Corey Code

Thanks, Brendan. We delivered strong operational performance across the portfolio with third quarter oil and condensate volumes averaging approximately 212,000 barrels per day. And total production of about 593,000 barrels of equivalent per day, beating the high end of our guidance. The production beat was driven by the Permian and the Montney, where we continue to see strong well results and outperformance from our base volumes.
Our third quarter capital investment was approximately $538 million, almost at the bottom end of our guidance range. We met or beat guidance on every item continuing to build on our track record as an industry-leading operator.
Our shareholder returns framework continue to balance the allocation of free cash flow to share buybacks with debt repayment during the quarter. We returned $240 million to our shareholders through share repurchases of $162 million and base dividends of $78 million. This represents a competitive cash return yield of approximately 9%.
Since the inception of our buyback program in the third quarter of 2021 through the third quarter of 2024, we’ve repurchased more than 40 million shares and distributed approximately $850 million in base dividend payments for total shareholder returns of about $2.7 billion.
We reduced debt by more than $210 million, and our 12-month trailing leverage ratio was 1.2 times. In the fourth quarter, we expect to direct $150 million from our previously disclosed legacy disposition settlement to debt reduction. $50 million of this has already been received and applied to debt reduction in October.
We continue to make progress towards optimizing our capital structure, decreasing our leverage and reducing interest expense. We also remain committed to our mid-cycle leverage target of 1 times or about $4 billion of total debt, assuming mid-cycle prices. The maturity profile of our bonds will allow us to optimize our debt paydown schedule over the next couple of years as we work towards that target.
Our continuous improvement in capital efficiency will allow us to generate additional cash flow and reach our debt target sooner. This bolsters the resiliency of our business and enables us to withstand market volatility. We remain investment-grade rated with a stable outlook from all four credit rating agencies.
I’ll now turn the call over to Greg to discuss our operational highlights.

Gregory Givens

Thanks, Corey. Our teams continue to drive efficiency gains in every part of our business during the quarter. Across the portfolio, we’ve made significant strides in increasing the speed of our drilling and completions activities and reducing cycle times as a result.
This is important for a couple of reasons. First, it shifts revenue earlier in time, which increases returns, but it also results in lower cost because many of the services in our business are built by the number of hours or days on location.
In the Permian, this was our fastest quarter ever for drilling speed, which averaged more than 2,170 feet per day and was roughly 28% faster than the program average last year. On completions, our third quarter average completed feet per day was about 3,875, this was 21% faster than our 2023 program average. These cycle time improvements mean that we continue to drive our well costs lower and during the quarter, our pacesetter well cost in the Permian was less than $600 per foot.
We recently dropped down to five rigs from six to better align the pace of our drilling and completion activities. We plan to run five rigs through the end of the year.
We continue to see our 2024 Permian well performance tracking our type curve, and we were able to essentially hold volumes flat quarter-over-quarter at approximately 124,000 barrels per day. We brought 154 wells online since the fourth quarter of last year, and the performance is right in line with our type curve.
As a reminder, the 2024 type curve is higher than our 2023 well results incorporating all the improved well productivity we achieved last year. We remain fully confident in our ability to meet our type curve in the Permian, which is unchanged from the start of the year.
In the Montney, we drilled an average of 1,820 feet per day, which was about 6% faster than our 2023 program average. We also drilled the longest well ever in the play in more than 18,000 feet. In fact, Ovintiv has drilled 14 of the 20 longest wells on record in the Montney.
On the completion side, our third quarter average of over 5,100 feet completed per day was 24% faster than the program average last year and is on par with our Trimulfrac averages in the Permian. Our Montney oil and condensate production averaged 32,000 barrels per day in the quarter, and we plan to run three rigs in the play through year-end. The Montney has the lowest well cost in the portfolio, and our pacesetter wells cost less than $500 per foot for drilling and completions.
Supported by our oil and condensate productivity the economics on our Montney wells remain outstanding. Even at current strip pricing, we expect to generate a program level IRR of more than 60%. Note that, that over 60% IRR result assumes full exposure to strip AECO and our actual realized prices have been much better because of our price diversification strategy.
Moving to the Anadarko. We continue to benefit from the strong free cash flow generation from the asset in part due to its exceptionally low base decline. Our 2024 program was designed to target the oiliest part of our acreage. The early production from these wells has displayed first year oil cuts of more than 55%, with about 85% of first year revenue coming from oil.
The team has made significant progress on drilling speed now averaging over 2,600 feet per day, less than eight days from spud to rig release or about 28% faster than the 2023 program average. This improvement contributed to our new pacesetter D&C cost in the Anadarko of about $500 per foot and enhance the economics of our eight-well program, which we completed during the quarter. We currently have one active rig in the play, which we will continue to run through the end of the year.
In the Uinta, our strong well performance combined with our continued progress on cost reductions has made to play competitive in our portfolio, with margins similar to what we receive in the Permian. Our largely undeveloped land base of approximately 137,000 net acres with about 1,000 feet of collective pay means we have significant scale and running room in the play. Our third quarter oil and condensate production of 29,000 barrels per day is consistent with our expected go-forward run rate for production from the asset.
As of the end of the third quarter, we have brought online 27 net wells. Our total expected turn in lines for the year. We recently resumed drilling in the play, and we plan to run one rig through the end of the year.
I’ll now turn the call back to Brendan.

