Key Takeaways OVV stock rose 5.7% in three months, beating sector and sub-industry performance.Ovintiv posted $392M in Q2 free cash flow and raised the 2025 output outlook.A debt load of $5.3B and rising transport costs weigh on future flexibility.Ovintiv Inc. (OVV) has delivered a robust 5.7% gain in its share price over the past three months, outperforming both its sector’s gain of 4.4% and its sub-industry’s loss of 3%. This outperformance signals strong relative strength and highlights the company’s fav ...

Ovintiv Inc. (NYSE: OVV ) has been largely trading sideways for the last 3 years as a relatively small company in the oil and gas exploration and production industry. Ranking 22 nd in terms ofI am currently a Level 1 CFA and continuing the pursuit of the CFA designation. I have worked within wealth management for over 3 years, with a Bachelors in Finance. However, my investing journey goes back to about 17 years old when I was infatuated with the idea of dividend investing. Since then, I have expanded my in ...

Group 1 - Ovintiv (NYSE: OVV) reported strong production results, allowing the company to increase its full-year production guidance by 1% [2] - The company's production expectations for the second half of 2025 remain unchanged, while it has reduced its capital expenditure (capex) budget by $50 million [2]

Core Insights - Ovintiv Inc. reported second-quarter 2025 adjusted earnings per share of $1.02, missing the Zacks Consensus Estimate of $1.04 and down from $1.24 year-over-year due to weaker oil price realizations and increased expenses [1][9] - Total revenues reached $2.3 billion, a 1.3% increase from the previous year, exceeding estimates by 18.8%, driven by higher sales of purchased products and strong hedging gains [2][9] - The company declared a quarterly dividend of 30 cents per share, payable on September 30, 2025, to shareholders of record as of September 15, 2025 [2] Production and Prices - Total production for the second quarter was 615,300 barrels of oil equivalent per day (BOE/d), surpassing the prior year's 593,800 BOE/d and exceeding predictions [4][9] - Natural gas production increased to 1,851 million cubic feet per day (MMcf/d) from 1,740 MMcf/d year-over-year, also beating estimates [4] - Realized natural gas prices rose to $2.38 per thousand cubic feet from $1.86, while realized oil prices fell to $65.23 per barrel from $76.58 [6] Costs, Capital Expenditures, and Balance Sheet - Total expenses increased to $1.8 billion from $1.7 billion year-over-year, but were lower than projections of $2.3 billion [7] - Capital investments were $521 million, down from $622 million in the previous year, with a non-GAAP free cash flow of $913 million generated in the quarter [8] - As of June 30, 2025, the company had cash and cash equivalents of $20 million and long-term debt of $4.4 billion, resulting in a debt-to-capitalization ratio of 29.7% [8] Asset Performance - Average production from the Permian Basin was approximately 215 MBOE/d, with liquids comprising 80% of the total, and 23 net wells were brought online [10] - From the Montney play, output averaged 300 MBOE/d, with liquids contributing about 26%, and 39 net wells were turned in [11] - In the Anadarko Basin, production was 100 MBOE/d, with a liquid mix of 59%, and 11 net wells were brought into production [12] Guidance - Ovintiv plans to allocate at least 50% of its non-GAAP free cash flow to shareholders through stock buybacks and/or variable dividends, expecting a total shareholder return of $235 million in Q3 2025 [13] - The company anticipates total production for Q3 2025 to be between 610 MBOE/d and 630 MBOE/d, with capital investment projected between $525 million and $575 million [14] - For the full year 2025, total production is expected to average between 600 MBOE/d and 620 MBOE/d, with capital investment estimated between $2.1 billion and $2.2 billion [15]

