Ovintiv increases 2022 capex 17% on inflationary cost pressures

Ovintiv Inc., Denver, raised its full year capital investment guidance to $1.7-1.8 billion from $1.5 billion, reflecting current expectations for cost inflation and costs associated with maintaining high spec equipment and preferred crews through yearend. For the year’s second quarter, capital investment is guided at $525-550 million, and second-half 2022 capital investment is guided at $725-825 million.

A modest portion of the additional capital has secured the company's existing equipment, crews, and materials through yearend. Planned activity levels for the remainder of the year are largely unchanged. Capital investment is expected to be 55-60% weighted to first-half 2022.

Full year oil and condensate production volumes of 180,000-185,000 b/d are expected, reflecting a slight decrease from previous guidance due to the impact of higher Canadian royalties resulting from higher commodity prices, first quarter operational delays, and adverse weather impacts in the first 4 months of the year. Oil and condensate production in second-half 2022 is expected to average 190,000 b/d.

First quarter

The company had a net loss of $241 million in quarter, which included net losses on risk management of $1.458 billion, before tax. First quarter cash from operating activities was $685 million.

First quarter total production was above the midpoint at 500,000 boe/d, including 173,000 b/d of oil and condensate, 79,000 b/d of other NGLs, and 1,487 MMcfd of natural gas. Production in the quarter was impacted by higher Canadian royalty rates, operational delays, and weather disruptions.

During the first quarter, Ovintiv purchased for cancellation, about 1.7 million shares of common stock outstanding at an average price of $40.57/share, for a total consideration of $71 million.

In the year’s second quarter, the company plans to deliver some $200 million to shareholders through a raised base dividend of $65 million and share buybacks totaling about $135 million.

Permian

Permian production averaged 114,000 boe/d (79% liquids) in the first quarter. The company averaged three gross rigs, drilled 13 net wells, and had 18 net wells turned in line (TIL). 

The Permian team is executing on a longer lateral program in 2022, with the first quarter wells TIL averaging over 14,300 ft—30% longer than the 2021 program average.

Ovintiv plans to spend $650-700 million in the basin in 2022.

Anadarko

Anadarko production averaged 120,000 boe/d (61% liquids) in the first quarter and averaged three gross rigs, drilled 13 net wells, and had 18 net wells TIL. 

During the quarter, the company completed four wells with a lateral length greater than 15,000 ft in the basin.

The company plans to spend $350-400 million in the basin in 2022.

Montney

Montney production averaged 213,000 boe/d (23% liquids) in the first quarter. The company averaged two gross rigs, drilled 16 net wells, and had 19 net wells TIL.

The company plans to spend $300-350 million in the basin in 2022.