UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended JuneSeptember 30, 2021

or

Commission file number 001-39191

Ovintiv Inc.

(Exact name of registrant as specified in its charter)

Suite 1700, 370 17th Street, Denver, Colorado, 80202, U.S.A.

(Address of principal executive offices)

Registrant’s telephone number, including area code (303) 623-2300

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  

Yes ☐    No  ☒

Securities registered pursuant to Section 12(b) of the Act:

OVINTIV INC.

FORM 10-Q

TABLE OF CONTENTS

DEFINITIONS

Unless the context otherwise indicates, references to “us,” “we,” “our,” “ours,” “Ovintiv,” and the “Company,” refer to Ovintiv Inc. and its consolidated subsidiaries for periods after January 24, 2020 and to Encana Corporation and its consolidated subsidiaries for periods before January 24, 2020. In addition, the following are other abbreviations and definitions of certain terms used within this Quarterly Report on Form 10-Q:

“AECO” means Alberta Energy Company and is the Canadian benchmark price for natural gas.

“ASU” means Accounting Standards Update.

“bbl” or “bbls” means barrel or barrels.

“BOE” means barrels of oil equivalent.

“Btu” means British thermal units, a measure of heating value.

“DD&A” means depreciation, depletion and amortization expenses.

“ESG” means environmental, social and governance.

“FASB” means Financial Accounting Standards Board.

“GHG” means greenhouse gas.

“Mbbls/d” means thousand barrels per day.

“MBOE/d” means thousand barrels of oil equivalent per day.

“Mcf” means thousand cubic feet.

“MD&A” means Management’s Discussion and Analysis of Financial Condition and Results of Operations.

“MMBOE” means million barrels of oil equivalent.

“MMBtu” means million Btu.

“MMcf/d” means million cubic feet per day.

“NCIB” means normal course issuer bid.

“NGL” or “NGLs” means natural gas liquids.

“NYMEX” means New York Mercantile Exchange.

“NYSE” means New York Stock Exchange.

“OPEC” means Organization of the Petroleum Exporting Countries.

“SEC” means United States Securities and Exchange Commission.

“SIB” means substantial issuer bid.

“TSX” means Toronto Stock Exchange.

“U.S.”, “United States” or “USA” means United States of America.

“U.S. GAAP” means U.S. Generally Accepted Accounting Principles.

“WTI” means West Texas Intermediate.

CONVERSIONS

In this Quarterly Report on Form 10-Q, a conversion of natural gas volumes to BOE is on the basis of six Mcf to one bbl.  BOE is based on a generic energy equivalency conversion method primarily applicable at the burner tip and does not represent economic value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value, particularly if used in isolation.

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CONVENTIONS

Unless otherwise specified, all dollar amounts are expressed in U.S. dollars, all references to “dollars”, “$” or “US$” are to U.S. dollars and all references to “C$” are to Canadian dollars. All amounts are provided on a before tax basis, unless otherwise stated. In addition, all information provided herein is presented on an after royalties basis.

The terms “include”, “includes”, “including” and “included” are to be construed as if they were immediately followed by the words “without limitation”, except where explicitly stated otherwise.

The term “liquids” is used to represent oil, NGLs and condensate. The term “liquids rich” is used to represent natural gas streams with associated liquids volumes. The term “play” is used to describe an area in which hydrocarbon accumulations or prospects of a given type occur. Ovintiv’s focus of development is on hydrocarbon accumulations known to exist over a large areal expanse and/or thick vertical section and are developed using hydraulic fracturing. This type of development typically has a lower geological and/or commercial development risk and lower average decline rate, when compared to conventional development.

The term “core asset” refers to plays that are the focus of the Company’s current capital investment and development plan. The Company continually reviews funding for development of its plays based on strategic fit, profitability and portfolio diversity and, as such, the composition of plays identified as a core asset may change over time.

References to information contained on the Company’s website at www.ovintiv.com are not incorporated by reference into, and does not constitute a part of, this Quarterly Report on Form 10-Q.