Financial Data and Key Metrics Changes - The company generated cash flow per share of $3.51 and free cash flow of $392 million, both exceeding consensus estimates [14] - Full year free cash flow guidance was increased by 10% to approximately $1.65 billion, reflecting strong operational performance [16][17] - The company returned approximately $223 million to shareholders through share buybacks and dividends [14] Business Line Data and Key Metrics Changes - Production during the quarter exceeded guidance across all products, driven by the integration of Montney assets and operational efficiencies [15] - The company increased its oil and condensate guidance by 2,000 barrels per day to an average of 207,000 barrels per day for the year [23] - NGL volume expectations were raised by about 5,000 barrels per day due to ethane recovery in the Anadarko [23] Market Data and Key Metrics Changes - The company is now less than 20% exposed to AECO prices for the remainder of 2025, with increased exposure to JKM pricing and Chicago markets [20] - The company has been realizing 72% of NYMEX for Canadian gas, compared to AECO's 40% [48] Company Strategy and Development Direction - The company focuses on capital discipline, operational efficiency, and innovative technology to enhance returns and free cash flow generation [8][11] - The strategy includes maintaining a high-quality inventory and maximizing resource recovery through cube development [25][28] - The company aims to achieve a net debt target of $4 billion while balancing shareholder returns and debt reduction [19][93] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate superior returns and free cash flow through the commodity cycle, with a breakeven price under $40 WTI [9] - The integration of Montney assets has been successful, leading to significant cost savings and operational efficiencies [31] - Management highlighted the importance of maintaining a disciplined approach to capital allocation and the potential for further efficiency gains [11][17] Other Important Information - The company has repurchased a total of $2.2 billion worth of shares since the inception of its buyback program [17] - The company is exploring opportunities to diversify its gas exposure and maximize profitability through new marketing agreements [20] Q&A Session Summary Question: Thoughts on portfolio and potential for consolidation - Management indicated that the current portfolio is strong and any future acquisitions would need to exceed existing asset value [38] Question: Long-term cash tax rate outlook - Management expects a cash tax rate of about 3% of pre-tax book income for the U.S. over the next three to five years [41] Question: Return of capital strategy - Management emphasized the importance of balancing debt reduction and share buybacks, viewing both as valuable for shareholder returns [46][78] Question: Marketing strategy for Montney gas - Management highlighted successful diversification strategies that have improved netbacks significantly [48] Question: Capital efficiency in Montney - Management confirmed that capital savings from the Montney acquisition have been integrated into guidance, with ongoing efforts to improve efficiency [60] Question: Service cost deflation and its impact - Management noted that service cost deflation is matching expectations and could provide a tailwind for 2026 [102]

Financial Data and Key Metrics Changes - The company reported cash flow per share of $3.51 and free cash flow of $392 million, both exceeding consensus estimates [13] - Full year free cash flow guidance was increased by 10% to approximately $1.65 billion, reflecting strong operational performance [15][16] - The company achieved a 25% growth in cash flow per share from 2021 to 2024, despite a 10% decline in realized prices during the same period [12] Business Line Data and Key Metrics Changes - Production during the quarter exceeded guidance across all products, driven by the integration of Montney assets and operational efficiencies [14] - The company increased its oil and condensate guidance by 2,000 barrels per day to an average of 207,000 barrels per day for the year [22] - NGL volume expectations were raised by about 5,000 barrels per day due to ethane recovery in the Anadarko Basin [22] Market Data and Key Metrics Changes - The company is now less than 20% exposed to AECO prices for the remainder of 2025, with increased exposure to JKM pricing and Chicago markets [19] - The company expects natural gas volumes in the second half of the year to be higher than the first half, alleviated by LNG Canada coming online [23] Company Strategy and Development Direction - The company focuses on capital discipline, inventory depth, and operational efficiency to deliver superior returns [7] - The integration of Montney assets has been successful, achieving significant cost savings and operational efficiencies [30][31] - The company aims to maintain a balance between debt reduction and shareholder returns through buybacks and dividends [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to generate durable free cash flow and superior returns despite commodity price fluctuations [12][15] - The company is optimistic about the potential for gas sales to data centers, enhancing margins and profitability [20] - Management highlighted the importance of innovation and technology adoption in maintaining competitive advantages [9][95] Other Important Information - The company has repurchased a total of $2.2 billion worth of shares since the inception of its buyback program [16] - The company is targeting a net debt of $4 billion, with plans to maintain an investment-grade credit rating [18][96] Q&A Session Summary Question: Thoughts on OVV as a natural consolidator - Management acknowledged the strong performance and indicated that any future M&A would need to exceed the value of their current assets [39] Question: Long-term cash tax rate outlook - Management indicated a reduction in cash tax guidance due to changes in depreciation, projecting a long-term rate of about 3% of pre-tax book income [42] Question: Return of capital strategy - Management emphasized the importance of balancing debt reduction and buybacks, highlighting the value proposition of their cash flow per share growth [48][49] Question: Marketing strategy for Montney gas - Management noted successful diversification strategies, achieving 72% of NYMEX pricing for Canadian gas, significantly higher than AECO prices [50] Question: Capital efficiency in Montney - Management confirmed that capital savings from the Montney acquisition were already integrated into guidance, with ongoing efforts to improve efficiency [60] Question: Future of service costs and capital allocation - Management expressed optimism about potential service cost deflation in 2026, while maintaining a focus on capital efficiency across the portfolio [107]

2Q25 Results Conference Call 1 Forward Looking Statements This presentation contains forward-looking statements or information (collectively, "forward-looking statements") within the meaning of applicable securities legislation, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, except for statements of historical fact, that relate to the anticipated future activities, plans, strategies, objectives or expectati ...

