An Update on Ovintiv September 2020 1
Ratings Action The Company issued the following statement in conjunction with its Fitch downgrade announced on September 18, 2020. Fitch Website This was done in conjunction with their review of commodity prices and we were not immune to their action. Here are some facts that you may find helpful: Our $4 billion credit facilities are in place until July 2024 and access is unchanged. There is no impact on their size, term or availability. Today, we have nearly $3 billion of total liquidity and this rating change will have almost no impact to our interest expense, nor will it trigger any significant requests for collateral or uses of liquidity. As you know, our forward plan is laser-focused on reducing debt over the next six quarters and our liquidity is a valuable asset. Many of our peers today are non-investment grade rated companies. As a BBB-rated company with a negative outlook, Ovintiv was somewhat of a hybrid between IG and HY. In some recent instances, we have seen companies have negative outlooks resolved and bonds spreads have actually tightened. We are confident in our ability to execute on our 2020 and 2021 scenarios. All free cash for the next six quarters will be allocated to debt reduction. Advisory Regarding Forward-Looking Statements: This communication contains “forward-looking statements” within the meaning of applicable U.S. and Canadian securities laws. Forward-looking statements include: statements regarding the risk and effect of a downgrade in the company’s credit rating. Readers are cautioned against unduly relying on forward-looking statements which, by their nature, involve numerous assumptions, risks and uncertainties that may cause such statements not to occur or results to differ materially from those expressed or implied. 2
2Q20 Key Takeaways High confidence in ’20 & ’21 scenarios, cash cost savings on track 4Q20 avg oil and C5+ raised to 200 Mbbls/d (previously exit rate) ‘20 capex of $1.8B now at low-end of previous range Tripled passive ownership in OVV since change in domicile Excess cash flows goes to debt reduction over the next six quarters 3 Note: All references to capital investment and oil and condensate production scenarios do not represent formal guidance
2Q Results Enhance “Next Six Quarters” High Operational Confidence: 2020 Scenario Recent well cost achievements underwrite 2021 scenario Previous Current • 200 200 Oil & C5+ 20% gain in capital efficiency vs 2019 • (Mbbls/d) exit 4Q20 ‘21 base decline improves 5% YoY to low 30%, adds material production / cash flow • Capex $1.8 - $1.9 $1.8 Multi-basin portfolio offers flexibility, multiple “ways to win” ($B) • High Financial Confidence: 2021 “Stay- Flat” Scenario $300 MM cash cost savings expected in 2021 • ‘21 FCF Ŧ Positive Majority of 2020 cost savings & $100 MM legacy cost savings • Post dividend at $35 / $2.75 Unhedged FY21 Price Sensitivities: ~200 Mbbls/d WTI $5 / bbl: $375 MM • Avg 2021 Oil & C5+ NYMEX Gas $0.25 / MMBtu: $140 MM • $1.4 – $1.6B “Next Six Quarters” 2021 capex scenario; 20% excess cash flows goes to debt reduction capital efficiency gain vs ‘19 4 Note: Declaration and payment of future dividends subject to Board discretion Ŧ Non-GAAP measures defined in advisories. For additional information regarding non-GAAP measures see the Company’s website and disclosure in the appendix of this document
E F F E C T I V E L Y M A N A G I N G V O L A T I L I T Y Priorities for “The Next Six Quarters” Maintaining Financial Maintaining Scale Strength/Reducing Debt Leading cost structure Protecting health & and capital efficiency safety of our people 5
B U I L D I N G C O N F I D E N C E I N T H E F U T U R E Strong 2Q20 Operating Performance Solid execution in unprecedented period of macro volatility Proven world class operator rapidly reducing cost structure • Capital efficiencies evident: 2Q capex at low end of guidance / FY20 capex reduced Massive organizational flexibility and optionality • Proven Capital Discipline Dynamic Production Management 2Q20 Capex ($ MM) 2Q20 Production 569 $300 (High End) 32 Shut-in 537 Actual 216 $252 Actual 18 Shut-in 198 $250 (Low End) Actual 2Q20 Capex Equivalent Oil & Condensate 1 Mboepd Oil & C5+ Guidance MBOE/d Mbbls/d 6
D E M O N S T R A T E D F L E X I B I L I T Y 2Q20 - Effectively Managing Volatility Delivered Free Cash Cash Flow Ŧ Liquidity Flow Ŧ $304 MM $3.0B 1 Challenging Macro $1.17 / share Investment Grade @ $28 WTI >$200 MM Savings Total Costs Ŧ Operated Rigs ‘20 Achieved ~50% of $11.23 / BOE 1Q20 2Q20 cash cost savings (8%) vs. 1Q20 x23 x07 YTD 7 Note 1: Refer to Slide Notes Ŧ Non-GAAP measures defined in advisories. For additional information regarding non-GAAP measures see the Company’s website and disclosure in the appendix of this document
