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Ovintiv's (OVV) Q2 Earnings Beat Estimate, Revenues Lag
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Ovintiv Inc. (OVV - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of $1.24, which beat the Zacks Consensus Estimate of $1.22 and increased from the year-ago level of 93 cents. The outperformance can be attributed to higher oil price realization and successful year-over-year cost-control initiatives.
The Denver, CO-based oil and gas exploration and production company’s total revenues of $2.2 billion decreased 13.3% from the year-ago quarter’s figure and missed the Zacks Consensus Estimate by 9.9%. This was due to a year-over-year decline in revenues from products and services.
On Jul 30, OVV’s board of directors declared a quarterly dividend of 30 cents per share for its common shareholders of record as of Sep 13, 2024. The dividends will be paid out on Sep 27.
In the reported quarter, the company repurchased approximately 3.6 million shares of common stock for about $182 million. It paid dividends of 30 cents per share, amounting to a total of $80 million. OVV also reduced its debt more than $100 million in the quarter, bringing the trailing 12-month leverage ratio to 1.2x.
Total second-quarter production was 593,800 barrels of oil equivalent per day (BOE/d) compared with 573,000 BOE/d in the prior-year period. The figure beat our projection of 572,300 BOE/d.
Natural gas production marginally decreased year over year to 1,740 million cubic feet per day while liquids production rose 7.5% to 275,600 BOE/d.
Ovintiv's realized natural gas price was $1.86 per thousand cubic feet compared with the year-ago level of $1.98 and beat our projection of $1.79.
Realized oil price increased to $76.58 per barrel from $72.83 in the second quarter of 2023. However, the figure missed our projection of $83.12.
Costs, Capex & Balance Sheet
Total expenses in the reported quarter decreased to $1.73 billion from the year-ago quarter’s figure of $1.99 billion attributed to lower costs associated with transportation and processing, administration and purchased products.
Ovintiv’s cash from operating activities in the quarter under review was $1.1 billion, which increased from the year-ago figure of $831 million. OVV's capital investments were $622 million compared with $640 million in the year-ago period. Ovintiv generated a non-GAAP free cash flow of $403 million in the reported quarter.
As of Jun 30, the company had cash and cash equivalents worth $8 million and long-term debt of $4.9 billion. Its debt-to-capitalization ratio was 32%.
Asset Performance and Outlook
Permian Basin: Second-quarter’s production averaged 203 thousand barrels of oil equivalent per day (MBOE/d), with a strong liquids component of 81%. The company brought 40 net wells online in this period. Ovintiv expects to allocate capital expenditures of $1.35 to $1.45 billion for the Permian in 2024, targeting the addition of 120 to 130 net wells.
Montney: Production totaled 251 MBOE/d in the second quarter, with a liquids weighting of 20%. The company added 33 net wells in the quarter under review. To support growth, Ovintiv plans to invest between $425 and $475 million in the Montney in 2024, with an expected addition of 60 to 70 net wells.
Uinta Basin: Second-quarter’s production averaged 33 MBOE/d, demonstrating a strong liquids-rich profile of 87%. Seven net wells were brought online. The company anticipates investing $300 to $350 million in the Uinta Basin in 2024, targeting the addition of 25 to 30 net wells.
Anadarko Basin: Production averaged 104 MBOE/d in the second quarter, with a liquids component of 57%. No new wells were brought online in this period. Additionally, Ovintiv expects to invest $100 to $125 million in the Anadarko Basin in 2024, targeting the addition of seven to ten net wells.
OVV’s management projects total production volumes to average between 565,000 and 580,000 barrels per day (bpd) in the third quarter and between 570,000 and 580,000 bpd for the full year.
The company projects crude oil and condensate volumes to average between 204,000 and 208,000 bpd in the third quarter and between 207,000 and 209,000 bpd for 2024.
In the third quarter, natural gas production is estimated to be in the range of 1,640 -1,690 million cubic feet per day (MMcf/d) and between 1,660 and 1,690 MMcf/d for the entire year.
The company plans to pay $80 million in dividends, repurchase shares worth $162 million and allocate $162 million to the balance sheet in the same time frame.
OVV has revised its cash tax guidance for 2024, anticipating lower cash taxes. In the United States, this adjustment is due to greater certainty around specific tax attributes from last year's Permian acquisition. In Canada, the outlook for cash taxes has decreased because of lower natural gas prices.
The company anticipates a one-time recovery of $150 million from resolving a legacy legal matter, which will be allocated to debt reduction. This cash is expected to be received in the late third and fourth quarter with minimal cash tax impact.
Important Energy Earnings So Far
While it's early in the earnings season, there have been a few key energy releases thus far. Let’s glance through a couple of them.
