Ovintiv doubles Cash Flow and Free Cash Flow but net Income drags with Risk Management Losses

 Q1 was an unusual quarter for Ovintiv which has it's headquarters in Denver,Colorado. True,it's operating income, cash flow and free cash flow were almost double Q4 in 2021 but it's revenues and earnings (net income) was well below the estimates made by many analysts.The consensus for revenues was $1.97-$2.05 billion and for earnings  was at about $2.25-$2.40 per share with some analysts forecasting $2.60-$2.65 per share.Production was lower than estimated because of natural gas and liquids.Oil hit it's target production figure. .Consequently Scotiaitrade reported a net loss for Ovinitiv but other analysts,including Zacks, reported e.p.s. of $1.97-$2.05.Because of the unusual nature of the losses Ovintiv should have reported it as an adjusted net income or loss.An adjusted net loss shows that the losses were due to extraordinary items.                                                                                                                 According to Scotiaitrade Ovintiv declared large losses due to risk management.Risk management is ususally done by hedging their oil,with traders, at prices higher than market.Consequently hedging or risk management ususally raises not lowers revenues.But in a fast rising oil price sceanario the oil producer could end up by selling oil that has been hedged below the existing market price.However this is an unrealized loss in revenues not an actual one.It appears to this blog that Ovintiv management has mixed together actual losses with unrealized losses.And so this confusing unrealized loss(according to Scotiaitrade) should not be emphasized by investors nor shareholders.

       Shareholder Returns

  Ovintiv has created a new measure of financial performance;they call it total shareholder retutrns. Ovintiv now has 259 million outstanding shares but since March31,2022 OVV has repurchased almost 5 million shares.And it has increased it's dividend by 25%.OVV calls these two actions total shareholder returns as they both benefit their shareholders.And Ovintiv states that they will have further shareholder returns of $$200 million in Q2.In addition, they will redeem a promissory note for $1billion.$400 million will be repaid in Q2 consequently bringing debt to $4 billion.This will also benefit shareholders although indirectly as it strengthens their balance sheet.           

  

        Other Analysts

Many analysts thought that based on the trend seen in 2021 that OVV would report earnings of $2.05-$2.40 with the high estimate being at $2.61 per share.Ovintiv reported total costs per barrel of oil at $15.48 and with rising oil prices the netback was $36.12 per barrel.And furthermore it met it's production guidance at 500,000 BOE/day and 175,000 barrels/day of oil. Consequently cash flow at $1,043 million was double that of Q1 in 2021.This has allowed OVV to pay down debt so that it will be only $3 billion in Q3 of 2022.Also OVV tells shareholders that it will buy back $200 million of shares in Q2. 

    Forward Earnings

 This blog sees that there will not likely be any significant increase in production from 2021 levels.However it should be said that this blog sees oil prices rising throughout 2022. And this will likely make projections made in Q1 below the final outcome in earnings.For excample, the price of oil has already raised 22% since Oventiv reported it's Q1 earnings.But the price of Oventiv shares has raised 42% in this time frame.Right now Oventiv trades at about 20 times earning,saccording to Scotiaitrade, (P/E ratio of 20), or almost $80/share.Estimates for OVV's annual earnings are $6.50 according  to Scotiaitrade and $9.50 per share according to Zacks Research.The difference is due to the calculation of Q1 earnings by both brokers.Both estimates may be low with the recent run-up in prices.But if so then the share price will probably break through the $85-$90 mark by summer's end.

                        https://www.marketbeat.com/

Has Northland Power weathered the Storm?

    For part of 2020 and most of 2021 Northland Power has suffered from mild weather in the North Sea and brought earnings down from expected levels.The North Sea is considered by many as having the strongest winds in the world.But during this period the North Sea has not produced strong enough winds to turn the turbines on NPI's 3 large wind farms here.It appears that the trouble is really caused by a minor technical adjustment as the winds,themselves,but it is true that the winds have been more moderate than usual.Some analysts think the new German member of the board will help NPI to adjust to the unusual weather conditions in the North Sea.

