Ovintiv Inc. (DE)

Ladies and gentlemen, and thank you for standing by, welcome to OVINTA's 2020 Second Quarter Results Conference Call. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode, but following the presentation, we will conduct a question and answer session. Members of the investment community will have the opportunity to ask questions and can join the queue at any time by pressing star 1. For members of the media attending in a listen-only mode today, you may quote statements made by any of the eventive representatives. However, members of the media who wish to quote others who are speaking on this call today, we advise you to contact those individuals directly to obtain their consent. Please be advised that this conference call may not be recorded or rebroadcast without the expressed consent of eventive. And I would like to turn the conference call over to Steve Campbell from Investor Relations. Please go ahead, Mr. Campbell.

Thank you, Operator, and welcome everyone to our second quarter conference call. This call today is being webcast, and the slides are available on our website at oventiv.com. Please take note of the advisory regarding forward-looking statements at the end of our slides and in our disclosure documents, which we filed with CDAR and EDGAR. Following today's prepared remarks, We will be available to take your specific questions. Please limit your time to one question and one follow-up. As always, this allows us to get to more of your questions today. I will now turn the call over to our CEO, Doug Suttles.

Thanks, Steve, and good morning, everyone. We appreciate you dialing in for our mid-year update. What a quarter the second quarter was. Clearly, it wasn't typical or normal, at least I hope not. What did we accomplish? Well, first, I have to say that the list would be impressive if it represented the whole year, but it was all completed in three months. To begin, and most importantly, we delivered outstanding safety performance. Second, we effectively managed COVID risks with the vast majority of our workforce back in the office since early June. Our protocols have been highly effective. We've had zero instances of the virus being transmitted in either our offices or field locations since the beginning of the pandemic. We delivered strong financial and operating results given the environment, probably highlighted by the fact that we generated free cash in the quarter. We rapidly reduced capital spending with no penalties, maybe unique in the sector. We created a dynamic real-time shut-in strategy that enhanced revenues and cash flow. We realigned our workforce to our view of future activity and to drive further organizational efficiency. We continued to set efficiency records in our development programs with industry-leading cost and capital efficiency. We highlighted the resiliency of our business through our six-quarter stay-flat scenario, which shows how we are positioned to thrive as a recovery happens. And we've made it very clear that excess cash flow over the next six quarters will flow to the balance sheet and debt reduction. Our business and our culture was purposely built with flexibility as we fully recognize the importance of being able to respond to the dynamic world we live in. I'm joined today by other members of our team who will help describe how we are performing and where we are headed. But I have to say to our organization that I could not be more proud of your resiliency and your accomplishments over the last few months As you, like everyone else, had to live with the incredible uncertainty and stress that COVID-19 has created. So thank you. During one of the toughest times in our industry, we adjusted rapidly and generated free cash of more than $50 million in the second quarter. We had very strong operating performance, and today we are providing a stronger outlook for 2020. Importantly, the momentum we are generating to lower cash costs and drive efficiencies provides high confidence in the 2021 scenario we shared with you last quarter. Our 2020 well costs across our three core plays are now down 15% when compared to 2019 averages. Well costs were down 9% after the first quarter and now 15% at mid-year. We have near-term line of sight to additional savings. You'll hear more on this from Greg in a moment. The majority of these savings are durable and are a result of our team's constant innovation. We have extremely high confidence that our objective to lower well costs by 20% over the next six quarters will be achieved very soon. Although not formal guidance, our 2020 and 21 scenarios showcase the flexibility we've built into our business and our ongoing progress to reduce costs such that we can maintain scale and generate free cash like we did in the second quarter. Our strategy is intact, but clearly given the impacts from the pandemic, it is appropriate to hit the pause button, focusing on generating free cash while maintaining scale. And that is our plan. Note that in the past two months, our passive ownership has nearly tripled from where we started. as a product of our domicile move to the U.S. earlier this year and our addition to important indices like the Russell. This move was clearly good for all shareholders regardless of which side of the border you reside. And lastly, you'll notice today that we are committing that all excess cash flows over the next six quarters will go to debt reduction. Even if commodity priors are much higher than we currently see, We will continue to direct that additional cash flow to debt reduction and not to additional drilling. Our second quarter achievements have strengthened our 2020 original scenario. We lowered total capex and raised fourth quarter average production. We are on track for our 2020 stay flat scenario that generates free cash inclusive of our dividend at a modest $35 oil price. Maintaining 200,000 barrels a day of crude and condensate with an investment of $1.4 to $1.6 billion screens as one of the best capital efficiency scenarios in our peer group today. This slide makes note of the key ingredients behind that scenario. Capital efficiency gains are well in hand and our multi-basin portfolio offers multiple ways to win. But there are some additional improvements also worth mentioning today. We expect that our base decline will improve by about 5% to the low 30% range in 2021, adding material production and cash flow. Our cash cost savings this year, estimated at more than $200 million, increase by an additional $100 million next year as our legacy costs are down significantly. And please take note of the commodity price sensitivity shown at the bottom of this slide. We generate an incremental $375 million of cash flow for every $5 move in oil price. Because of our legacy dry gas production, a $0.25 move in gas price moves or yields an additional $140 million in cash flow. Stronger oil and natural gas prices could significantly accelerate our debt reduction plans over the next six quarters. In fact, the current strip would have us generating significant excess cash flow next year. Our priorities for the next six quarters are crystal clear and can be categorized under these four key buckets. First and foremost is financial strength and debt reduction. We have made important adjustments to our business to ensure we maintain a strong balance sheet with deep liquidity. This is critical in volatile times like today. As we focus on generating free cash flow, we are committed to preserving liquidity and further strengthening our balance sheet through debt reduction. We are confident in our ability to generate free cash flow as we continue to push the frontier of capital efficiencies and cost structure. Our focused efforts on margin enhancement and innovatively creating new ways and durable efficiencies will be critical over the next six quarters. We also know that maintaining the scale of our business is important and will allow us to participate in the recovery as global demand for our products return, and it will return. We ran numerous scenarios to optimize our activity levels, investments, managed declines, debt levels, costs, and a host of other factors. The scenario we've shared with you for the next six quarters is the product of that work. Obviously, our second-quarter production was impacted by our voluntary shut-ins, dropping two-thirds of our rigs and all of our frac spreads. But we were able to maintain our significant scale and position us for a fourth-quarter average production of 200,000 barrels a day of crude and condensate. We can't achieve any of this without our team. Ensuring their health and safety is a deeply held value. We reacted quickly to COVID-19 to protect the health and safety of our workforce in the field and we use those learnings to safely return to the office. I'll now turn the call over to Corey to discuss our financial results.