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Ovintiv Inc. Fourth Quarter, Full Year 2021 Results

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   |    Monday,February 28,2022

Ovintiv Inc. announced its fourth quarter and year-end 2021 financial and operating results. 


  • Generated full year net earnings of $1.4 billion, cash from operating activities of $3.1 billion, Non-GAAP Cash Flow of $3.2 billion and Non-GAAP Free Cash Flow of $1.7 billion
  • Reduced Net Debt by approximately $2.3 billion; expect to reach $3 billion Net Debt target in the second half of 2022 assuming $85 per barrel for WTI oil and $4.50 per thousand cubic feet ("Mcf") for NYMEX natural gas
  • Announced a 43% increase to quarterly dividend payments; now $0.80 per share annualized
  • Continued substantial share buybacks with approximately 4.3 million shares acquired to date since the beginning of the fourth quarter of 2021
  • Reiterated 2022 capital program of approximately $1.5 billion, which is expected to deliver 180 to 190 thousand barrels per day ("Mbbls/d") of oil and condensate production and approximately $2.9 billion of Non-GAAP Free Cash Flow, assuming commodity prices of $85 per barrel for WTI oil and $4.50 per Mcf for NYMEX natural gas
  • Beat targeted 33% reduction in methane emissions intensity four years ahead of schedule with greater than 50% reduction in 2021 versus 2019 baseline
  • Established a 50% Scope 1&2 greenhouse gas (GHG) emissions intensity reduction target to be achieved by 2030 and using 2019 as a baseline year; tied to compensation for all Ovintiv employees

Ovintiv CEO Brendan McCracken said, "Our performance in 2021 demonstrates Ovintiv's unique strengths - our industry leading capital efficiency, top-tier multi-basin portfolio, culture of innovation, and disciplined approach to capital allocation. Our strategy to sustainably deliver superior returns is resulting in substantial value creation for our shareholders. Today, we are increasing our base dividend and we expect to meet our $3 billion net debt target in the second half of 2022, which will unlock another significant increase in cash returns."

Full Year and 4Q2021 Financial and Operating Results

  • The Company recorded full year net earnings of $1.4 billion, or $5.32 per diluted share of common stock.
  • Fourth quarter net earnings totaled $1.4 billion, or $5.21 per diluted share of common stock.
  • Full year cash from operating activities was $3.1 billion, Non-GAAP Cash Flow was $3.2 billion and capital investment totaled approximately $1.5 billion, resulting in $1.7 billion of Non-GAAP Free Cash Flow.
  • Fourth quarter cash from operating activities was $740 million, Non-GAAP Cash Flow was $741 million and capital investment totaled approximately $421 million, resulting in $320 million of Non-GAAP Free Cash Flow.
  • Average annual total production was approximately 534 thousand barrels of oil equivalent per day ("MBOE/d"), including 191 Mbbls/d of oil and condensate, 83 Mbbls/d of other NGLs (C2 to C4) and 1,556 million cubic feet per day ("MMcf/d") of natural gas, all in line with guidance.
  • Fourth quarter total production was approximately 508 MBOE/d, including 178 Mbbls/d of oil and condensate, 85 Mbbls/d of other NGLs and 1,476 MMcf/d of natural gas. Production in the quarter was impacted by unplanned midstream outages and permitting timing delays in Canada that reduced fourth quarter production by approximately 3 Mbblsd/d of oil and condensate, 2 Mbbls/d of other NGLs (C2 to C4) and 90 MMcf/d of natural gas. The fourth quarter also saw higher Canadian royalty rates that reduced production by approximately 1.3 Mbbls/d of oil and condensate, and 40 MMcf/d of natural gas.
  • Total Costs for the year were $13.42 per barrel of oil equivalent ("BOE") while fourth quarter Total Costs were $14.89 per BOE. Total Costs per BOE were impacted by higher commodity prices and lower production during the quarter.

2022 Guidance

With capital investment of approximately $1.5 billion in 2022, the Company expects to maintain oil and condensate production volumes of approximately 180 to 190 Mbbls/d. This range reflects a maintenance production program relative to the second half of 2021. Ovintiv expects to preserve its 2021 capital efficiency and offset inflationary pressures on capital costs in 2022 with efficiency and productivity gains. The Company expects its capital investment to be more weighted to the first half of the year.

McCracken commented: "Maintaining our capital efficiency in 2022 will be a differentiating factor among our peers. Despite the inflationary pressures across the economy, our teams continue to find innovative ways to offset cost inflation and improve well performance. Our industry-leading well cost and productivity performance, combined with our demonstrated operational efficiencies and culture of innovation give us confidence in the repeatability of our capital program in 2022. With more than a decade of premium drilling inventory in each of our core three assets - the Permian, Anadarko and Montney - we are well positioned to continue delivering industry-leading capital efficiencies for many years to come."

In the first quarter, through capital investments of $425 to $440 million, Ovintiv expects to deliver oil and condensate production of 174 to 178 Mbbls/d, other NGLs production of 77 to 81 Mbbls/d and natural gas production of 1,430 to 1,480 MMcf/d.

Share Buyback Program

As of December 31, 2021, Ovintiv had purchased for cancellation, approximately 3.1 million common shares outstanding at an average price of $36.18 per share, for a total consideration of approximately $111 million. During the first quarter of 2022, the Company plans to buyback shares equivalent to 25% of its fourth quarter Non-GAAP Free Cash Flow less base dividend payments, or approximately $71 million. The first quarter buyback program is currently underway with an additional approximately 1.2 million common shares outstanding purchased as of February 18, 2022.

