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Ovintiv Annual Report, Year Ended Dec 31, 2019

Filing Date
Filed February 21, 2020
Period End
December 31, 2019
Security
OVV
In the record · 2020–202610-K710-Q218-K127

OVV filed 7 annual reports (10-K), 21 quarterly reports (10-Q) and 127 current reports (8-K) between 2020 and 2026.

  1. Material agreement8-K · Apr ’21Apr ’21
  2. Leadership change8-K · Sep ’22Sep ’22
  3. Leadership change8-K · Mar ’24Mar ’24
  4. Material agreement8-K · Oct ’26Oct ’26

01—Abstract

Summary

Summary of the 10-K filed February 21, 2020. Cited figures are marked; the original filing is the authoritative source.

Ovintiv Inc. (NYSE/TSX: OVV) filed this Form 10-K for fiscal 2019 following the January 24, 2020 completion of a reorganization in which Encana Corporation was consolidated (one post-consolidation share for each five pre-consolidation shares) and Ovintiv migrated from Canada to become a Delaware corporation.

The Company reported 2019 net earnings of $234 milliona, down from $1,069 million in 2018, on total revenues of $6,726 million. Results were shaped by the February 13, 2019 Newfield Exploration acquisition, which lifted production 56 percent year over year to 564.9 MBOE/d and added proved reserves of 796.6 MMBOE through purchases. Cash from operating activities was $2,921 million and Non-GAAP Cash Flow was $2,931 million, against capital expenditures of $2,626 million, and the Company reported Net Debt to Adjusted EBITDA of 2.0 times.

The Company's strategy centers on three Core Assets, Permian and Anadarko in the U.S. and Montney in Canada, which received $2,030 millionb, or 77 percent, of 2019 capital spending. Total proved reserves at year-end 2019 were 2,188.8 MMBOE, of which 48 percent were proved developed. The Company exited its China operations on July 31, 2019, and reported a net loss on risk management in revenues of $361 million.

Shareholder returns included purchases of about 196.7 million pre-consolidation shares for approximately $1,250 millionc and dividends of $0.375 per share on a post-consolidation basis. The 2020 outlook calls for approximately $2.7 billion of capital investment, liquids production of 318.0 to 332.0 Mbbls/d, and Total Costs of $12.20 to $12.50 per BOE. Key investor considerations include the sensitivity of earnings and reserves to commodity prices, a $6,974 million long-term debt balance at year-end, one credit rating below investment grade, and the tax and listing consequences of the Reorganization, including the U.S. Domestication and possible index-inclusion effects.

02—Key points

Key Highlights

  1. Net earnings fell to $234 million in 2019 from $1,069 million in 2018, with total revenues of $6,726 million.
  2. Production rose 56 percent to 564.9 MBOE/d, primarily from the Newfield Exploration acquisition completed February 13, 2019.
  3. Cash from operating activities of $2,921 million exceeded capital expenditures of $2,626 million by $295 million.
  4. Year-end 2019 proved reserves were 2,188.8 MMBOE, up 973.1 MMBOE from 2018, including 605.3 MMBOE from extensions and discoveries.
  5. Net Debt to Adjusted EBITDA was 2.0 times, with long-term debt of $6,974 million and total liquidity of $3,492 million.
  6. Repurchased about 196.7 million pre-consolidation shares for approximately $1,250 million and paid $102 million in dividends during 2019.
  7. The 2020 outlook projects approximately $2.7 billion of capital investment and liquids production of 318.0 to 332.0 Mbbls/d.

03—One dollar

04—Financials

Financial Highlights

Figures from 10-KFY2019filed February 21, 2020
Revenue$6.73BNet Income$234.00M3.5% Net MarginEPS (Diluted)$0.90Total Assets$21.49BCash & Equivalents$190.00MFree Cash Flow$295.00M

Financial Statements

FY2019 against FY2018

Line itemFY2019FY2018Change
Revenue$6.73B$5.94B+13.3%
Operating Expenses$6.13B$4.25B+44.4%
Operating Income$598.00M$1.69B−64.7%
Interest Expense$382.00M$351.00M+8.8%
Net Income$234.00M$1.07B−78.1%
EPS (Basic)$0.90$5.57−83.8%
EPS (Diluted)$0.90$5.57−83.8%
Shares Outstanding (Basic)261.20M192.00M+36.0%
Shares Outstanding (Diluted)261.20M192.00M+36.0%

05—Questions

Frequently Asked Questions

  1. What was the purpose of the January 24, 2020 Reorganization?

    Encana completed a share consolidation on a one-for-five basis and Ovintiv acquired all of Encana's common shares on a one-for-one basis, becoming the parent company. Ovintiv then migrated out of Canada and became a Delaware corporation, referred to as the U.S. Domestication. The filing states the business continues as previously conducted by Encana.

  2. How did the Newfield acquisition affect 2019 results?

    Newfield results were included from February 14, 2019. The Company issued about 543.4 million pre-consolidation shares valued at $3.5 billion, and Newfield's $2.45 billion of senior notes remained outstanding. Upstream product revenues rose to $5,847 million from $4,223 million, and DD&A increased to $2,015 million from $1,272 million.

  3. What risks does the filing highlight for investors?

    The filing emphasizes commodity price volatility, with a substantial or extended decline potentially affecting revenues, cash flows and reserve values. It also notes that one of the Company's credit ratings is below investment grade, that downgrades could raise borrowing costs and collateral requirements, and that the Company faces ceiling test impairment risk if prices decline.

  4. What are the Company's dividend and capital return policies?

    The Company pays quarterly dividends at the Board's discretion. In 2019 it paid $0.375 per share on a post-consolidation basis. On February 19, 2020, the Board declared a dividend of $0.09375 per share payable March 31, 2020. The filing notes the DRIP was suspended in February 2019 and terminated in connection with the Reorganization.

06—Continue

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