01—Abstract
Summary
Summary of the 10-K filed February 27, 2024. Cited figures are marked; the original filing is the authoritative source.
Ovintiv Inc. (NYSE/TSX: OVV) is a North American oil and natural gas exploration and production company with operations in the United States (Permian, Anadarko, Uinta) and Canada (Montney, Horn River).
In 2023 the company completed the Permian Acquisition, a Midland basin transaction valued at approximately $4.4 billiona before closing adjustments, which added about 1,050 net well locations and 65,000 net acres, and it divested its Bakken assets for proceeds of approximately $734 million. Production averaged 565.6 MBOE/d, up from 510.0 MBOE/d in 2022, and total proved reserves ended the year at 2,185.9 MMBOE, a decline of 87.7 MMBOE from the prior year after production of 206.5 MMBOE, with the decrease attributed mainly to a 330.0 MMBOE change in the approved development plan. Financially, net earnings fell to $2,085 million from $3,637 million in 2022, as realized commodity prices dropped sharply; natural gas realized prices fell 53 percent and liquids prices fell 21 percent.
Cash from operating activities rose to $4,167 millionb from $3,866 million, Non-GAAP Cash Flow was $3,899 million, and capital expenditures were $2,744 million, leaving cash from operations in excess of capital spending by $1,423 million. Debt rose to $5,737 million, lifting Debt to Adjusted EBITDA to 1.3 times, and total liquidity was approximately $3.5 billion at year end.
The company returned capital through dividends of $1.15c per share ($307 million), share repurchases of approximately $426 million, and a quarterly dividend increase to $0.30 per share declared on February 27, 2024. For 2024, the company guided to capital investment of $2.2 billion to $2.4 billion and production of 545 to 575 MBOE/d.
02—Key points
Key Highlights
- Completed the Permian Acquisition in June 2023 for total consideration of approximately $4.4 billion, adding about 65,000 net acres and 1,050 net well locations in the Midland Basin.
- Net earnings declined to $2,085 million from $3,637 million, reflecting lower realized commodity prices, with natural gas realized prices down 53 percent year over year.
- Cash from operating activities increased to $4,167 million, and Non-GAAP Cash Flow was $3,899 million, exceeding capital expenditures of $2,744 million by $1,423 million.
- Average production rose to 565.6 MBOE/d from 510.0 MBOE/d, with total production volumes up 11 percent year over year, driven largely by the Permian Acquisition.
- Total proved reserves were 2,185.9 MMBOE at year end, down 87.7 MMBOE from 2022 after production of 206.5 MMBOE, primarily due to development plan changes.
- Returned $733 million to shareholders in 2023 through dividends of $307 million and share purchases of $426 million; the quarterly dividend was raised to $0.30 per share and the NCIB covers up to approximately 26.7 million shares.
- Long-term debt increased to $5,737 million, with Debt to Adjusted EBITDA of 1.3 times and approximately $3.5 billion of total liquidity at December 31, 2023.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 27, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $10.88B$12.46B | −12.7% |
| Operating Expenses | $8.02B$8.61B | −6.9% |
| Operating Income | $2.86B$3.85B | −25.7% |
| Interest Expense | $355.00M$311.00M | +14.1% |
| Net Income | $2.08B$3.64B | −42.7% |
| EPS (Basic) | $8.02$14.34 | −44.1% |
| EPS (Diluted) | $7.90$14.08 | −43.9% |
| Shares Outstanding (Basic) | 259.90M253.60M | +2.5% |
| Shares Outstanding (Diluted) | 263.90M258.40M | +2.1% |
05—Questions
Frequently Asked Questions
What drove the decline in net earnings in 2023?
Net earnings fell to $2,085 million from $3,637 million. Upstream product revenues declined to $7,778 million from $10,151 million, mainly because of lower average realized prices, with oil down 19 percent, natural gas down 53 percent and NGLs down about 21 percent. Income tax expense was $425 million compared with a recovery of $77 million in 2022, and DD&A rose to $1,825 million from $1,113 million.
How did the Permian Acquisition affect Ovintiv's financial position?
The company paid approximately $3.2 billion in cash and issued about 31.8 million shares, for total consideration of approximately $4.4 billion. The cash portion was funded in part by net proceeds of $2,278 million from senior unsecured notes issued in May 2023. Long-term debt increased to $5,737 million from $3,570 million, and Debt to Adjusted Capitalization rose to 24 percent from 19 percent.
What are Ovintiv's capital return plans?
In 2023 the company paid dividends of $1.15 per share, totaling $307 million, and purchased shares for cancellation for approximately $426 million. On February 27, 2024, the Board declared a quarterly dividend of $0.30 per share payable March 28, 2024. The NCIB permits repurchase of up to approximately 26.7 million shares between October 3, 2023 and October 2, 2024.
What is the 2024 outlook for production and spending?
The company plans capital investment of approximately $2.2 billion to $2.4 billion in 2024 and expects total average production of approximately 545 to 575 MBOE/d. It expects upstream transportation and processing costs of approximately $7.50 to $8.00 per BOE and to generate cash flows in excess of capital expenditures.
How much of the company's reserves and production are in the United States versus Canada?
The U.S. operations accounted for 58 percent of total proved reserves and 72 percent of upstream production revenues excluding hedging, while Canadian operations accounted for 42 percent of proved reserves and 28 percent of upstream production revenues. Total proved reserves were 1,273.8 MMBOE in the U.S. and 912.1 MMBOE in Canada.
06—Continue