    Q4 Highlights

    NPI  produced a very average performance for the year(2021) both in revenues and earnings but performance picked up in Q4 and that augurs well for 2022.NPI points out that although revenues were flat in 2021 that performance from their Spanish and Columbia assets provided a strong contribution to their annual performance.Consequently sales increased by 30% in Q4 over Q4 2020 but only by 2% for all of 2021.Consequently the same pattern followed for adjusted EBITDA.That is, adjusted EBITDA increased by 35% in Q4 to $364 million but decreased by 3% for the year.Similarly net income increased by 383% in Q4 and decreased by 44% for the full year. And Northland Power points out that annual losses would have been greater if not for the offsets by their Colombian and Spanish portfolio.                                       

 

      Future Projects

 Northland Power did not point out in this quarterly report that it has major wind farm  projects in the system that are almost ready for commercial operations including Hai LongHai Long 2 and Hai Long 3 offshore of Taiwan and a solar project called La Lucha in Mexico. These are mentionned in my blog dated 03/23/2020 on Blogdaleupsome-Blogger. But it surprised shareholders with the news that it has a new Colombian solar project nearing completion and a large- scale offshore project  Scotland (2340MW) expected to be commercial in 2029 and 3 more Nordsee projects (1350MW ) expected to be ready for 2026 to 2028.               

       NPI has just had a good Q4 as measured by all of it's financial indicators.This points to a better trend for 2022 as contributions come in from it's newly acquired assets like Baltic Power.Northland mentions the contribution from it's Spanish and Columbian portfolio but does not mention the status of it's newly acquired Baltic Power in Poland.Neither does it mention the expected contribution from Hai Long 1 and 2.But perhaps it is too early to see a significant contribution from it's Taiwan wind farm.It is clear that the weather has not cooperated with the ususally strong North Sea winds.Perhaps their new board member can help them harvest more power from the existing winds and make the required adjustments to weather the storm.If so then investors can expect a better 2022 than that of 2021.However this blog cannot give a price target until Q1 of 2022 has been examined.     https://www.moneysense.ca

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Facedrive owes it's Shareholders a Q4 report

     On Novembner28 Facedrive released it's Q3 report. The Q4 and annual report was due to be released on February 28.But Facedrive management thought it better to keep the financial figures to themselves.The only message from FD management received was that FD replaced it's CFO.As they agreed with the content of an earlier blog on Wordpress EconothonII dated December 25 that stated operating expenses were overstated and operating revenues were understated.Shareholders may have objected to downplaying the potential of Facedrive and the Facedrive share price.It almostv seems that Facedrive management is trying to make financial matters look worse than they are and keep the share price down.This,of course, is ludicrous as the stated objective of the CEO and the board of directors is to maximize profit and shareholder's equity.This behaviour by management is not doing that.What can the rationale for hiding the performance of Facedrive when it appears to be on an upwards trajectory?                 

                  The Expected Path 

    My last blog on Wordpress (Blogdaleup) dated February 15,2022 showed that FD had made quite a few astute acquisitions when the Facedrive share price was higher.Yet little information was shown to shareholders on companies like Foodhighway,Steer and Tally. But what was clear is that although there was a substantial amount of revenues and adjusted EBITDA in Q2 and Q3 management  made efforts to overstate expenses and understate revenues.In other words management downplayed their earnings.Consequently this blog applauded management for letting go the ultra -conservative CFO that clearly was understating e.p.s.That aside,this blog was expecting a report for Q4 better than Q3 based on the trajectory of revenues and adjusted EBITDA shown in the first 9 months of 2021.Although the end of the pandemic in 2022 meant that mobile food delivery would gradually  be reduced in Q4 the business from their sit- down restaurants would increase.It is likely most analysts saw increases in mobile food delivery for Q4.And any decreases in mobile food delivery would only take place in Q1 2022.

