Here's Why You Should Retain Ovintiv Stock in Your Portfolio for Now

Ovintiv Inc. OVV has delivered a robust 5.7% gain in its share price over the past three months, outperforming both its sector’s gain of 4.4% and its sub-industry’s loss of 3%. This outperformance signals strong relative strength and highlights the company’s favorable positioning. With such momentum, OVV stands out as a compelling candidate in terms of investor attention that is worth tracking closely.

OVV's Stock Price Changes Over the Past Three Months

Ovintiv, formerly known as Encana, is a leading independent energy producer with operations across the United States and Canada. The company relocated its headquarters from Calgary to Denver and expanded its footprint through the $6 billion acquisition of Newfield Exploration in 2019. Once primarily a natural gas producer, Ovintiv has strategically shifted its portfolio toward higher-margin crude oil, solidifying its position among the top North American E&P players.

However, for investors, the key debate is whether OVV’s strong run has more room to extend or if the rally has priced in much of the upside. With the company’s evolving portfolio strategy, shifting commodity mix and recent operational tailwinds playing a critical role, the stock’s prospects warrant a closer examination before deciding whether to buy, hold or take profits.

What’s Working in Favor of Ovintiv?

Robust Free Cash Flow Generation: Ovintiv generated a Non-GAAP free cash flow of $392 million during the second quarter of 2025 and is on track to generate about $1.6 billion of free cash flow in 2025. This represents a 10% improvement over earlier forecasts, highlighting the resiliency of its business model. This demonstrates both operational efficiency and financial discipline. Robust cash generation not only strengthens the balance sheet but also underpins shareholder returns via buybacks and dividends, signaling sustainable value creation even in a moderate commodity price environment.

Production Outperformance With Lower Capex: During the second quarter of 2025, the total production of 615 thousand barrels of oil equivalent per day (MBOE/d) exceeded guidance across all products, and the company raised its full-year outlook to 600-620 MBOE/d while lowering capital investment by $50 million at the midpoint. This rare combination of higher production with reduced spending highlights Ovintiv’s improving well productivity, enhanced capital efficiency and successful integration of new assets, which should support future margin expansion.

Diversified Asset Base Driving Growth: The company benefits from scale and diversification across three premier North American plays: the Permian (215 MBOE/d, 80% liquids), Montney (300 MBOE/d) and Anadarko (100 MBOE/d). This balanced mix of oil, condensate and natural gas reduces reliance on any single commodity or geography, providing resilience against price volatility. The Montney integration has already delivered synergies and meaningful volume growth, strengthening future growth visibility.

Premium, Long-Life Inventory: OVV holds nearly 15-20 years of premium inventory in the Permian and Montney, plus over a decade in Anadarko. This depth ensures long-term production visibility and supports a disciplined “cube development” strategy that maximizes resource recovery while avoiding well degradation. With an extensive runway of high-return locations, the company is well-positioned to sustain growth and cash generation over the next two decades, unlike its peers, which face shrinking inventory.

What’s Causing the Pressure on OVV Stock?

High Debt Load: At mid-2025, OVV carried $5.3B in total debt, aiming for $4B in the medium term. While deleveraging progress is evident, the current debt still weighs on flexibility and increases exposure to interest rate risk. Should commodity prices weaken or capital efficiency targets falter, debt reduction could stall, leaving the company vulnerable compared to peers with leaner balance sheets.

Execution Risks in Montney Integration: Although management reports seamless integration of newly acquired Montney assets with early cost savings, uncertainties remain regarding long-term well performance and the realization of upside potential. Any underperformance in these 900+ locations could impair the expected return on acquisition and strain capital allocation, raising execution risks in one of its anchor plays.

Rising Transportation and Processing Costs: While upstream operating costs improved year over year ($3.84/BOE vs. $4.29), transportation and processing costs increased to $7.62/BOE from $7.15. Given the company’s large gas footprint and reliance on takeaway capacity, these costs could continue to rise, eroding margins. Investors should monitor whether efficiency gains and productivity improvements can sustainably offset escalating midstream expenses.

Commodity Price & Hedge Risks: Ovintiv’s cash flow assumptions are based on $60 WTI and $3.75 NYMEX for the remainder of 2025. Any deviation below these levels could materially reduce free cash flow guidance. While hedging provides some downside protection, coverage is limited to near-term periods, leaving investors exposed to longer-term volatility. Dependence on external factors beyond management’s control adds uncertainty to future earnings power.

Where Do Estimates Stand for OVV?

The Zacks Consensus Estimate for Ovintiv’s 2025 earnings is pegged at $4.99 per share, indicating a 14.4% year-over-year decline. Additionally, the consensus mark for its revenues is pegged at $8.8 billion for 2025, also implying a 3.4% year-over-year decline.

OVV’s Earnings Estimate

Final Verdict on OVV Stock

OVV has demonstrated strong stock performance in the past three months, along with strong operational efficiency, highlighted by production outperformance and robust free cash flow generation, which underpin sustainable shareholder returns through dividends and buybacks. Its diversified asset base across the Permian, Montney and Anadarko, coupled with decades-long premium inventory, ensures long-term growth visibility and resilience against commodity price volatility.

However, headwinds remain, particularly its sizable debt load, execution risks associated with the Montney integration, and cost pressures tied to transportation and processing. Additionally, near-term consensus estimates point to earnings and revenue declines in 2025, suggesting limited upside in the immediate term.

Taken together, Ovintiv offers durable fundamentals but carries enough risk to warrant a hold stance rather than aggressive accumulation or exit, making it suitable for investors seeking stability and long-term value retention.

OVV's Zacks Rank & Key Picks

Currently, OVV has a Zacks Rank #3 (Hold).

Investors interested in the energy sector might look at some better-ranked stocks like Repsol, S.A. REPYY, Antero Midstream Corporation AM and Enbridge Inc. ENB. While Repsol sports a Zacks Rank #1 (Strong Buy) at present, Antero Midstream and Enbridge carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Repsol explores, develops and produces crude oil products and natural gas, transports petroleum products and liquified petroleum gas and refines petroleum. The Zacks Consensus Estimate for REPYY’s current quarter earnings indicates 47.9% year-over-year growth.

Denver, CO-based Antero Midstream is a leading provider of integrated and customized midstream services. The Zacks Consensus Estimate for AM’s 2025 earnings indicates 20.5% year-over-year growth.

Calgary, Alberta-based Enbridge is a leading energy infrastructure company engaged in the transportation of energy through the most extensive and advanced crude and liquids pipeline system. The Zacks Consensus Estimate for ENB’s 2025 earnings indicates 9.5% year-over-year growth.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research