Ovintiv (OVV) is positioned for potential valuation expansion as its streamlined portfolio, strong execution, resource depth and improving shareholder returns create a favorable setup, RBC Capital said in a Friday note.

The analysts said Ovintiv's Q2 performance supported its outlook, citing production of 614,600 barrels of oil equivlent per day, Permian outperformance, net debt below $3 billion and a 5,000-barrel-per-day increase in its Permian oil and condensate production run rate to about 125,000 barrels per day.

Ovintiv plans to return more than 60% of free cash flow to shareholders through dividends and share buybacks in 2026, with continued strong free cash flow generation expected from its asset base and operational execution, according to the note.

RBC said the company trades at a discount to peers despite its balance sheet, inventory depth and shareholder returns, with potential S&P/TSX Composite Index inclusion offering additional demand support.

RBC maintained its outperform rating on the stock and raised its price target to $85 from $70.

Ovintiv shares were down over 2% in Monday trading.

Price: 61.43, Change: -1.70, Percent Change: -2.69