UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20222023
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 001-39191
Ovintiv Inc.
(Exact name of registrant as specified in its charter)
Delaware | 84-4427672 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Suite 1700, 370 17th Street, Denver, Colorado, 80202, U.S.A.
(Address of principal executive offices)
Registrant’s telephone number, including area code (303) (303) 623-2300
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Shares | OVV | New York Stock Exchange |
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.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |
Emerging growth company | ☐ |
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:
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Number of registrant’s shares of common stock outstanding as of |
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1
OVINTIV INC.
FORM 10-Q
TABLE OF CONTENTS
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Condensed Consolidated Statement of Changes in Shareholders’ Equity |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 35 | ||
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66 | |||
67 |
DEFINITIONS2
DEFINITIONS
Unless the context otherwise indicates,requires or otherwise expressly stated, all references in this Quarterly Report on Form 10-Q to “Ovintiv,” the “Company,” “us,” “we,” “our,” “ours,” “Ovintiv,” and the “Company,”“ours” refer to Ovintiv Inc. and its consolidated subsidiaries for periods on or 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: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.
“S&P 400” means Standard and Poor’s MidCap 400 index.
“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.
3
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, and the other documents incorporated herein by reference (if any), contain certain forward-looking statements or information (collectively, “forward-looking statements”) within the meaning of applicable securities legislation, including Section 27A of the Securities Act of 1933 (the “Securities Act”), as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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, and the other documents incorporated herein by reference (if any), 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-lookingWithout limiting the generality of the foregoing, forward-looking statements include statements regarding:contained in this Quarterly Report on Form 10‑Q include: expectations of plans, strategies and objectives of the Company, including anticipated development activity and investment levels;reserves development; the Company’s coreability to consummate any future acquisition and divestiture transactions; the Company’s ability to successfully integrate any acquired assets (including the Permian Acquisition as defined in Note 8 to the Condensed Consolidated Financial Statements under Part I, Item 1 of this Quarterly Report on Form 10-Q)) into its business; drilling plans and programs, including availability of capital to complete these plans and programs; the composition of corethe Company’s assets and the anticipated capital returns associated with coreits assets; the Company’s capital allocation strategy, capital structure, anticipated sources of funding, growth in long-term shareholder value and ability to preserve balance sheet strength; the benefits of the Company’s multi-basin portfolio, including operational and commodity flexibility, and the ability to repeat and deploy successful operational learnings; the Company’s ability to maximize cash flow and the application of excess cash flows to reduce long-term debt; the ability of the Company to timely meet and maintain certain targets contained in the Company’s corporate guidance, including with respect to capital efficiency, cash flow generation, debt reduction and leverage, the return of capital to shareholders, oil, NGLs and natural gas production, GHG emissions and ESG performance; the ability of the Company to lower costs and improve capital and operating efficiencies, and the ability to maintain such cost savings and efficiencies; anticipated oil, NGL and natural gas prices; the anticipated success of, and benefits from, technology and innovation, including the cube development model, Simul-Frac techniques and other new or advanced drilling techniques or well completion designs; anticipated drilling and completions activity, including the number of drilling rigs and frac crews utilized; anticipated well inventory, drilling costs and cycle times; the Company’s ability to optimize well completion designs, including changes to horizontal lateral lengths, water and proppant volumes, number of frac stages, and well spacing and stacking; anticipated proceeds and future benefits from various joint venture, partnership and other agreements; estimates of the Company’s oil, NGLs and natural gas reserves and recoverable quantities; the Company’s expectedanticipated oil, NGLs and natural gas production and commodity mix, including growth of high margin liquids volumes; future interest expense;mix; the Company’s capital structure and ability to access credit facilities, credit markets and other sources of liquidityliquidity; the ability of the Company to meet financial obligations throughout commodity price cycles; the Company’s ability to manage debttimely achieve its stated ESG goals, targets and financial ratios, finance growth and comply with financial covenants; the implementation and outcomes of risk management programs, including exposure to commodity price, interest rate and foreign exchange fluctuations, the volume of oil, NGLs and natural gas production hedged, and the
markets or physical sales locations hedged;initiatives; the impact of changes in federal, state, provincial, local and tribal laws, rules and regulations; anticipated compliance with current or proposed environmental legislation, including the costs thereof; adequacy of provisions for abandonment and site reclamation costs;legislation; the Company’s operationalability to manage debt and financial flexibility, disciplineratios and abilitycomply with financial covenants; the implementation and outcomes of risk management programs, including exposure to respond to evolving market conditions;commodity prices, interest rate and foreign exchange fluctuations and the volume of oil, NGLs and natural gas production hedged; the declaration and payment of future dividends and the anticipated repurchase of the Company’s outstanding common shares; the adequacy of the Company’s provision for taxes and legal claims; the Company’s ability to manage cost inflation and expected cost structures, including expected operating, transportation, processing and labor expenses; the competitiveness of the Company against its peers, including with respect to capital, materials, people, assets and production; global oil, NGL and natural gas inventories and global demand for oil, NGL and natural gas; the outlook of the oil and natural gas industry generally, including impacts from changes to the geopolitical environment; anticipated staffing levels; anticipated payments related to the Company’s commitments, obligations and contingencies, and the ability to satisfy the same; and the possible impact of accounting and tax pronouncements, rule changes and standards.environment.
Readers are cautioned against unduly relying onThe forward-looking statements which, by their nature,included in this Quarterly Report on Form 10-Q involve numerous assumptions and are subject to both known and unknown risks and uncertainties (many of which are beyond our control) that maycould 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 abilityprojected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of the Company to access credit facilities and shelf prospectuses; assumptions contained in the Company’s corporate guidance; data contained in key modeling statistics; the availability of attractive commodity or financial hedges and the enforceability of risk management programs; the Company’s ability to capture and maintain gains in productivity and efficiency; benefits from technology and innovations; expectations that counterparties will fulfill their obligations pursuant to gathering, processing, transportation and marketing agreements; access to adequate gathering, transportation, processing and storage facilities; assumed tax, royalty and regulatory regimes;actual results. We have based these forward-looking statements on current expectations and projections made in lightassumptions about future events, taking into account all information currently known by us. While we consider these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and generally consistent with, the Company’s historical experiencebeyond our control. The risks and its perception of historical industry trends, including with respect to the pace of technological development; and the other assumptions contained herein.
Risks and 4
uncertainties that may affect the Company’s financial or operatingoperations, performance include: 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, NGLs 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 flow to meet our obligations and reduce debt; the impact of a pandemic, epidemic or other widespread outbreak of an infectious disease (such as the ongoing COVID-19 pandemic) on commodity prices and the Company’s operations, including maintaining adequate staffing levels, securing operational inputs, executing all or a portionresults of our business plan and managing cyber-security risks associated with remote work; our ability to secure adequate transportation and storage for oil, NGL and natural gas, as well as access to end markets or physical sales locations; interruptions to oil, NGLs and natural gas production, including potential curtailments of gathering, transportation or refining operations; variability and discretion of the 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 gathering and transportation pipelines; business interruption, property and casualty losses (including weather related losses) or unexpected technical difficulties 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 actions of members of OPEC and other state-controlled oil companies with respect to oil, NGLs and natural gas production and the resulting impacts on oil, NGLs and natural gas prices; changes in our credit rating and its effect on our ability to access liquidity, including the costs thereof; changes in political or economic conditions in the U.S. and Canada, including fluctuations in foreign exchange rates, tariffs, taxes, interest rates and inflation rates; failure to achieve or maintain our cost and efficiency initiatives; risks associated with technology, including electronic, cyber and physical security breaches; changes in royalty, tax, environmental, GHG, carbon, accounting and other laws, rules or 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, including with respect to environmental liabilities and other liabilities thatforward-looking statements include, but are not adequately covered by an effective indemnity or insurance; risks relatedlimited to, the purported causes and impact of climate change, and the costs therefrom; the impact of disputes arising with our partners, including the suspension of certain obligations and the inability to dispose of assets or interests in certain arrangements; the Company’s ability to acquire or find additional oil, NGLs and natural gas reserves; imprecision of oil, NGLs and natural gas reserves estimates and
estimates of recoverable quantities, including the impact to future net revenue estimates; land, legal, regulatory and ownership complexities inherent in the U.S., Canada and other applicable jurisdictions; risks associated with past and future acquisitions or divestitures of oil and natural gas assets, including the receipt of any contingent amounts contemplated in the transaction agreements (such transactions may include third-party capital investments, farm-ins, farm-outs or partnerships, which the Company may refer to from time to time as “partnerships” or “joint ventures” and the funds received in respect thereof which the Company may refer to from time to time as “proceeds”, “deferred purchase price” and/or “carry capital”, regardless of the legal form); our ability to repurchase the Company’s outstanding shares of common stock, including risks associated with obtaining any necessary stock exchange approvals; the existence of 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 shares of common stock; risks and uncertainties describedthose set forth in Item 1A. Risk Factors of the Company’s most recent Annual Report on Form 10‑K for the fiscal year ended December 31, 20212022 (the “2021“2022 Annual Report on Form 10‑K”10-K”) and in thisthe Company’s Quarterly Report on Form 10‑Q;10-Q for the three months ended March 31, 2023; and other risks and uncertainties impacting the Company’s business as described from time to time in the Company’s other periodic filings with the SEC or Canadian securities regulators.
Readers are cautioned that the assumptions, risks and uncertainties referenced above, and in the other documents incorporated herein by reference (if any), are not exhaustive.
Although 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-Q10‑Q are made as of the date of this document (or in the case of a document incorporated herein by reference, the date of such 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 or incorporated by reference in this Quarterly Report on Form 10-Q,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 carefully read the risk factors described in Item 1A. Risk Factors of the 2022 Annual Report on Form 10‑K and the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023, for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements.
5
PART I
Item 1. Financial Statements
Condensed Consolidated Statement of Earnings (unaudited)
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| Three Months Ended |
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| Nine Months Ended |
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| Three Months Ended |
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| Six Months Ended |
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| September 30, |
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| September 30, |
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| June 30, |
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| June 30, |
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(US$ millions, except per share amounts) |
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| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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| 2023 |
| 2022 |
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| 2023 |
| 2022 |
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Revenues |
| (Note 2) |
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| (Note 2) |
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Product and service revenues |
| (Note 3) |
| $ | 3,643 |
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| $ | 2,720 |
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| $ | 11,064 |
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| $ | 7,440 |
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| (Note 3) |
| $ | 2,352 |
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| $ | 4,014 |
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| $ | 4,944 |
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| $ | 7,421 |
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Gains (losses) on risk management, net |
| (Note 18) |
|
| (111 | ) |
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| (950 | ) |
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| (1,864 | ) |
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| (2,176 | ) |
| (Note 19) |
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| 147 |
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| (295 | ) |
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| 89 |
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| (1,753 | ) |
Sublease revenues |
| (Note 9) |
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| 17 |
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| 19 |
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| 52 |
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| 55 |
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| (Note 10) |
