Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 15 Jan, 25 | OVV | Buy | USD 44.98 | USD 47.5 | USD 49.0 | 49 days | 8.9% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Ovintiv Inc., together with its subsidiaries, explores, develops, produces, and markets natural gas, oil, and natural gas liquids in the United States and Canada. The company operates through USA Operations, Canadian Operations, and Market Optimization segments. Its principal assets include Permian in west Texas and Anadarko in west-central Oklahoma; and Montney in northeast British Columbia and northwest Alberta. In addition, the company's upstream assets comprise Bakken in northwest North Dakota, and Uinta in central Utah; and Horn River in northeast British Columbia. The company was formerly known as Encana Corporation and changed its name to Ovintiv Inc. in January 2020. Ovintiv Inc. was incorporated in 2020 and is based in Denver, Colorado.
Increase in EBITDA Margin
(48.5% in Q3 FY24 vs 36.0% in Q3 FY23)
Increase in Net Margin
(21.8% in Q3 FY24 vs 15.3% in Q3 FY23)
Higher Debt-Equity Ratio
(0.55x in Q3 FY24 vs the industry median of 0.36x)
Ovintiv's Q3 2024 revenue was constrained by lower commodity prices, with oil at $72 per barrel and natural gas at 60% of NYMEX
Commodity Price Volatility, Operational Risks, Regulatory and Environmental Compliance, Capital and Investment Risk, Geopolitical and Economic Risks, etc.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 44.98 | 38.6 | 47.5 | 49.0 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
1. Strong Earnings and Cash Flow - Company delivered robust financial results in Q3 FY24, reporting net earnings of $507 million, equivalent to $1.92 per diluted share. The company generated $1,022 million in cash from operating activities and achieved Non-GAAP Cash Flow of $978 million. After accounting for capital expenditures of $538 million, Ovintiv produced a Non-GAAP Free Cash Flow of $440 million, showcasing strong operational execution.
2. Production Performance Exceeds Expectations- In Q3FY24 production exceeded the high end of its guidance range, with total production averaging 593 thousand barrels of oil equivalent per day (MBOE/d). This included 212 thousand barrels per day (Mbbls/d) of oil and condensate, 93 Mbbls/d of other natural gas liquids (C2-C4), and 1,725 million cubic feet per day (MMcf/d) of natural gas. The company raised its full-year production guidance to a range of 583 MBOE/d to 587 MBOE/d, reflecting its continued operational success.
3. Debt Reduction - Company reduced its total debt by $210 million in Q3 FY24, bringing it down to $5.88 billion. The company's Non-GAAP Debt to Adjusted EBITDA ratio now stands at 1.2 times. With approximately $3.3 billion in total liquidity, including credit facilities and cash, Ovintiv remains committed to further debt reduction. It anticipates receiving $150 million from a legacy asset disposition settlement in Q4 2024.
4. Capital Investment and Production Growth- For full-year 2024, company expects total capital investments to range between $2.275 billion and $2.325 billion, with a midpoint of $2.3 billion. In Q4 2024, the company plans to allocate between $525 million and $575 million toward capital investment, focusing on production growth in key regions such as the Permian, Montney, Uinta, and Anadarko plays.
5. Updated Guidance and Operational Outlook- Company has revised its full-year 2024 production guidance to a range of 583 to 587 MBOE/d and refined its capital investment range to $2.275 billion to $2.325 billion. For Q4 2024, the company anticipates production between 575 and 595 MBOE/d, with oil and condensate production forecasted at 203 to 207 Mbbls/d. These updates highlight Ovintiv's agility and commitment to sustained growth and operational excellence.
Considering the decent fundamentals, associated risks, upward trending topline financials, and other key financial highlights, a 'Buy' recommendation is given on the stock at the closing price of USD 44.98, as of January 14, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Energy Industry: Oil & Gas E&P
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| OVV Ovintiv Inc |
1.05 2.45% | 43.85 | 6.03 | 14.24 | 1.25 | 1.12 | 1.84 | 3.57 |
| COP ConocoPhillips |
0.12 0.11% | 105.14 | 12.82 | 11.12 | 2.24 | 2.90 | 2.47 | 5.63 |
| CNQ Canadian Natural Resources Ltd |
0.38 1.23% | 31.18 | 15.51 | 14.24 | 2.37 | 2.92 | 2.26 | 5.34 |
| EOG EOG Resources Inc |
0.66 0.51% | 128.90 | 9.09 | 8.98 | 3.01 | 2.57 | 2.97 | 5.16 |
| PEXNY PTT Exploration & Production |
- -% | 12.69 | 25.79 | 24.51 | 5.92 | 3.66 | 0.05 | 0.08 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is January 14, 2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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