Ovintiv Inc. (OVV) Update - May 23

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dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Ovintiv Inc. (OVV) Update - May 23

Post by dan_s »

OVV was trading at $36.23 this morning. My current valuation is $64.00. TipRanks' consensus price target is $52.00

April 3: Ovintiv to Acquire Core Midland Basin Assets (~75,000 Boepd) and sell Bakken Assets (~37,000 Boepd)
> Acquisition to cost $3,125 million cash + 32.6 million shares of OVV to Sellers
> Sale to $825 million cash to Ovintiv
Both deals are expected to close in June.
Net impact should increase Ovintiv's production to ~550,000 Boepd in Q3 2023 (~209,500 bpd of oil and ~82,000 bpd of NGLs).
The Acquisition also adds a lot of running room; over 1,000 (~800 "Premium") HZ well locations in the Permian Basin.
Based on my forecast, Ovintiv's operating cash flow should go over $1Billion in Q3 and Q4.

DENVER, May 16, 2023 /PRNewswire/ - Ovintiv Inc. (NYSE: OVV) (TSX: OVV) (the "Company") today announced that it has priced an offering (the "Notes Offering") of $600,000,000 in aggregate principal amount of 5.650% senior notes due 2025 (the "2025 Notes"), $700,000,000 in aggregate principal amount of 5.650% senior notes due 2028 (the "2028 Notes"), $600,000,000 in aggregate principal amount of 6.250% senior notes due 2033 (the "2033 Notes") and $400,000,000 in aggregate principal amount of 7.100% senior notes due 2053 (the "2053 Notes", and together with the 2025 Notes, the 2028 Notes and the 2033 Notes, the "Notes"). The price to the public for the Notes is 99.994% of the principal amount for the 2025 Notes, 99.973% of the principal amount for the 2028 Notes, 99.793% of the principal amount for the 2033 Notes and 99.796% of the principal amount for the 2053 Notes.

The Company intends to use the net proceeds from the Notes Offering to finance a portion of the cash consideration for the pending acquisition of substantially all of the leasehold interest and related assets of Black Swan Oil & Gas, PetroLegacy Energy and Piedra Resources, which are portfolio companies of funds managed by EnCap Investments L.P., in a cash and stock transaction valued at approximately $4.275 billion (the "Pending Acquisition"). The Notes Offering is expected to close on May 31, 2023, subject to customary closing conditions.

The closing of the Notes Offering is not contingent on the closing of the Pending Acquisition.
Dan Steffens
Energy Prospectus Group
dan_s
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Joined: Fri Apr 23, 2010 8:22 am

Re: Ovintiv Inc. (OVV) Update - May 23

Post by dan_s »

Using March 30, 2023, strip pricing, the Company expects the combined Midland Basin acquisition and the Bakken disposition transactions to drive more than 25% higher cash returns per share over the next twelve months following the close of the transactions and more than 40% higher cash returns per share in 2024.

Dividend Declared
On April 2, 2023, Ovintiv's Board declared a quarterly dividend of $0.30 per share of common stock payable on June 30, 2023, to shareholders of record as of June 15, 2023.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34962
Joined: Fri Apr 23, 2010 8:22 am

Re: Ovintiv Inc. (OVV) Update - May 23

Post by dan_s »

On May 19, 2023: Ovintiv price target lowered to $62 from $66 at Mizuho by Nitin Kumar (a 5-Star energy sector analyst rated by TipRanks)

Mizuho lowered the firm's price target on Ovintiv to $62 from $66 and keeps a Buy rating on the shares.
"The stock selloffs in the U.S. oil and gas sector are "at odds with the messaging from individual companies," the analyst tells investors in a research note. Producers generally emphasized capital discipline, cash returns and an improving service cost environment in Q1, while refiners pointed to better physical markets, says the firm. It says valuations for the sector remain dislocated from both historical levels and other market sectors. Mizuho is more constructive on gas-focused exploration and production companies given the potential inflection in U.S. gas prices in the second half of 2023. Meanwhile, it turns more cautious on U.S. refiners. As a result, the firm is upgrading EOG Resources, Range Resources and Gulfport Energy to Buy while downgrading PBF Energy to Neutral. It also add Devon Energy (DVN) to its "Top Picks" alongside Coterra Energy (CTRA) and Diamondback Energy (FANG), replacing Exxon Mobil."

TipRanks: "In the last 3 months, 16 ranked analysts set 12-month price targets for OVV. The average price target among the analysts is $52.00. The 16 price targets range from $36 to $70." < When companies announce very large "strategic" transactions, some of the Wall Street Gang turns very cautious on their price targets. It usually takes a full quarter of post-closing results before the gap in the price targets narrows. OVV is currently trading at ~2.5 X 2023 operating cash flow per share. That is extremely low for a company of this size and quality.
Dan Steffens
Energy Prospectus Group
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