Brendan McCracken

Thanks, Greg. Capital efficiency and free cash generation remains the hallmark of our 2024 program as we work to generate superior and durable returns for our shareholders. For the third time this year, we’re increasing our production guidance while maintaining our targeted capital spending.
We expect to deliver higher volumes across all product streams. This includes 210,000 barrels a day of oil and condensate, up 5,000 barrels a day from our expectations at the start of the year and up 10,000 barrels a day from our original outlook in June of last year.
Fourth quarter production is set to average 575,000 to 595,000 BOEs per day. With oil and condensate volumes of about 205,000 barrels a day at the midpoint. We expect fourth quarter capital investment to come in around $550 million at the midpoint, and we remain committed to the midpoint of our full year guide at $2.3 billion. Our 2024 program is repeatable in ’25 and beyond, allowing us to sustain approximately 205,000 barrels a day of oil and condensate production with capital investment of about $2.3 billion per year.
In summary, we continue to deliver outstanding results. We’re focused on maximizing the profitability of our business, generating significant free cash flow and maintaining our strong balance sheet. We take great pride in producing safe, affordable, reliable and secure energy while delivering superior returns to our shareholders.
This concludes our prepared remarks. Operator, we’re now ready to open the line for questions.

Operator

(Operator Instructions) Gabe Daoud, TD Cowen.

Gabe Daoud

I was hoping, Brendan, we can maybe start with your capital budget. Obviously, you’ve highlighted your guidance evolution on the volume front, and you’ve increased that quite a bit moving through 2024. But the 2023 has been pretty static, at least the midpoint of your guidance ranges this year. So given any efficiency gains you’ve seen? Can you maybe talk a little bit about that 2.3 number and how that trends into 2025?

Brendan McCracken

Yeah, for sure, Gabe. Yes, thanks for the question. I think what I’d say is we have definitely stepped the guidance up as we’ve gone through the year, and it’s worth reminding ourselves of the production shape that we had planned for this year.
And when we closed the EnCap acquisition, we had a huge number of wells in progress, and we were significantly slowing the activity level down in the assets to run them for free cash and returns. Now obviously, that integration has gone very well and credit to the team. But we still have that overriding shape in our production profile on where we’re landing the oil run rate at a new stable level of 205,000 barrels a day.
And so we originally guided that landing to come in the first half of this year, but outperformance has pushed that landing now into the fourth quarter, which is a fantastic outcome for free cash. And we’ll continue to optimize and tune the ’25 program and do our official guidance with our year-end results.
As you point out, lots of things going in the right direction, but we’re still in the midst of pricing for next year on services and equipment and planning the detailed program. So I don’t want to get out over our skis. And so for now, the 2.3 and 205 is the right way to think about next year. And remember, that’s 5,000 barrels a day higher than our original guide.

Gabe Daoud

Got it. Okay. That’s helpful. Obviously, stay tuned for some more formal details. And then I guess just as a follow-up, maybe, can we get your updated comments on M&A and A&D markets generally. There’s been obviously a number of media reports related to you guys. So I would love to just get your updated thoughts on all of that.

