Back to top

Image: Shutterstock

Ovintiv (OVV) Boosts Shareholder Value With 26M Buyback Plan

Read MoreHide Full Article

Ovintiv Inc. (OVV - Free Report) recently stated that it received a regulatory clearance for a share buyback program, thus advancing its goal to boost its shareholder returns.

This move is in line with the company's capital allocation strategy, which aims to unlock shareholder value by delivering on its strategies like solid liquidity, increased cash distributions to its shareholders, better returns on capital investment and ESG development.

The Toronto Stock Exchange (TSX) has approved Ovintiv's proposal to conduct a normal course issuer bid for acquiring a little above 26 million common shares during the 12-month period beginning Oct 1, 2021 through Sep 30, 2022. As of Sep 20, 2021, the number of shares allowed for acquisition reflects 10% of the company's public float.

In the last reported quarter, Ovintiv’s board of directors declared a quarterly dividend of 14 cents per share for its common shareholders of record as of Sep 15, 2021, which will be paid out on Sep 30. This mirrors a 50% hike in its quarterly dividend payout from its previous levels of 9.375 cents. The move underscores the company’s sound financial position and its commitment to reward its shareholders.

As reported earlier, this currently Zacks Rank #3 (Hold) Ovintiv aims to return 25% of the preceding quarter's free cash flow after base dividends to its shareholders through share buybacks and/or variable dividends starting the fourth quarter of 2021 and continuing until it meets its $3-billion net debt objective. The company intends to boost its quarterly shareholder distributions to at least 50% of the preceding quarter's free cash flow after base dividends once it fulfills its net debt obligations of $3 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ballooning Cash Flows

The sharp increase in crude prices from the depths of -$38 a barrel in April 2020 to around $75 allowed the energy companies to deliver a solid financial performance. Particularly, cash from operations is on a sustainable path as revenues improve and companies slash capital expenditures from the pre-pandemic levels amid steep commodity prices. Thus, the environment of elevated oil prices helped the big energy operators generate significant “excess cash,” which they intend to use to drive investor returns.

Apart from Ovintiv, let’s give a lowdown on how some of the oil biggies are allocating their robust cash piles to stock buybacks and dividends.

Share Repurchases

British energy major BP plc (BP - Free Report) announced plans to buy back $1.4 billion worth of shares by utilizing surplus cashflow generated through the January-June period.

Continental rival Royal Dutch Shell launched a $2-billion stock repurchase program to be completed by the end of 2021.

American supermajor Chevron (CVX - Free Report) revived its stock repurchase program and aims to buy back $2-$3 billion of shares, annually, starting the third quarter of this year.

Final Thoughts

The balance sheet strength of energy firms like Ovintiv was aided by a substantially improved oil pricing environment and the economic recovery. Their cash from operations currently covers capital investment, courtesy of strong fundamentals. This creates a long-term financial framework for oil companies to bolster cash returns to their shareholders.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


BP p.l.c. (BP) - free report >>

Chevron Corporation (CVX) - free report >>

Ovintiv Inc. (OVV) - free report >>

Published in