DENVER, Sept. 9, 2021 /CNW/ - Ovintiv Inc. (NYSE: OVV)
(TSX: OVV) today announced a new capital allocation framework,
which supports the Company's goal of unlocking shareholder value by
delivering on its strategic priorities of financial strength,
increasing cash returns to shareholders, generating superior
returns on capital investment, and driving ESG progress.
"We are committed to unlocking shareholder value by delivering
on our strategic priorities," said Ovintiv President and CEO,
Brendan McCracken. "We are at the
forefront of driving innovation to produce oil and gas from shale
both profitably and sustainably. We will generate superior
returns and free cash flow by continuously improving capital
efficiency and expanding margins while driving down emissions. We
will deliver that value to our shareholders through disciplined
capital allocation. Over the next 10 years, our business is set to
generate about $15 billion of free
cash flow(1) at $55 per
barrel WTI flat oil pricing and would generate about $21 billion at $65
per barrel. Our capital allocation framework sets out our
commitment to financial strength, generating superior returns on
the capital we invest, returning cash to our shareholders, and
driving ESG progress."
As previously announced, Mr. McCracken will be presenting at the
Barclays CEO Energy-Power Conference on Friday, September 10, 2021, starting at
10:20 a.m. ET. The live webcast and
replay will be available on Ovintiv's website. An updated corporate
presentation has been posted to the Company's website at:
https://www.ovintiv.com/investors/presentations-events/
Key highlights of the capital allocation framework include:
Increasing Cash Returns to Shareholders
Beginning in
the fourth quarter of 2021, and until Ovintiv reaches its
$3 billion net debt(2)
target, the company plans to return 25% of the previous quarter's
free cash flow after base dividends to its shareholders through
share buybacks and/or variable dividends. The remaining 75% will
primarily be allocated to net debt reduction, with a modest amount
allocated to small, low-cost property bolt-ons.
In 2022, using commodity price assumptions of $60 per bbl for WTI oil and $3.00 per Mcf for NYMEX natural gas, the Company
anticipates that it will deliver approximately $550 million of direct shareholder returns
through its $150 million base
dividend and an additional $400
million in share buybacks or variable dividends. This cash
return would represent a cash yield of more than seven percent.
Once the Company reaches its net debt target of $3 billion, it plans to increase quarterly
shareholder returns to at least 50% of the previous quarter's free
cash flow after base dividends.
Maintaining Reinvestment Rate of Less Than 75%
Ovintiv
reaffirmed its long-term commitment to reinvest less than 75% of
non-GAAP cash flow at mid-cycle prices. In 2021, the Company's
expected capital investment of $1.5
billion represents a cash flow reinvestment rate of less
than 50%.
Sustainable Base Dividend
Providing shareholders with
a sustainable base dividend which grows over time is a key focus
for the Company. In July of 2021, Ovintiv increased its quarterly
dividend payment by approximately 50% to $0.14 per share, payable on September 30, 2021, to common stockholders of
record as of September 15, 2021. This
was the second time the dividend was increased since 2019.
Continued Focus on Net Debt Reduction
Ovintiv remains
committed to reducing net debt. By year-end 2021, the Company
expects net debt to be below $4.5
billion, marking approximately $3
billion of net debt reduction since the second quarter of
2020.
The Company previously set a net debt target of $3 billion, which it expects to achieve by or
before year-end 2023, assuming $50
per bbl WTI oil and $2.75 per Mcf
NYMEX natural gas prices.
Highly Repeatable Capital Program
With more than a decade of premium drilling inventory in each of
its core three assets – the Permian, Anadarko and Montney - Ovintiv is well positioned to
continue delivering industry-leading capital efficiencies for many
years to come.
The Company views the capital efficiency of its 2021 program as
being highly repeatable and it is committed to not grow production
into an oversupplied market.
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
cost savings, capital efficiency and sustainability thereof;
operational flexibility and benefits of the Company's multi-basin
portfolio; anticipated success of and benefits from technology and
innovation; expected activity and investment levels; ability to
meet targets, including with respect to capital efficiency, cash
flow generation, debt reduction, scale and emissions-related
performance, increasing cash returns to shareholders, generating
superior returns on capital investment, and the timing thereof;
timing of projections and expectation of meeting the targets
contained in the Company's corporate guidance and net debt target;
the Company's plans to return free cash flow to its shareholders
through dividends and/or share buybacks; statements regarding
potential shareholder returns; and the size of the Company's
drilling inventory. FLS involve assumptions, risks and
uncertainties that may cause such statements not to occur or
results to differ materially. These assumptions include: future
commodity prices and differentials; assumptions contained herein;
data contained in key modeling statistics; availability of
attractive hedges and enforceability of risk management program;
assumed tax, royalty and regulatory regimes; and expectations and
projections made in light of the Company's historical experience.
Risks and uncertainties include: suspension of or changes to
guidance, and associated impact to production; ability to generate
sufficient cash flow to meet obligations and to reduce debt;
commodity price volatility and impact to the Company's stock price
and cash flows; ability to secure adequate transportation and
potential curtailments of refinery operations, including resulting
storage constraints or widening price differentials; discretion to
declare and pay dividends, if any; ability to repurchase the
Company's outstanding common shares, including obtaining any
necessary stock exchange approvals therefor; the existence of
alternative uses for the Company's cash resources which may be
superior to payment of dividends or effecting repurchases of
outstanding common shares; business interruption, property and
casualty losses or unexpected technical difficulties; impact of
COVID-19 to the Company's operations, including maintaining
ordinary staffing levels, securing operational inputs, executing on
portions of its business and cyber-security risks associated with
remote work; counterparty and credit risk; impact of changes in
credit rating and access to liquidity, including costs thereof;
risks in marketing operations; risks associated with technology;
risks associated with lawsuits and regulatory actions, including
disputes with partners; ability to acquire or find additional
reserves; imprecision of reserves estimates and estimates of
recoverable quantities; and other risks and uncertainties as
described in the Company's Annual Report on Form 10- K, Quarterly
Report on Form 10-Q and as described from time to time in its other
periodic filings as filed on EDGAR and SEDAR. 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.
About Ovintiv Inc.
Ovintiv is one of the largest producers of oil, condensate and
natural gas in North America.
Further information on Ovintiv Inc. is available on the Company's
website, www.ovintiv.com, or by contacting:
Investor
contact:
(888)
525-0304
|
Media
contact:
(403)
645-2252
|
____________________________________
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1.
|
Free cash flow is a
non-GAAP measure Ovintiv defines as Non-GAAP Cash Flow in excess of
capital expenditures, excluding net acquisitions and divestitures.
Non-GAAP Cash Flow is a non-GAAP measure defined as cash from (used
in) operating activities excluding net change in other assets and
liabilities, net change in non-cash working capital and current tax
on sale of assets. Due to the forward-looking nature of projected
free cash flow used herein, management cannot reliably predict
certain of the necessary components of the most directly comparable
forward-looking GAAP measures, such as changes in operating assets
and liabilities. Accordingly, Ovintiv is unable to present a
quantitative reconciliation of such forward-looking non-GAAP
financial measures to their most directly comparable
forward-looking GAAP financial measures. Amounts excluded from this
non-GAAP measure in future periods could be
significant.
|
2.
|
Net debt is a
non-GAAP measure Ovintiv defines as long-term debt, including the
current portion, less cash and cash equivalents.
|
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SOURCE Ovintiv Inc.