Why Is Ovintiv (OVV) Up 6.5% Since Last Earnings Report?

It has been about a month since the last earnings report for Ovintiv (OVV). Shares have added about 6.5% 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 Reports In-Line Q1 Earnings

Ovintiv reported first-quarter 2021 adjusted earnings per share of $1.10, meeting the Zacks Consensus Estimate. The bottom-line result can be attributed to higher gas price realization and successful cost-control initiatives, partially offset by lower production and oil price realizations.

Meanwhile, the reported figure was higher than the year-ago bottom line of 10 cents per share.

Total revenues of $1.84 billion beat the Zacks Consensus Estimate of $1.65 billion but dropped 30.4% from the year-ago sales of $2.64 billion.

Production and Prices

Total first-quarter production came in at 538,300 barrels of oil equivalent per day (BOE/d) compared with 571,300 BOE/d in the prior-year period. The decline in volumes was in response to the winter storms in Texas and Oklahoma. Natural gas production marginally rose year over year to 1,576 million cubic feet per day while liquids production was down 11.03% to 275,600 BOE/d.

Ovintiv's realized natural gas price was $3.10 per thousand cubic feet compared with the year-ago level of $1.97. Realized oil price decreased to $47.44 per barrel from $48.99 in the first quarter of 2020.

Costs, Capex and Balance Sheet

Total expenses decreased to $1.64 billion from the year-ago figure of $1.88 billion. This decline is primarily attributed to lower depreciation and amortization charges.

Ovintiv’s cash from operating activities in the quarter under review summed $827 million, up from the year-ago figure of $566 million. The company's capital investments were $350 million compared with $790 million in the year-ago period.

As of Mar 31, Ovintiv had cash and cash equivalents worth $9 million, and a long-term debt of $6.4 billion. Its debt-to-capitalization ratio was 60.8.

The company generated non-GAAP free cash flow of $540 million.

Ovintiv’s board of directors declared a quarterly dividend of 9.375 cents per share to its common shareholders of record on Jun 15, 2021, which will be paid out on Jun 30.

Update on Duvernay Asset Sales

Ovintiv, formerly known as Encana Corp., recently concluded the divestment of its Duvernay assets for nearly $263 million comprising approximately $12 million worth contingency payments based on future commodity prices. Proceeds from the sale will be used for debt repayment.

Guidance

Ovintiv reaffirms its 2021 capital expenditure to be $1.5 billion. Following the asset sales, the company now projects crude oil and condensate volumes to average 190,000 barrels per day (bpd) in 2021 compared with its prior guidance of 200,000 bpd.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Ovintiv has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 has been net zero. 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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