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Why Is Ovintiv (OVV) Up 15.9% Since Last Earnings Report?
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A month has gone by since the last earnings report for Ovintiv (OVV - Free Report) . Shares have added about 15.9% 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 the most recent earnings report in order to get a better handle on the important drivers.
Ovintiv Reports Better-Than-Expected Q4 Earnings
Ovintiv reported fourth-quarter 2020 adjusted earnings per share of 70 cents, beating the Zacks Consensus Estimate of 63 cents. The better-than-anticipated bottom line can be attributed tosuccessful cost-control initiatives. In fact, the company achieved a record low well cost in each of its Core 3 assets during the period.
However, the reported figure was lower than the year-ago bottom line of 81 cents per share due to lower production and oil price realizations.
Total revenues of $1.53 billion missed the Zacks Consensus Estimate of $1.69 billion and also dipped 2.6% from the year-ago sales of $1.57 billion.
Production and Prices
Total fourth-quarter production came in at 557,200 barrels of oil equivalent per day (BOE/d) compared with 592,600 BOE/d in the prior-year period. The decline in volumes was in response to the coronavirus-induced oil price slump. Natural gas production fell 4% year over year to 1,559 million cubic feet per day while liquids production was down 7.6% to 297,400 BOE/d.
Ovintiv's realized natural gas price was $2.33 per thousand cubic feet compared with the year-ago level of $2.25. Realized oil price decreased to $47.75 per barrel from $56.17 in the fourth quarter of 2019.
Costs, Capex and Balance Sheet
Total expenses increased to $2.1 billion from the year-ago figure of $1.6 billion. This rise is primarily attributed to a $717-million impairment charge.
Ovintiv’s cash from operating activities in the quarter under review summed $719 million, down from the year-ago figure of $730 million. The company's capital investments were $343 million compared with $574 million in the year-ago period.
As of Dec 31, Ovintiv had cash and cash equivalents worth $10 million, and a long-term debt of $6.4 billion. Its debt-to-capitalization ratio was 62.4.
The company generated non-GAAP free cash flow of $349 million.
Ovintiv’s board of directors declared a quarterly dividend of 9.375 cents per share to its common shareholders of record on Mar 15, 2021. The payout will be made on Mar 31.
Update on Duvernay Assets Sale
Ovintiv, formerly known as Encana Corp., recently decided to divest its Duvernay assets for roughly $263 million comprising approximately $12 million in contingency payments based on future commodity prices.The deal is slated to close by the second quarter of this year and is contingent on regulatory approvals and usual closing conditions.
Ovintiv CEO Doug Suttles believes that "today's announcement of the sale of our Duvernay asset combined with our strong fourth quarter and 2021 guide clearly demonstrate our commitment to debt reduction and puts us squarely on track to achieve our $4.5 billion dollar year-end 2022 goal”.
Guidance
Ovintiv anticipates its 2021 capital expenditure to be $1.5 billion. Crude oil and condensate volumes are projected to average 200,000 barrels per day in 2021 while NGL and natural gas productions are anticipated to average 80,000 BOE/d and 1.55 billion cubic feet per day, respectively. Total costs in 2021 are projected to average in the $12.25-$12.50 per barrel of oil equivalent range. Finally, Ovintiv is expected to generate free cash flow for the fourth consecutive year in 2021, which is estimated at $1 billion. Further, the company set a target to trim its total debt to $4.5 billion by 2022 end, reflecting a 35% reduction from the current levels.
In a separate press release, Ovintiv revised its compensation program so that the remuneration across all categories is in direct proportion to its carbon-reduction targets.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 160% due to these changes.
VGM Scores
At this time, Ovintiv has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Ovintiv has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Ovintiv (OVV) Up 15.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Ovintiv (OVV - Free Report) . Shares have added about 15.9% 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 the most recent earnings report in order to get a better handle on the important drivers.
Ovintiv Reports Better-Than-Expected Q4 Earnings
Ovintiv reported fourth-quarter 2020 adjusted earnings per share of 70 cents, beating the Zacks Consensus Estimate of 63 cents. The better-than-anticipated bottom line can be attributed tosuccessful cost-control initiatives. In fact, the company achieved a record low well cost in each of its Core 3 assets during the period.
However, the reported figure was lower than the year-ago bottom line of 81 cents per share due to lower production and oil price realizations.
Total revenues of $1.53 billion missed the Zacks Consensus Estimate of $1.69 billion and also dipped 2.6% from the year-ago sales of $1.57 billion.
Production and Prices
Total fourth-quarter production came in at 557,200 barrels of oil equivalent per day (BOE/d) compared with 592,600 BOE/d in the prior-year period. The decline in volumes was in response to the coronavirus-induced oil price slump. Natural gas production fell 4% year over year to 1,559 million cubic feet per day while liquids production was down 7.6% to 297,400 BOE/d.
Ovintiv's realized natural gas price was $2.33 per thousand cubic feet compared with the year-ago level of $2.25. Realized oil price decreased to $47.75 per barrel from $56.17 in the fourth quarter of 2019.
Costs, Capex and Balance Sheet
Total expenses increased to $2.1 billion from the year-ago figure of $1.6 billion. This rise is primarily attributed to a $717-million impairment charge.
Ovintiv’s cash from operating activities in the quarter under review summed $719 million, down from the year-ago figure of $730 million. The company's capital investments were $343 million compared with $574 million in the year-ago period.
As of Dec 31, Ovintiv had cash and cash equivalents worth $10 million, and a long-term debt of $6.4 billion. Its debt-to-capitalization ratio was 62.4.
The company generated non-GAAP free cash flow of $349 million.
Ovintiv’s board of directors declared a quarterly dividend of 9.375 cents per share to its common shareholders of record on Mar 15, 2021. The payout will be made on Mar 31.
Update on Duvernay Assets Sale
Ovintiv, formerly known as Encana Corp., recently decided to divest its Duvernay assets for roughly $263 million comprising approximately $12 million in contingency payments based on future commodity prices.The deal is slated to close by the second quarter of this year and is contingent on regulatory approvals and usual closing conditions.
Ovintiv CEO Doug Suttles believes that "today's announcement of the sale of our Duvernay asset combined with our strong fourth quarter and 2021 guide clearly demonstrate our commitment to debt reduction and puts us squarely on track to achieve our $4.5 billion dollar year-end 2022 goal”.
Guidance
Ovintiv anticipates its 2021 capital expenditure to be $1.5 billion. Crude oil and condensate volumes are projected to average 200,000 barrels per day in 2021 while NGL and natural gas productions are anticipated to average 80,000 BOE/d and 1.55 billion cubic feet per day, respectively. Total costs in 2021 are projected to average in the $12.25-$12.50 per barrel of oil equivalent range. Finally, Ovintiv is expected to generate free cash flow for the fourth consecutive year in 2021, which is estimated at $1 billion. Further, the company set a target to trim its total debt to $4.5 billion by 2022 end, reflecting a 35% reduction from the current levels.
In a separate press release, Ovintiv revised its compensation program so that the remuneration across all categories is in direct proportion to its carbon-reduction targets.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 160% due to these changes.
VGM Scores
At this time, Ovintiv has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Ovintiv has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.