   When will Shareholders get their Annual Report?

   

 In my Feb.15 2022 blog I predicted that revenues would likely be up to $12 million in Q4.And if management made an attempt to control opertational expenses then e.p.s. could be as high as a loss of ($.02)- ($.03) for Q4 and a loss of ($.27) for 2021.This would be an encouraging sign for shareholders and new inverstors.This could even send the  Facedrive share price towards $3.00.Only an extraordinary event could knock FD off this path on the operational side.So why would the CEO not at least provide shareholders with a corporate update explaining why there was no Q4 and annual report?There was no significant event to change the path on the operational side between Q3 and Q4.There were some changes to the share price but that should not affect opertational performance.So the trajectory seen in the first 9 months should provide the best estimate of Q4 results.But shareholders need the CEO to confirm this in a corporate update or the release of Q4 results.

     Going Forward

   There have been quite a few changes to Facedrive personnel since Q2.And it can be seen how this could upset the CEO.Nevertheless skipping a quarterly report and the annual report is inexcusable.At least a corporate update might explain the rationale for this behaviour.But this blog believes that the CEO has until May 28 (the date of the next quarterly report) to correct this situation.Now it is likely that dominant shareholders are preparing an ambush by calling a Special General Meeting to discus filing an interim performance report and electing a new CEO.Until then it is impossible to predict the share price.

                                       

 

Dale Mcintyre M.S.Sc. is a freelance writer that works chiefly with Zacks Research and Moneysense.     https://www.zacks.com/  MoneySense 

 

One of my Biggest Slip-ups ; my forecast for VIQ Solutions (VQS)

     This blog(Workathon) has made several accurate forecasts of the future for Canadian small cap stocks.But one of my biggest mistakes was VIQ Solutions (VQS) it transcribes  legal documents into digital format and captures court documents on video.I forecasted it would go up to $5 and then $8 a share.It did make it to $5 for quite awhile and even $8 for 4 months but now it has fallen off to the $2.50 area.Where did I go wrong?

    Former Blogs

   I wrote 3 blogs on Wordpress (EconothonII) - one on August14,2020; one on October17,2020 and one on April23,2021.The first 2 were fairly accurate as the stock climbed to $5 and even $8 for awhile.But VQS could not raise it's annual revenue to $35 million and adjusted EBITDA to $4-$5 million.It has a loyal or dedicated customer base but it could not increase it's customer base.All 3 of these blogs counted on VQS making a new acquisition in 2021.Finally it did make a substantial acquisition in Australia late in 2021.VQS says this will increase revenues by $14 million (40%) in 2022.And this will help cover it's fixed costs as VIQ Solutions has expensive equipment to amortize.

    Using their Capital Base

  VIQ Solutions has come a long way since 2019.But this blog and VQSmanagement  thought that VQS shares would continue to trade in the $8 price range.The stock has fallen because VQS did not reach it's forecast of revenue and adjusted EBITDA.The pandemic did not help this stock.But on the bright side VIQ Solutions now has reduced it's debt completely.And it only has 30 million shares outstanding.This is not much for a small-cap technology stock.And this is after their Australian acquisition.

      It appears that the 4 acquisitions made since 2019 have been carefully made with a minimum of good will paid out.There may be few  other acquisitions around that can be immediately accretive to income.But this blog believes that VQS may have to either make a few more risky investments or pay considerably more goodwill to increase their revenue base.After all they still have negative net income.Many companies find themselves in this position after making 2 or 3 accretive acquisitions.Otherwise a larger company with a broader revenue base may start looking closer at VQS.

     Consolidation

   VIQ Solutions now is debt free as well as having a small number of shares outstanding.VQS is likely worried about issuing more shares and diluting shareholder's earnings.So expansion of the customer base likely will be accomplished by another acquisition.A future acquisition may require some shares issued but mostly new debt.

