Ovintiv Inc. (OVV) Update - Nov 9
Posted: Tue Nov 09, 2021 10:18 am
OVV is currently trading for $36.22. First Call's price target is $46.44.
Since the company announced Q3 results, four analysts have updated their price targets to $41, $42, $45 and $54.
OVV is up 152% YTD and I think it has at least 50% more upside for us over the next six months, primarily because rising gas prices should draw more attention to OVV. The Q4 production mix should be approximately 50% natural gas and 24% NGLs.
I have updated my forecast/valuation model for OVV and I have raised my valuation by $5 to $65.
Why?
> OVV is on pace to generate more than $1.8 Billion of free cash flow from operations in 2021.
> Production should be up ~30,000 Boepd from Q3 to Q4, most of it from unhedged natural gas.
> Preliminary guidance is for production to be flat from Q4 through 2022, but I am modeling a 3% YOY increase because they consistently under-promise and over-deliver on production.
> They plan to hold capex flat in 2022. If so, free cash flow will be approximately $2.5 billion in 2022.
> They announced a plan to purchase and retire 10% of their outstanding stock by 12/31/2022.
> 2022 should be a year of declining debt, increasing dividends and slow but sure production growth.
Since the company announced Q3 results, four analysts have updated their price targets to $41, $42, $45 and $54.
OVV is up 152% YTD and I think it has at least 50% more upside for us over the next six months, primarily because rising gas prices should draw more attention to OVV. The Q4 production mix should be approximately 50% natural gas and 24% NGLs.
I have updated my forecast/valuation model for OVV and I have raised my valuation by $5 to $65.
Why?
> OVV is on pace to generate more than $1.8 Billion of free cash flow from operations in 2021.
> Production should be up ~30,000 Boepd from Q3 to Q4, most of it from unhedged natural gas.
> Preliminary guidance is for production to be flat from Q4 through 2022, but I am modeling a 3% YOY increase because they consistently under-promise and over-deliver on production.
> They plan to hold capex flat in 2022. If so, free cash flow will be approximately $2.5 billion in 2022.
> They announced a plan to purchase and retire 10% of their outstanding stock by 12/31/2022.
> 2022 should be a year of declining debt, increasing dividends and slow but sure production growth.