Ovintiv Inc. (DE)

Good day, ladies and gentlemen, and thank you for standing by. Welcome to OVINTIF's 2021 Third Quarter Results Conference Call. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. 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 OVINTIV representatives. However, members of the media who wish to quote others who are speaking on today's call, 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 OVINTIV. I would now like to turn the conference call over to Jason Verheest from Investor Relations. Please go ahead, Mr. Verheest.

Thank you operator and welcome everyone to our third quarter 2021 conference call. This call is being webcast and the slides are available on our website at oventive.com. Please take note of the advisory regarding forward looking statements at the end of our slides and in our disclosure documents filed on CDAR and EDGAR. Following prepared remarks, we will be available to take your specific questions. Please limit your time to one question and one follow up. This allows us to get through more of your questions today. I'll now turn the call over to Brendan McCracken.

Good morning. Thanks, everyone, for joining us. Following our brief prepared remarks, our team will be available to answer your questions. We're pleased to announce our third quarter results. Our unique culture of innovation and discipline is driving value creation across our business. We're delivering on every aspect of our value proposition. We're in action on cash returns to shareholders. We're rapidly reducing debt. Our efficiency gains are fully offsetting inflation. We're generating superior returns on the capital we're investing, and that's resulting in significant free cash flow, and we're using our expertise and innovation to drive efficiency gains and lower emissions. We're committed to delivering this value creation directly to our shareholders, as demonstrated by our rapid debt reduction, share buybacks, and our recently increased base dividend. We reduced debt by over $400 million in the quarter to roughly $4.8 billion. and we remain on track to see debt below $4.5 billion by year end. Our leverage currently sticks at 1.5 times, which is less than half of what it was at the start of the year. Based on our significant free cash flow of $480 million during the quarter, we are already in action on our new shareholder returns framework. This will see us return almost $150 million to our shareholders in the fourth quarter through the combination of share buybacks and our base dividend. We continue to maintain capital discipline and our full year 2021 capital program remains unchanged at 1.5 billion. Thanks to our team's ongoing efficiency gains, we have seen no erosion to our capital efficiency from inflation. In a few moments, Greg will share how our team is continuing to relentlessly pursue operational efficiencies and technical innovations on costs and drive out performance from the new wells we're drilling, as well as from our base production. Performance remains strong across our assets, and we continue to see the benefits of our multi-basin portfolio and multi-product commodity exposure. In early September, we announced our new capital allocation framework with a focus on value creation for our shareholders. Our business is capable of generating substantial free cash flow, and over the next 10 years, we project about $15 billion of free cash flow at $55 WTI. and about $21 billion at $65 WTI. With this robust outlook, we felt it was important to provide the market with a clear, transparent, and durable roadmap for how we plan to allocate that capital. We've had the opportunity to meet with many of our shareholders since announcing the framework, and the feedback we've received has been positive on our plan. First of all, we remain committed to running our business with lower debt. Not only does it drive costs out of the system, it also improves our resiliency during periods of market volatility. With that in mind, we set a new debt target of $3 billion, which at mid-cycle prices would equate to a leverage ratio of about one times net debt to EBITDA. The $3 billion does not represent a stopping point, and our capital allocation framework gives us the ability to continue to further reduce debt and take our leverage even lower. While debt reduction remains a top priority, we've made tremendous progress, and we're now in a position where it doesn't need to be our only priority. So starting last month and until we reach $3 billion of net debt, we've committed to return 25% of the previous quarter's free cash flow after base dividends to our shareholders through either share buybacks or variable dividends. When we consider the total dollars involved at the 25% level, This level of cash returns is very competitive with our peers. The remaining 75% will be allocated to the balance sheet with a modest amount allocated to small, low-cost property bolt-ons. Once we hit our net debt target, which at today's prices could be as soon as year-end 2022, we plan to increase the shareholder return allocation to at least 50%. Our plan is underpinned by a reinvestment ratio of no more than 75% of cash flow. and in 2021, we'll reinvest less than $50. We've outlined the principles we'll use to make a value-based decision each quarter on which cash return option to use, either buybacks or variable dividends, based on the market conditions at the time. We currently view share buybacks as the best way to generate excess returns for our shareholders, and we're actively repurchasing shares in the open market. We'll continue to evaluate the value proposition of each option on an ongoing basis. I'll now turn the call over to Corey.