Ovintiv Inc. (OVV) Q1 Results - May 9

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Ovintiv Inc. (OVV) Q1 Results - May 9

Post by dan_s »

Ovintiv Reports First Quarter 2022 Financial and Operating Results
My comments are in blue.

Company Increases Quarterly Dividend by 25%; Announces Debt Redemption;
Announces Plan to Double Shareholder Returns Resulting in 2022 Returns of ~$1 billion

Q1 Highlights:

Generated first quarter cash from operating activities of $685 million, Non-GAAP Cash Flow of $1,043 million and Non-GAAP Free Cash Flow of $592 million < Non-GAAP or "Adjusted Operating Cash Flow" before changes in Working Capital, compares to my forecast of $1,051 million.

Announced plan to double shareholder returns from 25% to 50% of Non-GAAP Free Cash Flow after base dividends beginning in October of 2022

Announced a 25% increase to quarterly dividend payments; increasing annualized dividends to $1.00 per share

Planned 2022 shareholder returns now expected to total approximately $1 billion

Returned $123 million to shareholders in the first quarter via share buybacks of $71 million and base dividends of $52 million; the Company expects to return approximately $200 million in the second quarter

Issued notice to redeem the entire aggregate principal amount of its 2024 notes totaling approximately $1 billion on June 10, 2022; Company on track to achieve $3 billion Net Debt target in the third quarter of 2022 < This is VERY GOOD NEWS for stockholders.

Adjusted 2022 capital guidance to approximately $1.7 billion to $1.8 billion, reflecting current expectations for cost inflation and costs associated with maintaining high spec equipment and preferred crews through year-end < Higher realized natural gas and NGL prices should more than offset this increased capex spending.

Delivered first quarter total production of approximately 500 thousand barrels of oil equivalent per day ("MBOE/d"), above the midpoint of Company guidance < Compares to my Q1 production forecast of 497,000 Boe per day.

Published 2022 Sustainability Report and 2021 ESG performance metrics on the Company's Sustainability website

DENVER, May 9, 2022 /PRNewswire/ - Ovintiv Inc. (NYSE: OVV) (TSX: OVV) ("Ovintiv" or the "Company") today announced its first quarter 2022 financial and operating results. The Company plans to hold a conference call and webcast at 9:00 a.m. MT (11:00 a.m. ET) on May 10, 2022. Please see dial-in details within this release, as well as additional details on the Company's website at www.ovintiv.com.

"Our culture of innovation and focus on capital discipline delivered substantial free cash flow generation in the first quarter," said Ovintiv CEO Brendan McCracken. "Despite the significant inflationary pressures impacting our industry, we continue to deliver top tier capital efficiency and generate superior returns. We are maintaining discipline in a volatile market and will not invest in growth in 2022. With our $3 billion Net Debt target in sight in the third quarter, we have once again increased our base dividend and we are set to double shareholder returns, beginning October 1st. This puts us on track to deliver $1 billion of cash returns to our shareholders this year." < To reach the mid-point of the Company's guidance (508,500 Boe per day), Ovintiv's production will drift higher and I expect it to accelerate into year-end to an exit rate of ~530,000 Boepd.

First Quarter 2022 Financial and Operating Results

The Company reported a net loss of $241 million in the first quarter. These results included net losses on risk management of $1,458 million, before tax.

First quarter cash from operating activities was $685 million, Non-GAAP Cash Flow was $1,043 million and capital investment totaled $451 million, resulting in $592 million of Non-GAAP Free Cash Flow.

First quarter total production was above the midpoint of guidance and at approximately 500 MBOE/d, including 173 thousand barrels per day ("Mbbls/d") of oil and condensate, 79 Mbbls/d of other NGLs and 1,487 million cubic feet per day ("MMcf/d") of natural gas. Production in the quarter was impacted by higher Canadian royalty rates, operational delays and weather disruptions.

Total Costs were $15.48 per barrel of oil equivalent ("BOE"). Per unit costs were higher than the Company's $14.75 to $15.25 per BOE cost guidance due to higher commodity prices during the quarter directly impacting commodity linked cost items.

Excluding the impact of risk management losses, first quarter 2022 average realized prices were $93.35 per barrel for oil and condensate (99% of WTI), $34.94 per barrel for other NGLs (C2-C4) and $4.64 per Mcf for natural gas (94% of NYMEX) resulting in a total average realized price of $51.62 per BOE.

First quarter 2022 average realized prices, including risk management losses, were $82.08 per barrel for oil and condensate, $34.94 per barrel for other NGLs (C2-C4), and $2.60 per Mcf for natural gas, resulting in a total average realized price of $41.65 per BOE. Ovintiv's first quarter realized commodity-based risk management losses were $448 million, before-tax. < Lower realized natural gas price than my forecast of $3.40 was offset by much higher unhedged NGL prices.
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Bottomline: Q1 results were good and very close to my operating cash flow forecast. Some analysts won't like the increased capex, but all of the companies are reporting higher D&C costs. Increased natural gas and NGL prices + detailed guidance will increase the valuation multiple that I use for OVV. Ovintiv is a large-cap that has done a great job cleaning up their balance sheet. Rising the dividend is good, but I would prefer to see them get back to mid-single digit production growth. They have a lot of low-risk / high-return drilling inventory that can generate high ROI at today's commodity prices.
Dan Steffens
Energy Prospectus Group
allen46
Posts: 128
Joined: Wed May 05, 2010 10:44 pm

Re: Ovintiv Inc. (OVV) Q1 Results - May 9

Post by allen46 »

Dan, I thought their earnings announcement was very poorly written. I was not impressed and expect further decline in the stock price. They did not highlight earnings or cash flow per share but highlighted a dismal $1 per share annual dividend. So why should I want to own the stock?
Fraser921
Posts: 2955
Joined: Mon Mar 22, 2021 11:48 am

Re: Ovintiv Inc. (OVV) Q1 Results - May 9

Post by Fraser921 »

Down pre market 5 percent
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