Ovintiv (OVV) Valuation Update - May 7

[dan_s]

At the time of this post OVV was trading at $33.62, which is just 2.26 X my operating cash flow per share forecast for 2025.

I have updated my forecast/valuation model for the Company. It will be posted to the EPG website later this afternoon.

I have lowered my valuation by $4.50 to $62.50,

TipRanks: "In the last 3 months, 17 ranked analysts set 12-month price targets for OVV. The average price target among the analysts is $50.94." < Four analysts submitted updated price targets this morning of $48, $48, $53 and $57 by TD Cowen.

In the "Good Old Days" of belief that this world would continue to run on Oil, Gas and NGLs, a company of this size and quality would have a stock price of 6X annualized operating cash flow per share. My 2025 CFPS forecast is $14.86, which compares to TipRanks' consensus forecast of $14.78.

My current valuation of $62.50 is based on just 4X annualized operating cash flow per share + I have increased the "cushions" to my CFPS calculation for each future period.

The upside for OVV is that they have the ability to significantly increase their natural gas production in 2H 2025 and 2026. By Q4 2025 I expect their production mix to be 52% natural gas, 15% NGLs, 24% crude oil and 9% plant condensate that sells for ~$5/bbl discount to WTI oil.

Bottomline: If you believe natural gas prices will increase to $5.00/MMBtu by December 2025 then OVV should look good to you. At the time of this post the JAN26 NYMEX futures contact for HH natural gas was trading at $5.17.