Ovintiv(OVV) - 2025 Q2 - Quarterly Report

PART I Financial Statements Ovintiv's unaudited condensed consolidated financial statements for Q2 2025 include statements of earnings, comprehensive income, balance sheet, changes in shareholders' equity, and cash flows, with detailed notes on accounting policies and specific financial items Condensed Consolidated Statement of Earnings Ovintiv reported net earnings of $148 million for the six months ended June 30, 2025, a significant decrease from $678 million in 2024, primarily due to a $730 million impairment charge, with diluted EPS falling to $0.57 Condensed Consolidated Statement of Earnings Highlights (Six Months Ended June 30) | Metric | 2025 (US$ millions) | 2024 (US$ millions) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | 4,695 | 4,640 | +1.2% | | Operating Income (Loss) | 422 | 1,050 | -59.8% | | Net Earnings (Loss) | 148 | 678 | -78.2% | | Diluted EPS | $0.57 | $2.51 | -77.3% | - A significant non-cash impairment charge of $730 million was recorded in the first six months of 2025, which was the primary driver for the substantial decrease in net earnings compared to the prior year[27] Condensed Consolidated Balance Sheet As of June 30, 2025, Ovintiv's total assets increased to $19.73 billion from $19.25 billion at year-end 2024, with total liabilities growing to $9.36 billion from $8.92 billion, influenced by the Montney acquisition Condensed Consolidated Balance Sheet Summary | Metric | June 30, 2025 (US$ millions) | Dec 31, 2024 (US$ millions) | | :--- | :--- | :--- | | Total Current Assets | 1,244 | 1,369 | | Property, Plant and Equipment, net | 14,383 | 14,364 | | Total Assets | 19,734 | 19,254 | | Total Current Liabilities | 2,874 | 2,681 | | Long-Term Debt | 4,393 | 4,853 | | Total Liabilities | 9,357 | 8,923 | | Total Shareholders' Equity | 10,377 | 10,331 | Condensed Consolidated Statement of Cash Flows For the six months ended June 30, 2025, cash from operating activities increased to $1.89 billion, while investing activities used $1.45 billion primarily for acquisitions and capital expenditures, partially offset by divestiture proceeds Cash Flow Summary (Six Months Ended June 30) | Activity | 2025 (US$ millions) | 2024 (US$ millions) | | :--- | :--- | :--- | | Cash From Operating Activities | 1,886 | 1,679 | | Cash From (Used in) Investing Activities | (1,453) | (1,402) | | Cash From (Used in) Financing Activities | (442) | (274) | | Increase (Decrease) in Cash | (22) | 5 | Notes to Condensed Consolidated Financial Statements The notes detail financial statement explanations, including the reclassification of the Market Optimization segment, a $730 million non-cash impairment, the $2.3 billion Montney acquisition, $1.9 billion Uinta divestiture, and share capital updates - The Market Optimization segment was reclassified into the USA and Canadian operating segments, which they support, with prior periods reclassified for comparative purposes[42] - On January 31, 2025, the company completed the acquisition of Montney formation assets for approximately $2.308 billion in cash, accounted for as an asset acquisition[62] - The company sold its Uinta Basin assets for proceeds of approximately $1.882 billion during the first six months of 2025[64] - For the six months ended June 30, 2025, the company recognized a before-tax non-cash ceiling test impairment in the Canadian Operations of $730 million, primarily due to lower 12-month average trailing prices compared to market prices at the time of the Montney Acquisition[66] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) The MD&A provides management's perspective on financial results and condition, detailing strategy, performance, and outlook for 2025, including the Montney acquisition and Uinta divestiture, and covers liquidity and capital resources Executive Overview Ovintiv focuses on generating cash flow and shareholder returns through its multi-basin portfolio, with key H1 2025 developments including the $2.3 billion Montney acquisition and $1.9 billion Uinta divestiture, reporting $148 million in net earnings - The company's strategy is to be a leading North American energy producer, focusing on quality returns, cash flow generation, and durable cash returns to shareholders through its multi-basin portfolio[131] - On January 31, 2025, the company closed its acquisition of Montney assets for approximately $2.308 billion[143] - On January 22, 2025, the company closed its divestiture of Uinta assets for approximately $1.9 billion[143] Results of Operations Total revenues for H1 2025 were $4.7 billion, slightly up from $4.6 billion in 2024, with