Ovintiv Stock Rises As Goldman Sachs Sees ‘Meaningful Discount’ Compared With Oil Peers

Ovintiv (OVV) stock rose 3.3% on Tuesday after Goldman Sachs upgraded shares of the shale producer to ‘Buy’ from ‘Neutral.’

According to TheFly, the brokerage also raised its price target for the stock to $51 from $47, citing outsized expectations for free cash flow generation. The new price target implies a 34% upside from the stock’s previous close. Ovintiv stock has a consensus price target of $52.33, according to FinChat data.

Goldman Sachs analysts reportedly said that after the sale of higher-cost Uinta assets and the acquisition of deeper, more capital-efficient Montney inventory, Ovintiv’s free cash flow generation "trades at a meaningful discount relative to larger-cap diversified E&P peers.”

In November, Ovintiv agreed to sell its Uinta Basin assets located in Utah to FourPoint Resources for $2 billion. It also agreed to acquire assets in Canada’s Montney region for $2.38 billion from Paramount Resources.

The Montney deal will result in $125 million in annual cost savings, Ovintiv had said. The newly acquired assets, with a production capacity of 70,000 barrels of oil equivalent per day, are located adjacent to Ovintiv’s existing acreage in the area.

In May, the company projected second-quarter production to average approximately 595,000 barrels of oil equivalent per day (boepd), including about 205,000 barrels of oil and condensate per day. It also projected higher capital spending in the second quarter, due to increased activity in the Montney, where it has emerged as the second-largest producer.

Retail sentiment on Stocktwits was in the ‘neutral’ (48/100) territory, while retail chatter was ‘normal.’

Ovintiv stock has fallen 4.3% this year but is up 6.7% over the past month.

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