Ovintiv Inc. (OVV)·Q1 2024 Earnings Summary

Executive Summary

• Raised full-year 2024 production guidance to 560–575 MBOE/d while holding capital at $2.2–$2.4B; 2Q guide set at 560–575 MBOE/d and oil & condensate 205–209 Mbbl/d. This is a clear positive surprise relative to the prior 545–575 MBOE/d range set in February.
• Q1 2024 delivered net earnings of $338M ($1.24 diluted EPS), Non-GAAP Free Cash Flow of $444M, and total production of 574 MBOE/d; costs per BOE at the low end of guidance combined.
• Management lifted 2024 free cash flow outlook from $1.6B to $1.9B, citing stronger oil prices and capital efficiency; prioritized buybacks and accelerated debt reduction toward a $4B net debt target.
• Operational highlights: Permian averaged 206 MBOE/d (82% liquids); efficiency gains from Trimulfrac and faster drilling/completion underpin capital efficiency and robust oil productivity; Montney realized 103% of NYMEX on gas (unhedged) via transportation arrangements.
• Dividends and buybacks: $328M returned in Q1 (dividends + buybacks); dividend of $0.30/share declared May 7.

What Went Well and What Went Wrong

What Went Well

• Raised full-year production guidance without raising capital; full-year guide now 560–575 MBOE/d, capital unchanged at $2.2–$2.4B. “Our leading capital efficiency and a stronger oil price environment have raised our expectations for 2024 Non-GAAP Free Cash Flow from $1.6 billion to $1.9 billion.”
• Permian execution: type-curve consistency, faster cycle times, Trimulfrac used on >50% of program in 2024; completions speed ~4,200 feet/day and ~15% cost savings per foot cited.
• Balance sheet and returns: $3.0B liquidity; debt/EBITDA at 1.3x; returned $328M in Q1; buybacks guided at ~$182M in Q2 and focus on net debt to $4B.

What Went Wrong

• Q1 realized gas price softness ($2.56/Mcf), reflecting broader market pressure; total realized price per BOE at $37.84 including hedges.
• Q1 production disruptions: refinery turnarounds in Salt Lake City and downtime-related maintenance (largely Montney) prompted near-term variability; expected stabilization from Q2.
• Working capital headwind and bolt-on cash outflows weighed on Q1 cash from operations; management expects debt reduction to accelerate through the year, aided by REX roll-off (~$100M) and a ~$150M legal settlement recovery in 2H.

Financial Results

Segment production (MBOE/d):

Key KPIs and realized prices:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our combination of strong productivity, our leading capital efficiency and a stronger oil price environment have raised our expectations for 2024 Non-GAAP Free Cash Flow from $1.6 billion to $1.9 billion – roughly $750 million more than last year.” — CEO Brendan McCracken
• “We expect capital spending to trend down through the second half of the year, and we remain very comfortable with the midpoint of our full year capital guide at $2.3 billion.” — CFO Corey Code
• “We expect to utilize Trimulfrac on more than half of our program this year… yields a 15% savings in completions cost per foot… completed nearly 70 wells.” — COO Gregory Givens
• “Our Montney gas realized 103% of NYMEX in Q1 on an unhedged basis… result of physical transportation arrangements to markets in Eastern Canada, Chicago, California and the Pacific Northwest.” — COO Gregory Givens
• “We will buy back $182 million in shares in Q2, and we expect to allocate $182 million to the balance sheet.” — CFO Corey Code

Q&A Highlights

• Capital cadence and rigs: Management plans to keep a sixth Permian rig through year-end; turn-in-line cadence heavier in 2H; decision to grow vs maintain hinges on returns and macro signals.
• $150M legal settlement recovery: Minimal cash tax; proceeds to debt reduction in 2H (3Q–4Q).
• Trimulfrac performance: No degradation in well productivity vs zipper/Simulfrac; savings and faster execution are “above-ground” efficiencies.
• Buybacks vs variable dividend: Preference for buybacks based on mid-cycle intrinsic value lens ($55 WTI, $2.75 NYMEX); maintain 50/50 FCF allocation (debt vs returns).
• Hedging approach: Quarter-ahead ~¼ of production hedged; as leverage declines, need to hedge falls; aim to be FCF-neutral at ~$40 oil/$2 gas after base dividend.

Estimates Context

• Wall Street consensus (S&P Global) for Q1 2024 EPS and revenue was unavailable due to SPGI rate limit error; no numeric estimate comparisons are presented. Management stated CFPS ($3.80) and FCF were above consensus.
• Given the guidance raise and operational outperformance, estimate revisions are likely to skew upward for oil & condensate volumes and free cash flow for FY 2024.

Key Takeaways for Investors

• Guidance raise without capital increase is a clear positive; focus on oil & condensate volumes with stronger capital efficiency supports higher 2024 FCF.
• Permian efficiency (Trimulfrac) is a durable competitive edge, enabling faster cycle times and lower costs without productivity trade-offs.
• Montney continues to generate strong returns despite weak gas pricing due to favorable realizations and transport; portfolio flexibility remains valuable.
• Shareholder returns are robust and consistent; buybacks preferred at current valuation while accelerating toward $4B net debt target.
• Near-term production variability (Uinta refinery turnarounds) is resolving; more consistent profile expected in 2H.
• Hedge book and leverage profile provide downside protection; as debt falls, hedging can be reduced, potentially improving upside capture.
• Catalysts: continued Permian well performance, execution of 2Q–3Q turn-in-lines, confirmation of FCF trajectory ($1.9B), and visibility on debt reduction pace alongside buybacks.

Note: Where SPGI consensus comparisons are omitted due to rate limits, management commentary on “consensus beats” is cited from the earnings call. **[1792580_OVV_3387632_0]** **[1792580_OVV_3387632_4]**