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| 18 |
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| 17 |
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| 35 |
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| 35 |
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Total Revenues |
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| 3,549 |
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| 1,789 |
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| 9,252 |
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| 5,319 |
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| 2,517 |
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| 3,736 |
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| 5,068 |
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| 5,703 |
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Operating Expenses |
| (Note 2) |
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| (Note 2) |
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Production, mineral and other taxes |
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| 109 |
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| 77 |
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| 321 |
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| 210 |
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| 76 |
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| 118 |
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| 160 |
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| 212 |
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Transportation and processing |
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| 468 |
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| 397 |
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| 1,327 |
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| 1,194 |
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| 452 |
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| 453 |
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| 907 |
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| 859 |
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Operating | (Notes 15, 16) |
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| 228 |
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| 153 |
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| 596 |
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| 466 |
| (Notes 16, 17) |
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| 175 |
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| 180 |
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| 381 |
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| 368 |
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Purchased product |
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| 973 |
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| 759 |
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| 3,154 |
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| 2,096 |
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| 692 |
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| 1,115 |
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| 1,393 |
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| 2,181 |
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Depreciation, depletion and amortization |
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| 291 |
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| 297 |
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| 833 |
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| 916 |
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| 419 |
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| 278 |
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| 783 |
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| 542 |
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Accretion of asset retirement obligation |
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| 4 |
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| 5 |
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| 14 |
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| 17 |
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| 4 |
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| 5 |
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| 9 |
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| 10 |
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Administrative | (Notes 15, 16) |
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| 103 |
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| 101 |
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| 318 |
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| 346 |
| (Notes 8, 16, 17) |
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| 168 |
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| 71 |
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| 226 |
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| 215 |
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Total Operating Expenses |
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| 2,176 |
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| 1,789 |
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| 6,563 |
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| 5,245 |
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| 1,986 |
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| 2,220 |
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| 3,859 |
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| 4,387 |
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Operating Income (Loss) |
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| 1,373 |
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| - |
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| 2,689 |
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| 74 |
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| 531 |
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| 1,516 |
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| 1,209 |
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| 1,316 |
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Other (Income) Expenses |
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Interest |
| (Notes 4, 10) |
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| 83 |
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| 77 |
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| 248 |
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| 263 |
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| (Note 4) |
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| 80 |
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| 91 |
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| 151 |
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| 165 |
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Foreign exchange (gain) loss, net |
| (Notes 5, 18) |
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| 19 |
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| - |
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| 21 |
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| (15 | ) |
| (Notes 5, 19) |
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| 25 |
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| 3 |
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| 22 |
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| 2 |
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Other (gains) losses, net | (Notes 6, 16) |
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| (3 | ) |
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| (6 | ) |
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| (30 | ) |
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| (31 | ) | (Note 17) |
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| (11 | ) |
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| - |
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| (14 | ) |
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| (27 | ) | ||
Total Other (Income) Expenses |
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| 99 |
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| 71 |
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| 239 |
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| 217 |
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| 94 |
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| 94 |
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| 159 |
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| 140 |
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Net Earnings (Loss) Before Income Tax |
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| 1,274 |
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| (71 | ) |
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| 2,450 |
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| (143 | ) |
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| 437 |
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| 1,422 |
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| 1,050 |
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| 1,176 |
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Income tax expense (recovery) |
| (Note 6) |
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| 88 |
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| 1 |
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| 148 |
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|
| (175 | ) |
| (Note 6) |
|
| 101 |
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| 65 |
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|
| 227 |
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| 60 |
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Net Earnings (Loss) |
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| $ | 1,186 |
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| $ | (72 | ) |
| $ | 2,302 |
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| $ | 32 |
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| $ | 336 |
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| $ | 1,357 |
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| $ | 823 |
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| $ | 1,116 |
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Net Earnings (Loss) per Share of Common Stock |
| (Note 12) |
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|
|
|
|
|
|
|
| (Note 13) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
|
| $ | 4.70 |
|
| $ | (0.28 | ) |
| $ | 9.00 |
|
| $ | 0.12 |
|
|
|
| $ | 1.35 |
|
| $ | 5.28 |
|
| $ | 3.33 |
|
| $ | 4.34 |
|
Diluted |
|
|
|
| 4.63 |
|
|
| (0.28 | ) |
|
| 8.84 |
|
|
| 0.12 |
|
|
|
|
| 1.34 |
|
|
| 5.21 |
|
|
| 3.28 |
|
|
| 4.26 |
|
Weighted Average Shares of Common Stock Outstanding (millions) | Weighted Average Shares of Common Stock Outstanding (millions) | (Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted Average Shares of Common Stock Outstanding (millions) | (Note 13) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
|
|
| 252.5 |
|
|
| 261.1 |
|
|
| 255.7 |
|
|
| 260.7 |
|
|
|
| 249.4 |
|
|
| 257.2 |
|
|
| 246.9 |
|
|
| 257.3 |
| |
Diluted |
|
|
|
| 256.2 |
|
|
| 261.1 |
|
|
| 260.4 |
|
|
| 265.3 |
|
|
|
|
| 250.8 |
|
|
| 260.6 |
|
|
| 250.8 |
|
|
| 262.1 |
|
Condensed Consolidated Statement of Comprehensive Income (unaudited)
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
|
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
|
|
| September 30, |
|
| September 30, |
|
|
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
(US$ millions) |
|
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
|
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Earnings (Loss) |
|
|
| $ | 1,186 |
|
| $ | (72 | ) |
| $ | 2,302 |
|
| $ | 32 |
|
|
|
| $ | 336 |
|
| $ | 1,357 |
|
| $ | 823 |
|
| $ | 1,116 |
|
Other Comprehensive Income (Loss), Net of Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency translation adjustment |
| (Note 13) |
|
| (94 | ) |
|
| (48 | ) |
|
| (125 | ) |
|
| (4 | ) |
| (Note 14) |
|
| 53 |
|
|
| (59 | ) |
|
| 55 |
|
|
| (31 | ) |
Pension and other post-employment benefit plans |
| (Notes 13, 16) |
|
| (1 | ) |
|
| (1 | ) |
|
| (4 | ) |
|
| (4 | ) |
| (Notes 14, 17) |
|
| (1 | ) |
|
| (2 | ) |
|
| (3 | ) |
|
| (3 | ) |
Other Comprehensive Income (Loss) |
|
|
|
| (95 | ) |
|
| (49 | ) |
|
| (129 | ) |
|
| (8 | ) |
|
|
|
| 52 |
|
|
| (61 | ) |
|
| 52 |
|
|
| (34 | ) |
Comprehensive Income (Loss) |
|
|
| $ | 1,091 |
|
| $ | (121 | ) |
| $ | 2,173 |
|
| $ | 24 |
|
|
|
| $ | 388 |
|
| $ | 1,296 |
|
| $ | 875 |
|
| $ | 1,082 |
|
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements
|
6
Condensed Consolidated Balance Sheet (unaudited)
|
|
|
| As at |
|
| As at |
|
|
|
| As at |
|
| As at |
| ||||
|
|
|
| September 30, |
|
| December 31, |
|
|
|
| June 30, |
|
| December 31, |
| ||||
(US$ millions) |
|
|
| 2022 |
|
| 2021 |
|
|
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash and cash equivalents |
|
|
| $ | 18 |
|
| $ | 195 |
|
|
|
| $ | 52 |
|
| $ | 5 |
|
Accounts receivable and accrued revenues (net of allowances of $7 million (2021: $5 million)) |
| (Note 3) |
|
| 1,626 |
|
|
| 1,294 |
| ||||||||||
Accounts receivable and accrued revenues (net of allowances |
|
|
|
|
|
|
|
| ||||||||||||
of $4 million (2022: $4 million)) |
| (Note 3) |
|
| 1,253 |
|
|
| 1,594 |
| ||||||||||
Risk management |
| (Notes 17, 18) |
|
| 1 |
|
|
| 1 |
|
| (Notes 18, 19) |
|
| 167 |
|
|
| 53 |
|
Income tax receivable |
|
|
|
| 57 |
|
|
| 97 |
|
|
|
|
| 7 |
|
|
| 43 |
|
|
|
|
|
| 1,702 |
|
|
| 1,587 |
|
|
|
|
| 1,479 |
|
|
| 1,695 |
|
Property, Plant and Equipment, at cost: |
| (Note 8) |
|
|
|
|
|
|
|
|
| (Note 9) |
|
|
|
|
|
| ||
Oil and natural gas properties, based on full cost accounting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Proved properties |
|
|
|
| 56,123 |
|
|
| 55,475 |
|
|
|
|
| 62,058 |
|
|
| 57,054 |
|
Unproved properties |
|
|
|
| 1,239 |
|
|
| 1,944 |
|
|
|
|
| 1,989 |
|
|
| 1,172 |
|
Other |
|
|
|
| 871 |
|
|
| 903 |
|
|
|
|
| 945 |
|
|
| 882 |
|
Property, plant and equipment |
|
|
|
| 58,233 |
|
|
| 58,322 |
|
|
|
|
| 64,992 |
|
|
| 59,108 |
|
Less: Accumulated depreciation, depletion and amortization |
|
|
|
| (49,180 | ) |
|
| (49,561 | ) |
|
|
|
| (50,775 | ) |
|
| (49,640 | ) |
Property, plant and equipment, net |
| (Note 2) |
|
| 9,053 |
|
|
| 8,761 |
|
| (Note 2) |
|
| 14,217 |
|
|
| 9,468 |
|
Other Assets |
|
|
| 1,000 |
|
|
| 1,079 |
|
|
|
| 1,047 |
|
|
| 1,004 |
| ||
Risk Management |
| (Notes 17, 18) |
|
| 43 |
|
|
| - |
|
| (Notes 18, 19) |
|
| 21 |
|
|
| 34 |
|
Deferred Income Taxes |
|
|
|
| 157 |
|
|
| 271 |
| ||||||||||
Goodwill |
| (Note 2) |
|
| 2,576 |
|
|
| 2,628 |
|
| (Note 2) |
|
| 2,598 |
|
|
| 2,584 |
|
|
| (Note 2) |
| $ | 14,374 |
|
| $ | 14,055 |
|
| (Note 2) |
| $ | 19,519 |
|
| $ | 15,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
|
|
| $ | 2,216 |
|
| $ | 1,979 |
|
|
|
| $ | 2,443 |
|
| $ | 2,221 |
|
Current portion of operating lease liabilities |
|
|
|
| 69 |
|
|
| 62 |
|
|
|
|
| 85 |
|
|
| 76 |
|
Income tax payable |
|
|
|
| 7 |
|
|
| 4 |
|
|
|
|
| 97 |
|
|
| 4 |
|
Risk management |
| (Notes 17, 18) |
|
| 577 |
|
|
| 703 |
|
| (Notes 18, 19) |
|
| 5 |
|
|
| 86 |
|
Current portion of long-term debt |
| (Note 10) |
|
| 440 |
|
|
| - |
|
| (Note 11) |
|
| 680 |
|
|
| 393 |
|
|
|
|
|
| 3,309 |
|
|
| 2,748 |
|
|
|
|
| 3,310 |
|
|
| 2,780 |
|
Long-Term Debt |
| (Note 10) |
|
| 3,178 |
|
|
| 4,786 |
|
| (Note 11) |
|
| 5,454 |
|
|
| 3,177 |
|
Operating Lease Liabilities |
|
|
|
| 812 |
|
|
| 889 |
|
|
|
|
| 847 |
|
|
| 814 |
|
Other Liabilities and Provisions | (Note 11) |
|
| 153 |
|
|
| 190 |
| (Note 12) |
|
| 118 |
|
|
| 131 |
| ||
Risk Management |
| (Notes 17, 18) |
|
| 8 |
|
|
| 25 |
|
| (Notes 18, 19) |
|
| 7 |
|
|
| - |
|
Asset Retirement Obligation |
|
|
|
| 229 |
|
|
| 339 |
|
|
|
|
| 283 |
|
|
| 281 |
|
Deferred Income Taxes |
|
|
|
| 135 |
|
|
| 4 |
|
|
|
|
| 184 |
|
|
| 184 |
|
|
|
|
|
| 7,824 |
|
|
| 8,981 |
|
|
|
|
| 10,203 |
|
|
| 7,367 |
|
Commitments and Contingencies |
| (Note 20) |
|
|
|
|
|
|
|
|
| (Note 21) |
|
|
|
|
|
| ||
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Share capital - authorized 775 million shares of stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
2022 issued and outstanding: 249.2 million shares (2021: 258.0 million shares) |
| (Note 12) |
|
| 3 |
|
|
| 3 |
| ||||||||||
2023 issued and outstanding: 273.9 million shares (2022: 245.7 million shares) |
| (Note 13) |
|
| 3 |
|
|
| 3 |