Continued Net Debt Reduction

During the fourth quarter, Ovintiv reduced Net Debt by $192 million. This represents approximately $2.3 billion of Net Debt reduction since year-end 2020.

At year-end, the Company had no outstanding balances under its revolving credit facilities and commercial paper programs. Ovintiv's available liquidity totaled $4.5 billion.

The Company has a Net Debt target of $3 billion which, assuming commodity prices of $85 WTI oil and $4.50 NYMEX natural gas, it expects to meet in the second half of 2022. Once the Company reaches its Net Debt target, it plans to increase quarterly shareholder returns to at least 50% of the previous quarter's Non-GAAP Free Cash Flow after base dividends. The remaining Non-GAAP Free Cash Flow will be allocated to further Net Debt reduction and small, low-cost property bolt-ons.

Dividend Increase

On February 24, 2022, Ovintiv's Board declared a quarterly dividend of $0.20 per share of common stock payable on March 31, 2022, to shareholders of record as of March 15, 2022. This represents an increase of 43% from the previous level and an increase of 113% versus 1-year ago and also marks the second dividend raise in the last six months.

ESG Performance

Ovintiv continues to deliver measurable progress on its ESG initiatives. The Company is committed to advancing its ESG performance, and as such, announced today a Scope 1&2 GHG emissions intensity reduction target of 50% by 2030, using 2019 as a baseline year. This target will be tied to compensation for all Ovintiv employees.

Key highlights of the Company's recent sustainability achievements:
  • Achieved the Company's 33% methane intensity reduction target in 2021, four years ahead of schedule with a greater than 50% reduction from 2019 levels
  • Reduced 2021 Scope 1&2 GHG emissions intensity by more than 20% compared to 2019
  • Fully aligned with the World Bank Zero Routine Flaring by 2030 initiative, nine years ahead of the World Bank's target
  • Achieved 8th consecutive safest year ever in 2021
  • Established a social commitment leadership team and published inaugural social commitment framework
  • Increased the diversity of the Company's Board of Directors
  • Completed the Company's 17th consecutive year of industry leading sustainability reporting and transparency

Asset Highlights

Ovintiv continued to demonstrate well cost reductions across its portfolio throughout 2021. Despite significant industry-wide inflationary pressures, average well costs were 11% lower than 2020 levels.


For the year, Permian production averaged 118 MBOE/d (81% liquids). The Company averaged three gross rigs, drilled 80 net wells, and had 93 net wells turned in line ("TIL").

Permian production averaged 120 MBOE/d (79% liquids) in the fourth quarter. The Company averaged four gross rigs, drilled 20 net wells, and had 16 net wells TIL. The number of wells TIL were reduced as the company transitioned to longer laterals and set up a load-leveled completions program for 2022. Due to this transition, only three net wells were TIL from September to November 2021, with the majority of the fourth quarter wells coming on-line in December.

Permian drilling and completion ("D&C") costs were 10% lower than the 2020 program average. The lower costs achieved in 2021 were underpinned by increased operational efficiencies including faster D&C rates and longer lateral development. Ovintiv utilized Simul-Frac on 90% of its Permian completions in 2021.


For the year, Anadarko production averaged 132 MBOE/d (62% liquids). The Company averaged two gross rigs, drilled 51 net wells, and had 53 net wells TIL.

Anadarko production averaged 133 MBOE/d (61% liquids) in the fourth quarter. The Company averaged two gross rigs, drilled 9 net wells, and had 14 net wells TIL.

In the STACK area, D&C costs were eight percent lower than the 2020 program average. In addition to lower costs, 2021 STACK well performance surpassed expectations as six-month normalized cumulative oil production was 10% higher compared to the 2020 program. This performance improvement was driven by optimized completion designs.


For the year, Montney production averaged 225 MBOE/d (25% liquids). The Company averaged four gross rigs, drilled 84 net wells and had 78 net wells TIL.

Montney production averaged 207 MBOE/d (25% liquids) in the fourth quarter. The Company averaged three gross rigs, drilled 17 net wells and had 14 net wells TIL.

Montney D&C costs were 11% lower than the 2020 program average. Ovintiv made a step-change in drilling performance in the Montney in 2021, drilling three of the five longest laterals in the basin with an average drilling rate of over 1,600 feet per day. In the liquids-rich Pipestone portion of the play, Ovintiv delivered a 14% year-over-year improvement in six-month, normalized condensate production. This performance improvement was driven by optimized completion designs.


For the year, Bakken production averaged 24 MBOE/d (79% liquids). The Company averaged one net rig, drilled 11 net wells and had 10 net wells TIL.

Bakken production averaged 25 MBOE/d (79% liquids) in the fourth quarter. The Company averaged one net rig, drilled four net wells and had six net wells TIL.

Year-End 2021 Reserves

SEC proved reserves at year-end 2021 were 2.3 billion BOE, of which approximately 52% were liquids and 59% were proved developed. The strong well performance and lower costs that the Company realized through the year resulted in an SEC total proved reserve replacement of 269% of 2021 production excluding the impacts acquisitions and divestitures. Total proved reserves replacement excluding the impact of commodity prices and excluding acquisitions and divestitures was 194% of 2021 production.

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