Brendan McCracken

Yeah, Gabe, for sure. So I mean, really a consistent message from us on this topic. What I’d say is acquisitions have an extremely high hurdle for us. We’ve built up a very high-quality portfolio with a deep inventory in each asset, and we’re extremely disciplined about how we steward our shareholders’ capital.
And as you can see from our results and our focus, we’re really focused on execution and driving free cash flow out of the business. So that’s kind of where I’d leave that.

Operator

Neal Dingmann, Truist Securities.

Neal Dingmann

Brendan, team, another excellent quarter. My first question, Brendan is maybe on your notable continued efficiencies you even saw this last quarter. I’m just wondering specifically in the last few quarters, you all have notably outperformed production forecast using what I certainly would seem to be less expected capital.
I’m just wondering can you give me an idea of maybe some of the bigger drivers around this? Is it certain areas of outperforming or different things that Greg and the operation teams are doing? I’m just wondering what would have been the drivers of this continued upside?

Brendan McCracken

Yeah. Thanks, Neil. And yes, really, it’s been a very intentional exercise. And a lot of the — well, really everything we are doing from an innovation perspective is driven in the service of generating more free cash from the business. And so I’ll talk a bit about some of the operational things like you asked, but I would also say it extends all the way through the business to our bottom line financial performance to drive that incremental free cash.
And — but I would say, look, this is a skill we’ve built up over time. And like you pointed to, the results are speaking for themselves. We did investor tours in both the Permian and Montney this year and really, what we’re doing there is showcasing the sophistication and cutting edge work that our teams are doing.
So a few things I’d point to start of the foundation really has been our data strategy. So a lot of what we do is analytical and engineering and geoscience work and you have to have great data to do that with. And over a number of years here, we’ve built up a unique private data set across North America that I think has given us a real edge to understand true causality.
And then second, we’ve kind of combined that with a real lean in on our culture of innovation where throughout the entire team, everybody is engaged on being curious and trying to find those new opportunities. And one of the things we showcased on those, Montney and Permian tours this year was the AI machine learning automation that we’ve deployed, not only in our D&C operations, but also in our production operations and we’re excited about how those things are leading to best-in-class drilling and completion speed and cost, but also lowering our base decline across the portfolio.
And maybe the final thing I’d leave you with is really working hard to break down maybe a bit of an industry bad habit around being insular within the company walls. And one of the things we often say is the only infinite rate of return available to us is learning from another operator’s risk capital. And we’ve been really outward focused at studying and watching the leading-edge things that our peers are doing and then backward incorporating those back into our business.
And finally, I would just say to your question, it’s really spread across all the assets. We’ve been working hard to create collaboration across each asset in the portfolio and move those ideas rapidly around the company. So lot there, Neil, but it’s an important part of the story.

Neal Dingmann

No, very detail. I appreciate that. And then maybe a second question for Greg. Well maybe on the same line a little bit. Simply described your — I like the slide that you talked about — and it’s notable to optimize Permian program.
I was just curious, when you look at it today versus maybe a year ago, are things like D&C activity or logistics. I’m just wondering where you’re seeing — you noticed a couple of wells that cost are now coming down, but the returns are at record levels. And I’m just wondering, is that largely driven through more e-fleets and completions? Or what are you doing to sort of set these records?

Gregory Givens

Thanks for your question, Neil. And it’s — as Brendan was mentioning, it’s really the combination of a lot of things that the teams are working on to improve our execution efficiency and drive down cycle times, which ultimately results in higher returns and more free cash flow.
It’s a combination of high-performance rigs. It’s the better frac fleets. When it comes to e-fleets, they’re a great part of the fleet and part of the improvement. But it really comes down to whatever equipment you’re using, how well you can execute with it.
We always point to there’s three things that you can do to improve returns that’s placed laterals in the right place, design your jobs to optimize productivity per foot. We also look at increasing lateral whenever we can. And finally, just drilling and completing wells as quickly and efficiently as we possibly can.
And the teams are working on all of those fronts, which is what’s showing up in the strong execution and performance. As Brendan mentioned, that’s allowed us to push back that landing zone in the Permian back to the fourth quarter.
And going forward, if we think about the Permian and specifically, we’ve gotten to a point where we feel like five rigs and one frac crew we’ll get our whole program drilled. And that same match of rigs and frac fleet. We’ll do a lot more fleet now than it would have done a year ago.
And so that’s why we dropped from six rigs down to five. But we feel like that’s kind of the go-forward status quo for us is running five rigs and a frac crew and just being as efficient as we can using all the different technologies that are available to us.

