Ovintiv expects 2020 exit rate of 200,000 b/d crude and condensate
Ovintiv Inc. expects a total capital investment scenario in 2020 of $1.8-1.9 billion would result in a 2020 exit rate for crude and condensate of about 200,000 b/d.
"In 2021, with a total capital investment scenario of approximately $1.5 billion, we are confident that we could deliver free cash flow at $35 per barrel WTI and $2.75 per MMBtu NYMEX natural gas while holding crude and condensate flat at 200,000 bbls/d," said Doug Suttles, Ovintiv chief executive officer, as part of the company’s first quarter earnings statement.
In early April, the company noted plans to drop two-thirds of its operated rig fleet with plans to run seven rigs (three Permian, two Anadarko, two Montney) by mid-May as part of a 60% cut to capital investments to $250-300 million for 2020 (OGJ Online, Apr. 3, 2020). Completions activity has been deferred, and current net shut-in volumes are about 65,000 boe/d, including 35,000 b/d of crude and condensate.
Total average production in the first quarter of 2020 was 571,300 boe/d—3% higher than expectations. Crude and condensate production averaged 215,200 boe/d.
Permian production increased 20% year-over-year and averaged 109,600 boe/d (81% liquids). The region saw strong operational performance, achieving an average drill, complete and tie-in cost of $0.7 million/1,000 ft, or 7% below the 2019 average. During the quarter, 37 net wells were turned in line (TIL).
Anadarko production was 161,000 boe/d (62% liquids), up 11% when compared to proforma results in the first quarter of 2019. There were 27 net TILs during the quarter.
Well costs were significantly lowered again, with 13 recent wells drilled and completed for under $5 million/well. This is $3 million (~40%) below pre-2019 costs. The company is now estimating go-forward drill and complete costs at $5 million/well.
First quarter liquids Montney production grew 8% year-over-year to 52,500 b/d. Total production averaged 204,700 boe/d (26% liquids). There were 28 net TILs in the first quarter. The Montney produces nearly 60% of the company's natural gas volumes and has a significant inventory of dry gas opportunities.
The remaining assets in the portfolio include the Eagle Ford, Bakken, Uinta, and Duvernay. All drilling and completion activities in these areas have been suspended.
Net earnings in the first quarter were $421 million and were impacted by non-cash unrealized hedging gains of $904 million, before-tax, as well as a non-cash ceiling test impairment of $277 million, before-tax. The non-cash impairment primarily related to the decline in the 12-month average trailing prices for NGLs and natural gas which reduced the company's SEC proved reserves values.
First quarter capital investments were $790 million. Cash from operating activities was $566 million and non-GAAP cash flow was $535 million.
Current liquidity is approximately $3.4 billion, which represents the $4 billion credit facilities, available capacity on uncommitted demand lines and cash-on-hand, less the current commercial paper outstanding and the amount drawn on the facilities.
During the first quarter, Ovintiv repurchased $100 million of its senior notes in the open market for $89 million.