Key Takeaways OVV posted $387M in Q1 free cash flow and resumed buybacks, repurchasing 1.2M shares in April. A $2.3B Montney acquisition is driving cost savings and 20 years of inventory growth for OVV. OVV faces risks from weak stock performance, oil volatility and Permian production declines.Ovintiv Inc. (OVV) is a leading oil and gas exploration company headquartered in Denver, CO. The company has extensive operations in the United States and Canada, specializing in the exploration and production of na ...

A month has gone by since the last earnings report for Ovintiv (OVV) . Shares have added about 10.3% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Ovintiv due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.How Have Estimates Been Moving Since Then?It turns out, fres ...

Group 1 - Ovintiv (OVV) is projected to generate over $1.6 billion in free cash flow in 2025 at current strip prices [1] - The anticipated free cash flow will enable Ovintiv to reduce its net debt to $5 billion by the end of the forecast period [1] - The analysis is provided by Aaron Chow, a top-rated analyst with over 15 years of experience, focusing on value opportunities and distressed plays in the energy sector [1]

Group 1 - Daniel Mellado is an economist with a Master's Degree in Statistics and experience in analyzing agricultural commodity markets and financial investment portfolios [1] - He has managed trading and data analysis teams, focusing on investments in bonds, equities, and ETFs [1] - Mellado has transitioned to freelance work, developing and implementing algorithmic trading strategies [1] Group 2 - The analysis and valuation provided by Mellado will cover sectors including commodities, banking, technology, and pharmaceuticals [1] - Recommendations for buying and selling will be based on financial statements, regulations, and macroeconomic variables [1]

Financial Performance - Ovintiv Inc. reported first-quarter 2025 adjusted earnings per share of $1.42, exceeding the Zacks Consensus Estimate of $1.20, but slightly down from $1.44 in the previous year due to lower realized oil prices and increased total expenses [1] - Total revenues for the quarter were $2.4 billion, a 1.1% increase from the prior year, and surpassed the Zacks Consensus Estimate by 3.3%, driven by higher product and service sales [1] Dividend and Asset Management - The board of directors declared a quarterly dividend of 30 cents per share, payable on June 30 to shareholders of record as of June 31 [2] - The company completed the divestiture of its Uinta assets for approximately $1.9 billion during the quarter [2] Share Buyback and Debt Management - The share buyback program was paused in Q4 2024 to allocate $377 million from the Montney acquisition and Uinta divestiture [3] - By the end of Q1, approximately $368 million was redirected toward debt reduction due to the buyback pause, with plans to resume buybacks in Q2 [4] Production and Pricing - Total first-quarter production was 588,300 barrels of oil equivalent per day (BOE/d), an increase from 573,800 BOE/d year-over-year, but below the estimate of 591,500 BOE/d [5] - Natural gas production rose to 1,764 million cubic feet per day (MMcf/d) from 1,648 MMcf/d in the prior year, but missed the estimate of 1,798.1 MMcf/d [5] - Realized natural gas price was $3.16 per thousand cubic feet, up from $2.56 year-over-year, while realized oil price decreased to $71.79 per barrel from $75.66 [6] Costs and Capital Expenditures - Total expenses increased to $2.5 billion from $1.9 billion year-over-year, exceeding the estimate of $1.9 billion [7] - Capital investments were $617 million compared to $591 million in the previous year, with a non-GAAP free cash flow of $1 billion for the quarter [8] Production Outlook - For Q2 2025, total production is expected to be between 585 MBOE/d and 605 MBOE/d, with capital investment projected between $550 million and $600 million [13] - For the full year 2025, total production is anticipated to average between 595 MBOE/d and 615 MBOE/d, with capital investment expected to be between $2.15 billion and $2.25 billion [14] Regional Production Insights - In the Permian Basin, production averaged 217 MBOE/d, with plans to invest $1.2 billion to $1.3 billion to drill 130-140 net wells in 2025 [10] - Montney production averaged 272 MBOE/d, with an investment plan of approximately $575 million to $625 million for 75-85 net wells [11] - Anadarko production averaged 91 MBOE/d, with an expected investment of $300 million to $325 million for 25-35 net wells [12]

Group 1 - Ovintiv reported quarterly earnings of $1.42 per share, exceeding the Zacks Consensus Estimate of $1.20 per share, but slightly down from $1.44 per share a year ago, representing an earnings surprise of 18.33% [1] - The company achieved revenues of $2.38 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 3.34%, and showing a slight increase from $2.35 billion year-over-year [2] - Ovintiv has consistently surpassed consensus EPS estimates over the last four quarters, achieving this four times [2] Group 2 - The stock has underperformed the market, losing about 15% since the beginning of the year compared to the S&P 500's decline of 3.9% [3] - The current consensus EPS estimate for the upcoming quarter is $1.23 on revenues of $2.25 billion, and for the current fiscal year, it is $5.33 on revenues of $9.21 billion [7] - The Zacks Industry Rank for Oil and Gas - Exploration and Production - Canadian is in the top 37% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8]

