Ovintiv Inc. (NYSE: OVV)

Sector: Energy Industry: Oil & Gas E&P CIK: 0001792580
Market Cap 6.94 Bn
P/B 0.41
P/E 4.10
P/S 0.69
ROIC (Qtr) 3.20
Div Yield % 11.50
Rev 1y % (Qtr) -11.10
Total Debt (Qtr) 6.43 Bn
Debt/Equity (Qtr) 0.63
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About

Ovintiv Inc. (OVV) is a prominent player in the North American oil and natural gas exploration and production industry. The company is known for its strategic development of high-quality assets located in the United States and Canada. Its operations are structured into three reportable segments: USA Operations, Canadian Operations, and Market Optimization. USA Operations segment encompasses the exploration, development, and production of oil, natural gas liquids (NGLs), and natural gas within the United States. In 2023, this segment invested approximately...

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Investment thesis

Bull case

  • Strong operating cash flow of 3.72B provides robust 0.58x coverage of total debt 6.43B, indicating excellent debt servicing capability and financial flexibility.
  • Strong tangible asset base of 16.82B provides 2.62x coverage of total debt 6.43B, indicating robust asset backing and low credit risk.
  • Strong operating cash flow of 3.72B provides 10.27x coverage of SG&A expenses 362M, showing efficient operational cost management.
  • Tangible assets of 16.82B provide robust 600.79x coverage of other current liabilities 28M, indicating strong asset backing.
  • Operating cash flow of 3.72B fully covers other non-current liabilities 1.02B by 3.65x, showing strong long-term stability.

Bear case

  • Operating cash flow of 3.72B barely covers its investment activities of (2.44B), with a coverage ratio of -1.52, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 3.72B provides thin coverage of dividend payments of (310M) with a -11.99 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 25M provide limited coverage of acquisition spending of (207M), which is -0.12x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Operating earnings of 686M show weak coverage of depreciation charges of 2.19B, with a 0.31 ratio indicating high capital intensity and potential reinvestment needs.
  • High financing cash flow of (1.30B) relative to working capital of (1.46B), which is 0.89x suggests concerning dependence on external funding for operational needs.

Segments Breakdown of Revenue (2024)

Customer Breakdown of Revenue (2024)

Peer comparison

Companies in the Oil & Gas E&P
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 COP Conocophillips 136.62 Bn 17.10 2.22 23.44 Bn
2 CNQ Canadian Natural Resources Ltd 85.21 Bn 17.67 3.04 12.51 Bn
3 EOG Eog Resources Inc 66.33 Bn -60.48 8.67 8.13 Bn
4 FANG Diamondback Energy, Inc. 49.64 Bn -2,818.83 314.47 16.24 Bn
5 OXY Occidental Petroleum Corp /De/ 37.18 Bn 15.36 2.56 22.88 Bn
6 WDS Woodside Energy Group Ltd 34.64 Bn 11.73 2.51 -
7 TPL Texas Pacific Land Corp 29.74 Bn 126.16 78.66 0.02 Bn
8 DVN Devon Energy Corp/De 18.80 Bn 3.24 1.91 8.55 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.66 1.02
EV to Cash from Ops. EV/CFO 3.01 18.21
EV to Debt EV to Debt 1.98 54.57
EV to EBIT EV/EBIT 5.31 29.98
EV to EBITDA EV/EBITDA 2.19 19.64
EV to Free Cash Flow [EV/FCF] EV/FCF -190.28 39.33
EV to Market Cap EV to Market Cap 1.84 1.57
EV to Revenue EV/Rev 1.28 11.47
Price to Book Value [P/B] P/B 0.41 2.97
Price to Earnings [P/E] P/E 4.10 -25.98
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.76 26.80
Dividend Payout Ratio % Div Payout % (Qtr) 125.00 31.86
Dividend per Basic Share Div per Share (Qtr) 1.20 0.78
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 20.72 1.05
Interest Coverage Int. cover (Qtr) 1.76 -4.97
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 7.34 -533.65
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 177.78 52.06
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 -5.45
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -77.05 6.14
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -42.99 105.89
EBIT Growth (1y) % EBIT 1y % (Qtr) -76.60 75.94
EBT Growth (1y) % EBT 1y % (Qtr) -88.21 17.44
EPS Growth (1y) % EPS 1y % (Qtr) -87.50 3.07
FCF Growth (1y) % FCF 1y % (Qtr) -10.17 -43.36
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -15.22 149.32
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.46 0.33
Cash Payout Ratio Cash Payout (Qtr) 0.05 0.07
Cash Ratio Cash Ratio (Qtr) 0.01 1.32
Current Ratio Curr Ratio (Qtr) 0.45 2.37
Debt to Equity Ratio Debt/Equity (Qtr) 0.63 0.34
Interest Cover Ratio Int Coverage (Qtr) 1.76 -4.97
Times Interest Earned Times Interest Earned (Qtr) 1.76 -4.97
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 32.10 16.19
EBIT Margin % EBIT Margin % (Qtr) 7.67 -16.83
EBT Margin % EBT Margin % (Qtr) 3.32 -24.06
Gross Margin % Gross Margin % (Qtr) 51.40 58.92
Net Profit Margin % Net Margin % (Qtr) 2.60 -28.75