Ovintiv has a bit of a reputation for blasting a lot of natural gas into the Canadian market at the drop of a hat. It’s probably an unfair reputation, but it is the direct result of having some of the best Montney acreage around, and routinely drilling the most prolific natural gas wells in Canada. Our monthly top well reports almost always feature 10-15 of the top 15 natural gas wells from Ovintiv, proving the high quality of its acreage in northeast BC and elsewhere. In September for example, we highlighted these 3 wells that had cumulatively produced over 25 BCF of gas in less than a year.
So it might surprise readers to find out that the thing Ovintiv has done that it hasn’t done in over a decade is actually related to a lack of activity. Namely a lack of new well licences. In fact, Ovintiv has gone over 5 months since it licensed its last well in Canada on June 12th. Going back to 2010, we didn’t find a single instance of Ovintiv having such a long period between licences. It’s possible that this is simply the fact that licences tend to come in bunches these days as 10/15/20 well pads become the norm in the Montney. So it’s entirely possible, and probably quite likely, that we wake up one morning and see dozens of new licences all at once. But until then, we wait to see if this lack of new licensing activity means anything or not.
A look at spud activity shows that Ovintiv continues drilling wells at a relatively consistent rate of between 7-12 spuds per month, with 5 spuds already in November. On the Q3 conference call, Ovintiv continued to suggest a budget of USD $540-$580 MM for the Montney in 2023, with the company targeting the oil and condensate rich parts of its Montney acreage. That level of investment in the Montney would represent about 20% of corporate capex levels.
Figure 1 – Ovintiv spuds by Month
On a corporate level, Ovintiv continues to spend at healthy pace, with quarterly capex up for the last 3 quarters. In Q3, capex company wide was the highest in the last 5 years as shown in the chart in Figure 2 below.
Figure 2 – Operating cash flow vs. capex (adjusted to show in CAD$)
It is also worth highlighting that Ovintiv was recently able to dispose of some small non-core assets southeast of Strathmore, as an AER licence transfer was approved on November 10, 2023. See BOE Intel’s AER licence transfer map here. The company will transfer 463 wells, 19 pipelines, and 12 facilities to Rising Tide Energy. There won’t be much production associated with this transfer, but will likely reduce some abandonment liabilities and further concentrate Ovintiv’s assets in Canada towards the Montney. Ovintiv has not spud a well in this area in many years, as it focuses all of its Canadian capital into the Montney. Ovintiv also does not appear to own the majority of the mineral rights here as most of the affected locations shown on the map appear to be most likely freehold sections.
Figure 3 – Affected locations from recently approved AER licence transfer