Liberty Energy (LBRT - Free Report) , the Denver-CO-based oil and gas equipment company, announced second-quarter 2024 adjusted earnings of 61 cents per share, which marginally beat the Zacks Consensus Estimate of 60 cents. However, LBRT’s bottom line underperformed the year-ago quarter’s reported figure of 87 cents due to a year-over-year increase in costs and expenses.
Ahead of the earnings release, Liberty’s board of directors announced a cash dividend of 7 cents per common share, payable on Sep 20, 2024, to its stockholders of record as of Sep 6. As part of its shareholder return policy, LBRT repurchased the company’s shares worth $30 million at an average price of $20.39 per share in the reported quarter. Liberty returned $41 million to its shareholders through share repurchases and cash dividends.
Houston, TX-based Halliburton Company (HAL - Free Report) , an oil and gas equipment and services provider, reported second-quarter 2024 adjusted net income per share of 80 cents, in line with the Zacks Consensus Estimate and above the year-ago quarter profit of 77 cents (adjusted). The robust numbers reflect strength in the international markets.
As of Jun 30, 2024, the company reported $2.1 billion in cash and cash equivalents and $7.6 billion in long-term debt, representing a debt-to-capitalization ratio of 43.2. HAL also bought back $250 million worth of its stock in the April-June period. The company generated $1.1 billion of cash flow from operations in the second quarter, leading to a free cash flow of $793 million.
Meanwhile, energy infrastructure provider Kinder Morgan (KMI - Free Report) reported second-quarter adjusted EPS of 26 cents, in line with the Zacks Consensus Estimate. The bottom line was favorably impacted by strong financial contributions from the Natural Gas Pipelines, Products Pipelines and Terminals business segments. Moreover, KMI’s second-quarter discounted cash flow (DCF) was $1.10 billion, up from $1.07 billion a year ago.
As of Jun 30, 2024, Kinder Morgan reported $98 million in cash and cash equivalents. Its long-term debt amounted to $28.5 billion at the quarter-end. For the full year 2024, KMI anticipates a DCF of $5 billion ($2.26 per share) and an adjusted EBITDA of $8.16 billion, each indicating 8% growth from the previous year’s reported figures.
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Ovintiv's (OVV) Q2 Earnings Beat Estimate, Revenues Lag
Ovintiv Inc. (OVV - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of $1.24, which beat the Zacks Consensus Estimate of $1.22 and increased from the year-ago level of 93 cents. The outperformance can be attributed to higher oil price realization and successful year-over-year cost-control initiatives.
The Denver, CO-based oil and gas exploration and production company’s total revenues of $2.2 billion decreased 13.3% from the year-ago quarter’s figure and missed the Zacks Consensus Estimate by 9.9%. This was due to a year-over-year decline in revenues from products and services.
On Jul 30, OVV’s board of directors declared a quarterly dividend of 30 cents per share for its common shareholders of record as of Sep 13, 2024. The dividends will be paid out on Sep 27.
In the reported quarter, the company repurchased approximately 3.6 million shares of common stock for about $182 million. It paid dividends of 30 cents per share, amounting to a total of $80 million. OVV also reduced its debt more than $100 million in the quarter, bringing the trailing 12-month leverage ratio to 1.2x.
Ovintiv Inc. Price, Consensus and EPS Surprise
Ovintiv Inc. price-consensus-eps-surprise-chart | Ovintiv Inc. Quote
Production & Prices
Total second-quarter production was 593,800 barrels of oil equivalent per day (BOE/d) compared with 573,000 BOE/d in the prior-year period. The figure beat our projection of 572,300 BOE/d.
Natural gas production marginally decreased year over year to 1,740 million cubic feet per day while liquids production rose 7.5% to 275,600 BOE/d.
Ovintiv's realized natural gas price was $1.86 per thousand cubic feet compared with the year-ago level of $1.98 and beat our projection of $1.79.
Realized oil price increased to $76.58 per barrel from $72.83 in the second quarter of 2023. However, the figure missed our projection of $83.12.
Costs, Capex & Balance Sheet
Total expenses in the reported quarter decreased to $1.73 billion from the year-ago quarter’s figure of $1.99 billion attributed to lower costs associated with transportation and processing, administration and purchased products.
Ovintiv’s cash from operating activities in the quarter under review was $1.1 billion, which increased from the year-ago figure of $831 million. OVV's capital investments were $622 million compared with $640 million in the year-ago period. Ovintiv generated a non-GAAP free cash flow of $403 million in the reported quarter.
As of Jun 30, the company had cash and cash equivalents worth $8 million and long-term debt of $4.9 billion. Its debt-to-capitalization ratio was 32%.
