June 2020 Investor Presentation 1
U S I N G F L E X I B I L I T Y T O M A N A G E T O D A Y ’ S V O L A T I L I T Y Current Priorities & Recent Actions Cut Costs, Drive Preserve Liquidity & Protect Health, Safety Active Production Capital Efficiencies Balance Sheet Strength of Our People Management $200 MM in cash cost 1 savings 2Q-4Q hedge value ~$1.1B Assembled multi-disciplined Dynamic production “shut-in” strategy Pandemic Response Team 2H20/21 capital costs ~20% Utilized flexibility with lower vs 2019 immediate response to Moved seamlessly to Strong hedge book and reduce 2Q capex $500 MM “remote” work environment shutting in highest cost wells Expect majority of savings to with no penalties means minimal cash flow be durable Screening measures and impact Purchased $100 MM of safety protocols successfully notes (’21 - ’22) at 11% discount, implemented in field reducing interest expense, operations extending maturity profile & Safe “return to work” strategy lowering debt underway Priorities give OVV tremendous resilience and position us to thrive 2 1) Additional detail on cash cost savings available on slide 21 of this presentation. These savings refer to operating, transportation and processing G&A, and other cost outlays and recoveries
1 Q H I G H L I G H T S Strong 1Q Results Exceed Expectations Net Earnings $421 MM Cash Flow Ŧ Liquidity $1.62 / share $535 MM $3.4B 1 Operating Earnings Ŧ $2.06 / share Investment Grade $27 MM $0.10 / share Capex ($ MM) Production (MBOE/d) Total Costs ($/BOE) Ŧ $865 571 $12.77 $790 552 $12.17 1Q capex $75 MM lower 1Q Production 1Q Total Costs Ŧ 5% lower driven by efficiencies 19 MBOE/d higher Original Original Original Actuals Actuals Actuals 1Q20 1Q20 1Q20 1Q Budget 1Q Budget 1Q Budget 3 1) Total liquidity includes $190 MM of available capacity on uncommitted demand lines 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
M A N A G I N G T H E B U S I N E S S Q U A R T E R - T O - Q U A R T E R Rapid 2Q Response ~$1.1B Rapid Response to Current Conditions • 2Q capital reduced by >60% ($500 MM) Mark-to-market value of OVV • Restructured hedges provide increased 2020 protection hedge book (2Q-4Q20) 1 Proactively Managing Capex Hedge Value (WTI & NYMEX Gas) 1 MTM ($ MM) Capex ($ MM) Total >$800 NYMEX Gas $500 WTI Oil $75 $335 $280 $35 $250 - $300 $150 $425 $300 $280 Original 2Q20 2Q20 1Q 2Q 3Q 4Q 2Q Budget Guidance 4 1) Hedge mark to market and values for 2Q-4Q20 based on pricing and oil and natural gas benchmark positions as of April 30, 2020
M U L T I - Y E A R R E S I L I E N C Y $200 MM of Sustainable Cash Cost Savings $200 MM of cash cost savings in 2020 Cash Cost Savings ($ MM) Reduced operating and midstream costs • $300 Lower G&A, interest and other costs • Midstream optimization • Cost reductions over and above shut-in related costs • $200 and price-driven production tax reductions Legacy costs drop $100 MM+ in 2021 $100 Primarily unutilized midstream costs that expire in ‘21 • $0 Combination improves 2021 2020 2021 cash outlook by $300 MM Durable Cash Cost Savings Legacy Cost Savings 5
D R I V I N G C A P I T A L E F F I C I E N C Y Track Record of Efficiency Improvements Core 3 Assets demonstrating capital efficiency gains New Well Cost ($ MM) • 1Q well costs across all assets 9% lower vs 2019 – cost reductions Play D&C DC&E achieved BEFORE oil price collapse Permian $5.6 $6.2 • Expect ~20% savings in 2Q20 and beyond vs 2019 STACK $5.0 $5.4 Montney $3.5 $3.7 1Q20 D&C rates achieved pre-downturn, ability to capture additional savings D&C ($ M) / 1,000 ft $820 Pacesetter $740 FY18 – FY19 $680 $640 $640 1Q20 Go forward $560 $540 $500 $500 $500 $490 $470 Permian STACK Montney Note: DC&E includes: Drill, complete, facilities and lease tie in costs. STACK and Permian well lengths normalized to 10,000 ft. Montney normalized to 7,500 ft. Montney costs displayed in USD. FX rate is 0.7. Montney 6 assumes 50% Pipestone and 50% Dawson
