- Portfolio Transformation Completed focus on Permian and Montney, achieving $40M annual interest savings from 2028 notes repayment, plus $25M from 2026 notes.
- Shareholder Returns 75% free cash flow return to shareholders in 2026, with long-term range of 50ā100% to balance volatility and valuation opportunities.
- 2025 Financial Performance Generated $3.8B cash flow and $1.6B free cash flow, returning $600M to shareholders via dividends/buybacks.
- Operational Efficiency Permian drilling costs fell to <$600/foot ($25/foot lower YoY) with 5 rigs, 130 net wells planned to maintain 120,000 BOE/day oil production.
- Surfactant Program 9% productivity gains in Permian wells, with $1M per well synergy gains from AI-driven drilling optimization and surfactant cost reductions to <$100K per well.
Financial Performance
The company's focus on capital efficiency enabled it to produce more with less capital. Ovintiv's full-year cash flow was $3.8 billion, and it generated free cash flow of more than $1.6 billion. The company's return on invested capital (ROIC) is impressive at 239.62%, indicating a strong ability to generate returns from its investments.
Operational Highlights
Ovintiv's operational performance was also strong, with the company achieving a 9% uplift in productivity gains through its surfactant program. The company is consistently one of the highest productivity, lowest cost operators in the Permian basin. Ovintiv's 2026 expected drilling and completion cost is among the best in the industry at less than $600 per foot.
Valuation Metrics
Ovintiv's valuation metrics indicate that the company is reasonably priced. The P/E Ratio is 10.37, and the P/B Ratio is 1.15, indicating a relatively low valuation compared to its earnings and book value. The EV/EBITDA ratio is 4.81, which is also reasonable. The company's Free Cash Flow Yield is 19.02%, indicating a strong ability to generate cash for shareholders.
Shareholder Returns
Ovintiv plans to return at least 75% of its free cash flows to shareholders in 2026, under its revised framework. The company's wider range of 50% to 100% is intended to allow flexibility to accommodate commodity price volatility and avoid pro-cyclical buybacks. Brendan McCracken mentioned that the company sees a lot of value in its equity and plans to be more opportunistic in addressing its valuation discount.
Growth Opportunities
Ovintiv is well-positioned for growth, with a strong portfolio of assets in the Permian and Montney plays. The company's NuVista acquisition is expected to add to its inventory and provide technical confidence. Ovintiv is also exploring new opportunities, such as the Barnett play, where it has a 100,000-acre position. The company's growth potential is unlocked, and it is well-positioned to take advantage of opportunities as they arise.