Ovintiv's (OVV) inventory depth in the Montney, "streamlined" asset portfolio, strong balance sheet and enhanced shareholder returns position the company for a "valuation re-rating" over time, RBC Capital Markets said in a report Tuesday.

Ovintiv remains committed to its disciplined capital allocation strategy, maintaining its 2026 mid-point capital spending program of $2.3 billion and production outlook of 620,000 to 645,000 barrels of oil equivalent per day while retaining flexibility to pursue growth if commodity prices improve over the next 18 to 24 months, the report said.

Ovintiv's plan to return 50% to 75% of free cash flow to shareholders in 2026 through dividends and buybacks, coupled with net debt falling to $3.3 billion below its $4 billion target and the potential for inclusion in the S&P/TSX index, enhances the company's financial flexibility and could drive additional investor demand for its shares, according to the report.

The firm estimates Ovintiv could generate about $2.8 billion in free cash flow in 2026 and said the stock trades at a significant discount to North American peers despite its strong asset base and financial profile, according to the report.

RBC maintained an outperform rating on Ovintiv with a price target of $70.

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