         

                                                             

      This blog see the next quarter as pivotal.If revenues aren't at least $50-$52 million and adjusted EBITDA around $7 million then the stock price will likely drift lower.This may bring an unsolicited bid for purchase or rerquire VQS to make a less than desirable acquisition.In fact, VQS management may be talking to both kinds of partners right now.

                      DaleMcintyre is a freelance writer that works primarily with Zacks Research and MoneySense websites.     https://www.zacks.com/   https://www.moneysense.ca/ 

                                       

Payfare makes new partnerships in Q3 but stock lags slightly

Payfare (PAY) has been active in Q3 expanding it's usability by using customer apps.It made 3 partnerships that potentially will increase it's active user count and hence revenues.Principally it made a deal to allow instant access to Doordash delivery drivers plus a 2% cashback on every gas purchase.It made a deal to allow international money transfers from Payfare.And it made it clearer that there would be no monthly fees nor minimum account balance  required.

Q3 Highlights

Active user count increased by 37% over Q2 2021 which also had a healthy increase.This resulted in Q3 revenues of $12.7 million for a 286% increase over Q3 2020 and a 46% increase over Q2 2021.This produced a $606,000 gross profit and allowed PAY to completely pay off it's loan facility.In addition, Payfare made a partnership with a company called Plaid that allowed it to interconnect with any app.Although this blog feels that the gain in active user account of 37% was quite favorable it needs another 25% gain in active user account in the next quarter.Some revenue increase will be made by a gain the velocity of present users.But this blog feels that Payfare must expand it's customer base beyond the GIG  economy.

                                                            Forecast for Q4 

   Payfare had an increase in revenues from Q2 to Q3 of about 46%.This brought revenues to $12.7 million. And if Payfare is able to expand it's active user account by perhaps 25% and increase it's usage velocity this blog feels that revenues may hit $15.5-$16 million in Q4.But this will likely require Payfare to make one or two new partnerships.And this will bring annual revenues to about $50 million plus net income will then approach being positive.This will probably send the PAY  share price to $10.But if the active user account only shows a small percentage increase and there is a small increase in velocity this blog feels that Payfare will stay in a range between it's present level and $9 a share. 

                           

 Dale Mcintyre M.S.Sc.(Econ) is a freelance writer associated with Zacks Research and the Woodbridge Group.

Zacks Investment Research: Stock Research, Analysis, MarketBeat: Stock Market News and Research Tools

 
 

Labrador Iron Ore (LIF) still a steal at Q4 prices

   Labrador Iron Ore (LIF) has a substantial position in Iron Ore Company of Canada (IOC) which produces iron and iron is the principal element in making steel and steel pipes like the one shown above.And yes it is a steal at these prices.My blog on Wordpress (Blogdaleup dated June 2,2021) stated that the stock price movement in LIF has been chiefly caused by the doubling of iron ore prices since Q2 2020.And the World Steel Association is calling for a 6% increase in steel production in 2021.It is true that LIF is a unique stock because it controls no production decisions as it is a royalty company.This has brought it's P/E ratio down to 6.2 times earnings.On the other hand, LIF has almost no operating expenses,no debt and is flush with cash.It certainly would be a good time for LIF to start diversification.

       Iron Ore Company

      All of LIF's revenue and earnings come from Iron Ore Company of Canada (IOC).So LIF gets production royalties of 7% and 10 cents a tonne and because it owns 15% of IOC it gets a sizeable dividend from IOC.Production has only increased slightly from Q2 2020 but iron ore prices have doubled as have royalties.However the iron ore price has come down from Q2 2021 when it hit a high of $219/tonne.The price quickly fell to $90/tonne but has recovered now to $115/tonne.Analysts expect the price to move up to $150/tonne until the second half of 2022.Equity earnings from IOC were $60 million compared to $35 million in Q3 2020.