| ||||||||||
Paid in surplus |
| (Note 12) |
|
| 7,939 |
|
|
| 8,458 |
|
| (Note 13) |
|
| 8,671 |
|
|
| 7,776 |
|
Retained earnings (Accumulated deficit) |
|
|
|
| (2,355 | ) |
|
| (4,479 | ) |
|
|
|
| (401 | ) |
|
| (1,081 | ) |
Accumulated other comprehensive income |
| (Note 13) |
|
| 963 |
|
|
| 1,092 |
|
| (Note 14) |
|
| 1,043 |
|
|
| 991 |
|
Total Shareholders’ Equity |
|
|
|
| 6,550 |
|
|
| 5,074 |
|
|
|
|
| 9,316 |
|
|
| 7,689 |
|
|
|
|
| $ | 14,374 |
|
| $ | 14,055 |
|
|
|
| $ | 19,519 |
|
| $ | 15,056 |
|
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements
|
7
Condensed Consolidated Statement of Changes in Shareholders’ Equity (unaudited)
Three Months Ended September 30, 2022 (US$ millions) |
|
|
| Share Capital |
|
| Paid in Surplus |
|
| Retained Earnings (Accumulated Deficit) |
|
| Accumulated Other Comprehensive Income |
|
| Total Shareholders’ Equity |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2022 |
|
|
| $ | 3 |
|
| $ | 8,239 |
|
| $ | (3,479 | ) |
| $ | 1,058 |
|
| $ | 5,821 |
|
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| 1,186 |
|
|
| - |
|
|
| 1,186 |
|
Dividends on Shares of Common Stock ($0.25 per share) |
| (Note 12) |
|
| - |
|
|
| - |
|
|
| (62 | ) |
|
| - |
|
|
| (62 | ) |
Shares of Common Stock Purchased under Normal Course Issuer Bid |
| (Note 12) |
|
| - |
|
|
| (325 | ) |
|
| - |
|
|
| - |
|
|
| (325 | ) |
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| 25 |
|
|
| - |
|
|
| - |
|
|
| 25 |
|
Other Comprehensive Income (Loss) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (95 | ) |
|
| (95 | ) |
Balance, September 30, 2022 |
|
|
| $ | 3 |
|
| $ | 7,939 |
|
| $ | (2,355 | ) |
| $ | 963 |
|
| $ | 6,550 |
|
Three Months Ended September 30, 2021 (US$ millions) |
|
|
| Share Capital |
|
| Paid in Surplus |
|
| Retained Earnings (Accumulated Deficit) |
|
| Accumulated Other Comprehensive Income |
|
| Total Shareholders’ Equity |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2021 |
|
|
| $ | 3 |
|
| $ | 8,532 |
|
| $ | (5,718 | ) |
| $ | 1,117 |
|
| $ | 3,934 |
|
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| (72 | ) |
|
| - |
|
|
| (72 | ) |
Dividends on Shares of Common Stock ($0.14 per share) |
| (Note 12) |
|
| - |
|
|
| - |
|
|
| (37 | ) |
|
| - |
|
|
| (37 | ) |
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| 21 |
|
|
| - |
|
|
| - |
|
|
| 21 |
|
Other Comprehensive Income (Loss) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (49 | ) |
|
| (49 | ) |
Balance, September 30, 2021 |
|
|
| $ | 3 |
|
| $ | 8,553 |
|
| $ | (5,827 | ) |
| $ | 1,068 |
|
| $ | 3,797 |
|
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements
|
Nine Months Ended September 30, 2022 (US$ millions) |
|
|
| Share Capital |
|
| Paid in Surplus |
|
| Retained Earnings (Accumulated Deficit) |
|
| Accumulated Other Comprehensive Income |
|
| Total Shareholders’ Equity |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2021 |
|
|
| $ | 3 |
|
| $ | 8,458 |
|
| $ | (4,479 | ) |
| $ | 1,092 |
|
| $ | 5,074 |
|
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| 2,302 |
|
|
| - |
|
|
| 2,302 |
|
Dividends on Shares of Common Stock ($0.70 per share) |
| (Note 12) |
|
| - |
|
|
| - |
|
|
| (178 | ) |
|
| - |
|
|
| (178 | ) |
Shares of Common Stock Purchased under Normal Course Issuer Bid |
| (Note 12) |
|
| - |
|
|
| (531 | ) |
|
| - |
|
|
| - |
|
|
| (531 | ) |
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| 12 |
|
|
| - |
|
|
| - |
|
|
| 12 |
|
Other Comprehensive Income (Loss) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (129 | ) |
|
| (129 | ) |
Balance, September 30, 2022 |
|
|
| $ | 3 |
|
| $ | 7,939 |
|
| $ | (2,355 | ) |
| $ | 963 |
|
| $ | 6,550 |
|
Three Months Ended June 30, 2023 (US$ millions) |
|
|
| Share |
|
| Paid in |
| Retained |
| Accumulated |
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, March 31, 2023 |
|
|
| $ | 3 |
|
| $ | 7,555 |
|
| $ | (655 | ) |
| $ | 991 |
|
| $ | 7,894 |
| |||
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| 336 |
|
|
| - |
|
|
| 336 |
| |||
Dividends on Shares of Common Stock ($0.30 per share) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| (82 | ) |
|
| - |
|
|
| (82 | ) | |||
Shares of Common Stock Purchased under Normal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Course Issuer Bid |
| (Note 13) |
|
| - |
|
|
| (89 | ) |
|
| - |
|
|
| - |
|
|
| (89 | ) | |||
Shares of Common Stock Issued | (Notes 8, 13, 20) |
|
| - |
|
|
| 1,169 |
|
|
| - |
|
|
| - |
|
|
| 1,169 |
| ||||
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| 36 |
|
|
| - |
|
|
| - |
|
|
| 36 |
| |||
Other Comprehensive Income (Loss) |
| (Note 14) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 52 |
|
|
| 52 |
| |||
Balance, June 30, 2023 |
|
|
| $ | 3 |
|
| $ | 8,671 |
|
| $ | (401 | ) |
| $ | 1,043 |
|
| $ | 9,316 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Three Months Ended June 30, 2022 (US$ millions) |
|
|
| Share |
|
| Paid in |
| Retained |
| Accumulated |
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, March 31, 2022 |
|
|
| $ | 3 |
|
| $ | 8,334 |
|
| $ | (4,772 | ) |
| $ | 1,119 |
|
| $ | 4,684 |
| |||
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| 1,357 |
|
|
| - |
|
|
| 1,357 |
| |||
Dividends on Shares of Common Stock ($0.25 per share) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| (64 | ) |
|
| - |
|
|
| (64 | ) | |||
Shares of Common Stock Purchased under Normal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Course Issuer Bid |
| (Note 13) |
|
| - |
|
|
| (135 | ) |
|
| - |
|
|
| - |
|
|
| (135 | ) | |||
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| 40 |
|
|
| - |
|
|
| - |
|
|
| 40 |
| |||
Other Comprehensive Income (Loss) |
| (Note 14) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (61 | ) |
|
| (61 | ) | |||
Balance, June 30, 2022 |
|
|
| $ | 3 |
|
| $ | 8,239 |
|
| $ | (3,479 | ) |
| $ | 1,058 |
|
| $ | 5,821 |
|
Nine Months Ended September 30, 2021 (US$ millions) |
|
|
| Share Capital |
|
| Paid in Surplus |
|
| Retained Earnings (Accumulated Deficit) |
|
| Accumulated Other Comprehensive Income |
|
| Total Shareholders’ Equity |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020 |
|
|
| $ | 3 |
|
| $ | 8,531 |
|
| $ | (5,773 | ) |
| $ | 1,076 |
|
| $ | 3,837 |
|
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| 32 |
|
|
| - |
|
|
| 32 |
|
Dividends on Shares of Common Stock ($0.3275 per share) |
| (Note 12) |
|
| - |
|
|
| - |
|
|
| (86 | ) |
|
| - |
|
|
| (86 | ) |
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| 22 |
|
|
| - |
|
|
| - |
|
|
| 22 |
|
Other Comprehensive Income (Loss) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (8 | ) |
|
| (8 | ) |
Balance, September 30, 2021 |
|
|
| $ | 3 |
|
| $ | 8,553 |
|
| $ | (5,827 | ) |
| $ | 1,068 |
|
| $ | 3,797 |
|
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements
|
8
Condensed Consolidated Statement of Cash Flows Changes in Shareholders’ Equity (unaudited)
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
|
|
| September 30, |
|
| September 30, |
| ||||||||||
(US$ millions) |
|
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
|
|
| $ | 1,186 |
|
| $ | (72 | ) |
| $ | 2,302 |
|
| $ | 32 |
|
Depreciation, depletion and amortization |
|
|
|
| 291 |
|
|
| 297 |
|
|
| 833 |
|
|
| 916 |
|
Accretion of asset retirement obligation |
|
|
|
| 4 |
|
|
| 5 |
|
|
| 14 |
|
|
| 17 |
|
Deferred income taxes |
| (Note 6) |
|
| 88 |
|
|
| 1 |
|
|
| 138 |
|
|
| (19 | ) |
Unrealized (gain) loss on risk management |
| (Note 18) |
|
| (710 | ) |
|
| 579 |
|
|
| (211 | ) |
|
| 1,426 |
|
Unrealized foreign exchange (gain) loss |
| (Note 5) |
|
| 20 |
|
|
| 14 |
|
|
| 24 |
|
|
| 20 |
|
Foreign exchange on settlements |
| (Note 5) |
|
| 12 |
|
|
| (3 | ) |
|
| 11 |
|
|
| (12 | ) |
Other |
|
|
|
| 57 |
|
|
| 24 |
|
|
| 104 |
|
|
| 88 |
|
Net change in other assets and liabilities |
|
|
|
| (17 | ) |
|
| (10 | ) |
|
| (42 | ) |
|
| (21 | ) |
Net change in non-cash working capital |
| (Note 19) |
|
| 31 |
|
|
| (23 | ) |
|
| (182 | ) |
|
| (58 | ) |
Cash From (Used in) Operating Activities |
|
|
|
| 962 |
|
|
| 812 |
|
|
| 2,991 |
|
|
| 2,389 |
|
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
| (Note 2) |
|
| (511 | ) |
|
| (365 | ) |
|
| (1,473 | ) |
|
| (1,098 | ) |
Acquisitions |
| (Note 7) |
|
| (12 | ) |
|
| - |
|
|
| (34 | ) |
|
| (3 | ) |
Proceeds from divestitures |
| (Note 7) |
|
| 225 |
|
|
| (8 | ) |
|
| 230 |
|
|
| 1,017 |
|
Net change in investments and other |
|
|
|
| 34 |
|
|
| 6 |
|
|
| 82 |
|
|
| (36 | ) |
Cash From (Used in) Investing Activities |
|
|
|
| (264 | ) |
|
| (367 | ) |
|
| (1,195 | ) |
|
| (120 | ) |
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net issuance (repayment) of revolving long-term debt |
| (Note 10) |
|
| 225 |
|
|
| - |
|
|
| 440 |
|
|
| (950 | ) |
Repayment of long-term debt |
| (Note 10) |
|
| (525 | ) |
|
| (518 | ) |
|
| (1,634 | ) |
|
| (1,137 | ) |
Purchase of shares of common stock |
| (Note 12) |
|
| (325 | ) |
|
| - |
|
|
| (531 | ) |
|
| - |
|
Dividends on shares of common stock |
| (Note 12) |
|
| (62 | ) |
|
| (37 | ) |
|
| (178 | ) |
|
| (86 | ) |
Finance lease payments and other |
|
|
|
| (2 | ) |
|
| (2 | ) |
|
| (68 | ) |
|
| (98 | ) |
Cash From (Used in) Financing Activities |
|
|
|
| (689 | ) |
|
| (557 | ) |
|
| (1,971 | ) |
|
| (2,271 | ) |
Foreign Exchange Gain (Loss) on Cash, Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Restricted Cash Held in Foreign Currency |
|
|
|
| 1 |
|
|
| (2 | ) |
|
| (2 | ) |
|
| - |
|
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash |
|
| 10 |
|
|
| (114 | ) |
|
| (177 | ) |
|
| (2 | ) | ||
Cash, Cash Equivalents and Restricted Cash, Beginning of Period |
|
| 8 |
|
|
| 122 |
|
|
| 195 |
|
|
| 10 |
| ||
Cash, Cash Equivalents and Restricted Cash, End of Period |
|
|
| $ | 18 |
|
| $ | 8 |
|
| $ | 18 |
|
| $ | 8 |
|
Cash, End of Period |
|
|
| $ | 12 |
|
| $ | 7 |
|
| $ | 12 |
|
| $ | 7 |
|
Cash Equivalents, End of Period |
|
|
|
| 6 |
|
|
| 1 |
|
|
| 6 |
|
|
| 1 |
|
Restricted Cash, End of Period |
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Cash, Cash Equivalents and Restricted Cash, End of Period |
|
|
| $ | 18 |
|
| $ | 8 |
|
| $ | 18 |
|
| $ | 8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Cash Flow Information |
| (Note 19) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2023 (US$ millions) |
|
|
| Share |
|
| Paid in |
| Retained |
| Accumulated |
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, December 31, 2022 |
|
|
| $ | 3 |
|
| $ | 7,776 |
|
| $ | (1,081 | ) |
| $ | 991 |
|
| $ | 7,689 |
| |||
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| 823 |
|
|
| - |
|
|
| 823 |
| |||
Dividends on Shares of Common Stock ($0.55 per share) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| (143 | ) |
|
| - |
|
|
| (143 | ) | |||
Shares of Common Stock Purchased under Normal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Course Issuer Bid |
| (Note 13) |
|
| - |
|
|
| (328 | ) |
|
| - |
|
|
| - |
|
|
| (328 | ) | |||
Shares of Common Stock Issued | (Notes 8, 13, 20) |
|
| - |
|
|
| 1,169 |
|
|
| - |
|
|
| - |
|
|
| 1,169 |
| ||||
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| 54 |
|
|
| - |
|
|
| - |
|
|
| 54 |
| |||
Other Comprehensive Income (Loss) |
| (Note 14) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 52 |
|
|
| 52 |
| |||
Balance, June 30, 2023 |
|
|
| $ | 3 |
|
| $ | 8,671 |
|
| $ | (401 | ) |
| $ | 1,043 |
|
| $ | 9,316 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Six Months Ended June 30, 2022 (US$ millions) |
|
|
| Share |
|
| Paid in |
| Retained |
| Accumulated |
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance, December 31, 2021 |
|
|
| $ | 3 |
|
| $ | 8,458 |
|
| $ | (4,479 | ) |
| $ | 1,092 |
|
| $ | 5,074 |
| |||
Net Earnings (Loss) |
|
|
|
| - |
|
|
| - |
|
|
| 1,116 |
|
|
| - |
|
|
| 1,116 |
| |||
Dividends on Shares of Common Stock ($0.45 per share) |
| (Note 13) |
|
| - |
|
|
| - |
|
|
| (116 | ) |
|
| - |
|
|
| (116 | ) | |||
Shares of Common Stock Purchased under Normal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Course Issuer Bid |
| (Note 13) |
|
| - |
|
|
| (206 | ) |
|
| - |
|
|
| - |
|
|
| (206 | ) | |||
Equity-Settled Compensation Costs |
|
|
|
| - |
|
|
| (13 | ) |
|
| - |
|
|
| - |
|
|
| (13 | ) | |||
Other Comprehensive Income (Loss) |
| (Note 14) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (34 | ) |
|
| (34 | ) | |||
Balance, June 30, 2022 |
|
|
| $ | 3 |
|
| $ | 8,239 |
|
| $ | (3,479 | ) |
| $ | 1,058 |
|
| $ | 5,821 |
|
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements
9
Condensed Consolidated Statement of Cash Flows (unaudited)
|
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
|
|
| June 30, |
|
| June 30, |
| ||||||||||
(US$ millions) |
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net earnings (loss) |
|
|
| $ | 336 |
|
| $ | 1,357 |
|
| $ | 823 |
|
| $ | 1,116 |
|
Depreciation, depletion and amortization |
|
|
|
| 419 |
|
|
| 278 |
|
|
| 783 |
|
|
| 542 |
|
Accretion of asset retirement obligation |
|
|
|
| 4 |
|
|
| 5 |
|
|
| 9 |
|
|
| 10 |
|
Deferred income taxes |
| (Note 6) |
|
| 47 |
|
|
| 58 |
|
|
| 111 |
|
|
| 50 |
|
Unrealized (gain) loss on risk management |
| (Note 19) |
|
| (142 | ) |
|
| (513 | ) |
|
| (160 | ) |
|
| 499 |
|
Unrealized foreign exchange (gain) loss |
| (Note 5) |
|
| 10 |
|
|
| 7 |
|
|
| 5 |
|
|
| 4 |
|
Foreign exchange on settlements |
| (Note 5) |
|
| 4 |
|
|
| - |
|
|
| 3 |
|
|
| (1 | ) |
Other |
|
|
|
| 21 |
|
|
| 32 |
|
|
| (24 | ) |
|
| 47 |
|
Net change in other assets and liabilities |
|
|
|
| (12 | ) |
|
| (13 | ) |
|
| (17 | ) |
|
| (25 | ) |
Net change in non-cash working capital |
| (Note 20) |
|
| 144 |
|
|
| 133 |
|
|
| 366 |
|
|
| (213 | ) |
Cash From (Used in) Operating Activities |
|
|
|
| 831 |
|
|
| 1,344 |
|
|
| 1,899 |
|
|
| 2,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Capital expenditures |
| (Note 2) |
|
| (640 | ) |
|
| (511 | ) |
|
| (1,250 | ) |
|
| (962 | ) |
Acquisitions |
| (Note 7) |
|
| (15 | ) |
|
| (7 | ) |
|
| (214 | ) |
|
| (22 | ) |
Corporate acquisition, net of cash acquired |
| (Note 8) |
|
| (3,225 | ) |
|
| - |
|
|
| (3,225 | ) |
|
| - |
|
Proceeds from divestitures |
| (Note 7) |
|
| 717 |
|
|
| 4 |
|
|
| 729 |
|
|
| 5 |
|
Net change in investments and other |
|
|
|
| 155 |
|
|
| - |
|
|
| 89 |
|
|
| 48 |
|
Cash From (Used in) Investing Activities |
|
|
|
| (3,008 | ) |
|
| (514 | ) |
|
| (3,871 | ) |
|
| (931 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net issuance (repayment) of revolving long-term debt |
| (Note 11) |
|
| 100 |
|
|
| 215 |
|
|
| 287 |
|
|
| 215 |
|
Issuance of long-term debt |
| (Note 11) |
|
| 2,278 |
|
|
| - |
|
|
| 2,278 |
|
|
| - |
|
Repayment of long-term debt |
| (Note 11) |
|
| - |
|
|
| (1,103 | ) |
|
| - |
|
|
| (1,109 | ) |
Purchase of shares of common stock |
| (Note 13) |
|
| (89 | ) |
|
| (135 | ) |
|
| (328 | ) |
|
| (206 | ) |
Dividends on shares of common stock |
| (Note 13) |
|
| (82 | ) |
|
| (64 | ) |
|
| (143 | ) |
|
| (116 | ) |
Finance lease payments and other |
|
|
|
| (1 | ) |
|
| (2 | ) |
|
| (72 | ) |
|
| (66 | ) |
Cash From (Used in) Financing Activities |
|
|
|
| 2,206 |
|
|
| (1,089 | ) |
|
| 2,022 |
|
|
| (1,282 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign Exchange Gain (Loss) on Cash, Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
and Restricted Cash Held in Foreign Currency |
|
|
|
| (3 | ) |
|
| (4 | ) |
|
| (3 | ) |
|
| (3 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash |
|
| 26 |
|
|
| (263 | ) |
|
| 47 |
|
|
| (187 | ) | ||
Cash, Cash Equivalents and Restricted Cash, Beginning of Period |
|
| 26 |
|
|
| 271 |
|
|
| 5 |
|
|
| 195 |
| ||
Cash, Cash Equivalents and Restricted Cash, End of Period |
|
|
| $ | 52 |
|
| $ | 8 |
|
| $ | 52 |
|
| $ | 8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash, End of Period |
|
|
| $ | 9 |
|
| $ | 8 |
|
| $ | 9 |
|
| $ | 8 |
|
Cash Equivalents, End of Period |
|
|
|
| 43 |
|
|
| - |
|
| $ | 43 |
|
|
| - |
|
Restricted Cash, End of Period |
|
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Cash, Cash Equivalents and Restricted Cash, End of Period |
|
|
| $ | 52 |
|
| $ | 8 |
|
| $ | 52 |
|
| $ | 8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Supplementary Cash Flow Information |
| (Note 20) |
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to the unaudited Condensed Consolidated Financial Statements
10
|
1. | Basis of Presentation and Principles of Consolidation |
Ovintiv is in the business of the exploration for, the development of, and the production and marketing of oil, NGLs and natural gas.