Flexibility Continues in 2H20 2H20 Demonstrates Business Resiliency Workforce Balanced with Future Plans Align business with activity FY20 now on track for $1.8B capex 25% Moderate growth vs. history • Low end of previous range of $1.8 - $1.9B • Confidence in 2021 scenario 200 Mbbls/d oil and condensate now 4Q20 average Through cycle cost savings • Previously 200 Mbbls/d oil and condensate was an exit rate 2Q20 workforce • Workforce efficiencies reduction increases Demonstrates strong operations and asset performance • Since 2013, 67% smaller with oil & • expected margin and Strengthens confidence in ability to achieve 2021 scenario • condensate production up >6x cash flow 2H20 Game Plan Sets Up Optimal 2021 Scenario Confidence in ‘20 & ‘21 scenarios bolstered by 2Q results Oil & C5+ Production (Mbbls/d) 215 220 4Q20 Flat ‘21 oil and 2H20: Resumption of completions 200 condensate 198 200 Completions to resume in 3Q20 • ~180 180 Frac holiday in 2Q20 to mark 3Q20 as production trough • 200 Flexibility of completion schedule allows for dynamic operations • 160 Exiting ‘20 with typical balance of drilled uncompleted wells (DUCs) • 140 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 2021 8
M U L T I - Y E A R R E S I L I E N C Y >$200 MM of Cash Cost Savings in 2020 2020: >$200 MM of expected cash cost savings Cash Cost Savings ($ MM) Nearly half of estimated savings achieved YTD • $300 $300 Reduced operating and midstream costs • Lower G&A, interest and other costs • >$200 Midstream optimization • $200 Cost reductions over and above shut-in related costs and • price-driven production tax reductions $100 2021: Legacy costs drop $100 MM+ Primarily unutilized midstream costs that expire in ’21 • $0 2020 2021 Durable Cash Cost Savings Combination improves 2021 Legacy Cost Savings cash outlook by $300 MM 9
D R I V I N G C A P I T A L E F F I C I E N C Y Track Record of Efficiency Improvements Core 3 Assets demonstrating capital efficiency gains Go Forward Well Costs ($ MM) 2Q20 capital costs 15% lower vs 2019 (9% in 1Q20) • 1Q20 NEW On track to realize 20% lower D&C in 2021 vs 2019 • Play D&C DC&E 1 D&C DC&E 1 Permian $5.6 $6.2 $5.3 $5.8 STACK $5.0 $5.4 $5.0 $5.4 1Q Actual 2Q Actual Next Six Quarters Montney $3.5 $3.7 $3.4 $3.5 9% 15% 20% Capital Efficiency 2Q20 D&C rates building on efficiencies established in 1Q20 $680 $640 $640 D&C ($ M) / 1,000 ft 2 Pacesetter $550 $540 $530 $520 $500 $500 $500 $490 $450 $ 300 1 2 3 FY19 1Q20 2Q20 Go Forward FY19 1Q20 2Q20 Go Forward FY19 1Q20 2Q20 Go Forward Previously Same as Previously Permian STACK Montney $560 1Q20 $470 10 Note 1, 2: Refer to Slide Notes
W O R L D C L A S S O P E R A T O R Capital Efficiency More Important Than Ever Permian Drilling – Total Well (ft) / day 1 2,000 Continued Simul-Frac improvements leading to increased • completion rates and $350k $400k savings per well Anadarko 1,500 14 STACK wells drilled and completed for under $5 MM 2 • 2Q completions avg 20 hrs / day pump time (+5% vs 1Q20) • 1,000 2018 2019 1H20 Montney Completions – Lateral Length (ft) / day 4-well Pipestone pad achieved Ovintiv average completion rate • 3,000 record of 3,450 ft / day 2,500 2,000 Total Company 1,500 15% reduction in well facility costs vs FY19 driven by optimized site • 1,000 design and multi-basin knowledge transfer 500 Op. costs down 14% from 1Q20: $3.34 $2.86 / BOE (excl LTI ) • 2018 2019 1H20 Permian STACK Montney 11 Note 1, 2: Refer to Slide Notes
OVV: Well Positioned vs Industry Narratives “Stay-flat” capital efficiencies Capital efficiency through innovation ’21 scenario: 200 Mbbls/d oil & C5+ for $1.4 - $1.6B Proven track record of safely reducing costs Optionality through legacy gas production Scale provides stability thru-cycle Minimal Federal acreage exposure Multi-year track record of returning cash <1% exposure in Core 3 assets 12
Defining the Successful E&P of the Future Quality Multi-Basin Portfolio Financial Strength and Risk Management Industry Leading Efficiency Driven by Innovation Size & Scale as One of The Largest Oil & Condensate Producers Unique Combination of Capital Discipline & Flexibility A Culture That Values Being One, Agile & Driven Proven Team of Talented & Committed Professionals 13
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