Ovintiv (OVV) Valuation Update - May 24

[dan_s]

This morning, I finished my review of the updated profile for Ovintiv, one of the largest companies in the Sweet 16. Q1 2024 production was 574,000 Boepd, beating my forecast.

At the time of this post OVV was trading for $48.55. My valuation increases by $1 to $71/share, which is just 3.1 X annualized operating cash flow per share.

Ovintiv's "gassy" production mix (47.5% natural gas and 16% NGLs) was a negative that may soon be a positive.

Based on my forecast, Ovintiv should generate over $1.7 billion of free cash flow this year. The Company pays a small dividend ($0.30/quarter) and most of this year's FCF is being used by pay down debt and buy back common stock. The balance sheet is in decent shape, so I expect dividend increases to come later this year.

Ovintiv has a lot of high-quality Running Room within its four core areas.

The updated profile and my new forecast will be posted to the EPG website this afternoon.

TipRanks: "In the last 3 months, 17 ranked analysts set 12-month price targets for OVV. The average price target among the analysts is $60.47. The 17 price targets range from $49 to $71." < All of the price targets updated since Ovintiv released Q1 results are over $54. Rising natural gas prices should justify higher price targets.