The interim Condensed Consolidated Financial Statements include the accounts of Ovintiv and entities in which it holds a controlling interest. All intercompany balances and transactions are eliminated on consolidation. Undivided interests in oil and natural gas exploration and production joint ventures and partnerships are consolidated on a proportionate basis. Investments in non-controlled entities over which the Company has the ability to exercise significant influence are accounted for using the equity method.
The interim Condensed Consolidated Financial Statements are prepared in conformity with U.S. GAAP and the rules and regulations of the SEC. Pursuant to these rules and regulations, certain information and disclosures normally required under U.S. GAAP have been condensed or have been disclosed on an annual basis only. Accordingly, the interim Condensed Consolidated Financial Statements should be read in conjunction with the annual audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2021,2022, which are included in Item 8 of Ovintiv’s 20212022 Annual Report on Form 10‑K.
The interim Condensed Consolidated Financial Statements have been prepared following the same accounting policies and methods of computation as the annual audited Consolidated Financial Statements for the year ended December 31, 2021.2022.
These unaudited interim Condensed Consolidated Financial Statements reflect, in the opinion of Management, all normal and recurring adjustments necessary to present fairly the financial position and results of the Company as at and for the periods presented. Interim condensed consolidated financial results are not necessarily indicative of consolidated financial results expected for the fiscal year.
2. | Segmented Information |
Ovintiv’s reportable segments are determined based on the following operations and geographic locations:
• USA Operations includes the exploration for, development of, and production of oil, NGLs and natural gas and other related activities within the U.S. cost center. • Canadian Operations includes the exploration for, development of, and production of oil, NGLs and natural gas and other related activities within the Canadian cost center. • Market Optimization is primarily responsible for the sale of the Company’s proprietary production. These results are reported in the USA and Canadian Operations. Market optimization activities include third-party purchases and sales of product to provide operational flexibility and cost mitigation for transportation commitments, product type, delivery points and customer diversification. These activities are reflected in the Market Optimization segment. Market Optimization sells substantially all of the Company’s upstream production to third-party customers. Transactions between segments are based on market values and are eliminated on consolidation.
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|
|
|
|
Corporate and Other mainly includes unrealized gains or losses recorded on derivative financial instruments. Once the instruments are settled, the realized gains and losses are recorded in the reporting segment to which the derivative instruments relate. Corporate and Other also includes amounts related to sublease rentals.
|
11
Results of Operations (For the three months ended SeptemberJune 30)
Segment and Geographic Information
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
| ||||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Product and service revenues |
| $ | 1,762 |
|
| $ | 1,286 |
|
| $ | 893 |
|
| $ | 663 |
|
| $ | 988 |
|
| $ | 771 |
|
| $ | 1,181 |
|
| $ | 1,925 |
|
| $ | 468 |
|
| $ | 962 |
|
| $ | 703 |
|
| $ | 1,127 |
|
Gains (losses) on risk management, net |
|
| (324 | ) |
|
| (265 | ) |
|
| (497 | ) |
|
| (107 | ) |
|
| - |
|
|
| 1 |
|
|
| 5 |
|
|
| (383 | ) |
|
| - |
|
|
| (425 | ) |
|
| - |
|
|
| - |
|
Sublease revenues |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total Revenues |
|
| 1,438 |
|
|
| 1,021 |
|
|
| 396 |
|
|
| 556 |
|
|
| 988 |
|
|
| 772 |
|
|
| 1,186 |
|
|
| 1,542 |
|
|
| 468 |
|
|
| 537 |
|
|
| 703 |
|
|
| 1,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Production, mineral and other taxes |
|
| 106 |
|
|
| 75 |
|
|
| 3 |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| 73 |
|
|
| 115 |
|
|
| 3 |
|
|
| 3 |
|
|
| - |
|
|
| - |
|
Transportation and processing |
|
| 170 |
|
|
| 122 |
|
|
| 257 |
|
|
| 231 |
|
|
| 41 |
|
|
| 44 |
|
|
| 148 |
|
|
| 159 |
|
|
| 268 |
|
|
| 253 |
|
|
| 36 |
|
|
| 41 |
|
Operating |
|
| 187 |
|
|
| 122 |
|
|
| 34 |
|
|
| 25 |
|
|
| 7 |
|
|
| 5 |
|
|
| 167 |
|
|
| 149 |
|
|
| 2 |
|
|
| 25 |
|
|
| 6 |
|
|
| 6 |
|
Purchased product |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 973 |
|
|
| 759 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 692 |
|
|
| 1,115 |
|
Depreciation, depletion and amortization |
|
| 225 |
|
|
| 207 |
|
|
| 61 |
|
|
| 83 |
|
|
| - |
|
|
| - |
|
|
| 336 |
|
|
| 217 |
|
|
| 78 |
|
|
| 56 |
|
|
| - |
|
|
| - |
|
Total Operating Expenses |
|
| 688 |
|
|
| 526 |
|
|
| 355 |
|
|
| 341 |
|
|
| 1,021 |
|
|
| 808 |
|
|
| 724 |
|
|
| 640 |
|
|
| 351 |
|
|
| 337 |
|
|
| 734 |
|
|
| 1,162 |
|
Operating Income (Loss) |
| $ | 750 |
|
| $ | 495 |
|
| $ | 41 |
|
| $ | 215 |
|
| $ | (33 | ) |
| $ | (36 | ) |
| $ | 462 |
|
| $ | 902 |
|
| $ | 117 |
|
| $ | 200 |
|
| $ | (31 | ) |
| $ | (35 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
|
|
|
| Corporate & Other |
|
| Consolidated |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Product and service revenues |
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 2,352 |
|
| $ | 4,014 |
| ||||||||||||||||||||||||||
Gains (losses) on risk management, net |
|
|
|
|
|
|
|
| 142 |
|
|
| 513 |
|
|
| 147 |
|
|
| (295 | ) | ||||||||||||||||||||||||||
Sublease revenues |
|
|
|
|
|
|
|
| 18 |
|
|
| 17 |
|
|
| 18 |
|
|
| 17 |
| ||||||||||||||||||||||||||
Total Revenues |
|
|
|
|
|
|
|
| 160 |
|
|
| 530 |
|
|
| 2,517 |
|
|
| 3,736 |
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Production, mineral and other taxes |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 76 |
|
|
| 118 |
| ||||||||||||||||||||||||||
Transportation and processing |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 452 |
|
|
| 453 |
| ||||||||||||||||||||||||||
Operating |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 175 |
|
|
| 180 |
| ||||||||||||||||||||||||||
Purchased product |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 692 |
|
|
| 1,115 |
| ||||||||||||||||||||||||||
Depreciation, depletion and amortization |
|
|
|
|
|
|
|
| 5 |
|
|
| 5 |
|
|
| 419 |
|
|
| 278 |
| ||||||||||||||||||||||||||
Accretion of asset retirement obligation |
|
|
|
|
|
|
|
| 4 |
|
|
| 5 |
|
|
| 4 |
|
|
| 5 |
| ||||||||||||||||||||||||||
Administrative |
|
|
|
|
|
|
|
| 168 |
|
|
| 71 |
|
|
| 168 |
|
|
| 71 |
| ||||||||||||||||||||||||||
Total Operating Expenses |
|
|
|
|
|
|
|
| 177 |
|
|
| 81 |
|
|
| 1,986 |
|
|
| 2,220 |
| ||||||||||||||||||||||||||
Operating Income (Loss) |
|
|
|
|
|
|
| $ | (17 | ) |
| $ | 449 |
|
|
| 531 |
|
|
| 1,516 |
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Other (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 80 |
|
|
| 91 |
| ||||||||||||||||||||||||||||
Foreign exchange (gain) loss, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 25 |
|
|
| 3 |
| ||||||||||||||||||||||||||||
Other (gains) losses, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (11 | ) |
|
| - |
| ||||||||||||||||||||||||||||
Total Other (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 94 |
|
|
| 94 |
| ||||||||||||||||||||||||||||
Net Earnings (Loss) Before Income Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 437 |
|
|
| 1,422 |
| ||||||||||||||||||||||||||||
Income tax expense (recovery) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 101 |
|
|
| 65 |
| ||||||||||||||||||||||||||||
Net Earnings (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 336 |
|
| $ | 1,357 |
|
|
|
|
| Corporate & Other |
|
| Consolidated |
| ||||||||||||
|
|
|
|
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service revenues |
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 3,643 |
|
| $ | 2,720 |
|
Gains (losses) on risk management, net |
|
|
|
|
|
| 710 |
|
|
| (579 | ) |
|
| (111 | ) |
|
| (950 | ) |
Sublease revenues |
|
|
|
|
|
| 17 |
|
|
| 19 |
|
|
| 17 |
|
|
| 19 |
|
Total Revenues |
|
|
|
|
|
| 727 |
|
|
| (560 | ) |
|
| 3,549 |
|
|
| 1,789 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production, mineral and other taxes |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 109 |
|
|
| 77 |
|
Transportation and processing |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 468 |
|
|
| 397 |
|
Operating |
|
|
|
|
|
| - |
|
|
| 1 |
|
|
| 228 |
|
|
| 153 |
|
Purchased product |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 973 |
|
|
| 759 |
|
Depreciation, depletion and amortization |
|
|
|
|
|
| 5 |
|
|
| 7 |
|
|
| 291 |
|
|
| 297 |
|
Accretion of asset retirement obligation |
|
|
|
|
|
| 4 |
|
|
| 5 |
|
|
| 4 |
|
|
| 5 |
|
Administrative |
|
|
|
|
|
| 103 |
|
|
| 101 |
|
|
| 103 |
|
|
| 101 |
|
Total Operating Expenses |
|
|
|
|
|
| 112 |
|
|
| 114 |
|
|
| 2,176 |
|
|
| 1,789 |
|
Operating Income (Loss) |
|
|
|
|
| $ | 615 |
|
| $ | (674 | ) |
|
| 1,373 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 83 |
|
|
| 77 |
|
Foreign exchange (gain) loss, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 19 |
|
|
| - |
|
Other (gains) losses, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3 | ) |
|
| (6 | ) |
Total Other (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 99 |
|
|
| 71 |
|
Net Earnings (Loss) Before Income Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,274 |
|
|
| (71 | ) |
Income tax expense (recovery) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 88 |
|
|
| 1 |
|
Net Earnings (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,186 |
|
| $ | (72 | ) |
|
12
Results of Operations (For the ninesix months ended SeptemberJune 30)
Segment and Geographic Information
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
| ||||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Product and service revenues |
| $ | 5,234 |
|
| $ | 3,459 |
|
| $ | 2,633 |
|
| $ | 1,810 |
|
| $ | 3,197 |
|
| $ | 2,171 |
|
| $ | 2,367 |
|
| $ | 3,472 |
|
| $ | 1,158 |
|
| $ | 1,740 |
|
| $ | 1,419 |
|
| $ | 2,209 |
|
Gains (losses) on risk management, net |
|
| (926 | ) |
|
| (589 | ) |
|
| (1,149 | ) |
|
| (164 | ) |
|
| - |
|
|
| 3 |
|
|
| 7 |
|
|
| (602 | ) |
|
| (78 | ) |
|
| (652 | ) |
|
| - |
|
|
| - |
|
Sublease revenues |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Total Revenues |
|
| 4,308 |
|
|
| 2,870 |
|
|
| 1,484 |
|
|
| 1,646 |
|
|
| 3,197 |
|
|
| 2,174 |
|
|
| 2,374 |
|
|
| 2,870 |
|
|
| 1,080 |
|
|
| 1,088 |
|
|
| 1,419 |
|
|
| 2,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Production, mineral and other taxes |
|
| 311 |
|
|
| 199 |
|
|
| 10 |
|
|
| 11 |
|
|
| - |
|
|
| - |
|
|
| 153 |
|
|
| 205 |
|
|
| 7 |
|
|
| 7 |
|
|
| - |
|
|
| - |
|
Transportation and processing |
|
| 464 |
|
|
| 361 |
|
|
| 741 |
|
|
| 703 |
|
|
| 122 |
|
|
| 130 |
|
|
| 295 |
|
|
| 294 |
|
|
| 535 |
|
|
| 484 |
|
|
| 77 |
|
|
| 81 |
|
Operating |
|
| 478 |
|
|
| 368 |
|
|
| 96 |
|
|