Operator

Neil Mehta, Goldman Sachs.

Neil Mehta

Yeah. Relatively easy questions for me. One is — one of the big debates of this earnings season is how to get the most amount of value out of your natural gas molecule, not only just in the context of Waha, but given basis issues and then the long-term demand story that we see for natural gas.
So just curious, Brendan, how you guys are shaping your business to maximize the capture on natural gas?

Brendan McCracken

Yeah, absolutely, Neil. We’re very pleased to see even though it’s a low number, it’s probably better than industry number on gas realization for us the last couple of quarters. And I think that reflects the strategy you’re pointing to. And really what we’ve been doing is basin diversification.
So we produce a lot of gas in the Western Canada market and in the Permian. And both of those markets have been horrific for gas prices through the summer months. And so what we set up over the last several years is based on egress out of both of those places. So we really tried to minimize our exposure to those two markets and that has been paying off.
And so really, we’re kind of continuing to lean into that strategy. With the acquisition in the Permian, we picked up a bunch of Waha exposure with that — with those assets. And we just recently secured some additional capacity starting late next year to egress gas out of the Permian.
So we’ll be kind of bringing that pie chart that’s in the appendix slides of ours back into kind of a more normal place for us where we’re getting most of our gas outside of AECO and most of our gas outside of Waha.

Neil Mehta

Okay. That makes sense, Brendan. And then you talked a little bit about the Uinta in the deck, but just curious on your perspective of monetization of that asset, how we should think about whether that asset could trade? And any comments you would have on the process there?

Brendan McCracken

Yeah. No, for sure, Neil. And I think a pretty consistent message here from us. We’re always thinking about how we can create value with our portfolio. That’s our job. And — but we focus down to the four assets that we have today, and they’re all great assets.
They’re competitive for capital, delivering consistent returns across the portfolio and with the Uinta, what’s really helped there is getting our margin competitive. And then the team has been working to drive down drilling costs. So yeah, I think that’s where I’d leave it.

Operator

Doug Leggate, Wolfe Research.

Doug Leggate

Brendan, two kind of philosophical questions, I guess. When you look at the extraordinary progress you’ve made with every other quarter, you’re doing a new pacesetter well in one of your basins. It seems that as we look to 2025, there’s a choice coming for Ovintiv, which is take the efficiency gains, and ultimately, I don’t want to put words in your mouth, deliver a higher production number or take the efficiency gains and cut capital.
And I’m not — again, I’m not trying to get in front of the ’25 guide, but it seems that you’re going to have some options given to you by the strength of your operations, which of those two would you rather take higher production or lower capital?

Brendan McCracken

Yes, it’s a great dilemma to have. And what I’d say is we’ll be driven by value and really free cash generation. So the kind of a couple of the parameters that we’ll look at as we make those decisions is going to be how do we feel about the macro. So is the world looking for more barrels and BTUs. And then also how do we look from a low-level perspective because we really feel like the efficiency gains that the low-level program that we’re set up for is helpful.
So if you look at what we did this year, we chose to kind of let production float out and harvested the free cash flow there. We found that to be the more accretive choice. And so we’ll do the same calculus next year. And if the world turns out a little more bearish and it makes sense to pull the capital back and just kind of keep the volumes flat, then that’s the choice we would make in that instance.

Doug Leggate

Okay. We will watch for the guidance. I had two philosophical questions, and you have to forgive me for the second one.
Your — execution-wise, it’s been flawless pretty much since you took the helm. You’ve done your share of deals. You’re a $10 billion company in a $2 trillion sector. It’s kind of tough from our discussions at least with investors, given the commodity backdrop to differentiate? And despite everything you’re doing, your share price is ultimately exposed to the wins of the market. Are we going to buy energy. We’re not going to buy energy or whatever.
So my question is, how do you gain relevance, putting good assets in the hands of good strong management is a way to create value. But I wonder, do you think you have the scale to compete for investor dollars? And if not, what might you do to change that?

Brendan McCracken

Yeah. And again, I would say the driver here is going to be shareholder value. We’re always engaged in a strategic conversation around how we do that and what’s the most effective way to do that. I would say philosophically, I think there is always going to be a space for a strong independent part of the E&P landscape. The innovation and efficiency gains tend to be driven from that group, and we’re certainly at the forefront of doing that.
I think from a scale perspective, look, I think there is an investor relevancy scale, but I think we’re there. We continue to have a lot of engagement and don’t see that as a barrier as we sit here today. But look, we’re always looking for how we create the most shareholder value.