Industry Overview - The Zacks Oil and Gas - Exploration and Production - Canadian industry is facing challenges due to weaker commodity prices and a stronger Canadian dollar, which are eroding margins and cash flows [1][3] - Dividend growth and share buybacks are becoming unsustainable for many companies under current strip prices, leading to tighter capital spending [1][4] - The long-term impact of electric vehicle (EV) adoption and climate policies is contributing to a cautious outlook for the industry [1][6] LNG Breakthrough - Canada's first shipment of LNG to Asia marks a significant milestone, opening access to premium markets and reducing the natural gas discount [1][5] - The LNG Canada project, valued at $40 billion, is expected to ramp up exports to 14 million tonnes per annum (mtpa) and potentially double output in Phase 2, which will strengthen Canadian natural gas prices [5] Key Companies - **ARC Resources Ltd. (AETUF)**: The largest pure-play Montney operator in Canada, focusing on cost leadership and LNG market opportunities. It aims to triple free funds flow per share by 2028 and has a Zacks Consensus Estimate indicating 11% year-over-year earnings growth for 2025 [22][23] - **Ovintiv Inc. (OVV)**: A leading independent E&P company with a diverse portfolio. It has maintained a disciplined cost reduction approach and benefits from a proactive hedging program, with a trailing four-quarter earnings surprise of approximately 27.8% [27][28] - **Obsidian Energy Ltd. (OBE)**: Focused on oil-weighted assets, aiming to increase production from 34,000 boe/d to 50,000 boe/d by 2026. The company has a Zacks Consensus Estimate indicating 199.5% year-over-year earnings growth for 2025 [31][32] - **InPlay Oil Corp. (IPOOF)**: A junior upstream company with a focus on light oil development, expected to exceed production of 18,750 boe/d in the second half of the year. It prioritizes sustainability and shareholder returns [18][19] Market Performance - The Zacks Oil and Gas - Canadian E&P industry has underperformed compared to the S&P 500 and the broader Zacks Oil – Energy sector, declining 9.4% over the past year [11] - The industry's Zacks Industry Rank is 165, placing it in the bottom 33% of 245 Zacks industries, indicating challenging near-term prospects [7][8] Valuation Metrics - The industry is currently trading at a trailing 12-month EV/EBITDA ratio of 4.76, significantly lower than the S&P 500's 17.98 and slightly below the sector's 4.84 [15]

Core Viewpoint - Ovintiv reported quarterly earnings of $1.02 per share, missing the Zacks Consensus Estimate of $1.04 per share, and down from $1.24 per share a year ago, indicating an earnings surprise of -1.92% [1] - The company posted revenues of $2.32 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 18.75% and slightly up from $2.29 billion year-over-year [2] Group 1: Earnings Performance - Ovintiv has surpassed consensus EPS estimates three times over the last four quarters [2] - The earnings report reflects a mixed trend in estimate revisions leading to a Zacks Rank 3 (Hold) for the stock, suggesting it will perform in line with the market in the near future [6] Group 2: Revenue Insights - The current consensus EPS estimate for the upcoming quarter is $1.32 on revenues of $2.08 billion, and for the current fiscal year, it is $5.31 on revenues of $8.63 billion [7] Group 3: Market Context - Ovintiv shares have underperformed the market, losing about 2.5% since the beginning of the year compared to the S&P 500's gain of 8.1% [3] - The Oil and Gas - Exploration and Production - Canadian industry is currently in the bottom 32% of Zacks industries, indicating potential challenges ahead [8]

