Ovintiv Inc. Q1 FY2025 earnings call

• Macro Environment and Positioning: Business built using mid-cycle prices of $55 WTI and $2.75 NYMEX, positioned to handle lower oil prices with post dividend breakeven under $40 WTI, strong inventory (10-20 years of premium drilling inventory in assets) and capital efficiency.
• Transactions Impact: Montney for Uinta transactions closed in January boosted free cash flow by increasing price realizations, lowering cost structure, and enhancing capital efficiency.
• Asset Performance: Permian well performance strong with 53 net turn-in-lines in Q1; Montney integration successful with good well results and cost savings on drilling; Anadarko benefits from low base decline rate driving free cash flow generation.
• Shareholder Returns: Resumed share buybacks, expects to repurchase ~$146 million of shares in Q2, committed to debt reduction with leverage at 1.2x and $3.5 billion liquidity.

Permian: Oil and condensate volumes averaged 206,000 barrels a day in the quarter, with 131,000 barrels per day in Q1 and expected to stabilize at around 120,000 barrels per day from Q2 onward. Montney: Currently producing about 55,000 barrels per day of oil and condensate, with strong initial well results and cost savings achieved on drilling. Anadarko: Producing around 28,000 barrels per day in April, expected to grow to 30,000 barrels per day and maintain that level for the rest of the year.

• Full year free cash flow guidance maintained at ~$1.5 billion assuming $60 WTI and $3.75 NYMEX for the rest of the year, and ~$1 billion if $50 WTI and $3.75 NYMEX.
• Q2 production expected to average approximately 595,000 barrels of oil equivalent per day, including about 205,000 barrels of oil and condensate per day.
• Capital spend in Q2 around $575 million, full year capital plans unchanged but flexible to adjust activity levels if needed.

• Commodity Price Volatility: Lower oil prices could impact free cash flow.
• Supply Chain Risks: Though pre-purchased steel and tubular goods for 2025 program, potential supply chain issues.
• Regulatory/Trade Uncertainties: Canadian election and U.S. tariffs could impact operations and market access.

Q: How are you thinking around full year CapEx?

A: Corey Code states full confidence, it's an activity story with capital deceleration due to integrating new Montney assets and activity pull-forward, expecting to find savings through the year.

Q: Recent Canadian election, thoughts on impact on Montney operations?

A: Brendan McCracken says Canada has opportunity to grow economy with energy as foundational part, watching cabinet selections next week, key priorities include market access, regulatory reform, and attracting investment.

Q: In a scenario of worse macro and lower oil prices, what triggers activity reduction?

A: Brendan McCracken says if market drops below $50 WTI and stays there for some time, will reduce activity below maintenance level.

Q: Thoughts on AECO market as LNG exports ramp up?

A: Brendan McCracken says view is to diversify market access away from AECO, with team working on various diversification options.

Q: How are you thinking about AECO and Waha pricing?

A: Brendan McCracken says plan is to produce gas and not sell at local prices, aiming for NYMEX or higher realizations.

Q: Royalties sensitivity north of the border?

A: Brendan McCracken says condensate price drops lower condensate royalties, cushioning cash flow effect of lower prices on Canadian business.

Q: Changing pricing dynamics and liquids-rich Montney?

A: Brendan McCracken says some activity shift in Western Canada, but Ovintiv maintains maintenance level and focuses on efficiency gains.

Q: Shareholder returns and 50-50 split?

A: Brendan McCracken says balanced allocation makes sense today, not ideologically stuck but right choice for shareholders now.

Q: Steel tariffs and Montney well costs?

A: Brendan McCracken says pre-purchased steel, no tariff exposure on Canadian side, and knowledge sharing across borders drives well design improvements.

Q: Permian efficiency metrics and evolution?

A: Greg Givens and Brendan McCracken discuss significant cost efficiency improvements, driven by private data sets and innovation, expecting further gains but not at previous pace.