- Ovintiv Inc (TSX:OVV) is cutting its second quarter spending by a further C$200 million
- This brings the company’s recent cuts to half a billion, since the oil price crashed in early March
- The company has hedged 206,000 barrels of oil per day at an average price of C$59.53 to mitigate the low oil price
- The oil price has been driven to historic lows by an ongoing trade war between OPEC and Russia, combined with the economic effects of the COVID-19 pandemic
- Ovintiv Inc (OVV) is holding steady, with share trading at $4.50 and a market cap of $1.17 billion.
Ovintiv Inc (TSX:OVV) is cutting its second quarter spending by further C$200 million and is adjusting its hedges, after the recent oil price crash.
The latest reduction brings the company’s total second quarter spending to half a billion less than it was just a month ago, before the floor fell out from underneath the oil price.
When negotiations between OPEC and Russia broke down in early March, Saudi Arabia and a number of other countries uncapped oil production.
This flooded the market and drove the oil price to historic lows. The ongoing COVID-19 crisis has also dropped demand for oil in China, which has exacerbated the steep decline.
At the time, this forced the company to cut its capital budget significantly and drop 10 operating oil rigs until the price improves.
In today’s release, Ovintiv has now hedged 206,000 barrels of oil per day at an average price of C$59.53, to mitigate the recent price instability. This is a substantial premium as the benchmark WTI oil price is currently around $38 and has dropped by more than half since the year began.
CEO of Ovintiv, Doug Suttles believes rapidly adjusting the company’s position is a sensible move, given the unpredictable market.
“We have built our Company with tremendous flexibility and optionality for volatile and uncertain times like we are currently experiencing.
“We are using and expect to continue to use this flexibility as market conditions evolve. We have created more certainty in our cash flow by restructuring oil hedges and further reducing second quarter capital spending,” he said.
Ovintiv Inc (OVV) is holding steady, with share trading for $4.50 at 12:55pm EST.