[PART I](index=6&type=section&id=PART%20I) [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) Ovintiv's unaudited condensed consolidated financial statements for Q2 2025 include statements of earnings, comprehensive income, balance sheet, changes in shareholders' equity, and cash flows, with detailed notes on accounting policies and specific financial items [Condensed Consolidated Statement of Earnings](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Earnings) Ovintiv reported net earnings of **$148 million** for the six months ended June 30, 2025, a significant decrease from **$678 million** in 2024, primarily due to a **$730 million** impairment charge, with diluted EPS falling to **$0.57** Condensed Consolidated Statement of Earnings Highlights (Six Months Ended June 30) | Metric | 2025 (US$ millions) | 2024 (US$ millions) | Change (%) | | :--- | :--- | :--- | :--- | | **Total Revenues** | 4,695 | 4,640 | +1.2% | | **Operating Income (Loss)** | 422 | 1,050 | -59.8% | | **Net Earnings (Loss)** | 148 | 678 | -78.2% | | **Diluted EPS** | $0.57 | $2.51 | -77.3% | - A significant non-cash impairment charge of **$730 million** was recorded in the first six months of 2025, which was the primary driver for the substantial decrease in net earnings compared to the prior year[27](index=27&type=chunk) [Condensed Consolidated Balance Sheet](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) As of June 30, 2025, Ovintiv's total assets increased to **$19.73 billion** from **$19.25 billion** at year-end 2024, with total liabilities growing to **$9.36 billion** from **$8.92 billion**, influenced by the Montney acquisition Condensed Consolidated Balance Sheet Summary | Metric | June 30, 2025 (US$ millions) | Dec 31, 2024 (US$ millions) | | :--- | :--- | :--- | | **Total Current Assets** | 1,244 | 1,369 | | **Property, Plant and Equipment, net** | 14,383 | 14,364 | | **Total Assets** | 19,734 | 19,254 | | **Total Current Liabilities** | 2,874 | 2,681 | | **Long-Term Debt** | 4,393 | 4,853 | | **Total Liabilities** | 9,357 | 8,923 | | **Total Shareholders' Equity** | 10,377 | 10,331 | [Condensed Consolidated Statement of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For the six months ended June 30, 2025, cash from operating activities increased to **$1.89 billion**, while investing activities used **$1.45 billion** primarily for acquisitions and capital expenditures, partially offset by divestiture proceeds Cash Flow Summary (Six Months Ended June 30) | Activity | 2025 (US$ millions) | 2024 (US$ millions) | | :--- | :--- | :--- | | **Cash From Operating Activities** | 1,886 | 1,679 | | **Cash From (Used in) Investing Activities** | (1,453) | (1,402) | | **Cash From (Used in) Financing Activities** | (442) | (274) | | **Increase (Decrease) in Cash** | (22) | 5 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail financial statement explanations, including the reclassification of the Market Optimization segment, a **$730 million** non-cash impairment, the **$2.3 billion** Montney acquisition, **$1.9 billion** Uinta divestiture, and share capital updates - The Market Optimization segment was reclassified into the USA and Canadian operating segments, which they support, with prior periods reclassified for comparative purposes[42](index=42&type=chunk) - On January 31, 2025, the company completed the acquisition of Montney formation assets for approximately **$2.308 billion** in cash, accounted for as an asset acquisition[62](index=62&type=chunk) - The company sold its Uinta Basin assets for proceeds of approximately **$1.882 billion** during the first six months of 2025[64](index=64&type=chunk) - For the six months ended June 30, 2025, the company recognized a before-tax non-cash ceiling test impairment in the Canadian Operations of **$730 million**, primarily due to lower 12-month average trailing prices compared to market prices at the time of the Montney Acquisition[66](index=66&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=35&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The MD&A provides management's perspective on financial results and condition, detailing strategy, performance, and outlook for 2025, including the Montney acquisition and Uinta divestiture, and covers liquidity and capital resources [Executive Overview](index=35&type=section&id=Executive%20Overview) Ovintiv focuses on generating cash flow and shareholder returns through its multi-basin portfolio, with key H1 2025 developments including the **$2.3 billion** Montney acquisition and **$1.9 billion** Uinta divestiture, reporting **$148 million** in net earnings - The company's strategy is to be a leading North American energy producer, focusing on quality returns, cash flow generation, and durable cash returns to shareholders through its multi-basin portfolio[131](index=131&type=chunk) - On January 31, 2025, the company closed its acquisition of Montney assets for approximately **$2.308 billion**[143](index=143&type=chunk) - On January 22, 2025, the company closed its divestiture of Uinta assets for approximately **$1.9 billion**[143](index=143&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) Total revenues for H1 2025 were **$4.7 billion**, slightly up from **$4.6 billion** in 2024, with upstream product revenues impacted