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Ovintiv: Anticipating A Dividend Cut

Published Mon, 06 Apr 2020 15:04:58 -0400 on Seeking Alpha

Over the last 52 weeks, Ovintiv Inc. has lost more than 93% of its market value, pushing its dividend yield up to approximately 14%.
The company has less liquidity and more debt than it did in 2018, which leaves it ill-prepared to wait out commodity price weakness.
Ovintiv has hedges that cover 70% of its production and significant flexibility in its capital plan which will allow the company some optionality in managing near-term cash flow challenges.
Ovintiv is likely to cut its dividend, as the company has done in 2013 and 2015.
All figures are reported in USD unless otherwise noted.
Investment Thesis
Over the last 52 weeks, Ovintiv Inc. (NYSE: OVV) has lost more than 93% of its value by market capitalization. The recent decline was triggered by falling energy demand from the growing COVID-19 pandemic and the Russia-Saudi Arabia price war. The rapid decline in share price has pushed up Ovintiv's dividend yield from 1.6% at the end of 2019 to almost 14% at current levels. While a robust hedging program and flexibility in the company's capital expenditure program will allow it some protection, the company's cash flow will be materially impacted due to falling commodity prices. With two dividend cuts in the last decade, it is probable that Ovintiv will cut its dividend again in the coming quarters to protect its cash flow. Investors should anticipate a dividend cut and significant share price volatility.

Source: Morningstar
Company Profile
Ovintiv Inc. formerly, Encana Corporation, is an oil and gas producer production and exploration company headquartered in Denver, CO. Ovintiv has roots dating back to the 1950s where it was formed as "Canadian Pacific Oil and Gas". Subsequent mergers with "Central-Del Rio Oils" and the "Alberta Energy Company" in the following decades saw the company grow and complete a number of corporate restructurings that led to its current form. The company operates through three segments: Canadian Operations, USA... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
VERMILION ENERGY 15.98   9.3 1.72 2.09 13.10
OCCIDENTAL PETROLEUM 45.40   9.0 5.05 3.16 6.81
APACHE 23.84   0.0 -1.87 1.00 4.22


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