Ovintiv Inc. (OVV) Q2 Results - Aug 2
Posted: Mon Aug 02, 2021 11:30 am
Last week Ovintiv released Q2 2021 results and updated guidance for 2021.
> Adjusted Net Income and Operating Cash Flow beat my Q2 forecast (and I believe their 2H 2021 guidance is very conservative).
> Q2 production of 555,000 Boepd compares to my forecast of 516,000 Boepd (based on OVV's earlier guidance). Liquids came in much higher than I expected.
> The Company continues to pay off debt faster than expected.
> They raised their dividend 50% to $0.56/year for annual yield of 2.2% based on today's share price of $25.37 as of the time of this post.
> The Company is now on pace to generate over $3.1 Billion of operating cash flow in 2021, which compares to their capex budget of $1.5 Billion. < They are doing this despite having "Bad Oil Hedges" that locks in their realized oil price for 2H 2021 at less than $55/bbl. Most of the Bad Oil Hedges expire at 12-31-2021.
Five respected energy sector analysts have updated their price price targets for OVV since they released Q2 results to a range of $36.00 by RBC Capital to $54.00 by MKM Partners. The five fresh price targets average $43.20, 70% below today's share price.
I really like OVV's production mix: 48.4% natural gas, 26.7% crude oil, 9.2% plant condensate that sells at ~$7 discount to WTI and 15.7% NGLs.
OVV's realized natural gas prices net of cash settlements on their hedges were $3.10 in Q1, $2.74 in Q2 and should be $3.15 in Q3 and $3.40 in Q4. Higher ngas and NGL prices should generate a lot of free cash flow over the next three quarters allowing them to reach their new debt reduction target much earlier than expected and raise their dividends.
I have posted my updated forecast/valuation model to the EPG website. OVV should be a double for us within 12 months.
> Adjusted Net Income and Operating Cash Flow beat my Q2 forecast (and I believe their 2H 2021 guidance is very conservative).
> Q2 production of 555,000 Boepd compares to my forecast of 516,000 Boepd (based on OVV's earlier guidance). Liquids came in much higher than I expected.
> The Company continues to pay off debt faster than expected.
> They raised their dividend 50% to $0.56/year for annual yield of 2.2% based on today's share price of $25.37 as of the time of this post.
> The Company is now on pace to generate over $3.1 Billion of operating cash flow in 2021, which compares to their capex budget of $1.5 Billion. < They are doing this despite having "Bad Oil Hedges" that locks in their realized oil price for 2H 2021 at less than $55/bbl. Most of the Bad Oil Hedges expire at 12-31-2021.
Five respected energy sector analysts have updated their price price targets for OVV since they released Q2 results to a range of $36.00 by RBC Capital to $54.00 by MKM Partners. The five fresh price targets average $43.20, 70% below today's share price.
I really like OVV's production mix: 48.4% natural gas, 26.7% crude oil, 9.2% plant condensate that sells at ~$7 discount to WTI and 15.7% NGLs.
OVV's realized natural gas prices net of cash settlements on their hedges were $3.10 in Q1, $2.74 in Q2 and should be $3.15 in Q3 and $3.40 in Q4. Higher ngas and NGL prices should generate a lot of free cash flow over the next three quarters allowing them to reach their new debt reduction target much earlier than expected and raise their dividends.
I have posted my updated forecast/valuation model to the EPG website. OVV should be a double for us within 12 months.