Ovintiv Inc. (OVV) Update - April 3

[dan_s]

Ovintiv is doing the right thing by shutting down several operated rigs and slashing their capex spending. However, they have not announced new production guidance. What I've done is assume that 2020 production will be about 10% below the mid-point of their previous production guidance for 2020 that was announced on February 19.

I've also lowered the multiple of operating cash flow that I'm using to value the stock from 3X to just 2X operating CFPS for (2020+2021)/2.
> Ovintiv is a large company with production of ~580,000 Boepd
> 2019 results were $0.90 earnings per share and $11.28 operating cash flow per share
> Most of their 2020 production is now hedged at prices much higher than the current WTI and HH indexes.
> The stock is trading for $3.29 today.

My valuation drops from $18.00 to $12.50 per share.

If you aren't familiar with Ovintive, it used be called Encana. It is now headquartered in Denver.

This will give you an idea of the crazy world we live in today:
"In the last 3 months, 16 ranked analysts set 12-month price targets for OVV. The average price target among the analysts is $10.23. The price targets range from $2.12 to $25.00."

My forecast/valuation model will be posted to the EPG website this afternoon. I believe the production volumes and commodity prices used in my forecasts for 2020 and 2021 are conservative, but forecasting is a difficult task in "Crazy Coronavirus World".