Ovintiv Launches 26M Share Buy-Back Program; Shares Rise

Shares of oil, condensate and natural gas producer Ovintiv (OVV) jumped around 3% in Wednesday’s pre-market trading session after the company received approval for a share buy-back program from the Toronto Stock Exchange (TSX).

The company said that the TSX approved its plan to implement a normal course issuer bid (NCIB) to buy back up to 26.05 million shares during the 12 months beginning October 1, 2021.

The number of shares applicable for buyback represents 10% of Ovintiv’s public float as of September 20, 2021. (See Ovintiv stock charts on TipRanks)

The buybacks will be made in the open market through TSX, the New York Stock Exchange, and other trading systems at the prevailing market price at the time of purchase.

Further, starting in the fourth quarter of 2021, and until Ovintiv reaches its net debt target of $3 billion, the company plans to return 25% of the previous quarter’s free cash flow after base dividends through share buy-backs and/or variable dividends to its shareholders.

Additionally, upon meeting its net debt target of $3 billion, the company plans to hike quarterly shareholder returns to at least 50% of the previous quarter’s free cash flow after base dividends.

Seaport Global analyst Nicholas Pope recently initiated coverage on Ovintiv with a Buy rating and price target of $42 (27.50% upside potential).

Pope is impressed by Ovintiv’s debt repayment and assets divestiture initiatives to focus on its main operations. He said that potential returns remain attractive, and its core assets in the Permian, Mid-Continent, and Montney will drive the company’s free cash flow upside.

Consensus among analysts is a Strong Buy based on 14 Buys and 3 Holds. The average Ovintiv price target of $41.31 implies 25.4% upside potential to current levels.

OVV scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.