Commodity Price Risk - The company reported a commodity price risk exposure, with a potential unrealized loss of $44 million for a 10% increase in oil prices and a loss of $53 million for a 10% increase in natural gas prices[255]. - The company anticipates continued volatility in oil, NGL, and natural gas prices, impacting future revenues and cash flows[254]. - The company has implemented risk management programs to mitigate exposure to commodity prices, interest rates, and foreign exchange fluctuations[22]. Interest Rate Sensitivity - As of March 31, 2025, the company had $85 million in floating rate revolving credit and term loan borrowings, with a sensitivity of $1 million for each 1% change in interest rates[263]. Foreign Currency Exchange - The company entered into $51 million notional U.S. dollar denominated currency swaps at an average exchange rate of C$1.3875 to US$, maturing monthly throughout Q2 2025[259]. - A 10% increase in foreign currency exchange rates could result in a gain of $37 million, while a 10% decrease could lead to a loss of $45 million[261]. Cost Management - The company experienced a decrease in capital investment by $8 million and a decrease in transportation and processing expenses by $15 million compared to the same period in 2024[258]. - The company is focused on managing cost inflation and expected cost structures, including operating, transportation, processing, and labor expenses[22]. Environmental, Social, and Governance Goals - The company is committed to achieving its environmental, social, and governance goals, with ongoing assessments of its strategies and objectives[22]. Business Risks - The company’s forward-looking statements are subject to significant business, economic, and regulatory risks that could cause actual results to differ materially from projections[23].

Financial Performance - Total revenues for Q1 2025 were $2,377 million, a slight increase of 1.1% compared to $2,352 million in Q1 2024[2] - Net loss for Q1 2025 was $159 million, compared to net earnings of $338 million in Q1 2024, representing a significant decline[2] - Operating expenses increased to $2,466 million in Q1 2025, up from $1,858 million in Q1 2024, primarily due to impairments of $730 million[2] - Basic and diluted net earnings (loss) per share for Q1 2025 were both $(0.61), compared to $1.25 in Q1 2024[2] - Cash from operating activities for Q1 2025 was $873 million, an increase from $659 million in Q1 2024[7] - Capital expenditures in Q1 2025 were $617 million, compared to $591 million in Q1 2024[7] - The company reported acquisitions totaling $2,310 million in Q1 2025, significantly higher than $190 million in Q1 2024[7] - Shareholders' equity decreased to $10,080 million as of March 31, 2025, down from $10,331 million at the end of 2024[6] - The company had a weighted average of 260.4 million shares outstanding in Q1 2025, compared to 269.7 million in Q1 2024[9] Production and Operations - In Q1 2025, total production volumes reached 588.3 MBOE/d, a slight increase from 585.0 MBOE/d in 2024[13] - Oil production averaged 150.5 Mbbls/d in Q1 2025, compared to 168.3 Mbbls/d for the entire year of 2024[13] - The company reported a total of 294.4 Mbbls/d for oil and NGLs production in Q1 2025, compared to 299.3 Mbbls/d in Q1 2024, a decrease of 1.6%[25] - Total oil production in Q1 2025 reached 150.5 Mbbls/d, a decrease of 11.7% compared to Q1 2024's 170.4 Mbbls/d[23] - Total production (MBOE/d) in Q1 2025 was 588.3 MBOE/d, slightly up from 573.8 MBOE/d in Q1 2024[27] - Natural gas production in Q1 2025 was 1,764 MMcf/d, an increase of 7.0% from Q1 2024's 1,648 MMcf/d[27] - The Montney region in Canada produced 1,251 MMcf/d of natural gas in Q1 2025, up from 1,093 MMcf/d in Q1 2024, representing a 14.5% increase[27] - The company plans to focus on expanding its operations in the Permian and Montney regions to enhance production efficiency and growth[23] Revenue and Pricing - Revenues from USA operations for Q1 2025 were $1,310 million, with oil revenues contributing $975 million[15] - Total upstream product revenue for USA operations in Q1 2025 was $1,310 million, a decrease of 10.6% from Q1 2024's $1,466 million[47] - Total upstream product revenue for Canadian operations in Q1 2025 was $652 million, down from $470 million in Q1 2024, representing a 38.5% increase[47] - The average price received for oil in USA operations was $46.02 per BOE in Q1 2025, compared to $46.85 per BOE in Q1 2024[18] - Total operations price per BOE for Q1 2025 is $37.03, compared to $36.97 in Q1 2024, indicating a slight increase of 0.2%[20] - Total operations natural gas price for Q1 2025 is $2.98 per Mcf, up from $2.21 in Q1 2024, representing a 34.9% increase[20] - USA Operations oil price for Q1 2025 is $71.79 per barrel, a decrease from $76.17 in Q1 2024, reflecting a 5.8% decline[20] - Canadian Operations oil price for Q1 2025 is $71.46 per barrel, consistent with $72.34 in Q1 2024, reflecting a marginal decrease of 1.2%[20] Debt and Equity - The company's debt to EBITDA ratio increased to 1.6x in Q1 2025 from 1.3x in 2024, indicating a rise in leverage[11] - The company reported a debt to adjusted capitalization of 24% in Q1 2025, up from 23% in 2024[11] - The company's long-term debt, including the current portion, stood at $5,538 million, resulting in a debt to capitalization ratio of 35%[38] - The company reported a net debt of $5,530 million after accounting for cash and cash equivalents of $8 million[42] Cash Flow and Capital Expenditures - Non-GAAP cash flow for YTD 2025 was reported at $1,004 million, resulting in a non-GAAP free cash flow of $387 million after capital expenditures of $617 million[35] - Total capital expenditures for Q1 2025 reached $617 million, with a year-to-date total of $2,303 million, reflecting a slight increase compared to previous quarters[29] - Future capital expenditures are projected to focus on key operational areas, including the Permian and Montney plays, to enhance production capabilities[29] Operational Efficiency - Operating margin and netback metrics are utilized by management to assess the profitability of operations, although specific figures were not disclosed[42] - Total operating netback for USA operations in Q1 2025 was $33.22 per BOE, an increase of 5.4% from $31.48 per BOE in Q4 2024[50] - Total operating netback for Canadian operations in Q1 2025 was $13.58 per BOE, significantly up from $9.00 per BOE in Q1 2024, marking a 50.9% increase[50] - The company drilled a total of 65 net wells in Q1 2025, with 44 wells in USA operations and 21 in Canadian operations, indicating a robust drilling activity[31]

