Ovintiv Inc. (OVV) Q4 Results - Feb 19

[dan_s]

RBC Capital Markets raised their price target by $5 to $23. I am working on my forecast/valuation model now.

Ovintiv’s robust fourth-quarter results were accompanied by an in-line 2021
budget and a $263 million disposition of its Duvernay properties in Canada.
UPSIDE 34.00 TARGET 23.00
Balance sheet deleveraging remains the number one priority for the company,
with further asset dispositions potentially accelerating this process. We are
maintaining a Sector Perform recommendation on Ovintiv, but have raised our
one-year target price by $ 5 to $23 per share.

• Solid 4Q . Ovintiv delivered solid fourth-quarter operating and financial results
amid in-line production of 557,200 boe/d, modestly higher oil and natural gas
realizations, and a cash tax recovery of $0.06 per share. The company generated
an impressive $349 million of free cash in the quarter and reduced long-term
debt by $257 million.

• A&D Update . Amid a thawing of the A&D market, Ovintiv announced the
disposition of its Duvernay assets (9,700 boe/d 4Q production, 43% liquids) for
$263 million (including $12 million in contingency payments). Closing of the
transaction is expected in the second-quarter of 2021.

• Debt Reduction the Priority . Ovintiv reaffirmed its commitment to reducing
absolute debt levels. The company increased its targeted debt reduction from
the second-half of 2020 through to 2021 by 25% to $1.25 billion, and established
a total debt target of $4.5 billion by year-end 2022. Notably, this target includes
$1 billion in expected disposition proceeds (inclusive of the Duvernay sale). Long-
term, the company is also targeting an annual reinvestment rate of sub 75%.

[dan_s]

I have updated my forecast/valuation model for OVV and it will be posted to the EPG website this afternoon.

OVV is currently trading at $21.25
I am raising my valuation from $20 to $27

My forecast assumes their production is flat in 1H 2021 then goes up about 5% in 2H 2021.
My forecast is based on realized prices (including cash settlements on their hedges) of $2.70 for ngas, $52.50/bbl of crude oil and $26.50/bbl of NGLs.

FCF from operations should be over $1 Billion + proceeds from asset sales will also be paying down debt.
Dividend should stay at $0.375/year. < This is good because some funds can only buy stocks that pay a dividend.

My HOPE is that they hold off on hedging any 2022 production. If so, and WTI stays at $60/bbl and HH gas averages $2.75/mcf then this could be a $40 stock in a year.