FORWARD-LOOKING STATEMENTS AND RISK

This Quarterly Report on Form 10-Q contains certain forward-looking statements or information (collectively, “forward-looking statements”) within the meaning of applicable securities legislation, including Section 27A of the United States Private Securities Litigation Reform Act of 1995.1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  All statements, except for statements of historical fact, that relate to the anticipated future activities, plans, strategies, objectives or expectations of the Company are forward-looking statements.  When used in this Quarterly Report on Form 10-Q, the use of words and phrases including “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “focused on,” “forecast,” “guidance,” “intends,” “maintain,” “may,” “opportunities,” “outlook,” “plans,” “potential,” “strategy,” “targets,” “will,” “would” and other similar terminology is intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words or phrases.  Forward-looking statements include:include statements regarding: expectations of plans, strategies and objectives of the Company, including anticipated activity and investment levels; composition of the Company’s core assets, including allocation of capital and focus of development plans; growth in long-term shareholder value; vision of being a leading North American energy producer; statements with respect to the Company’s strategic objectives, including capital allocation strategy, focus of investment, growth in long-term shareholder value, return of capital to stockholders,shareholders through dividends and/or share buybacks, growth of high margin liquids volumes, operating and capital efficiencies and ability to preserve balance sheet strength; statements regarding the benefits of the Company’s multi-basin portfolio; statements regardingportfolio, including operational flexibility and the ability to repeat and deploy successful operational learnings; the Company’s capital plan; statements regardingability to maximize cash flows and the Company’s application of excess cash flows to reduce long-term debt; the ability of the Company to maximizetimely meet and maintain certain targets contained in the Company’s corporate guidance, including with respect to capital efficiency, hydrocarbon production, cash flow through a disciplined capital allocation strategy;flows generation, debt reduction, GHG emissions and ESG performance, and cash returns to shareholders; anticipated cost savings, capital efficiency and sustainability thereof; ability to repeatanticipated oil, NGL and deploy successful practices across the Company’s multi-basin portfolio; anticipated commoditynatural gas prices; anticipated success of, and benefits from, technology and innovation, including the cube development approach, Simul-Frac techniques and other new or advanced drilling or well completion designs; ability to optimize well and completion designs; future well inventory; anticipated drilling activity, including the number of drilling rigs utilized and the success thereof; anticipated well inventory, drilling costs and cycle times; anticipated proceeds and future benefits from various joint venture, partnership and other agreements; estimates of oil and natural gas reserves and resources and potential for negative price related reserve revisions;recoverable quantities; expected production and product types; anticipatedexpected future interest expense; the Company’s ability to access to cash, cash equivalentscredit facilities and other methods of funding; anticipated hedgingfunding, meet financial obligations, manage debt and financial ratios, finance growth and comply with financial covenants; the implementation and outcomes of risk management program,programs, including exposure to certain commodity prices and foreign exchange fluctuations, amountthe volume of production hedged, production, market access and the markets or physical sales locations;locations hedged; the impact of changes in laws and regulations; anticipated compliance with environmental legislation and claims related to the purported causes and impact of climate change, and the costs therefrom;legislation; adequacy of provisions for abandonment and site reclamation costs; statements regarding the Company’s operational and financial flexibility, discipline and ability to respond to evolving market conditions; ability to meet financial obligations, manage debt and financial ratios, finance growth and comply with financial covenants; impactimpacts to the Company as a result of a reduction of its credit rating; access to the Company’s credit facilities; planned dividend and the declaration and payment of future dividends, if any; planned redemption of outstanding senior notes; expectations with respect to the Company’s restructuring initiative, including anticipated transition and severance costs and the timing thereof; adequacy of the Company’s provision

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for taxes and legal claims; projections and statements in respect of funding;the Company’s ability to manage cost inflation and expected cost structures, including expected operating, transportation, and processing and administrative expenses; competitiveness and pace of growth of the Company’s assets within North America andCompany against its peers;peers, including with respect to capital, materials, people, assets and production; global oil, NGL and natural gas inventories and global demand for oil;oil, NGL and natural gas; the outlook of the oil and gas industry generally, and impact ofincluding impacts from changes to the geopolitical environment; expected future interest expense; the Company’s commitments and contingencies and anticipated payments thereunder; and the possible impact of accounting pronouncements, rule changes and standards.

Readers are cautioned against unduly relying on forward-looking statements which, by their nature, involve numerous assumptions and are subject to both known and unknown risks and uncertainties (many of which are beyond our control) that may cause such statements not to occur, or actual results to differ materially and/or adversely from those expressed or implied. These assumptions include: future commodity prices and basis differentials; future foreign exchange rates; the ability of the Company to access credit facilities and shelf prospectuses; data contained in key modeling statistics; the availability of attractive commodity or financial hedges and the enforceability of risk management program; effectiveness ofprograms; the Company’s driveability to capture and maintain gains in productivity and efficiencies; resultsefficiency; benefits from technology and innovations; expectationexpectations that counterparties will fulfill their obligations under thepursuant to gathering, midstreamprocessing, transportation and marketing agreements; access to adequate gathering, transportation, processing and processing facilities where Ovintiv operates;storage facilities; assumed tax, royalty and regulatory regimes; assumptions contained herein and expectations and projections made in light of, and generally consistent with,

Ovintiv’s the Company’s historical experience and its perception of historical industry trends, including with respect to the pace of technological development, benefits achieveddevelopment; and general industry expectations.the other assumptions contained herein.

