Ovintiv Raises Payout Target as Debt Falls After Anadarko Sale
Ovintiv (OVV) cut its net debt to $2.995 billion in the quarter, less than half the year-end 2025 level, after closing its $2.82 billion Anadarko divestiture.
Ovintiv (OVV) swung to a $456 million profit in the second quarter, or $1.62 a diluted share, reversing a $630 million loss in the prior quarter that had been weighed down by $1.2 billion of after-tax ceiling-test impairments. The oil and gas producer's turnaround coincided with the close of its Anadarko Basin asset sale on April 9, which brought in final proceeds of about $2.82 billion, slightly below the $2.85 billion preliminary estimate the company had given a quarter earlier.
The divestiture reshaped both sides of the balance sheet. Net debt fell to $2.995 billion as of June 30, or 0.6 times adjusted EBITDA, from $5.167 billion and 1.2 times at the end of 2024, with the pace of deleveraging accelerating after the sale closed and a $700 million note redemption was completed in April. Long-term debt including its current portion dropped to $3,695 million from $5,202 million over the same period.
Production fell sequentially to 615 thousand barrels of oil equivalent a day in the quarter from 679 MBOE/d in the first quarter, with oil and condensate volumes down to 206 thousand barrels a day from 225 thousand and natural gas down to 1,959 million cubic feet a day from 2,124 million, reflecting the loss of Anadarko output. Measured against a year earlier rather than the prior quarter, total volumes were essentially flat at 614.6 MBOE/d versus 615.3 MBOE/d, though the mix shifted: oil volumes declined to 123.0 thousand barrels a day from 142.0 thousand while plant condensate rose to 82.8 thousand barrels a day from 69.2 thousand.
Pricing told a similar story of divergence between oil and gas. Realized oil and condensate prices, including hedges, climbed to $91.22 a barrel in the quarter from $65.23 a year earlier as benchmark WTI averaged $92.79 versus $63.74. Natural gas realizations moved the other way, falling to $1.99 per thousand cubic feet from $2.38 despite a higher NYMEX benchmark, pointing to weaker basis and hedge realization on the gas side. Upstream operating costs eased to $3.25 per barrel of oil equivalent from $3.71 in the first quarter, but transportation and processing costs rose to $9.47 per BOE from $7.53, a shift that partly offset the operating-cost improvement.
Non-GAAP free cash flow nearly doubled from a year earlier to $682 million in the quarter, from $392 million, while non-GAAP cash flow rose to $1,256 million from $913 million. Capital expenditures still rose year over year, to $574 million from $521 million, even as total production held roughly flat, underscoring the cost of sustaining output through the liquids mix shift.
Ovintiv used the improved cash generation to accelerate share repurchases. Shareholder returns totaled about $429 million in the quarter, or roughly 63% of non-GAAP free cash flow, split between $345 million of buybacks and $84 million of dividends, up sharply from $84 million of buybacks in the first quarter after repurchases resumed in March. Weighted average diluted shares outstanding nonetheless rose to 281.9 million from 260.1 million a year earlier, reflecting equity issued in the NuVista acquisition even as buybacks ramped.
For the full year, Ovintiv raised its production guidance to a range of 630 to 645 MBOE/d from 620 to 645 MBOE/d, citing higher expected oil, condensate and NGL volumes, while holding capital spending guidance unchanged at $2.25 billion to $2.35 billion. The company also lifted its 2026 shareholder-return guidance to more than 60% of non-GAAP free cash flow, up from the roughly 45% actually returned year to date, though still below the at-least-75% target set out in the framework it announced in the fourth quarter of 2024.
Third-quarter production guidance of 615 to 640 MBOE/d sits just above the level Ovintiv actually produced in the second quarter, after the company's prior guide for the second quarter — 610 to 635 MBOE/d — proved conservative against the 615 MBOE/d it delivered.