Ovintiv Inc. OVV reported second-quarter 2023 adjusted earnings of 93 cents per share, which beat the Zacks Consensus Estimate of 91 cents per share. The upside can be attributed to lower expenses. However, the bottom line underperformed the year-ago quarter’s figure of $2.42 per share due to a decline in realized natural gas and oil prices.
Total revenues of $2.52 billion beat the Zacks Consensus Estimate of $2.12 billion due to higher-than-expected total oil and natural gas liquid production.The top line underperformed by about 32.6% from the year-ago sales of $3.74 billion.
OVV’s board of directors declared a quarterly dividend of 30 cents per share for its common shareholders of record as of Sep 15, 2022, which will be paid out on Sep 30. OVV’s returned approximately $172 million to shareholders through share buybacks.
Ovintiv Inc. Price, Consensus and EPS Surprise
Ovintiv Inc. price-consensus-eps-surprise-chart | Ovintiv Inc. Quote
Production & Prices
Total second-quarter production came in at 573,000 BOE/d compared with 500,000 BOE/d in the prior-year period, beating our projection of 528,300 BOE/d. Higher volumes can be attributed to natural gas production increasing 22.2% year over year to 1,743 million cubic feet per day (MMcf/d). Production of liquids increased to 282,700 BOE/d.
Ovintiv's realized natural gas price was $1.98 per thousand cubic feet compared with the year-ago quarter’s figure of $2.78, which missed our projection of $2.65. The realized oil price decreased to $72.83 per barrel from $89.16 in the second quarter of 2022 and the figure beat our projection of $66.95.
Costs, Capex & Balance Sheet
Total expenses in the reported quarter decreased to $1.99 billion from the year-ago quarter’s figure of $2.20 billion due to lower costs associated with production, mineral and other taxes, operating, and purchased goods.
Ovintiv’s cash from operating activities was $831 million, down from the year-ago figure of $1.34 billion. Its capital investments were $640 million compared with $511 million in the year-ago period.
The company generated a non-GAAP-free cash flow of $699 billion in the quarter.
As of Jun 30, the company had cash and cash equivalents worth $52 million and long-term debt of $6.1 billion. Its debt-to-capitalization ratio was 39.7%.
Ovintiv expects capital expenditure in the $840-$890 million range for third-quarter 2023 and between $2.68 and 2.85 billion for the full year.
OVV projects total production volumes to average between 540,000 and 560,000 barrels per day (bpd) in the third quarter and between 535,000 and 550,000 bpd for the full year.
OVV projects crude oil and condensate volumes to average between 190,000 and 196,000 barrels per day (bpd) in the third quarter and between 202,000 and 208,000 bpd for 2023.
In the third-quarter of 2023, natural gas production is estimated to be in the range of 1,575 -1,625 MMcf/d and between 1,575 and 1,625 MMcf/d for the entire year.
Ovintiv predicts capital investment in the third quarter to reach its highest point for this year due to higher activity of the recent acquisition of Midland Basin assets.
Ovintiv anticipates that most of the acquired wells will be in production by the end of 2023. Ovintiv's total oil and condensate production is projected to average 210 Mbbls/d in the second half of 2023, with volumes rising from the third to the fourth quarter.
Upstream operating expenses and upstream transportation and processing expenses per unit are anticipated to be 5% lower in the second half of the year compared to the initial full-year 2023 guidance.
With a capital investment of between $2.1 billion and $2.5 billion, Ovintiv anticipates producing more than 200 Mbbls/d of oil and condensate overall in 2024. Ovintiv's production profile is expected to stabilize at 200 Mbbls/d for the second half of the year by mid-year 2024, returning to normal.
Zacks Rank and Key Picks
Currently, OVVcarries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks for investors interested in the energy sector are Evolution Petroleum EPM, sporting a Zacks Rank #1 (Strong Buy), and Murphy USA MUSA and NGL Energy Partners NGL, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Evolution Petroleum is worth approximately $307.07 million. EPM currently pays a dividend of 48 cents per share, or 5.20% on an annual basis.
The company currently has a forward P/E ratio of 8.55. In comparison, its industry has an average forward P/E of 13.40, which means EPM is trading at a discount to the group.
Murphy USA is valued at around $6.58 billion. In the past year, its shares have risen 5.8%
MUSA currently pays a dividend of $1.52 per share, or 0.50%, annually. Its payout ratio currently sits at 6% of earnings.
NGL Energy Partners is valued at around $535.63 million. In the past year, its units have risen 149.1%.
The partnership currently has a forward P/E ratio of 4.67. In comparison, its industry has an average forward P/E of 16.20, which means NGL is trading at a discount to the group.
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