Risks and uncertainties that may affect these business outcomesthe Company’s financial or operating performance include: suspension of or changes to guidance, and associated impact to production; ability to generate sufficient cash flow to meet obligations; market and commodity price volatility, including widening price or basis differentials, and the associated impact to the Company’s stock price, credit rating, financial condition, oil and natural gas reserves and access to liquidity; uncertainties, costs and risks involved in our operations, including hazards and risks incidental to both the drilling and completion of wells and the production, transportation, marketing and sale of oil, NGL and natural gas; availability of equipment, services, resources and personnel required to perform the Company’s operating activities; suspension of or changes to corporate guidance, and associated impacts to production and cash flows; our ability to generate sufficient cash flows to meet our obligations and reduce debt; the impact of COVID-19 (or other future pandemics) on oilcommodity prices and to the Company’s operations, including maintaining ordinaryadequate staffing levels, securing operational inputs, executing on portionsall or a portion of itsour business plan and managing cyber-security risks associated with remote work; our ability to secure adequate transportation;transportation and storage for oil, NGL and natural gas, as well as access to end markets or physical sales locations; interruptions to oil, NGL and natural gas production, including potential curtailments of refinery operations, including resulting storage constraintsgathering, transportation or widening price differentials;refining operations; variability and discretion of Ovintiv’sthe Company’s board of directors (the “Board of Directors”) to declare and pay dividends, if any; the timing and costs associated with drilling and completing wells, and the construction of well facilities and pipeline construction;gathering and transportation pipelines; business interruption, property and casualty losses (including weather related losses) or unexpected technical difficulties including impact of weather;and the extent to which insurance covers any such losses; risks associated with decommissioning activities, including timing and costs thereof; counterparty and credit risk; the impact of changes in our credit rating and access to liquidity, including costs thereof; changes in political or economic conditions in the U.S. and Canada, including fluctuations in currencyforeign exchange rates, interest rates and interestinflation rates; failure to achieve or maintain our cost and efficiency initiatives; risks inherent in marketing operations; risks associated with technology, including electronic, cyber and physical security breaches; changes in or interpretation of royalty, tax, environmental, greenhouse gas,GHG, carbon, accounting and other laws or regulations;regulations or the interpretations thereof; our ability to timely obtain environmental or other necessary government permits or approvals; the Company’s ability to utilize U.S. net operating loss carryforwards and other tax attributes; risks associated with existing and potential lawsuits and regulatory actions made against the Company; risks related to the purported causes and impact of climate change, and the costs therefrom; the impact of disputes arising with itsour partners, including suspension of certain obligations and inability to dispose of assets or interests in certain arrangements; the Company’s ability to acquire or find additional oil and natural gas reserves; imprecision of oil and natural gas reserves estimates and estimates of recoverable quantities, including the impact to future net revenue estimates; risks associated with past and future acquisitions or divestitures of certainoil and natural gas assets, or other transactions orincluding the receipt of any contingent amounts contemplated underin the transaction agreements (such transactions may include third-party capital investments, farm-ins, farm-outs or partnerships, which Ovintivthe Company may refer to from time to time as “partnerships” or “joint ventures” and the funds received in respect thereof which Ovintivthe Company may refer to from time to time as “proceeds”, “deferred purchase price” and/or “carry capital”, regardless of the legal form) as a result; our ability to repurchase the Company’s outstanding common shares, including risks associated with obtaining any necessary stock exchange approvals; the existence of various conditions not being met;alternative uses for the Company’s cash resources which may be superior to the payment of dividends or effecting repurchases of the Company’s outstanding common shares; risks and other risksuncertainties described in Item 1A. Risk Factors of the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 Annual Report

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on Form 10-K”) and in this Quarterly Report on Form 10-Q,10-Q; and other risks and uncertainties impacting Ovintiv’sthe Company’s business as described from time to time in the Company’s other periodic filings with the SEC.SEC or Canadian securities regulators.

Although the Company believes the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions, risks and uncertainties referenced above are not exhaustive. Forward-lookingAlthough the Company believes the expectations represented by its forward-looking statements are reasonable based on the information available to it as of the date such statements are made, forward-looking statements are only predictions and statements of our current beliefs and there can be no assurance that such expectations will prove to be correct.  All forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this document and, except as required by law, the Company undertakes no obligation to update publicly or revise any forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q and all subsequent forward-looking statements attributable to the Company, whether written or oral, are expressly qualified by these cautionary statements.

The reader should read carefully the risk factors described in Item 1A. Risk Factors of the 2020 Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements.

PART I

Item 1. Financial Statements

Condensed Consolidated Statement of Earnings (unaudited)

Condensed Consolidated Statement of Comprehensive Income (unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheet (unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheet (unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements

Condensed Consolidated Statement of Changes in Shareholders’ Equity (unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements

Condensed Consolidated Statement of Changes in Shareholders’ Equity (unaudited)