Ovintiv Inc. (OVV) Valuation Update - July 29
Posted: Sat Jul 29, 2023 12:46 pm
OVV closed at $45.12 on July 28
I have updated my forecast/valuation model for the Company's Q2 actual results, which were solid but slightly below my forecast.
They have increased their production guidance thanks to outstanding well results.
They have lowered the high end of their capital expenditure budget.
Full year free cash flow should be $650 to $800 million.
Ovintiv now has a lot of high-quality running room and more than enough operating cash flow to fund steady production growth.
It pays a decent dividend with annualized yield of ~2.8% + a stock repurchase plan.
I am increasing my current valuation by $3 to $65.00 per share because I believe OVV deserves a valuation of 4.5 X annualized operating cash flow per share. < My 2024 operating cash flow per share forecast of $15.33 compares to TipRanks' CFPS forecast of $14.56.
Production mix is a bit "gassy", but revenues in 2H 2023 should be ~53% from the sale of oil and condensate. Lots of upside if natural gas and NGL prices do rebound a year from now.
TipRanks: "In the last 3 months, 14 ranked analysts set 12-month price targets for OVV. The average price target among the analysts is $50.21. Only two of the analysts have increased their price targets since Q2 results were announced. They both rate OVV a BUY with price targets of $60 and $62."
I have updated my forecast/valuation model for the Company's Q2 actual results, which were solid but slightly below my forecast.
They have increased their production guidance thanks to outstanding well results.
They have lowered the high end of their capital expenditure budget.
Full year free cash flow should be $650 to $800 million.
Ovintiv now has a lot of high-quality running room and more than enough operating cash flow to fund steady production growth.
It pays a decent dividend with annualized yield of ~2.8% + a stock repurchase plan.
I am increasing my current valuation by $3 to $65.00 per share because I believe OVV deserves a valuation of 4.5 X annualized operating cash flow per share. < My 2024 operating cash flow per share forecast of $15.33 compares to TipRanks' CFPS forecast of $14.56.
Production mix is a bit "gassy", but revenues in 2H 2023 should be ~53% from the sale of oil and condensate. Lots of upside if natural gas and NGL prices do rebound a year from now.
TipRanks: "In the last 3 months, 14 ranked analysts set 12-month price targets for OVV. The average price target among the analysts is $50.21. Only two of the analysts have increased their price targets since Q2 results were announced. They both rate OVV a BUY with price targets of $60 and $62."