| 78 |
|
|
| 22 |
|
|
| 19 |
|
|
| 337 |
|
|
| 291 |
|
|
| 31 |
|
|
| 62 |
|
|
| 13 |
|
|
| 15 |
|
Purchased product |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 3,154 |
|
|
| 2,096 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,393 |
|
|
| 2,181 |
|
Depreciation, depletion and amortization |
|
| 642 |
|
|
| 635 |
|
|
| 176 |
|
|
| 265 |
|
|
| - |
|
|
| - |
|
|
| 630 |
|
|
| 417 |
|
|
| 143 |
|
|
| 115 |
|
|
| - |
|
|
| - |
|
Total Operating Expenses |
|
| 1,895 |
|
|
| 1,563 |
|
|
| 1,023 |
|
|
| 1,057 |
|
|
| 3,298 |
|
|
| 2,245 |
|
|
| 1,415 |
|
|
| 1,207 |
|
|
| 716 |
|
|
| 668 |
|
|
| 1,483 |
|
|
| 2,277 |
|
Operating Income (Loss) |
| $ | 2,413 |
|
| $ | 1,307 |
|
| $ | 461 |
|
| $ | 589 |
|
| $ | (101 | ) |
| $ | (71 | ) |
| $ | 959 |
|
| $ | 1,663 |
|
| $ | 364 |
|
| $ | 420 |
|
| $ | (64 | ) |
| $ | (68 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
|
|
|
| Corporate & Other |
|
| Consolidated |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Product and service revenues |
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 4,944 |
|
| $ | 7,421 |
| ||||||||||||||||||||||||||
Gains (losses) on risk management, net |
|
|
|
|
|
|
|
| 160 |
|
|
| (499 | ) |
|
| 89 |
|
|
| (1,753 | ) | ||||||||||||||||||||||||||
Sublease revenues |
|
|
|
|
|
|
|
| 35 |
|
|
| 35 |
|
|
| 35 |
|
|
| 35 |
| ||||||||||||||||||||||||||
Total Revenues |
|
|
|
|
|
|
|
| 195 |
|
|
| (464 | ) |
|
| 5,068 |
|
|
| 5,703 |
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Production, mineral and other taxes |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 160 |
|
|
| 212 |
| ||||||||||||||||||||||||||
Transportation and processing |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 907 |
|
|
| 859 |
| ||||||||||||||||||||||||||
Operating |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 381 |
|
|
| 368 |
| ||||||||||||||||||||||||||
Purchased product |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1,393 |
|
|
| 2,181 |
| ||||||||||||||||||||||||||
Depreciation, depletion and amortization |
|
|
|
|
|
|
|
| 10 |
|
|
| 10 |
|
|
| 783 |
|
|
| 542 |
| ||||||||||||||||||||||||||
Accretion of asset retirement obligation |
|
|
|
|
|
|
|
| 9 |
|
|
| 10 |
|
|
| 9 |
|
|
| 10 |
| ||||||||||||||||||||||||||
Administrative |
|
|
|
|
|
|
|
| 226 |
|
|
| 215 |
|
|
| 226 |
|
|
| 215 |
| ||||||||||||||||||||||||||
Total Operating Expenses |
|
|
|
|
|
|
|
| 245 |
|
|
| 235 |
|
|
| 3,859 |
|
|
| 4,387 |
| ||||||||||||||||||||||||||
Operating Income (Loss) |
|
|
|
|
|
|
| $ | (50 | ) |
| $ | (699 | ) |
|
| 1,209 |
|
|
| 1,316 |
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Other (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 151 |
|
|
| 165 |
| ||||||||||||||||||||||||||||
Foreign exchange (gain) loss, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 22 |
|
|
| 2 |
| ||||||||||||||||||||||||||||
Other (gains) losses, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (14 | ) |
|
| (27 | ) | ||||||||||||||||||||||||||||
Total Other (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 159 |
|
|
| 140 |
| ||||||||||||||||||||||||||||
Net Earnings (Loss) Before Income Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,050 |
|
|
| 1,176 |
| ||||||||||||||||||||||||||||
Income tax expense (recovery) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 227 |
|
|
| 60 |
| ||||||||||||||||||||||||||||
Net Earnings (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 823 |
|
| $ | 1,116 |
|
|
|
|
| Corporate & Other |
|
| Consolidated |
| ||||||||||||
|
|
|
|
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service revenues |
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 11,064 |
|
| $ | 7,440 |
|
Gains (losses) on risk management, net |
|
|
|
|
|
| 211 |
|
|
| (1,426 | ) |
|
| (1,864 | ) |
|
| (2,176 | ) |
Sublease revenues |
|
|
|
|
|
| 52 |
|
|
| 55 |
|
|
| 52 |
|
|
| 55 |
|
Total Revenues |
|
|
|
|
|
| 263 |
|
|
| (1,371 | ) |
|
| 9,252 |
|
|
| 5,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production, mineral and other taxes |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 321 |
|
|
| 210 |
|
Transportation and processing |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1,327 |
|
|
| 1,194 |
|
Operating |
|
|
|
|
|
| - |
|
|
| 1 |
|
|
| 596 |
|
|
| 466 |
|
Purchased product |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 3,154 |
|
|
| 2,096 |
|
Depreciation, depletion and amortization |
|
|
|
|
|
| 15 |
|
|
| 16 |
|
|
| 833 |
|
|
| 916 |
|
Accretion of asset retirement obligation |
|
|
|
|
|
| 14 |
|
|
| 17 |
|
|
| 14 |
|
|
| 17 |
|
Administrative |
|
|
|
|
|
| 318 |
|
|
| 346 |
|
|
| 318 |
|
|
| 346 |
|
Total Operating Expenses |
|
|
|
|
|
| 347 |
|
|
| 380 |
|
|
| 6,563 |
|
|
| 5,245 |
|
Operating Income (Loss) |
|
|
|
|
| $ | (84 | ) |
| $ | (1,751 | ) |
|
| 2,689 |
|
|
| 74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 248 |
|
|
| 263 |
|
Foreign exchange (gain) loss, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 21 |
|
|
| (15 | ) |
Other (gains) losses, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (30 | ) |
|
| (31 | ) |
Total Other (Income) Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 239 |
|
|
| 217 |
|
Net Earnings (Loss) Before Income Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,450 |
|
|
| (143 | ) |
Income tax expense (recovery) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 148 |
|
|
| (175 | ) |
Net Earnings (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 2,302 |
|
| $ | 32 |
|
|
13
Intersegment Information
|
|
|
|
|
|
|
| Market Optimization |
|
|
|
|
|
|
| |||||||||
|
| Marketing Sales |
|
| Upstream Eliminations |
|
| Total |
| |||||||||||||||
For the three months ended June 30, |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues |
| $ | 2,874 |
|
| $ | 4,346 |
|
| $ | (2,171 | ) |
| $ | (3,219 | ) |
| $ | 703 |
|
| $ | 1,127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Transportation and processing |
|
| 180 |
|
|
| 161 |
|
|
| (144 | ) |
|
| (120 | ) |
|
| 36 |
|
|
| 41 |
|
Operating |
|
| 6 |
|
|
| 6 |
|
|
| - |
|
|
| - |
|
|
| 6 |
|
|
| 6 |
|
Purchased product |
|
| 2,719 |
|
|
| 4,213 |
|
|
| (2,027 | ) |
|
| (3,098 | ) |
|
| 692 |
|
|
| 1,115 |
|
Operating Income (Loss) |
| $ | (31 | ) |
| $ | (34 | ) |
| $ | - |
|
| $ | (1 | ) |
| $ | (31 | ) |
| $ | (35 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
| Market Optimization |
|
|
|
|
|
|
| |||||||||
|
| Marketing Sales |
|
| Upstream Eliminations |
|
| Total |
| |||||||||||||||
For the six months ended June 30, |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues |
| $ | 6,010 |
|
| $ | 7,769 |
|
| $ | (4,591 | ) |
| $ | (5,560 | ) |
| $ | 1,419 |
|
| $ | 2,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Transportation and processing |
|
| 345 |
|
|
| 313 |
|
|
| (268 | ) |
|
| (232 | ) |
|
| 77 |
|
|
| 81 |
|
Operating |
|
| 13 |
|
|
| 15 |
|
|
| - |
|
|
| - |
|
|
| 13 |
|
|
| 15 |
|
Purchased product |
|
| 5,716 |
|
|
| 7,508 |
|
|
| (4,323 | ) |
|
| (5,327 | ) |
|
| 1,393 |
|
|
| 2,181 |
|
Operating Income (Loss) |
| $ | (64 | ) |
| $ | (67 | ) |
| $ | - |
|
| $ | (1 | ) |
| $ | (64 | ) |
| $ | (68 | ) |
|
|
|
|
|
|
|
|
|
| Market Optimization |
|
|
|
|
|
|
|
|
| |||||
|
| Marketing Sales |
|
| Upstream Eliminations |
|
| Total |
| |||||||||||||||
For the three months ended September 30, |
| 2022 | �� |
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| $ | 4,109 |
|
| $ | 2,705 |
|
| $ | (3,121 | ) |
| $ | (1,933 | ) |
| $ | 988 |
|
| $ | 772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation and processing |
|
| 164 |
|
|
| 141 |
|
|
| (123 | ) |
|
| (97 | ) |
|
| 41 |
|
|
| 44 |
|
Operating |
|
| 7 |
|
|
| 5 |
|
|
| - |
|
|
| - |
|
|
| 7 |
|
|
| 5 |
|
Purchased product |
|
| 3,972 |
|
|
| 2,596 |
|
|
| (2,999 | ) |
|
| (1,837 | ) |
|
| 973 |
|
|
| 759 |
|
Operating Income (Loss) |
| $ | (34 | ) |
| $ | (37 | ) |
| $ | 1 |
|
| $ | 1 |
|
| $ | (33 | ) |
| $ | (36 | ) |
|
| Market Optimization |
| |||||||||||||||||||||
|
| Marketing Sales |
|
| Upstream Eliminations |
|
| Total |
| |||||||||||||||
For the nine months ended September 30, |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| $ | 11,878 |
|
| $ | 7,486 |
|
| $ | (8,681 | ) |
| $ | (5,312 | ) |
| $ | 3,197 |
|
| $ | 2,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation and processing |
|
| 477 |
|
|
| 427 |
|
|
| (355 | ) |
|
| (297 | ) |
|
| 122 |
|
|
| 130 |
|
Operating |
|
| 22 |
|
|
| 19 |
|
|
| - |
|
|
| - |
|
|
| 22 |
|
|
| 19 |
|
Purchased product |
|
| 11,480 |
|
|
| 7,111 |
|
|
| (8,326 | ) |
|
| (5,015 | ) |
|
| 3,154 |
|
|
| 2,096 |
|
Operating Income (Loss) |
| $ | (101 | ) |
| $ | (71 | ) |
| $ | - |
|
| $ | - |
|
| $ | (101 | ) |
| $ | (71 | ) |
Capital Expenditures by Segment
|
|
|
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
|
|
|
|
| June 30, |
|
| June 30, |
| ||||||||||
|
|
|
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
USA Operations |
|
|
|
|
| $ | 502 |
|
| $ | 410 |
|
| $ | 969 |
|
| $ | 782 |
|
Canadian Operations |
|
|
|
|
|
| 137 |
|
|
| 101 |
|
|
| 279 |
|
|
| 179 |
|
Corporate & Other |
|
|
|
|
|
| 1 |
|
|
| - |
|
|
| 2 |
|
|
| 1 |
|
|
|
|
|
|
| $ | 640 |
|
| $ | 511 |
|
| $ | 1,250 |
|
| $ | 962 |
|
|
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
|
|
|
|
| September 30, |
|
| September 30, |
| ||||||||||
|
|
|
|
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA Operations |
|
|
|
|
| $ | 416 |
|
| $ | 265 |
|
| $ | 1,198 |
|
| $ | 805 |
|
Canadian Operations |
|
|
|
|
|
| 95 |
|
|
| 99 |
|
|
| 274 |
|
|
| 291 |
|
Corporate & Other |
|
|
|
|
|
| - |
|
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
|
|
|
|
| $ | 511 |
|
| $ | 365 |
|
| $ | 1,473 |
|
| $ | 1,098 |
|
Goodwill, Property, Plant and Equipment and Total Assets by Segment
|
| Goodwill |
|
| Property, Plant and Equipment |
|
| Total Assets |
|
| Goodwill |
|
| Property, Plant and Equipment |
|
| Total Assets |
| ||||||||||||||||||||||||||||||
|
| As at |
|
| As at |
|
| As at |
|
| As at |
|
| As at |
|
| As at |
| ||||||||||||||||||||||||||||||
|
| September 30, |
| December 31, |
|
| September 30, |
| December 31, |
|
| September 30, |
| December 31, |
|
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
USA Operations |
| $ | 1,938 |
|
| $ | 1,938 |
|
| $ | 7,915 |
|
| $ | 7,623 |
|
| $ | 10,860 |
|
| $ | 10,345 |
|
| $ | 1,938 |
|
| $ | 1,938 |
|
| $ | 12,841 |
|
| $ | 8,259 |
|
| $ | 15,642 |
|
| $ | 11,043 |
|
Canadian Operations |
|
| 638 |
|
|
| 690 |
|
|
| 975 |
|
|
| 951 |
|
|
| 1,904 |
|
|
| 1,932 |
|
|
| 660 |
|
|
| 646 |
|
|
| 1,217 |
|
|
| 1,044 |
|
|
| 2,117 |
|
|
| 2,075 |
|
Market Optimization |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 397 |
|
|
| 300 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 292 |
|
|
| 446 |
|
Corporate & Other |
|
| - |
|
|
| - |
|
|
| 163 |
|
|
| 187 |
|
|
| 1,213 |
|
|
| 1,478 |
|
|
| - |
|
|
| - |
|
|
| 159 |
|
|
| 165 |
|
|
| 1,468 |
|
|
| 1,492 |
|
|
| $ | 2,576 |
|
| $ | 2,628 |
|
| $ | 9,053 |
|
| $ | 8,761 |
|
| $ | 14,374 |
|
| $ | 14,055 |
|
| $ | 2,598 |
|
| $ | 2,584 |
|
| $ | 14,217 |
|
| $ | 9,468 |
|
| $ | 19,519 |
|
| $ | 15,056 |
|
14
|
3. | Revenues from Contracts with Customers |
The following tables summarizetable summarizes Ovintiv’s revenues from contracts with customers.