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 • 17% increase in lateral lengths vs FY19 leads to 15% reduction 2,000 in drilling cost per foot • Drilling innovations and Simul-Frac reduce 1Q D&C costs 1,500 $400k/well vs FY19 Anadarko 1,000 • 13 wells drilled and completed for under $5 MM 1 2018 2019 1Q20 • Continued operational gains: 14% faster spud to rig release Completions – Lateral Length (ft) / day and 18% increase in completed lateral feet per day vs 4Q19 3000 • Supply chain management delivers significant savings 2500 Montney 2000 • Industry-leading drilling cycle times 1500 • Pump time in Pipestone completions increased 16% vs FY19 1000 500 2018 2019 1Q20 Permian STACK Montney 7 1) Well lengths normalized to 10,000 ft
F L E X I B I L I T Y T O R E S P O N D T O O I L P R I C E D R O P Dynamic Shut-in Strategy Preserves Value Dynamic analysis factors • Variable expense/margin analysis & contango valuation • Continuously updated based on market environment Shut-in net production (May 7): • No onerous MVCs 1 provides considerable flexibility • Market conditions vary by asset ~35 Mbbls/d • Control of operations: >95% of wells are operated Oil and condensate • Production planning closely aligned with customer requirements ~65 MBOE/d • Current gross shut-ins: ~50 Mbbls/d crude and condensate and ~92 MBOE/d Oil Equivalent Favorable hedge position minimizes cash flow impact Market conditions to drive timing of returning production • Operational Control Centers enable well restarts in <24 hours 8 1) MVCs: Minimum Volume Commitments
U N D E R S T A N D I N G O U R C R E D I T F A C I L I T I E S Our Liquidity is a Valuable Asset Our credit facilities are: OVV Debt / Adjusted Capitalization Ŧ Unsecured 80% Fully committed/available to July 2024 Based on adjusted book capitalization 70% 60% Covenant Supported by 20 lenders, all are A- rated or better Our credit facilities do not have: 60% X A Borrowing Base / annual redetermination 50% Cash flow / EBITDA / leverage covenants X Substantial Covenant X Minimum credit rating requirement Headroom (2X) 40% 30% Financial Covenant Calculation 1Q20 28% 28% 20% Long-Term Debt, including current portion $7,006 Total Shareholders’ Equity $10,191 10% Fixed add-back Equity adjustment 1 $7,746 does not change 0% Adjusted Capitalization $24,943 YE 2019 1Q20 Debt to Adjusted Capitalization Ŧ 28% 9 1) Fixed amount reflecting cumulative historical ceiling test impairments recorded as at December 31, 2011 in conjunction with the Company’s January 1, 2012 adoption of U.S. GAAP 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
2 0 2 0 - 2 1 S C E N A R I O S Positioned to Thrive in 2021 and Beyond FCF Ŧ breakeven lowered and scale maintained through capital efficiency and cost reductions ‘21 FCF Ŧ Positive $1.4 – $1.6B ~200 Mbbls/d 2021 capex scenario; 20% Post dividend at $35 / $2.75 Avg 2021 Oil & C5+ capital efficiency gain vs ‘19 Significantly Lower “Stay-Flat” Capital Scenario 2020 Scenario: “Stay-Flat” Capital Lower by >30% $1.8 - $1.9B of capex and 200 Mbbls/d Oil & C5+ exit rate • 2021 Stay-Flat Scenario: ~$2 - $2.4B Capex Oil & C5+ flat at 200 Mbbls/d at $1.4 - $1.6B of capital • $1.4 - $1.6B Capex $300 MM of cash cost reductions and lower legacy costs • 20% gain in capital efficiency vs 2019 • FCF Ŧ positive at $35 / bbl WTI oil and $2.75 / MMBtu NYMEX gas • Unhedged price sensitivities: • WTI $5 / bbl: $375 MM Previous Current • As at 2019 As at 2021 NYMEX Gas $0.25 / MMBtu: $140 MM • 10 Note: Capital investment scenarios do not represent formal guidance. 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
B U S I N E S S R O A D M A P Defining the Successful E&P of the Future Quality Multi-Basin Portfolio Financial Strength Industry Leading Efficiency Driven by Innovation Size & Scale As One Of The Largest Crude & Condensate Producers Unique Combination Of Capital Discipline & Flexibility A Culture That Values Being Agile, Driven & One Proven Team of Talented & Committed Professionals 11
Appendix
P R O V E N T R A C K R E C O R D O N E F F I C I E N C Y Update on Organization Changes June 2020 – the Company restructured and reduced its workforce by 25% Adds confidence to our ability to deliver on the 2021 scenario described in our 1Q20 call Organization is 67% smaller with crude and condensate production up >6x Headcount Crude & Condensate (Mbbls/d) BOE Production (MBOE/d) 215 571 700 517 5,600 200 35 1,900 2013 Current 2013 1Q20 2013 1Q20 Contractors Employees 13 Note: 2013 includes employees, contractors and acquired headcount. Current includes employees and contractors
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