Ovintiv (OVV) Down 8% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Ovintiv (OVV). Shares have lost about 8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Ovintiv due for a breakout? 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 catalysts.
Ovintiv Q3 Earnings Miss Estimates, Revenues Beat
Ovintiv Inc. reported third-quarter 2023 adjusted earnings per share (EPS) of $1.74, which missed the Zacks Consensus Estimate of $1.75. This can be attributed to a year-over-year decline in realized oil prices. However, the bottom line outperformed the year-ago quarter’s level of $1.44.
Total revenues of $2.6 billion decreased 25.7% from the year-ago quarter’s figure of $3.5 billion due to a year-over-year decline in revenues from products and services. The top line, however, beat the Zacks Consensus Estimate by 2.8%. This was due to higher-than-expected production. Total oil production came in at 171,000 barrels of oil equivalent per day (BOE/d), which outpaced the Zacks Consensus Estimate of 166,000 BOE/d.
OVV’s board of directors declared a quarterly dividend of 30 cents per share for its common shareholders of record as of Dec 15, 2023, which will be paid out on Dec 29, 2023. The company returned approximately $127 million to its shareholders through share buybacks.
OVV’s board of directors declared a quarterly dividend of 30 cents per share for common shareholders of record as of Jun 15, 2023, which will be paid out on Jun 30. This represents a 20% increase from the previous level.
Production & Prices
Total third-quarter production came in at 571,800 BOE/d compared with 516,300 BOE/d in the prior-year period. The figure beat our projection of 556,800 BOE/d. Higher volumes can be attributed to an 8.3% year-over-year increase in natural gas production that amounted to 1,625 million cubic feet per day (MMcf/d). Production of liquids increased to 300,900 BOE/d.
Ovintiv's realized natural gas price was $2.51 per thousand cubic feet compared with the year-ago quarter’s figure of $1.85. The reported figure beat our projection of $2.40.
The realized oil price decreased to $79.52 per barrel from $81.74 in the third quarter of 2022. The figure beat our projection of $78.29.
Costs, Capex & Balance Sheet
Ovintiv reported total expenses of $2.18 billion in the third quarter, up 0.3% from the year-ago quarter’s level due to higher costs associated with depreciation, depletion and amortization.
Cash from operating activities totaled $906 million, down from the year-ago quarter’s figure of $962 billion. Capital investments amounted to $834 million compared with $511 million in the year-ago period.
The company generated a non-GAAP-free cash flow of $1.11 billion in the quarter.
As of Sep 30, 2023, the company had cash and cash equivalents worth $3 million and long-term debt of $6.2 billion. Its debt-to-capitalization ratio was 39.2%.
Guidance
Ovintiv expects capital expenditures in the $660-$700 million range for fourth-quarter 2023 and between $2.75 billion and 2.79 billion for the full year.
The company expects total production volumes to be in the band of 560,000-580,000 barrels per day (bpd) in the fourth quarter and in the range of 550,000-560,000 bpd for the full year.
It anticipates crude oil and condensate volumes to be in the 220,000-227,000 bpd range in the fourth quarter and between 196,000 bpd and 198,000 bpd for 2023.
In the fourth quarter of 2023, natural gas production is estimated to be in the band of 1,550-1,600 MMcf/d and between 1,615 MMcf/d and 1,630 MMcf/d for the entire year.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Ovintiv has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Ovintiv has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Ovintiv belongs to the Zacks Oil and Gas - Exploration and Production - Canadian industry. Another stock from the same industry, Canadian Natural Resources (CNQ), has gained 0.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Canadian Natural Resources reported revenues of $7.38 billion in the last reported quarter, representing a year-over-year change of -8%. EPS of $1.93 for the same period compares with $2.37 a year ago.
Canadian Natural Resources is expected to post earnings of $1.62 per share for the current quarter, representing a year-over-year change of +12.5%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.6%.
Canadian Natural Resources has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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