Revenues (For the three months ended SeptemberJune 30)
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from Customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Product revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Oil |
| $ | 947 |
|
| $ | 1,313 |
|
| $ | - |
|
| $ | 1 |
|
| $ | 644 |
|
| $ | 931 |
|
NGLs |
|
| 149 |
|
|
| 312 |
|
|
| 246 |
|
|
| 383 |
|
|
| 5 |
|
|
| 8 |
|
Natural gas |
|
| 86 |
|
|
| 302 |
|
|
| 223 |
|
|
| 581 |
|
|
| 49 |
|
|
| 183 |
|
Service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gathering and processing |
|
| 2 |
|
|
| 1 |
|
|
| 1 |
|
|
| (1 | ) |
|
| - |
|
|
| - |
|
Product and Service Revenues |
| $ | 1,184 |
|
| $ | 1,928 |
|
| $ | 470 |
|
| $ | 964 |
|
| $ | 698 |
|
| $ | 1,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
| Corporate & Other |
|
| Consolidated |
| |||||||||||||||
|
|
|
|
|
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from Customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Product revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Oil |
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 1,591 |
|
| $ | 2,245 |
| ||
NGLs |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 400 |
|
|
| 703 |
| ||
Natural gas |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 358 |
|
|
| 1,066 |
| ||
Service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gathering and processing |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 3 |
|
|
| - |
| ||
Product and Service Revenues |
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 2,352 |
|
| $ | 4,014 |
|
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from Customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
| $ | 1,146 |
|
| $ | 866 |
|
| $ | 1 |
|
| $ | 1 |
|
| $ | 844 |
|
| $ | 609 |
|
NGLs |
|
| 271 |
|
|
| 250 |
|
|
| 327 |
|
|
| 303 |
|
|
| 2 |
|
|
| 8 |
|
Natural gas |
|
| 348 |
|
|
| 172 |
|
|
| 565 |
|
|
| 360 |
|
|
| 137 |
|
|
| 150 |
|
Service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gathering and processing |
|
| - |
|
|
| - |
|
|
| 2 |
|
|
| 1 |
|
|
| - |
|
|
| - |
|
Product and Service Revenues |
| $ | 1,765 |
|
| $ | 1,288 |
|
| $ | 895 |
|
| $ | 665 |
|
| $ | 983 |
|
| $ | 767 |
|
|
|
|
| Corporate & Other |
|
| Consolidated |
| ||||||||||||
|
|
|
|
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from Customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 1,991 |
|
| $ | 1,476 |
|
NGLs |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 600 |
|
|
| 561 |
|
Natural gas |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1,050 |
|
|
| 682 |
|
Service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gathering and processing |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 2 |
|
|
| 1 |
|
Product and Service Revenues |
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 3,643 |
|
| $ | 2,720 |
|
|
|
Revenues (For the ninesix months ended SeptemberJune 30)
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from Customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Product revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Oil |
| $ | 1,798 |
|
| $ | 2,393 |
|
| $ | - |
|
| $ | 1 |
|
| $ | 1,253 |
|
| $ | 1,817 |
|
NGLs |
|
| 333 |
|
|
| 579 |
|
|
| 483 |
|
|
| 745 |
|
|
| 25 |
|
|
| 11 |
|
Natural gas |
|
| 241 |
|
|
| 508 |
|
|
| 678 |
|
|
| 1,000 |
|
|
| 129 |
|
|
| 366 |
|
Service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gathering and processing |
|
| 2 |
|
|
| 1 |
|
|
| 2 |
|
|
| - |
|
|
| - |
|
|
| - |
|
Product and Service Revenues |
| $ | 2,374 |
|
| $ | 3,481 |
|
| $ | 1,163 |
|
| $ | 1,746 |
|
| $ | 1,407 |
|
| $ | 2,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
| Corporate & Other |
|
| Consolidated |
| |||||||||||||||
|
|
|
|
|
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues from Customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Product revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Oil |
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 3,051 |
|
| $ | 4,211 |
| ||
NGLs |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 841 |
|
|
| 1,335 |
| ||
Natural gas |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1,048 |
|
|
| 1,874 |
| ||
Service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gathering and processing |
|
|
|
|
|
|
|
| - |
|
|
| - |
|
|
| 4 |
|
|
| 1 |
| ||
Product and Service Revenues |
|
|
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 4,944 |
|
| $ | 7,421 |
|
|
| USA Operations |
|
| Canadian Operations |
|
| Market Optimization |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from Customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
| $ | 3,539 |
|
| $ | 2,468 |
|
| $ | 2 |
|
| $ | 7 |
|
| $ | 2,661 |
|
| $ | 1,596 |
|
NGLs |
|
| 850 |
|
|
| 587 |
|
|
| 1,072 |
|
|
| 844 |
|
|
| 13 |
|
|
| 34 |
|
Natural gas |
|
| 856 |
|
|
| 413 |
|
|
| 1,565 |
|
|
| 963 |
|
|
| 503 |
|
|
| 519 |
|
Service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gathering and processing |
|
| 1 |
|
|
| - |
|
|
| 2 |
|
|
| 4 |
|
|
| - |
|
|
| 5 |
|
Product and Service Revenues |
| $ | 5,246 |
|
| $ | 3,468 |
|
| $ | 2,641 |
|
| $ | 1,818 |
|
| $ | 3,177 |
|
| $ | 2,154 |
|
|
|
|
| Corporate & Other |
|
| Consolidated |
| ||||||||||||
|
|
|
|
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from Customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 6,202 |
|
| $ | 4,071 |
|
NGLs |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 1,935 |
|
|
| 1,465 |
|
Natural gas |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 2,924 |
|
|
| 1,895 |
|
Service revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gathering and processing |
|
|
|
|
|
| - |
|
|
| - |
|
|
| 3 |
|
|
| 9 |
|
Product and Service Revenues |
|
|
|
|
| $ | - |
|
| $ | - |
|
| $ | 11,064 |
|
| $ | 7,440 |
|
|
|
|
The Company’s revenues from contracts with customers consists of product sales including oil, NGLs and natural gas, as well as the provision of gathering and processing services to third parties. Ovintiv had no contract asset or liability balances during the periods presented. As at SeptemberJune 30, 2022,2023, receivables and accrued revenues from contracts with customers were $1,344$843 million ($1,0701,257 million as at December 31, 2021)2022).
Ovintiv’s product sales are sold under short-term contracts with terms that are less than one year at either fixed or market index prices or under long-term contracts exceeding one year at market index prices.
The Company’s gathering and processing services are provided on an interruptible basis with transaction prices that are for fixed prices and/or variable consideration. Variable consideration received is related to recovery of plant operating costs or escalation of the fixed price based on a consumer price index. As the service contracts are interruptible, with service provided on an “as available” basis, there are no unsatisfied performance obligations remaining at SeptemberJune 30, 2022.2023.
As at SeptemberJune 30, 2022,2023, all remaining performance obligations are priced at market index prices or are variable volume delivery contracts. As such, the variable consideration is allocated entirely to the wholly unsatisfied performance obligation or promise to deliver units of production, and revenue is recognized at the amount for which the Company has the right to invoice the product delivered. As the period between when the product sales are transferred and Ovintiv receives payments is generally 30 to 60 days, there is no financing element associated with customer contracts. In addition, Ovintiv does not disclose unsatisfied performance obligations for customer contracts with terms less than 12 months or for variable consideration related to unsatisfied performance obligations.
4. | Interest |
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest Expense on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Debt |
| $ | 79 |
|
| $ | 74 |
|
| $ | 237 |
|
| $ | 251 |
|
| $ | 77 |
|
| $ | 88 |
|
| $ | 137 |
|
| $ | 158 |
|
Finance leases |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
| 3 |
|
|
| 1 |
|
|
| 1 |
|
|
| 1 |
|
|
| 1 |
|
Other |
|
| 3 |
|
|
| 2 |
|
|
| 9 |
|
|
| 9 |
|
|
| 2 |
|
|
| 2 |
|
|
| 13 |
|
|
| 6 |
|
|
| $ | 83 |
|
| $ | 77 |
|
| $ | 248 |
|
| $ | 263 |
|
| $ | 80 |
|
| $ | 91 |
|
| $ | 151 |
|
| $ | 165 |
|
For the three and nine months ended September 30, 2022, interest expense on debt includes $22 million related to premiums paid to repurchase certain of the Company’s senior notes in the open market. See Note 10 for details of the open market repurchases.
Interest expense on debt for the ninethree and six months ended SeptemberJune 30, 2022, includes a one-time make-whole interest payment of $47$47 million (2021 - $19 million) resulting from the early redemption of certain of the Company’s senior notes as discussed in Note 10.11. Additionally, interest expense on debt for the ninethree and six months ended SeptemberJune 30, 2022, includes $30$30 million in non-cash fair value amortization related to the senior notes, previously acquired through a business combination, which were redeemed in the second quarter of 2022 (see Note 10)11).
|
5. | Foreign Exchange (Gain) Loss, Net |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Foreign Exchange (Gain) Loss on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation of U.S. dollar financing debt issued from Canada |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| $ | 1 |
|
Translation of U.S. dollar risk management contracts issued from Canada |
|
| 20 |
|
|
| 14 |
|
|
| 24 |
|
|
| 19 |
|
|
|
| 20 |
|
|
| 14 |
|
|
| 24 |
|
|
| 20 |
|
Foreign Exchange (Gain) Loss on Settlements of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar financing debt issued from Canada |
|
| 12 |
|
|
| - |
|
|
| 11 |
|
|
| (9 | ) |
U.S. dollar risk management contracts issued from Canada |
|
| 1 |
|
|
| (7 | ) |
|
| (1 | ) |
|
| (25 | ) |
Intercompany notes |
|
| - |
|
|
| (3 | ) |
|
| - |
|
|
| (3 | ) |
Other Monetary Revaluations |
|
| (14 | ) |
|
| (4 | ) |
|
| (13 | ) |
|
| 2 |
|
|
| $ | 19 |
|
| $ | - |
|
| $ | 21 |
|
| $ | (15 | ) |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized Foreign Exchange (Gain) Loss on: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Translation of U.S. dollar risk management contracts issued from Canada |
| $ | (9 | ) |
| $ | 7 |
|
| $ | (15 | ) |
| $ | 4 |
|
Translation of intercompany notes |
|
| 19 |
|
|
| - |
|
|
| 20 |
|
|
| - |
|
|
|
| 10 |
|
|
| 7 |
|
|
| 5 |
|
|
| 4 |
|
Foreign Exchange (Gain) Loss on Settlements of: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. dollar financing debt issued from Canada |
|
| (1 | ) |
|
| - |
|
|
| (2 | ) |
|
| (1 | ) |
U.S. dollar risk management contracts issued from Canada |
|
| 3 |
|
|
| (1 | ) |
|
| 7 |
|
|
| (2 | ) |
Intercompany notes |
|
| 5 |
|
|
| - |
|
|
| 5 |
|
|
| - |
|
Other Monetary Revaluations |
|
| 8 |
|
|
| (3 | ) |
|
| 7 |
|
|
| 1 |
|
|
| $ | 25 |
|
| $ | 3 |
|
| $ | 22 |
|
| $ | 2 |
|
16
6. | Income Taxes |
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Current Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
United States |
| $ | - |
|
| $ | - |
|
| $ | 10 |
|
| $ | - |
|
| $ | 8 |
|
| $ | 7 |
|
| $ | 8 |
|
| $ | 10 |
|
Canada |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (156 | ) |
|
| 46 |
|
|
| - |
|
|
| 108 |
|
|
| - |
|
Total Current Tax Expense (Recovery) |
|
| - |
|
|
| - |
|
|
| 10 |
|
|
| (156 | ) |
|
| 54 |
|
|
| 7 |
|
|
| 116 |
|
|
| 10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Deferred Tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
United States |
|
| 44 |
|
|
| 1 |
|
|
| 44 |
|
|
| 1 |
|
|
| 65 |
|
|
| 17 |
|
|
| 137 |
|
|
| - |
|
Canada |
|
| 44 |
|
|
| - |
|
|
| 94 |
|
|
| (20 | ) |
|
| (18 | ) |
|
| 41 |
|
|
| (26 | ) |
|
| 50 |
|
Total Deferred Tax Expense (Recovery) |
|
| 88 |
|
|
| 1 |
|
|
| 138 |
|
|
| (19 | ) |
|
| 47 |
|
|
| 58 |
|
|
| 111 |
|
|
| 50 |
|
Income Tax Expense (Recovery) |
| $ | 88 |
|
| $ | 1 |
|
| $ | 148 |
|
| $ | (175 | ) |
| $ | 101 |
|
| $ | 65 |
|
| $ | 227 |
|
| $ | 60 |
|
Effective Tax Rate |
|
| 6.9 | % |
|
| (1.4 | %) |
|
| 6.0 | % |
|
| 122.4 | % |
|
| 23.1 | % |
|
| 4.6 | % |
|
| 21.6 | % |
|
| 5.1 | % |
Ovintiv’s interim income tax expense is determined using the estimated annual effective income tax rate applied to year-to-date net earnings before income tax plus the effect of legislative changes and amounts in respect of prior periods. The estimated annual effective income tax rate is impacted by expected annual earnings, changes in valuation allowances, income tax related to foreign operations, state taxes, the effect of legislative changes, non-taxable items and tax differences on transactions, which can produce interim effective tax rate fluctuations.
During the ninethree and six months ended SeptemberJune 30, 2021,2023, the current income tax recoveryexpense was primarily due to the resolutionexpected full utilization of prior years’Ovintiv’s operating losses in Canada, resulting in current tax items. The resolution, along with other items, resulted in a $222 million reduction of unrecognized tax benefits, offset by a $66 million reduction in valuation allowance. The Company also recognized related interest income of $12 million in other (gains) losses, net.
2023. During the three and ninesix months ended SeptemberJune 30, 2022, the current income tax expense in the United States was primarily due to state taxes.
During the three and six months ended June 30, 2023, the deferred tax expense was primarily due to the annual effective tax rate applied to the U.S. earnings. During the three and six months ended June 30, 2022, the deferred tax expense was due to the lower annual effective income tax rate applied to jurisdictional earnings. During the nine months ended September 30, 2021, the deferred tax recovery was primarily due to the change in valuation allowances and from the resolution of prior years’ tax items.
The effective tax rate of 6.021.6 percent for the ninesix months ended SeptemberJune 30, 2023, is higher than the U.S. federal statutory rate of 21 percent primarily due to state taxes. The effective tax rate of 5.1 percent for the six months ended June 30, 2022, iswas lower than the U.S. federal statutory tax rate of 21 percent primarily due to the lower annual effective income tax rate resulting from a reduction in valuation allowances. The effective tax rate of 122.4 percent for the nine months ended September 30, 2021 was higher than the U.S. federal statutory tax rate of 21 percent primarily due to the resolution of prior years’ tax items and the changes in valuation allowances.
