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Ovintiv (OVV) Up 7.3% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Ovintiv (OVV). Shares have added about 7.3% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Ovintiv Q4 Earnings Beat Estimates on Lower Costs

Ovintiv Inc. reported fourth-quarter 2023 adjusted earnings per share (EPS) of $2.35, which beat the Zacks Consensus Estimate of $1.94. The bottom line also improved from the year-ago level of 91 cents. The upside can be attributed to lower expenses year over year.

Total revenues of $3.2 billion decreased 1.4% from the year-ago quarter’s figure. This was due to a year-over-year decline in revenues from products and services. The top line, however, beat the Zacks Consensus Estimate by 14.3%. This was due to higher-than-expected production. Total oil production came in at 194,100 barrels of oil equivalent per day (BOE/d), which outpaced the Zacks Consensus Estimate of 174,000 BOE/d.

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OVV’s board of directors declared a quarterly dividend of 30 cents per share for its common shareholders of record as of Mar 15, 2024. The dividend will be paid out on Mar 28.

During this quarter, the company returned approximately $135 million to shareholders through share buybacks of $53 million and a base dividend of $82 million.

OVV’s board of directors declared a quarterly dividend of 30 cents per share for common shareholders of record as of Jun 15, 2023, which will be paid out on Jun 30. This represents a 20% increase from the previous level.

 

Production & Prices

Total fourth-quarter production was 605,200 BOE/d compared with 523,600 BOE/d in the prior-year period.  The figure beat our projection of 567,000 BOE/d. Higher volumes can be attributed to a 5.4% year-over-year increase in natural gas production that amounted to 1,645 million cubic feet per day (MMcf/d). Production of liquids increased to 331,100 BOE/d.

Ovintiv's realized natural gas price was $2.65 per thousand cubic feet compared with the year-ago quarter’s figure of $2.49. However, the reported figure fell short of our projection of $3.13 per thousand cubic feet.

The realized oil price increased to $76.64 per barrel from $75.85 in the fourth quarter of 2022. However, the figure fell short of our projection of $85.70.

Costs, Capex & Balance Sheet

Total expenses in the reported quarter decreased to $1.98 billion from the year-ago figure of $2.05 billion.

Ovintiv’s cash from operating activities in the quarter under review summed at $1.4 billion, up from the year-ago figure of $875 million. Its capital investments amounted to $660 million compared with $358 million in the year-ago period. Ovintiv generated non-GAAP free cash flow of $577 million
in the reported quarter.

As of Dec 31, the company had cash and cash equivalents worth $3 million and long-term debt of $5.7 billion. Its debt-to-capitalization at the end of the reported quarter was 34.5%.

Guidance

Ovintiv expects capital expenditures in the range of $2.2-$2.4 billion for full-year 2024 and in the band of $580-$620 million for the first quarter of the year.

OVV now projects crude oil and condensate volumes to be in the range of 202,000-208,000 bpd for 2024, and in the band of 208,000-212,000 bpd for the first quarter. Natural gas production is estimated to be in the 1,575-1,625 MMcf/d range for the first quarter, and between 1,550 MMcf/d and 1,650 MMcf/d for the entire year.

In the first quarter of 2024, share buybacks are expected to be worth $248 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -10.48% due to these changes.

VGM Scores

At this time, Ovintiv has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ovintiv has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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