Ceiling Test Pushes Ovintiv to $4.4bn Loss in Q2
A $3.25bn non-cash ceiling test impairment taken on the revaluation of its proved reserves pushed Denver-based producer Ovintiv (formerly Canada’s Encana) to a $4.4bn net loss in Q2 2020, the company reported July 28. A year ago, it had second quarter earnings of $336mn.
Other non-cash charges in the quarter included $568mn related to a deferred tax asset valuation and an unrealised loss on risk management of $679mn. The company also recorded a pre-tax restructuring charge of $81mn as it cut its workforce by 25% in response to the Opec+ price war and demand destruction in the wake of the Covid-19 pandemic.
Without those and other charges, Ovintiv reported a $111mn operating loss compared to operating earnings of $290mn in Q2 2019. Cash from operating activities fell to $117mn from $906mn, while non-GAAP cash flow was reduced to $304mn from $877mn.
Capital expenditures for Q2 2020 were slashed to $252mn from $750mn as Ovintiv cut its operated rig fleet from 23 in March to just seven by mid-May. Completions were halted for the quarter in all three of the company’s core operating areas – the Permian and Anadarko basins in the US and the Montney basin in Canada.
Reflecting the reduced field activity, production in the quarter averaged 536,600 barrels of oil equivalent (boe)/day, down from 591,800 boe/day in the same period last year. Natural gas production slipped to 1.55bn ft3/day from 1.6bn ft3/day, while crude oil and liquids production fell to 278,400 b/d from 324,000 b/d in Q2 2019.