FCF US Quality ETF (TTAC) holding Ovintiv generated record free cash flow in what president and CEO Brendan McCracken called “a milestone year” for the Denver-based hydrocarbon exploration and production company. The company generated $2.3 billion of free cash flow in 2022, up from the $1.7 billion generated in 2021.
Through this free cash flow, Ovintiv engaged in share buybacks, reduced its long-term debt, and expanded its drilling inventory with new return locations.
“2022 was a milestone year for Ovintiv. At $2.3 billion, our team delivered a record Non-GAAP Free Cash Flow,” McCracken said. “We returned nearly $1 billion directly to our shareholders through our base dividend and share buybacks, we reduced long-term debt by approximately $1.2 billion and we expanded our drilling inventory with approximately 450 new premium return locations.”
Added McCracken: “These results demonstrate that our strategy is working, and our strong financial performance is translating into durable returns for our shareholders.”
Free cash flow is the cash left over after a company has paid expenses, interest, taxes, and long-term investments. It is used to buy back stocks, pay dividends, or participate in mergers and acquisitions.
FCF Advisors specializes in free cash flow investment strategies, primarily through its Free Cash Flow Quality Model. The company has been focused on this factor since 2011 and is specialized in multi-factor fundamental analysis grounded in decades of research.
Bob Shea, CIO of FCF Advisors, said he believes that “GAAP earnings have significant disadvantages” and “accounting practices allow a lot of leeway and discretion to management.” Meanwhile, “the ability to manipulate and distort free cash flow is a lot more difficult than with earnings.”
TTAC aims to outperform the Russell 3000 through a fundamentals-driven investment process that selects about 150 stocks based on free cash flow strength. Its holdings are then weighted by a modified market-cap log transformation, allowing increased exposure to companies with the strongest proprietary rankings.
The ETF’s portfolio will also be rated with an ESG score, excluding companies with low ESG ratings. Firms with an extreme rise in share count and increase in leverage are excluded.
For more news, information, and analysis, visit the Free Cash Flow Channel.