upstream product revenues impacted by lower oil prices and Uinta divestiture, offset by higher natural gas prices and Montney acquisition volumes Production Volumes (Six Months Ended June 30) | Product | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Oil (Mbbls/d) | 146.3 | 168.8 | -13.3% | | NGLs (Mbbls/d) | 154.3 | 132.6 | +16.4% | | Natural Gas (MMcf/d) | 1,807 | 1,693 | +6.7% | | Total (MBOE/d) | 601.9 | 583.8 | +3.1% | Average Realized Prices (Six Months Ended June 30, excluding risk management) | Product | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Oil ($/bbl) | $68.24 | $77.17 | -11.6% | | NGLs ($/bbl) | $40.00 (Blended) | $42.10 (Blended) | -5.0% | | Natural Gas ($/Mcf) | $2.60 | $1.74 | +49.4% | - Oil revenues for H1 2025 decreased by $568 million YoY, driven by a 12% drop in realized prices and lower production volumes from the Uinta asset sale[179][180] - Natural gas revenues for H1 2025 increased by $313 million YoY, driven by a 49% increase in realized prices and higher production volumes from the Montney acquisition[182] Liquidity and Capital Resources As of June 30, 2025, Ovintiv had total liquidity of approximately $3.2 billion, with a Debt to Adjusted Capitalization ratio of 23%, and generated $1.9 billion in cash from operations, funding acquisitions and debt repayment Liquidity Position (as of June 30, 2025) | Component | Amount (US$ millions) | | :--- | :--- | | Cash and Cash Equivalents | 20 | | Available Credit Facilities | 3,350 | | Available Uncommitted Demand Lines | 132 | | Issuance of U.S. Commercial Paper | (331) | | Total Liquidity | 3,171 | - The company is in compliance with all financial covenants, with a Debt to Adjusted Capitalization of 23% against a 60% limit[247] - In May 2025, the company redeemed its $600 million, 5.65% senior notes due May 2025[263] - The share buyback program, which was paused in Q4 2024, resumed in Q2 2025, with 4.1 million shares repurchased for approximately $147 million[269] Quantitative and Qualitative Disclosures about Market Risk Ovintiv is exposed to market risks from commodity prices, foreign currency exchange rates, and interest rates, with sensitivity analyses indicating a 10% change in oil prices impacts pre-tax net earnings by approximately $48-51 million Market Risk Sensitivity Analysis (as of June 30, 2025) | Risk Factor | Change | Impact on Pre-Tax Net Earnings (US$ millions) | | :--- | :--- | :--- | | Oil Price | +10% | $(51) | | | -10% | $48 | | Natural Gas Price | +10% | $(13) | | | -10% | $9 | | Foreign Exchange Rate (CAD/USD) | +10% | $22 | | | -10% | $(27) | - The company had $481 million in floating rate debt as of June 30, 2025, resulting in a sensitivity of $5 million in before-tax earnings for each 1% change in interest rates[293] Controls and Procedures The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls over financial reporting during Q2 2025 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[295] - No changes in internal control over financial reporting occurred during the second quarter of 2025 that have materially affected, or are reasonably likely to affect, these controls[296] PART II Legal Proceedings The company refers to its 2024 Annual Report on Form 10-K and Note 21 for legal proceedings information, not expecting outstanding claims to materially affect its financial position - For information on legal proceedings, the report refers to Item 3 of the 2024 Annual Report on Form 10-K and Note 21 of the current 10-Q[299] Risk Factors No material changes to risk factors have been reported since the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported since the last Annual Report on Form 10-K[300] Unregistered Sales of Equity Securities and Use of Proceeds Under its NCIB program, Ovintiv repurchased approximately 4.1 million shares for $146 million during Q2 2025, with approximately 21.9 million shares remaining for purchase Share Repurchases (Three Months Ended June 30, 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 1,234,753 | $32.40 | | May 2025 | 1,788,932 | $36.89 | | June 2025 | 1,041,415 | $38.41 | | Total | 4,065,100 | $35.92 | - The current NCIB program allows for the purchase of up to approximately 25.9 million shares and is active from October 3, 2024, to October 2, 2025[301] Other Part II Items This section covers remaining Part II items, reporting no defaults upon senior securities, mine safety disclosures as not applicable, and no other information to report, with a list of exhibits provided - Item 3, Defaults Upon Senior Securities: None[306] - Item 4, Mine Safety Disclosures: Not applicable[307] - Item 5, Other Information: None[308]