Ovintiv Inc: 2Q26 Preview: The Little Boy that Cried Wolf; Anticipating Another Upbeat Permian Print, But Cash Flow Miss on Quarter Specific Items

Research evidence excerpt

Ovintiv Inc: 2Q26 Preview: The Little Boy that Cried Wolf; Anticipating Another Upbeat Permian Print, But Cash Flow Miss on Quarter Specific Items

prices. At JPM’s Natural

Resources Conference in late June, we observed a positive shift in tone from CEO Quarterly Forecasts (FYE Dec)

McCracken, particularly given the reduction in net debt to below $3.3bn (vs. a Adj. EPS ($)

long-term debt target of $4.0bn) and the decline in crude oil prices. Another 2025A 2026E 2027E

upcoming catalyst could be the potential to get added to the TSX index, as we Q1 1.42 2.00A 1.69

Q2 1.02 1.98 1.24

understand that the S&P is considering adding companies not domiciled in Canada Q3 1.03 1.29 1.34

to key passive indexes. Based on the company’s commentary, a potential index Q4 1.39 1.44 1.52

inclusion could be constructive for the stock, as OVV would carry a ~2.5% FY 4.86 6.70 5.78

weighting in the index under the currently proposed rules. In this note, we also Style Exposure

show updated productivity charts for the Midland Basin (see Figure 1OVMidlandBasinOilCumes-Quarterly and Figure

2OVMidlandBasinOilCumes-Anual), with 1Q26 wells trending +13% ahead of 2025 vintages in terms of 2-mo oil

cumes.

In terms of the quarter, we do anticipate a financial miss from OVV, with our 2Q26

EPS/CFPS estimates of $1.98 and $4.23 being -3%/-3% below current consensus

estimates of $2.05/$4.36, respectively. While the company's cash flows will

benefit from higher crude oil/condensate prices relative to 1Q26 levels, we believe

our below consensus estimates are primarily attributable to three factors: 1)

restructuring/transaction costs of $47mm related to recent M&A transactions and

one-time make-whole provision costs of $22mm for the redemption of 2028 notes;