Ovintiv Inc. (OVV) Valuation Update - Nov 8

[dan_s]

At the time of this post OVV was trading at $42.70, which is just slightly over book value per share.

My valuation increases by $1.50 to $68.00 per share.
> This morning three energy sector analysts submitted updated price targets of $50, $55 and $60.
> My valuation is just 4.5 X annualized operating cash flow per share; a low multiple for a company of this size and quality.
> Q3 results beat my forecast and they raised their production guidance again. < They do it each quarter.
> For Q4 I am using the midpoint of their production guidance, but my guess is that they beat it again like OVV has done each quarter.
> OVV pays a decent dividend and they have an aggressive stock buyback that is a positive impact on my valuation.
> My Q4 forecast is actually lower than TipRanks' consensus EPS forecast of $1.23/share.
> Balance Sheet is in good shape with no near-term debt problems.
> They have a lot of high-quality "Running Room", which you can see on slide 13 of this morning's slides at the link below.
https://filecache.investorroom.com/mr5ircnw_encana/1079/3Q24-earnings-presentation.pdf

Q4 production guidance is ~585,000 Boepd
The only negative that I see is their production mix: 49% natural gas, 15.7% NGLs, 27.8% crude oil and 7.5% plant condensate that sells for ~$6.50/bbl lower than their crude oil price. If natural gas prices do move over $3.00, 2025 will be a very good year for OVV.

I have one more Sweet 16 forecast model to update: APA