Ovintiv Inc. (OVV) Update - April 2
Posted: Thu Apr 02, 2020 5:05 pm
Ovintiv Restructures Crude Oil Derivatives to Provide Additional Downside Protection; Company Now Plans to Reduce Second Quarter 2020 Investments by $500 Million
DENVER , April 2, 2020 /CNW/ - Ovintiv Inc. (NYSE, TSX: OVV) restructured its crude oil derivatives positions to provide additional downside protection for the balance of 2020. In addition, the Company now plans to further reduce its second quarter investments by an additional $200 million , bringing total capital reductions in the second quarter to $500 million . Updated hedge and sensitivity tables are included within this release.
"We have built our Company with tremendous flexibility and optionality for volatile and uncertain times like we are currently experiencing," said Ovintiv CEO Doug Suttles . "We are using and expect to continue to use this flexibility as market conditions evolve. We have created more certainty in our cash flow by restructuring oil hedges and further reducing second quarter capital spending. We will have additional details when we report our first quarter earnings and operating results."
Strong Hedging Position Protects Cash Flow:
Ovintiv is now substantially hedged on benchmark oil risk for the near term. For the second quarter of 2020, 206 Mbbls/d is hedged at an average price of $42.09 per barrel. Of these positions 191 Mbbls/d is in a fixed price swap at $41.47 per barrel and 15 Mbbls/d is covered by costless collars between $50.00 and $68.71 per barrel. The term "benchmark" above refers to NYMEX WTI and NYMEX Henry Hub.
With these updated positions, downside oil price risk is further reduced. A balance of year $20.00 NYMEX WTI price would generate oil hedge revenues of more than $1.1 billion . This amount excludes oil hedge settlements in the first quarter of 2020. Settlements for natural gas and various other oil differential and natural gas basis positions in 2020 are expected to further add to oil hedge revenues.
I will take a hard look at the OVV forecast/valuation model tomorrow, but my "Quick Take" puts the valuation in the $14 range. OVV produces a lot of natural gas and NGLs,
DENVER , April 2, 2020 /CNW/ - Ovintiv Inc. (NYSE, TSX: OVV) restructured its crude oil derivatives positions to provide additional downside protection for the balance of 2020. In addition, the Company now plans to further reduce its second quarter investments by an additional $200 million , bringing total capital reductions in the second quarter to $500 million . Updated hedge and sensitivity tables are included within this release.
"We have built our Company with tremendous flexibility and optionality for volatile and uncertain times like we are currently experiencing," said Ovintiv CEO Doug Suttles . "We are using and expect to continue to use this flexibility as market conditions evolve. We have created more certainty in our cash flow by restructuring oil hedges and further reducing second quarter capital spending. We will have additional details when we report our first quarter earnings and operating results."
Strong Hedging Position Protects Cash Flow:
Ovintiv is now substantially hedged on benchmark oil risk for the near term. For the second quarter of 2020, 206 Mbbls/d is hedged at an average price of $42.09 per barrel. Of these positions 191 Mbbls/d is in a fixed price swap at $41.47 per barrel and 15 Mbbls/d is covered by costless collars between $50.00 and $68.71 per barrel. The term "benchmark" above refers to NYMEX WTI and NYMEX Henry Hub.
With these updated positions, downside oil price risk is further reduced. A balance of year $20.00 NYMEX WTI price would generate oil hedge revenues of more than $1.1 billion . This amount excludes oil hedge settlements in the first quarter of 2020. Settlements for natural gas and various other oil differential and natural gas basis positions in 2020 are expected to further add to oil hedge revenues.
I will take a hard look at the OVV forecast/valuation model tomorrow, but my "Quick Take" puts the valuation in the $14 range. OVV produces a lot of natural gas and NGLs,