Asset Performance and Outlook
Permian Basin: Second-quarter’s production averaged 203 thousand barrels of oil equivalent per day (MBOE/d), with a strong liquids component of 81%. The company brought 40 net wells online in this period. Ovintiv expects to allocate capital expenditures of $1.35 to $1.45 billion for the Permian in 2024, targeting the addition of 120 to 130 net wells.
Montney: Production totaled 251 MBOE/d in the second quarter, with a liquids weighting of 20%. The company added 33 net wells in the quarter under review. To support growth, Ovintiv plans to invest between $425 and $475 million in the Montney in 2024, with an expected addition of 60 to 70 net wells.
Uinta Basin: Second-quarter’s production averaged 33 MBOE/d, demonstrating a strong liquids-rich profile of 87%. Seven net wells were brought online. The company anticipates investing $300 to $350 million in the Uinta Basin in 2024, targeting the addition of 25 to 30 net wells.
Anadarko Basin: Production averaged 104 MBOE/d in the second quarter, with a liquids component of 57%. No new wells were brought online in this period. Additionally, Ovintiv expects to invest $100 to $125 million in the Anadarko Basin in 2024, targeting the addition of seven to ten net wells.
Guidance
This Zacks Rank #3 (Hold) company expects capital expenditure in the $530 - $570 million range for third-quarter 2024 and between $2.25 and $2.35 billion for the full year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
OVV’s management projects total production volumes to average between 565,000 and 580,000 barrels per day (bpd) in the third quarter and between 570,000 and 580,000 bpd for the full year.
The company projects crude oil and condensate volumes to average between 204,000 and 208,000 bpd in the third quarter and between 207,000 and 209,000 bpd for 2024.
In the third quarter, natural gas production is estimated to be in the range of 1,640 -1,690 million cubic feet per day (MMcf/d) and between 1,660 and 1,690 MMcf/d for the entire year.
The company plans to pay $80 million in dividends, repurchase shares worth $162 million and allocate $162 million to the balance sheet in the same time frame.
OVV has revised its cash tax guidance for 2024, anticipating lower cash taxes. In the United States, this adjustment is due to greater certainty around specific tax attributes from last year's Permian acquisition. In Canada, the outlook for cash taxes has decreased because of lower natural gas prices.
The company anticipates a one-time recovery of $150 million from resolving a legacy legal matter, which will be allocated to debt reduction. This cash is expected to be received in the late third and fourth quarter with minimal cash tax impact.
Important Energy Earnings So Far
While it's early in the earnings season, there have been a few key energy releases thus far. Let’s glance through a couple of them.
Liberty Energy (LBRT - Free Report) , the Denver-CO-based oil and gas equipment company, announced second-quarter 2024 adjusted earnings of 61 cents per share, which marginally beat the Zacks Consensus Estimate of 60 cents. However, LBRT’s bottom line underperformed the year-ago quarter’s reported figure of 87 cents due to a year-over-year increase in costs and expenses.
Ahead of the earnings release, Liberty’s board of directors announced a cash dividend of 7 cents per common share, payable on Sep 20, 2024, to its stockholders of record as of Sep 6. As part of its shareholder return policy, LBRT repurchased the company’s shares worth $30 million at an average price of $20.39 per share in the reported quarter. Liberty returned $41 million to its shareholders through share repurchases and cash dividends.
Houston, TX-based Halliburton Company (HAL - Free Report) , an oil and gas equipment and services provider, reported second-quarter 2024 adjusted net income per share of 80 cents, in line with the Zacks Consensus Estimate and above the year-ago quarter profit of 77 cents (adjusted). The robust numbers reflect strength in the international markets.
As of Jun 30, 2024, the company reported $2.1 billion in cash and cash equivalents and $7.6 billion in long-term debt, representing a debt-to-capitalization ratio of 43.2. HAL also bought back $250 million worth of its stock in the April-June period. The company generated $1.1 billion of cash flow from operations in the second quarter, leading to a free cash flow of $793 million.
Meanwhile, energy infrastructure provider Kinder Morgan (KMI - Free Report) reported second-quarter adjusted EPS of 26 cents, in line with the Zacks Consensus Estimate. The bottom line was favorably impacted by strong financial contributions from the Natural Gas Pipelines, Products Pipelines and Terminals business segments. Moreover, KMI’s second-quarter discounted cash flow (DCF) was $1.10 billion, up from $1.07 billion a year ago.
As of Jun 30, 2024, Kinder Morgan reported $98 million in cash and cash equivalents. Its long-term debt amounted to $28.5 billion at the quarter-end. For the full year 2024, KMI anticipates a DCF of $5 billion ($2.26 per share) and an adjusted EBITDA of $8.16 billion, each indicating 8% growth from the previous year’s reported figures.