    Q3 Highlights

      Aided by Q3 prices royalty revenues were $74 million compared to $52 million in Q3 2020.And as already mentionned equity earnings from IOC were $60 million. Consequently net income (including the IOC dividend) was $1.64 per share an 82% increase over Q3 2020. And despite a longer than expected maintenance shutdown LIF produced 12.3 million tonnes of iron ore in the first 9 months or about 4 million tonnes per quarter.LIF expects to produce 4-5 million tonnes in Q4. 

 No  Debt and a Good Steel Market 

       The iron ore price is largely determined by exports to the Chinese market.And this market is expected to be stable unitl the seconf half of 2022.And in fact analysts expect the price of iron ore to greadually move up to $150/tonne.And LIF management expects that "IOC will pay a sizeable dividend but not as great as that in Q3".So it is likely that e.p.s. could be in a range of $1.50- $1.75 in Q4 and the Q4 dividend is expected to be $2.10 per share.This could send the share price back to the $45 price level if IOC sends a reasonable dividend.

       This blog feels that the LIF share price is too volatile because of the fluctuating iron ore price and it's lack of control over production at IOC.Furthermore it has no debt and even has some cash on hand. My last blog on LIF  suggested that it buy the 7% not needed for control of IOC from Rio Tinto.But failing that it could buy a chunk of of a steel maker that is starting to rebuild.Yes a 15% stake in Stelco would help to stabilize both company's earnings.         Zacks Investment Research: Stock Research, Analysis, & Recommendations

                             

 

 

  Dale McIntyre M.S.Sc.(Econ) is a freelance writer that writes blogs for several brokers. 

Western Forest awaits Q3 Results

Western Forest Products (WEF) has had a rough time for the last 2 to 3 years.In March of 2020 it hit a low of $.61 and even in August of 2020 it traded only at $1.20.Lumber prices had been trading around $250-$500 per 1000 boardfeet. But in the summer of 2020 the lumber cycle reversed and prices climbed to a high of $1500 per Mbdft.The revenues for Q1 and Q2 of 2021 were at record highs.With the wait in delivery times and bills being paid a considerable amount of June Q2's high prices will be reflected in Q3 not Q2.But then the price dropped to the $500 per Mbdft. area and only now is recovering to the $750 area.

  Recap of Q2 Highlights

 Q1 revenues and earnings were well above the rate seen in Q1 2020.A traditional level of earnings would have been $.03-$.05 in the 2018-2020 period.But in Q1 2021 WEF produced $.14 per share.This helped to move the almost stagnant stock price.And WEF reported e.p.s. of $.21 in Q2.So in Q2 the stock price moved up to the $2.00 level after reporting e.p.s. of $.09 per share in Q4 2020 and $.14 in Q1 2021.And in Q2 WEF started to divest all it's non-core assets like partnerships with indigenous people and a stone quarry.This money came to about $45 million and Western used it to pay off debt.Now it's debt/equity ratio is a reasonable 12%.However as the lumber price came down in Q3 WEF retreated to it's former level around $2.00.Now it awaits Q3 results but investors have bid the stock price up to the $2.35 level.This blog believes that investors will be rewarded as e.p.s. should be in a range from $.11-$.15 per share.Scotiabank foreacsts annual e.p.s. of $.47 for WEF in 2021.This blog expects $.51-$.55 per share .Because of the cyclical nature of lumber stocks their P/E/ ratio tends to be lower than the TSX average.But with a P/E ratio of 6 times investors should expect the stock price to move towards $3.00-$3.25 by December.Now WEF shareholders only have to wait until November3 to see Q3 results.     

  Dale Mcintyre  M.SC is a freelance writer working with Zacks Research.

Keeping up with Interfor and Canfor

         Western Forest has made a lot of improvements in the last 18 months.Mostly to clean up it's B.C. coastal operations.Now it's debt has been reduced and it's liquidity is solid.But it has not made acquisitions to bolster it's diversity against another shock from the lumber price cycle. WEF needs to solidify it's supply chain  by 2022. Zacks Investment Research: Stock Research, Analysis, & Recommendations              MoneySense