17
|
7. | Acquisitions and Divestitures |
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
USA Operations |
| $ | 12 |
|
| $ | - |
|
| $ | 34 |
|
| $ | 3 |
|
| $ | 15 |
|
| $ | 7 |
|
| $ | 208 |
|
| $ | 22 |
|
Canadian Operations |
|
| - |
|
|
| - |
|
|
| 6 |
|
|
| - |
| ||||||||||||||||
Total Acquisitions |
|
| 12 |
|
|
| - |
|
|
| 34 |
|
|
| 3 |
|
|
| 15 |
|
|
| 7 |
|
|
| 214 |
|
|
| 22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Divestitures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
USA Operations |
|
| (226 | ) |
|
| 7 |
|
|
| (229 | ) |
|
| (767 | ) |
|
| (718 | ) |
|
| (2 | ) |
|
| (730 | ) |
|
| (3 | ) |
Canadian Operations |
|
| 1 |
|
|
| 1 |
|
|
| (1 | ) |
|
| (250 | ) |
|
| 1 |
|
|
| (2 | ) |
|
| 1 |
|
|
| (2 | ) |
Total Divestitures |
|
| (225 | ) |
|
| 8 |
|
|
| (230 | ) |
|
| (1,017 | ) |
|
| (717 | ) |
|
| (4 | ) |
|
| (729 | ) |
|
| (5 | ) |
Net Acquisitions & (Divestitures) |
| $ | (213 | ) |
| $ | 8 |
|
| $ | (196 | ) |
| $ | (1,014 | ) |
| $ | (702 | ) |
| $ | 3 |
|
| $ | (515 | ) |
| $ | 17 |
|
Acquisitions
For the three and ninesix months ended SeptemberJune 30, 2023, acquisitions in the USA Operations were $208 million, which primarily included property purchases in Permian and Uinta with oil and liquids rich potential. For the six months ended June 30, 2022, acquisitions in the USA Operations were $12$22 million, and $34 million, respectively, which primarily included property purchases with oil and liquids rich potential.
Divestitures
For the three and ninesix months ended SeptemberJune 30, 2022,2023, divestitures in the USA Operations were $226$718 million and $229$730 million, respectively, which primarily included the sale of portions of the Uinta assetsBakken located in northeastern Utah and Bakken assets located in northeastern MontanaNorth Dakota for combined proceeds of approximately $215$706 million, after closing and other adjustments. For the nine months ended September 30, 2021, divestitures in the USA Operations were $767 million, which primarily included the sale of the Eagle Ford assets located in south Texas.
For the nine months ended September 30, 2021, divestitures in the Canadian Operations were $250 million, which primarily included the sale of the Duvernay assets located in west central Alberta.
Amounts received from the Company’s divestiture transactions have been deducted from the respective U.S. and Canadian full cost pools.
As part of the Duvernay asset divestiture, the Company agreed to a contingent consideration arrangement, payable to Ovintiv, in the amount of C$5 million at the end of 2021 and an additional C$10 million at the end of 2022, if the annual average of the WTI reference price for each calendar year is greater than $56 per barrel and $62 per barrel, respectively. The terms of the contingent consideration for the 2021 calendar year were met and the consideration was settled in the first quarter of 2022. The fair value of the contingent consideration pertaining to the 2022 calendar year is presented in accounts receivable and accrued revenues in the Condensed Consolidated Balance Sheet. See Notes 17 and 18 for further information on the contingent consideration.
|
8. | Business Combination |
Acquisition of Midland Basin Assets (“Permian Acquisition”)
On June 12, 2023, Ovintiv completed a business combination to purchase all of the outstanding equity interests in seven Delaware limited liability companies (“Permian LLCs”) pursuant to the purchase agreement with Black Swan Oil & Gas, LLC, PetroLegacy II Holdings, LLC, Piedra Energy III Holdings, LLC and Piedra Energy IV Holdings, LLC, which are portfolio companies of funds managed by EnCap Investments L.P (“EnCap”). The Company paid aggregate cash consideration of approximately $3.2 billion and issued approximately 31.8 million shares of Ovintiv common stock, representing a value of approximately $1.2 billion, subject to final closing adjustments under the purchase agreement. The cash portion of the consideration was funded through a combination of net proceeds from the Company’s May 2023 senior notes offering (see Note 11), net proceeds from the sale of Bakken (see Note 7), cash on hand and proceeds from short-term borrowings. Transaction costs of approximately $75 million were included in administrative expense.
The acquisition is strategically located in close proximity to Ovintiv’s current Permian operations and adds approximately 1,050 net well locations to Ovintiv’s existing Permian inventory and approximately 65,000 net acres. The assets acquired generated revenues of $67 million and direct operating expenses of $15 million for the period from June 12, 2023, to June 30, 2023. The results of the Permian LLCs’ operations have been included in Ovintiv’s consolidated financial statements as of June 12, 2023.
18
Purchase Price Allocation
The Permian LLCs have been accounted for under the acquisition method and as a single transaction because the purchase agreement was entered into at the same time with EnCap and in contemplation of one another to achieve an overall economic effect. The purchase price allocations represent the consideration paid and the fair values of the assets acquired, and liabilities assumed as of the acquisition date.
The preliminary purchase price allocation was based on the initial valuations from estimates and assumptions that management believes are reasonable. These will be subject to change based on the determination of the final closing adjustments and when the remaining information necessary to complete the valuation is obtained. The Company expects the purchase price allocation to be completed within 12 months following the acquisition date, during which time the value of net assets and liabilities acquired may be revised as appropriate.
Preliminary Purchase Price Allocation |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
Consideration: |
|
|
|
|
|
|
|
| |
Fair value of shares of Ovintiv common stock issued (1) |
|
|
|
|
|
| $ | 1,169 |
|
Consideration paid in cash |
|
|
|
|
|
|
| 3,241 |
|
Total Consideration |
|
|
|
|
|
| $ | 4,410 |
|
|
|
|
|
|
|
|
|
| |
Assets Acquired: |
|
|
|
|
|
|
|
| |
Cash and cash equivalents |
|
|
|
|
|
| $ | 16 |
|
Accounts receivable and accrued revenues |
|
|
|
|
|
|
| 180 |
|
Proved properties |
|
|
|
|
|
|
| 3,593 |
|
Unproved properties |
|
|
|
|
|
|
| 1,141 |
|
Other property, plant and equipment |
|
|
|
|
|
|
| 33 |
|
|
|
|
|
|
|
|
|
| |
Liabilities Assumed: |
|
|
|
|
|
|
|
| |
Accounts payable and accrued liabilities |
|
|
|
|
|
|
| (519 | ) |
Asset retirement obligation |
|
|
|
|
|
|
| (28 | ) |
Other liabilities and provisions |
|
|
|
|
|
|
| (6 | ) |
Total Purchase Price |
|
|
|
|
|
| $ | 4,410 |
|
The Company used the income approach valuation technique for the fair value of assets acquired and liabilities assumed. The carrying amounts of cash, accounts receivable and accounts payable approximate their fair values due to their nature and/or short-term maturity of the instruments. The fair value of tubular inventory in other property, plant and equipment was based on the cost approach, which utilized asset listings and cost records with consideration for the relative age, condition, utilization and economic support of the inventory. The fair values of the proved properties, unproved properties and asset retirement obligation were categorized within Level 3 and were determined using relevant market assumptions, including discount rates, future commodity prices and costs, timing of development activities, projections of oil and gas reserves, and estimates to abandon and reclaim producing wells. Level 3 inputs require significant judgement and estimates to be made.
For income tax purposes, the Permian Acquisition is treated as an asset purchase, and as a result, the tax basis in the assets and liabilities reflect their allocated fair value.
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information combines the historical financial results of Ovintiv with the Permian LLCs and has been prepared as though the acquisition and the associated debt issuance described in Note 11 had occurred on January 1, 2022. The pro forma information is not intended to reflect the actual results of operations that would have occurred if the Permian Acquisition had been completed at the date indicated. In addition, the pro forma information is not intended to be a projection of Ovintiv’s results of operations for any future period.
19
Additionally, pro forma earnings were adjusted to exclude acquisition-related costs incurred of approximately $75 million for the three and six months ended June 30, 2023, and 2022. The pro forma financial information does not include any cost savings or other synergies that may result from the acquisition or any estimated costs that have been or will be incurred to integrate the assets. The pro forma financial data does not include the results of operations for any other acquisitions made during the periods presented, as they were primarily acreage acquisitions, and their results were not deemed material.
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(US$ millions, except per share amounts) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues |
| $ | 2,791 |
|
| $ | 3,925 |
|
| $ | 5,653 |
|
| $ | 6,001 |
|
Net Earnings (Loss) |
| $ | 419 |
|
| $ | 1,390 |
|
| $ | 1,012 |
|
| $ | 1,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Earnings (Loss) per Share of Common Stock |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 1.68 |
|
| $ | 4.81 |
|
| $ | 4.10 |
|
| $ | 3.84 |
|
Diluted |
|
| 1.67 |
|
|
| 4.75 |
|
|
| 4.04 |
|
|
| 3.77 |
|
9. | Property, Plant and Equipment, Net |
|
| As at September 30, 2022 |
|
| As at December 31, 2021 |
|
| As at June 30, 2023 |
|
| As at December 31, 2022 |
| ||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| Accumulated |
|
|
|
| |||||||||
|
| Cost |
|
| DD&A |
|
| Net |
|
| Cost |
|
| DD&A |
|
| Net |
|
| Cost |
|
| DD&A |
|
| Net |
|
| Cost |
|
| DD&A |
|
| Net |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
USA Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Proved properties |
| $ | 40,756 |
|
| $ | (34,061 | ) |
| $ | 6,695 |
|
| $ | 39,145 |
|
| $ | (33,418 | ) |
| $ | 5,727 |
|
| $ | 45,724 |
|
| $ | (34,909 | ) |
| $ | 10,815 |
|
| $ | 41,382 |
|
| $ | (34,280 | ) |
| $ | 7,102 |
|
Unproved properties |
|
| 1,192 |
|
|
| - |
|
|
| 1,192 |
|
|
| 1,884 |
|
|
| - |
|
|
| 1,884 |
|
|
| 1,947 |
|
|
| - |
|
|
| 1,947 |
|
|
| 1,127 |
|
|
| - |
|
|
| 1,127 |
|
Other |
|
| 28 |
|
|
| - |
|
|
| 28 |
|
|
| 12 |
|
|
| - |
|
|
| 12 |
|
|
| 79 |
|
|
| - |
|
|
| 79 |
|
|
| 30 |
|
|
| - |
|
|
| 30 |
|
|
|
| 41,976 |
|
|
| (34,061 | ) |
|
| 7,915 |
|
|
| 41,041 |
|
|
| (33,418 | ) |
|
| 7,623 |
|
|
| 47,750 |
|
|
| (34,909 | ) |
|
| 12,841 |
|
|
| 42,539 |
|
|
| (34,280 | ) |
|
| 8,259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Canadian Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Proved properties |
|
| 15,367 |
|
|
| (14,454 | ) |
|
| 913 |
|
|
| 16,330 |
|
|
| (15,450 | ) |
|
| 880 |
|
|
| 16,334 |
|
|
| (15,170 | ) |
|
| 1,164 |
|
|
| 15,672 |
|
|
| (14,687 | ) |
|
| 985 |
|
Unproved properties |
|
| 47 |
|
|
| - |
|
|
| 47 |
|
|
| 60 |
|
|
| - |
|
|
| 60 |
|
|
| 42 |
|
|
| - |
|
|
| 42 |
|
|
| 45 |
|
|
| - |
|
|
| 45 |
|
Other |
|
| 15 |
|
|
| - |
|
|
| 15 |
|
|
| 11 |
|
|
| - |
|
|
| 11 |
|
|
| 11 |
|
|
| - |
|
|
| 11 |
|
|
| 14 |
|
|
| - |
|
|
| 14 |
|
|
|
| 15,429 |
|
|
| (14,454 | ) |
|
| 975 |
|
|
| 16,401 |
|
|
| (15,450 | ) |
|
| 951 |
|
|
| 16,387 |
|
|
| (15,170 | ) |
|
| 1,217 |
|
|
| 15,731 |
|
|
| (14,687 | ) |
|
| 1,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Market Optimization |
|
| 7 |
|
|
| (7 | ) |
|
| - |
|
|
| 7 |
|
|
| (7 | ) |
|
| - |
|
|
| 7 |
|
|
| (7 | ) |
|
| - |
|
|
| 7 |
|
|
| (7 | ) |
|
| - |
|
Corporate & Other |
|
| 821 |
|
|
| (658 | ) |
|
| 163 |
|
|
| 873 |
|
|
| (686 | ) |
|
| 187 |
|
|
| 848 |
|
|
| (689 | ) |
|
| 159 |
|
|
| 831 |
|
|
| (666 | ) |
|
| 165 |
|
|
| $ | 58,233 |
|
| $ | (49,180 | ) |
| $ | 9,053 |
|
| $ | 58,322 |
|
| $ | (49,561 | ) |
| $ | 8,761 |
|
| $ | 64,992 |
|
| $ | (50,775 | ) |
| $ | 14,217 |
|
| $ | 59,108 |
|
| $ | (49,640 | ) |
| $ | 9,468 |
|
USA and Canadian Operations’ property, plant and equipment include internal costs directly related to exploration, development and construction activities of $135$76 million, which have been capitalized during the ninesix months ended SeptemberJune 30, 2022 (20212023 (2022 - $124$89 million).
| Leases |
The following table outlines Ovintiv’s estimated future sublease income as at SeptemberJune 30, 2022.2023. All subleases are classified as operating leases.
(undiscounted) |
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Thereafter |
|
| Total |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| Thereafter |
|
| Total |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Sublease Income |
| $ | 11 |
|
| $ | 48 |
|
| $ | 49 |
|
| $ | 50 |
|
| $ | 50 |
|
| $ | 455 |
|
| $ | 663 |
|
| $ | 26 |
|
| $ | 52 |
|
| $ | 52 |
|
| $ | 52 |
|
| $ | 48 |
|
| $ | 419 |
|
| $ | 649 |
|
For the three and ninesix months ended SeptemberJune 30, 2022,2023, operating lease income was $12$12 million and $37$24 million, respectively (2021(2022 - $15$12 million and $42$25 million, respectively), and variable lease income was $5$6 million and $15$11 million, respectively (2021(2022 - $4$5 million and $13$10 million, respectively).
