Ovintiv Inc. (OVV) Valuation Update - Oct 17

[dan_s]

At the time of this post OVV was trading at $51.28, which is only $0.57 higher than where it closed on 12-31-2022. It is in MUCH BETTER SHAPE today.

My updated valuation is $66.50, which compares to TipRanks' average price target of $56.47

Five analysts have submitted adjusted price targets to TipRanks since October 10th. They are $50, $55, $63, $65 and $69. < "On 10-16-2023 Truist Securities analyst Neal Dingmann (5 Star) raised the price target on Ovintiv Inc. (NYSE: OVV) to $63.00 (from $54.00) while maintaining a Buy rating."

I think OVV has a lot of upside for us. This is a big company (previously called EnCana).
> Q2 production of 573,200 Boepd beat my forecast by a wide margin.
> On June 12th they closed a large Midland Basin acquisition that added ~75,000 Boepd and a lot of low-risk development drilling locations (I love "running room"). On the same day they sold their Bakken assets which were producing ~37,000 Boepd (60% oil).
> The Company's production mix is approximately 37.5% oil, 48% natural gas and 14.5% NGLs. < Lots of upside if ngas prices move higher.
> They should generate about $800 million of free cash flow this year. Most of it should be used to pay down debt.
> If WTI averages $90 and HH ngas averages $3.25 in 2024, Ovintiv should generate over $4.4 Billion of operating cash flow next year. My WAG is that 2024 will be $2.8 to $3.0 Billion.
> They announced an aggressive stock buyback, but I'd rather see free cash flow used to pay down debt first. Either or both should increase the equity value.

In my opinion, 2023 has been a "Transformational Year" for Ovintiv. They now have a significant core area in the Permian Basin that sets up steady production growth going forward that can be fully funded by operating cash flow. Go take a look at the stock price chart. The Wall Street Gang has just begun to see the potential of this large-cap.