | ||||
WTI | 78.32 | 82.65 | 77.62 | 94.23 |
Realized Liquids Prices | ||||
Oil | 76.64 | 75.85 | 76.06 | 81.88 |
NGLs – Plant Condensate | 70.46 | 72.01 | 70.51 | 80.74 |
Oil & Plant Condensate | 75.46 | 74.91 | 74.88 | 81.59 |
NGLs – Other | 18.85 | 22.95 | 18.09 | 31.45 |
Total NGLs | 36.20 | 38.88 | 34.98 | 48.20 |
Natural Gas | ||||
NYMEX ($/MMBtu) | 2.88 | 6.26 | 2.74 | 6.64 |
Realized Natural Gas Price ($/Mcf) | 2.65 | 2.49 | 2.71 | 2.42 |
Cost Summary
(for the period ended December 31) ($/BOE, except as indicated) | 2023 | 2022 |
Production, mineral and other taxes | 1.66 | 2.23 |
Upstream transportation and processing | 7.76 | 8.75 |
Upstream operating | 4.03 | 4.15 |
Administrative, excluding long-term incentive, transaction and | 1.35 | 1.39 |
Debt to EBITDA (1)
($ millions, except as indicated) | December 31, 2023 | December 31, 2022 |
Long-Term Debt, including Current Portion | 5,737 | 3,570 |
Net Earnings (Loss) | 2,085 | 3,637 |
Add back (Deduct): | ||
Depreciation, depletion and amortization | 1,825 | 1,113 |
Interest | 355 | 311 |
Income tax expense (recovery) | 425 | (77) |
EBITDA | 4,690 | 4,984 |
Debt to EBITDA (times) | 1.2 | 0.7 |
Debt to Adjusted EBITDA (1)
($ millions, except as indicated) | December 31, 2023 | December 31, 2022 |
Long-Term Debt, including Current Portion | 5,737 | 3,570 |
Net Earnings (Loss) | 2,085 | 3,637 |
Add back (Deduct): | ||
Depreciation, depletion and amortization | 1,825 | 1,113 |
Accretion of asset retirement obligation | 19 | 18 |
Interest | 355 | 311 |
Unrealized (gains) losses on risk management | (194) | (741) |
Foreign exchange (gain) loss, net | 19 | 15 |
Other (gains) losses, net | (20) | (33) |
Income tax expense (recovery) | 425 | (77) |
Adjusted EBITDA | 4,514 | 4,243 |
Debt to Adjusted EBITDA (times) | 1.3 | 0.8 |
(1) Debt to EBITDA and Debt to Adjusted EBITDA are non-GAAP measures as defined in Note 1. |
Hedge Details as of December 31, 2023
Oil and Condensate Hedges ($/bbl) | 1Q 2024 | 2Q 2024 | 3Q 2024 | 4Q 2024 | 1Q 2025 |
WTI Swaps | 25 Mbbls/d $73.69 | 25 Mbbls/d $73.69 | 0 - | 0 - | 0 - |
WTI Collars Call Strike Put Strike | 75 Mbbls/d $82.29 $64.33 | 75 Mbbls/d $80.39 $65.00 | 10 Mbbls/d $92.06 $60.00 | 0 - - | 0 - - |
WTI 3-Way Options Long Put Short Put | 0 - - - | 0 - - - | 40 Mbbls/d $89.76 $65.00 $50.00 | 32 Mbbls/d $85.36 $65.00 $50.00 | 0 - - - |
Natural Gas Hedges ($/Mcf) | 1Q 2024 | 2Q 2024 | 3Q 2024 | 4Q 2024 | 1Q 2025 |
NYMEX Swaps | 200 MMcf/d $3.62 | 200 MMcf/d $3.62 | 200 MMcf/d $3.62 | 200 MMcf/d $3.62 | 0 - |
NYMEX Collars Call Strike Put Strike | 400 MMcf/d $5.10 $3.00 | 400 M
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