Ovintiv Inc. (OVV) Update - July 2

[dan_s]

Ovintiv deserves a lot more of our attention. It closed on July 1 at $43.50.
I have updated my valuation to $85.00 and I am only using a 4.5 X multiple of annualized operating cash flow. It deserves a multiple of 6X. If the Company's Q2 results and guidance confirm my model assumptions, my valuation s/b going over $100/share.

TipRanks: "In the last 3 months, 11 ranked analysts set 12-month price targets for OVV. The average price target among the analysts is $70.45." Since June 6th, six analysts have submitted updated price targets to TipRanks that range from $57.00 to $115.00.

This one is worth noting: "On 6/16/2022 National Bank analyst Travis Wood raised the firm's price target on Ovintiv to $115 from $90 and keeps an Outperform rating on the shares." Travis Wood is a 5-Star energy sector analyst.

Key Stats:
> Ovintiv reported Q1 2022 Adjusted Operating Cash Flow of $1,031 million ($3.99/share). I am expecting Q2 Adjusted Operating Cash Flow to be ~$1.2 Billion.
> Key to my valuation: For the year 2022, Ovintiv is on pace to generate $5 Billion of operating cash flow and $3.2 Billion of free cash flow from operations.
> I am expecting the Company's production to be down slightly in Q2 and then ramp up steadily to an exit rate of more than 530,000 Boepd, which compares to Q1 actual production of 499,933 Boepd
> Ovintiv's revenues are heavily weighted to liquids. The recent dip in natural gas prices had a minor impact on my valuation.
> FCF priorities have been pay down debt, stock repurchases and dividends. The balance sheet is already in good shape and s/b in great shape by year-end.
> The Company will be paying much higher dividends after Q3.