Doug Leggate

Would you — could I maybe put a part B on that and ask you if you would care to comment about whether you’re currently engaged in any particular M&A discussions?

Brendan McCracken

As you know, Doug, we’re not able to ever comment on that. So afraid I can’t answer that one.

Operator

Kalei Akamine, Bank of America.

Kalei Akamine

I guess my first question is on Permian oil. It seems to be holding up a little bit better than expected here. It’s still above your soft guide of 115 to 120. So aesthetically, it looks like you’ve already mitigated the decline from the EnCap transaction. When do you think that you’ll have a better understanding of where that’s going to send out?

Brendan McCracken

Well, yeah, I think a great question. What we pointed to here was landing at around 120,000 barrels a day and really seeing that landing happen in the fourth quarter here. So we pushed that kind of production up through the middle part of this year, which is great because it let us harvest more free cash and more value. And we’re kind of in the midst of that landing right now.

Kalei Akamine

Got it. I appreciate that. My second is a follow-up on the operational improvement. The staff that jumped out this quarter was the drilling times in the Permian. If you were to extrapolate those cycle times for ’25, how many more wells do you think to drill in ’25 over (inaudible).

Brendan McCracken

Yeah. I think if you looked at our TILs for this year, it would put us in the upper end of that TIL range year-over-year.

Operator

Arun Jayaram, JPMorgan.

Arun Jayaram

Brendan, I was wondering if you could discuss your thoughts on the implications of LNG Canada, which could start mid next year? Implications do you think for the Canadian gas market and as well as your position in the Montney?

Brendan McCracken

Yeah. I think, look, this is going to be a long-term great thing for Canadian gas. I think LNG Canada could start up early 2025. We don’t have any special insight there, but that would be kind of the best steering we would have and then ramp up through the year.
So you’re talking about 2.2 Bcf a day of incremental takeaway which is a big share of the Canadian gas market. But what we see when we look at the landscape there is the number of gas leveraged operators have drilled into that upcoming capacity.
So perhaps not unlike what we see in the Permian where egress fills relatively quickly new egress fills relatively quickly. That’s probably going to be the dynamic that we see with LNG Canada. So we would say AECO’s going to tighten, but it probably might have a bit of a transitory feature to it. So that’s kind of been a cautious tone that we’ve taken and anything better than that is upside for us.
And then, of course, what we’re really excited about is some of the projects coming in behind LNG Canada Phase 1 that probably are more towards the end of the decade, but offer even more egress out of the basin, and we’ll continue to support AECO pricing.

Arun Jayaram

Brendan, I wondering if you could characterize what you’re seeing in the A&D market, obviously, a large trade potentially in the Midland Basin. But just thoughts on what you’re seeing and the ability to maybe leverage what looks to be one of the lower cost structure in the Permian Basin and other basins to your advantage?

Brendan McCracken

Yeah, Arun, for sure. I think probably the biggest notable feature has been the increase in valuations that have been paid in the A&D market from when we did our deal. And so for us, acquisitions have a very high hurdle because we’ve already built up a really high-quality portfolio with a deep inventory there. So we’re just very disciplined with how we’re stewarding the shareholder capital, and that’s how you should expect us to behave.

Operator

Geoff Jay, Daniel Energy Partners.

Geoff Jay

I just have one — I noticed you said that 60% of your Permian completions were Trimulfrac, I’m wondering if that’s sort of a good go-forward rate for your 2025 plan? Or if there’s upside to that 60%?

Brendan McCracken

Yeah, I think that’s a decent place to start. We’re still putting final details on next year’s plan. So it could move around a little bit. But clearly, we’ve marched up over the course of the year and with more and more of the program in Trimulfrac. So it’s probably a decent place to start for ’25.
Geoff, you donated your extra question to Doug, I guess.

Operator

Thank you. At this time, we have completed the question-and-answer session, and we’ll turn the call back to Mr. Verhaest.

Jason Verhaest

Thanks, Joanna, and thanks, everyone, for joining us today. Our call is now complete.

Brendan McCracken

Thanks, everybody.

Operator

Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines.