Ovintiv Inc. (OVV) Q4 Results - Mar 4
Posted: Fri Mar 04, 2022 12:38 pm
Ovintiv is one of the "Elite Eight" in our Sweet 16.
Prior to the recent spike in oil & gas prices my valuation of OVV was $66/share. At the time of this post it was trading at $47.80.
I am updating my forecast/valuation model now.
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2021 Highlights:
Generated full year net earnings of $1.4 billion, cash from operating activities of $3.1 billion, Non-GAAP Cash Flow of $3.2 billion and Non-GAAP Free Cash Flow of $1.7 billion
Reduced Net Debt by approximately $2.3 billion; expect to reach $3 billion Net Debt target in the second half of 2022 assuming $85 per barrel for WTI oil and $4.50 per thousand cubic feet ("Mcf") for NYMEX natural gas
Announced a 43% increase to quarterly dividend payments; now $0.80 per share annualized
Continued substantial share buybacks with approximately 4.3 million shares acquired to date since the beginning of the fourth quarter of 2021
Reiterated 2022 capital program of approximately $1.5 billion, which is expected to deliver 180 to 190 thousand barrels per day ("Mbbls/d") of oil and condensate production and approximately $2.9 billion of Non-GAAP Free Cash Flow, assuming commodity prices of $85 per barrel for WTI oil and $4.50 per Mcf for NYMEX natural gas
Beat targeted 33% reduction in methane emissions intensity four years ahead of schedule with greater than 50% reduction in 2021 versus 2019 baseline
Established a 50% Scope 1&2 greenhouse gas (GHG) emissions intensity reduction target to be achieved by 2030 and using 2019 as a baseline year; tied to compensation for all Ovintiv employees
Ovintiv CEO Brendan McCracken said, "Our performance in 2021 demonstrates Ovintiv's unique strengths – our industry leading capital efficiency, top-tier multi-basin portfolio, culture of innovation, and disciplined approach to capital allocation. Our strategy to sustainably deliver superior returns is resulting in substantial value creation for our shareholders. Today, we are increasing our base dividend and we expect to meet our $3 billion net debt target in the second half of 2022, which will unlock another significant increase in cash returns."
Full Year and Fourth Quarter 2021 Financial and Operating Results
The Company recorded full year net earnings of $1.4 billion, or $5.32 per diluted share of common stock.
Fourth quarter net earnings totaled $1.4 billion, or $5.21 per diluted share of common stock.
Full year cash from operating activities was $3.1 billion, Non-GAAP Cash Flow was $3.2 billion and capital investment totaled approximately $1.5 billion, resulting in $1.7 billion of Non-GAAP Free Cash Flow. < Compares to my 2021 operating cash flow forecast of $3.3 billion.
Fourth quarter cash from operating activities was $740 million, Non-GAAP Cash Flow was $741 million and capital investment totaled approximately $421 million, resulting in $320 million of Non-GAAP Free Cash Flow.
Average annual total production was approximately 534 thousand barrels of oil equivalent per day ("MBOE/d"), including 191 Mbbls/d of oil and condensate, 83 Mbbls/d of other NGLs (C2 to C4) and 1,556 million cubic feet per day ("MMcf/d") of natural gas, all in line with guidance. < Natural gas production was below my forecast due to well freeze offs in some areas.
Fourth quarter total production was approximately 508 MBOE/d, including 178 Mbbls/d of oil and condensate, 85 Mbbls/d of other NGLs and 1,476 MMcf/d of natural gas. Production in the quarter was impacted by unplanned midstream outages and permitting timing delays in Canada that reduced fourth quarter production by approximately 3 Mbblsd/d of oil and condensate, 2 Mbbls/d of other NGLs (C2 to C4) and 90 MMcf/d of natural gas. The fourth quarter also saw higher Canadian royalty rates that reduced production by approximately 1.3 Mbbls/d of oil and condensate, and 40 MMcf/d of natural gas.
Total Costs for the year were $13.42 per barrel of oil equivalent ("BOE") while fourth quarter Total Costs were $14.89 per BOE. Total Costs per BOE were impacted by higher commodity prices and lower production during the quarter.
Prior to the recent spike in oil & gas prices my valuation of OVV was $66/share. At the time of this post it was trading at $47.80.
I am updating my forecast/valuation model now.
-----------------------
2021 Highlights:
Generated full year net earnings of $1.4 billion, cash from operating activities of $3.1 billion, Non-GAAP Cash Flow of $3.2 billion and Non-GAAP Free Cash Flow of $1.7 billion
Reduced Net Debt by approximately $2.3 billion; expect to reach $3 billion Net Debt target in the second half of 2022 assuming $85 per barrel for WTI oil and $4.50 per thousand cubic feet ("Mcf") for NYMEX natural gas
Announced a 43% increase to quarterly dividend payments; now $0.80 per share annualized
Continued substantial share buybacks with approximately 4.3 million shares acquired to date since the beginning of the fourth quarter of 2021
Reiterated 2022 capital program of approximately $1.5 billion, which is expected to deliver 180 to 190 thousand barrels per day ("Mbbls/d") of oil and condensate production and approximately $2.9 billion of Non-GAAP Free Cash Flow, assuming commodity prices of $85 per barrel for WTI oil and $4.50 per Mcf for NYMEX natural gas
Beat targeted 33% reduction in methane emissions intensity four years ahead of schedule with greater than 50% reduction in 2021 versus 2019 baseline
Established a 50% Scope 1&2 greenhouse gas (GHG) emissions intensity reduction target to be achieved by 2030 and using 2019 as a baseline year; tied to compensation for all Ovintiv employees
Ovintiv CEO Brendan McCracken said, "Our performance in 2021 demonstrates Ovintiv's unique strengths – our industry leading capital efficiency, top-tier multi-basin portfolio, culture of innovation, and disciplined approach to capital allocation. Our strategy to sustainably deliver superior returns is resulting in substantial value creation for our shareholders. Today, we are increasing our base dividend and we expect to meet our $3 billion net debt target in the second half of 2022, which will unlock another significant increase in cash returns."
Full Year and Fourth Quarter 2021 Financial and Operating Results
The Company recorded full year net earnings of $1.4 billion, or $5.32 per diluted share of common stock.
Fourth quarter net earnings totaled $1.4 billion, or $5.21 per diluted share of common stock.
Full year cash from operating activities was $3.1 billion, Non-GAAP Cash Flow was $3.2 billion and capital investment totaled approximately $1.5 billion, resulting in $1.7 billion of Non-GAAP Free Cash Flow. < Compares to my 2021 operating cash flow forecast of $3.3 billion.
Fourth quarter cash from operating activities was $740 million, Non-GAAP Cash Flow was $741 million and capital investment totaled approximately $421 million, resulting in $320 million of Non-GAAP Free Cash Flow.
Average annual total production was approximately 534 thousand barrels of oil equivalent per day ("MBOE/d"), including 191 Mbbls/d of oil and condensate, 83 Mbbls/d of other NGLs (C2 to C4) and 1,556 million cubic feet per day ("MMcf/d") of natural gas, all in line with guidance. < Natural gas production was below my forecast due to well freeze offs in some areas.
Fourth quarter total production was approximately 508 MBOE/d, including 178 Mbbls/d of oil and condensate, 85 Mbbls/d of other NGLs and 1,476 MMcf/d of natural gas. Production in the quarter was impacted by unplanned midstream outages and permitting timing delays in Canada that reduced fourth quarter production by approximately 3 Mbblsd/d of oil and condensate, 2 Mbbls/d of other NGLs (C2 to C4) and 90 MMcf/d of natural gas. The fourth quarter also saw higher Canadian royalty rates that reduced production by approximately 1.3 Mbbls/d of oil and condensate, and 40 MMcf/d of natural gas.
Total Costs for the year were $13.42 per barrel of oil equivalent ("BOE") while fourth quarter Total Costs were $14.89 per BOE. Total Costs per BOE were impacted by higher commodity prices and lower production during the quarter.