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Ovintiv Says Reducing Near-term Capital Spending to Ensure Co Maintains Free Cash Neutrality in Current Market Conditions

Ovintiv Inc. (NYSE: OVV) today provided additional information related to its strong capital structure and liquidity. In addition, the Company has great flexibility to quickly adapt operations to changing market conditions.

Benzinga · 03/10/2020 09:44

Ovintiv Inc. (NYSE: OVV) today provided additional information related to its strong capital structure and liquidity. In addition, the Company has great flexibility to quickly adapt operations to changing market conditions.

"In addition to our liquidity, we have substantial operational flexibility and a track record of driving cost reductions across the business," said CEO Doug Suttles. "We will be reducing our near-term capital spending to ensure we maintain free cash neutrality in the current market conditions. When combined with cost savings, we are confident that we can do this while maintaining the scale of our business."

Balance Sheet & Liquidity:

$4 billion credit facilities recently renewed through July 2024. No reserve-based, cash flow, EBITDA lending covenants or minimum credit rating requirement. The facilities are based on book value only (not market capitalization) with a maximum ratio of 60% debt-to-adjusted capitalization (at year-end 2019, ratio was 28%). The capitalization calculation adjustment includes a fixed $7.7 billion add back to capitalization. Full terms can be found as an exhibit to the Company's Form 10-K.

Current liquidity is approximately $3.5 billion, which represents the $4 billion credit facilities plus cash-on-hand, less the current commercial paper balance.

OVV is currently rated investment grade at BBB.

Approximately 80% of total long-term debt is due in 2024 or later with a weighted average bond maturity of approximately 10 years.

The Company has significant flexibility to manage the late 2021 and 2022 maturities, including the use of the credit facilities.
Hedging position protects cash flow:

More than 70% of 2020 crude oil and condensate production and 2020 natural gas production is hedged at prices significantly above the current market. The Company utilizes more than a dozen "A" credit rated hedge counterparties. See hedge table in this release.
Recent U.S. Shelf Registration Filing:

A recent U.S. shelf registration filing was made Friday. This shelf was part of a normal course renewal and the Company has no current intentions of issuing any debt or equity under the shelf.
The Company expects to finalize and communicate on its response plan in the coming days.

Hedge Volumes as of December 31, 2019:

Natural Gas Hedges

2020

Oil & Condensate Hedges

2020

Total Benchmark Hedges

1,188 MMcf/d

Total Benchmark Hedges

165 Mbbls/d

Benchmark Hedges ($/Mcf)

Benchmark Hedges ($/bbl)

NYMEX Swaps

Swap Price

803 MMcf/d

$2.65

WTI Swaps

Swap Price

70 Mbbls/d

$57.56

NYMEX 3-Way Options

Short Call

Long Put

Short Put

330 MMcf/d

$2.72

$2.60

$2.25

WTI 3-Way Options

Short Call

Long Put

Short Put

80 Mbbls/d

$61.68

$53.44

$43.44

NYMEX Costless Collars

Short Call

Long Put

55 MMcf/d

$2.88

$2.50

WTI Costless Collars

Short Call

Long Put

15 Mbbls/d

$68.71

$50.00

Basis Hedges ($/Mcf)

Basis Hedges ($/bbl)

AECO Basis Swaps

Swap Price

349 MMcf/d

($0.88)

WTI / Midland Swaps

Swap Price

8 Mbbls/d

($1.20)

WAHA Basis Swaps

Swap Price

105 MMcf/d

($0.91)