by lower oil prices and Uinta divestiture, offset by higher natural gas prices and Montney acquisition volumes Production Volumes (Six Months Ended June 30) | Product | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Oil (Mbbls/d)** | 146.3 | 168.8 | -13.3% | | **NGLs (Mbbls/d)** | 154.3 | 132.6 | +16.4% | | **Natural Gas (MMcf/d)** | 1,807 | 1,693 | +6.7% | | **Total (MBOE/d)** | 601.9 | 583.8 | +3.1% | Average Realized Prices (Six Months Ended June 30, excluding risk management) | Product | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Oil ($/bbl)** | $68.24 | $77.17 | -11.6% | | **NGLs ($/bbl)** | $40.00 (Blended) | $42.10 (Blended) | -5.0% | | **Natural Gas ($/Mcf)** | $2.60 | $1.74 | +49.4% | - Oil revenues for H1 2025 decreased by **$568 million** YoY, driven by a **12%** drop in realized prices and lower production volumes from the Uinta asset sale[179](index=179&type=chunk)[180](index=180&type=chunk) - Natural gas revenues for H1 2025 increased by **$313 million** YoY, driven by a **49%** increase in realized prices and higher production volumes from the Montney acquisition[182](index=182&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, Ovintiv had total liquidity of approximately **$3.2 billion**, with a Debt to Adjusted Capitalization ratio of **23%**, and generated **$1.9 billion** in cash from operations, funding acquisitions and debt repayment Liquidity Position (as of June 30, 2025) | Component | Amount (US$ millions) | | :--- | :--- | | Cash and Cash Equivalents | 20 | | Available Credit Facilities | 3,350 | | Available Uncommitted Demand Lines | 132 | | Issuance of U.S. Commercial Paper | (331) | | **Total Liquidity** | **3,171** | - The company is in compliance with all financial covenants, with a Debt to Adjusted Capitalization of **23%** against a **60%** limit[247](index=247&type=chunk) - In May 2025, the company redeemed its **$600 million**, **5.65%** senior notes due May 2025[263](index=263&type=chunk) - The share buyback program, which was paused in Q4 2024, resumed in Q2 2025, with **4.1 million** shares repurchased for approximately **$147 million**[269](index=269&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=61&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Ovintiv is exposed to market risks from commodity prices, foreign currency exchange rates, and interest rates, with sensitivity analyses indicating a **10%** change in oil prices impacts pre-tax net earnings by approximately **$48-51 million** Market Risk Sensitivity Analysis (as of June 30, 2025) | Risk Factor | Change | Impact on Pre-Tax Net Earnings (US$ millions) | | :--- | :--- | :--- | | **Oil Price** | +10% | $(51) | | | -10% | $48 | | **Natural Gas Price** | +10% | $(13) | | | -10% | $9 | | **Foreign Exchange Rate (CAD/USD)** | +10% | $22 | | | -10% | $(27) | - The company had **$481 million** in floating rate debt as of June 30, 2025, resulting in a sensitivity of **$5 million** in before-tax earnings for each **1%** change in interest rates[293](index=293&type=chunk) [Controls and Procedures](index=63&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls over financial reporting during Q2 2025 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period[295](index=295&type=chunk) - No changes in internal control over financial reporting occurred during the second quarter of 2025 that have materially affected, or are reasonably likely to affect, these controls[296](index=296&type=chunk) [PART II](index=64&type=section&id=PART%20II) [Legal Proceedings](index=64&type=section&id=Item%201.%20Legal%20Proceedings) The company refers to its 2024 Annual Report on Form 10-K and Note 21 for legal proceedings information, not expecting outstanding claims to materially affect its financial position - For information on legal proceedings, the report refers to Item 3 of the 2024 Annual Report on Form 10-K and Note 21 of the current 10-Q[299](index=299&type=chunk) [Risk Factors](index=64&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors have been reported since the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported since the last Annual Report on Form 10-K[300](index=300&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Under its NCIB program, Ovintiv repurchased approximately **4.1 million** shares for **$146 million** during Q2 2025, with approximately **21.9 million** shares remaining for purchase Share Repurchases (Three Months Ended June 30, 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 1,234,753 | $32.40 | | May 2025 | 1,788,932 | $36.89 | | June 2025 | 1,041,415 | $38.41 | | **Total** | **4,065,100** | **$35.92** | - The current NCIB program allows for the purchase of up to approximately **25.9 million** shares and is active from October 3, 2024, to October 2, 2025[301](index=301&type=chunk) [Other Part II Items](index=65&type=section&id=Other%20Part%20II%20Items) This section covers remaining Part II items, reporting no defaults upon senior securities, mine safety disclosures as not applicable, and no other information to report, with a list of exhibits provided - Item 3, Defaults Upon Senior Securities: None[306](index=306&type=chunk) - Item 4, Mine Safety Disclosures: Not applicable[307](index=307&type=chunk) - Item 5, Other Information: None[308](index=308&type=chunk)