Core Viewpoint - Ovintiv Inc. reported strong first quarter 2025 results, emphasizing operational excellence and free cash flow generation, while maintaining capital investment plans amidst market volatility [3][4][5]. Financial Performance - Generated cash from operating activities of $873 million, with Non-GAAP Cash Flow of $1,004 million and Non-GAAP Free Cash Flow of $387 million after capital expenditures of $617 million [7][8]. - The company recorded a net loss of $159 million, or $(0.61) per diluted share, which included a non-cash ceiling test impairment of $557 million after tax [8][26]. - Average total production was approximately 588 MBOE/d, exceeding guidance, with oil and condensate production at 206 Mbbls/d [7][8]. Production and Capital Investment - Full year production volumes are expected to average between 595 to 615 MBOE/d, with capital investment projected at $2.15 billion to $2.25 billion [5][6]. - Specific production averages for the first quarter included 217 MBOE/d from Permian, 272 MBOE/d from Montney, and 91 MBOE/d from Anadarko [14][15][16]. Shareholder Returns - The company plans to return at least 50% of post-base dividend Non-GAAP Free Cash Flow to shareholders through buybacks and/or variable dividends [9]. - Share buybacks were temporarily paused in Q4 2024 but resumed in Q2 2025, with approximately $146 million expected to be repurchased [10]. Balance Sheet and Liquidity - As of March 31, 2025, Ovintiv had approximately $3.5 billion in total liquidity, including available credit facilities and cash [11]. - The company reported a Debt to EBITDA ratio of 1.6 times and a Non-GAAP Debt to Adjusted EBITDA ratio of 1.2 times [11][30]. Sustainability Initiatives - The company achieved a greater than 45% reduction in Scope 1 & 2 greenhouse gas emissions intensity since 2019, continuing progress towards a 50% reduction goal by 2030 [25]. - Released its 2024 Sustainability Report, highlighting efforts in environmental responsibility and corporate governance [17][18].

Company Overview - Ovintiv (OVV) is expected to report a year-over-year decline in earnings due to lower revenues for the quarter ended March 2025, with a consensus EPS estimate of $1 per share, reflecting a -30.6% change [1][3] - Revenues are anticipated to be $2.34 billion, down 0.7% from the same quarter last year [3] Earnings Estimates and Revisions - The consensus EPS estimate has been revised 10.06% lower in the last 30 days, indicating a bearish sentiment among analysts regarding the company's earnings prospects [4][10] - The Most Accurate Estimate for Ovintiv is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -2.51% [10][11] Earnings Surprise History - Ovintiv has a history of beating consensus EPS estimates, having surpassed expectations in the last four quarters [12][13] - In the last reported quarter, Ovintiv was expected to post earnings of $1.11 per share but delivered $1.35, resulting in a surprise of +21.62% [12] Industry Comparison - In the Zacks Oil and Gas - Exploration and Production - Canadian industry, Canadian Natural Resources (CNQ) is expected to post earnings of $0.73 per share for the quarter ended March 2025, indicating a year-over-year change of +43.1% [17] - CNQ's revenue is projected to be $6.8 billion, up 11.2% from the previous year [17] - The consensus EPS estimate for CNQ has been revised 12.9% lower over the last 30 days, resulting in an Earnings ESP of 0.00% [18]