20
|
| Long-Term Debt |
|
|
|
| As at |
|
| As at |
|
|
|
| As at |
|
| As at |
| ||||
|
|
|
| September 30, |
|
| December 31, |
|
|
|
| June 30, |
|
| December 31, |
| ||||
|
|
|
| 2022 |
|
| 2021 |
|
|
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
U.S. Dollar Denominated Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Revolving credit and term loan borrowings |
|
|
| $ | 440 |
|
| $ | - |
|
|
|
| $ | 680 |
|
| $ | 393 |
|
U.S. Unsecured Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
5.625% due July 1, 2024 |
|
|
|
| - |
|
|
| 1,000 |
| ||||||||||
5.375% due January 1, 2026 |
|
|
|
| 459 |
|
|
| 688 |
| ||||||||||
8.125% due September 15, 2030 |
|
|
|
| 300 |
|
|
| 300 |
| ||||||||||
7.20% due November 1, 2031 |
|
|
|
| 350 |
|
|
| 350 |
| ||||||||||
7.375% due November 1, 2031 |
|
|
|
| 500 |
|
|
| 500 |
| ||||||||||
6.50% due August 15, 2034 |
|
|
|
| 599 |
|
|
| 750 |
| ||||||||||
6.625% due August 15, 2037 |
|
|
|
| 390 |
|
|
| 462 |
| ||||||||||
6.50% due February 1, 2038 |
|
|
|
| 430 |
|
|
| 488 |
| ||||||||||
5.15% due November 15, 2041 |
|
|
|
| 148 |
|
|
| 203 |
| ||||||||||
5.65% due May 15, 2025 |
|
|
|
| 600 |
|
|
| - |
| ||||||||||
5.375% due January 1, 2026 |
|
|
|
| 459 |
|
|
| 459 |
| ||||||||||
5.65% due May 15, 2028 |
|
|
|
| 700 |
|
|
| - |
| ||||||||||
8.125% due September 15, 2030 |
|
|
|
| 300 |
|
|
| 300 |
| ||||||||||
7.20% due November 1, 2031 |
|
|
|
| 350 |
|
|
| 350 |
| ||||||||||
7.375% due November 1, 2031 |
|
|
|
| 500 |
|
|
| 500 |
| ||||||||||
6.25% due July 15, 2033 |
|
|
|
| 600 |
|
|
| - |
| ||||||||||
6.50% due August 15, 2034 |
|
|
|
| 599 |
|
|
| 599 |
| ||||||||||
6.625% due August 15, 2037 |
|
|
|
| 390 |
|
|
| 390 |
| ||||||||||
6.50% due February 1, 2038 |
|
|
|
| 430 |
|
|
| 430 |
| ||||||||||
5.15% due November 15, 2041 |
|
|
|
| 148 |
|
|
| 148 |
| ||||||||||
7.10% due July 15, 2053 |
|
|
|
| 400 |
|
|
| - |
| ||||||||||
Total Principal |
|
|
|
| 3,616 |
|
|
| 4,741 |
|
|
|
|
| 6,156 |
|
|
| 3,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Increase in Value of Debt Acquired |
|
|
|
| 29 |
|
|
| 77 |
|
|
|
|
| 25 |
|
|
| 27 |
|
Unamortized Debt Discounts and Issuance Costs |
|
|
|
| (27 | ) |
|
| (32 | ) |
|
|
|
| (47 | ) |
|
| (26 | ) |
Total Long-Term Debt |
|
|
| $ | 3,618 |
|
| $ | 4,786 |
|
|
|
| $ | 6,134 |
|
| $ | 3,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Current Portion |
|
|
| $ | 440 |
|
| $ | - |
|
|
|
| $ | 680 |
|
| $ | 393 |
|
Long-Term Portion |
|
|
|
| 3,178 |
|
|
| 4,786 |
|
|
|
|
| 5,454 |
|
|
| 3,177 |
|
|
|
|
| $ | 3,618 |
|
| $ | 4,786 |
|
|
|
| $ | 6,134 |
|
| $ | 3,570 |
|
On May 31, 2023, Ovintiv completed a public offering of senior unsecured notes of $600 million with a coupon rate of 5.65 percent due May 15, 2025, $700 million with a coupon rate of 5.65 percent due May 15, 2028, $600 million with a coupon rate of 6.25 percent due July 15, 2033, and $400 million with a coupon rate of 7.10 percent due July 15, 2053. The net proceeds of the offering, totaling $2,278 million, were used to fund a portion of the Company’s Permian Acquisition. See Note 8 for further information on the business combination.
During the ninethree and six months ended SeptemberJune 30, 2022, the Company repurchased, in the open market, approximately $565$55 million and $61 million, respectively, in principal amount of its senior notes, in the open market, which included approximately $229 million in principal amount of its 5.375 percent senior notes due in January 2026, approximately $151 million in principal amount of its 6.5 percent senior notes due in August 2034, approximately $72 million in principal amount of its 6.625 percent senior notes due in August 2037, approximately $58 million in principal amount of its 6.5 percent senior notes due in February 2038 and approximately $55 million in principal amount of its 5.15 percent senior notes due in November 2041. To complete these open market repurchases, the Company paid premiums of $22 million, which are included in interest expense as discussed in Note 4.plus accrued interest.
On June 10, 2022, Ovintiv redeemed the Company’s $1,000$1,000 million, 5.625 percent senior notes due July 1, 2024, using cash on hand and proceeds from short-term borrowings. Ovintiv paid approximately $1,072$1,072 million in cash including accrued and unpaid interest of $25$25 million and a one-time make-whole payment of $47 million, which is included in interest expense as discussed in Note 4.
On June 18, 2021, the Company redeemed its $600 million, 5.75 percent senior notes due January 30, 2022, using a portion of the net proceeds from its Eagle Ford and Duvernay asset sales, as discussed in Note 7. Ovintiv paid approximately $632 million in cash including accrued and unpaid interest of $13 million and a one-time make-whole payment of $19$47 million, which was included in interest expense as discussed in Note 4.
On August 16, 2021, the Company completed the redemption of its $518 million, 3.90 percent senior notes due November 15, 2021. The Company redeemed the notes at par and paid approximately $523 million in cash including accrued and unpaid interest of $5 million.
As at SeptemberJune 30, 2022,2023, the Company had outstanding commercial paper of $440$330 million maturing at various dates with a weighted average interest rate of approximately 4.085.98 percent.
As at SeptemberJune 30, 2022,2023, the Company also had $350 million drawn on its revolving credit facilities.
As at June 30, 2023, total long-term debt had a carrying value of $3,618$6,134 million and a fair value of $3,588$6,161 million (as at December 31, 20212022 - carrying value of $4,786$3,570 million and a fair value of $5,804$3,648 million). The estimated fair value of long-term borrowings is categorized within Level 2 of the fair value hierarchy and has been determined based on market information of long-term debt with similar terms and maturity, or by discounting future payments of interest and principal at interest rates expected to be available to the Company at period end.
21
|
|
|
|
| As at |
|
| As at |
| ||
|
| September 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
|
|
|
Finance Lease Obligations |
| $ | 28 |
|
| $ | 33 |
|
Pensions and Other Post-Employment Benefits |
|
| 98 |
|
|
| 104 |
|
Long-Term Incentive Costs (See Note 15) |
|
| 10 |
|
|
| 36 |
|
Other Derivative Contracts (See Notes 17, 18) |
|
| 5 |
|
|
| 5 |
|
Other |
|
| 12 |
|
|
| 12 |
|
|
| $ | 153 |
|
| $ | 190 |
|
12. |
|
|
| As at |
|
| As at |
| ||
|
| June 30, |
|
| December 31, |
| ||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Finance Lease Obligations |
| $ | 23 |
|
| $ | 27 |
|
Pensions and Other Post-Employment Benefits |
|
| 76 |
|
|
| 73 |
|
Long-Term Incentive Costs (See Note 16) |
|
| - |
|
|
| 14 |
|
Other Derivative Contracts (See Notes 18, 19) |
|
| - |
|
|
| 5 |
|
Other |
|
| 19 |
|
|
| 12 |
|
|
| $ | 118 |
|
| $ | 131 |
|
Authorized
13. | Share Capital |
Authorized
Ovintiv is authorized to issue 750 million shares of common stock, par value $0.01$0.01 per share, and 25 million shares of preferred stock, par value $0.01$0.01 per share. No shares of preferred stock are outstanding.
Issued and Outstanding
|
| As at |
|
| As at |
| ||||||||||||||||||||||||||
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||
|
| As at September 30, 2022 |
|
| As at December 31, 2021 |
|
| Number |
|
|
|
|
| Number |
|
|
|
| ||||||||||||||
|
| Number (millions) |
|
| Amount |
|
| Number (millions) |
|
| Amount |
|
| (millions) |
|
| Amount |
|
| (millions) |
|
| Amount |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Shares of Common Stock Outstanding, Beginning of Year |
|
| 258.0 |
|
| $ | 3 |
|
|
| 259.8 |
|
| $ | 3 |
|
|
| 245.7 |
|
| $ | 3 |
|
|
| 258.0 |
|
| $ | 3 |
|
Shares of Common Stock Purchased |
|
| (11.2 | ) |
|
| - |
|
|
| (3.1 | ) |
|
| - |
|
|
| (7.7 | ) |
|
| - |
|
|
| (14.7 | ) |
|
| - |
|
Shares of Common Stock Issued |
|
| 2.4 |
|
|
| - |
|
|
| 1.3 |
|
|
| - |
|
|
| 35.9 |
|
|
| - |
|
|
| 2.4 |
|
|
| - |
|
Shares of Common Stock Outstanding, End of Period |
|
| 249.2 |
|
| $ | 3 |
|
|
| 258.0 |
|
| $ | 3 |
|
|
| 273.9 |
|
| $ | 3 |
|
|
| 245.7 |
|
| $ | 3 |
|
On June 12, 2023, in accordance with the terms of the Permian Acquisition agreement, Ovintiv issued approximately 31.8 million shares of common stock as a component of the consideration paid to EnCap as discussed in Note 8. In conjunction with the share issuance, the Company recognized share capital of $318 thousand, and paid in surplus of $1,169 million.
Ovintiv’s Performance Share Units (“PSU”) and Restricted Share Units (“RSU”) stock-based compensation plans allow the Company to settle the awards either in cash or in the Company’s common stock. Accordingly, Ovintiv issued 2.44.1 million shares of common stock during the ninesix months ended SeptemberJune 30, 2022 (1.32023 (2.4 million shares of common stock during the twelve months ended December 31, 2021)2022) as certain PSU and RSU grants vested during the period.
Normal Course Issuer Bid
On September 28, 2022, the Company announced it had received regulatory approval for the renewal of its NCIB program, that enables the Company to purchase, for cancellation or return to treasury, up to approximately 24.8 million shares of common stock over a 12-month period from October 3, 2022, to October 2, 2023.
During the three months ended SeptemberJune 30, 2023, the Company purchased approximately 2.5 million shares for total consideration of approximately $89 million. Of the amount paid, $25 thousand was charged to share capital and $89 million was charged to paid in surplus.
During the six months ended June 30, 2023, the Company purchased approximately 7.7 million shares for total consideration of approximately $328 million. Of the amount paid, $77 thousand was charged to share capital and $328 million was charged to paid in surplus.
22
During the three months ended June 30, 2022, the Company purchased approximately 2.8 million shares under theits previous NCIB program which extended from October 1, 2021, to September 30, 2022, the Company purchased, for cancellation, approximately 6.7 million shares for total2022. Total consideration of approximately $325 million. Of$135 million was paid to complete the amount paid, $77share repurchases, of which $21 thousand was charged to share capital and $325$135 million was charged to paid in surplus.
During the ninesix months ended SeptemberJune 30, 2022, the Company purchased approximately 4.5 million shares under theits previous NCIB program the Company purchased, for cancellation, approximately 11.2 million shares for total consideration of approximately $531 million. Of the amount paid, $112$206 million, of which $35 thousand was charged to share capital and $531$206 million was charged to paid in surplus.
For the twelve months ended December 31, 2022, the Company purchased approximately 14.7 million shares under a combination of its current and previous NCIB programs for total consideration of approximately $719 million. Of the amount paid, $147 thousand was charged to share capital and $719 million was charged to paid in surplus.
All purchases were made in accordance with the previousrespective NCIB programprograms at prevailing market prices plus brokerage fees, with consideration allocated to share capital up to the par value of the shares, with any excess allocated to paid in surplus.
|
Dividends
Dividends
During the three months ended SeptemberJune 30, 2022,2023, the Company declared and paid dividends of $0.25$0.30 per share of common stock totaling $62$82 million (2021(2022 - $0.14$0.25 per share of common stock totaling $37$64 million).
During the ninesix months ended SeptemberJune 30, 2022,2023, the Company declared and paid dividends of $0.70$0.55 per share of common stock totaling $178$143 million (2021(2022 - $0.3275$0.45 per share of common stock totaling $86$116 million).
On November 8, 2022,July 27, 2023, the Board of Directors declared a dividend of $0.25$0.30 per share of common stock payable on December 30, 2022September 29, 2023, to shareholders of record as of DecemberSeptember 15, 2022.2023.
Earnings Per Share of Common Stock
The following table presents the calculation of net earnings (loss) per share of common stock:
|
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
|
| September 30, |
|
| September 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
(US$ millions, except per share amounts) |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Earnings (Loss) |
|
| $ | 1,186 |
|
| $ | (72 | ) |
| $ | 2,302 |
|
| $ | 32 |
|
| $ | 336 |
|
| $ | 1,357 |
|
| $ | 823 |
|
| $ | 1,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Number of Shares of Common Stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares of common stock outstanding - Basic |
|
|
| 252.5 |
|
|
| 261.1 |
|
|
| 255.7 |
|
|
| 260.7 |
|
|
| 249.4 |
|
|
| 257.2 |
|
|
| 246.9 |
|
|
| 257.3 |
|
Effect of dilutive securities (1) |
|
|
| 3.7 |
|
|
| - |
|
|
| 4.7 |
|
|
| 4.6 |
| ||||||||||||||||
Effect of dilutive securities |
|
| 1.4 |
|
|
| 3.4 |
|
|
| 3.9 |
|
|
| 4.8 |
| |||||||||||||||||
Weighted Average Shares of Common Stock Outstanding - Diluted |
|
|
| 256.2 |
|
|
| 261.1 |
|
|
| 260.4 |
|
|
| 265.3 |
|
|
| 250.8 |
|
|
| 260.6 |
|
|
| 250.8 |
|
|
| 262.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Earnings (Loss) per Share of Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| $ | 4.70 |
|
| $ | (0.28 | ) |
| $ | 9.00 |
|
| $ | 0.12 |
|
| $ | 1.35 |
|
| $ | 5.28 |
|
| $ | 3.33 |
|
| $ | 4.34 |
|
Diluted (1) |
|
|
| 4.63 |
|
|
| (0.28 | ) |
|
| 8.84 |
|
|
| 0.12 |
| ||||||||||||||||
Diluted |
|
| 1.34 |
|
|
| 5.21 |
|
|
| 3.28 |
|
|
| 4.26 |
|
|
|
Stock-Based Compensation Plans
Shares issued as a result of awards granted from stock-based compensation plans are generally funded out of the common stock authorized for issuance as approved by the Company’s shareholders.
TheCertain PSUs and RSUs are classified as equity-settled if the Company has sufficient common stock held in reserve for issuance. These awards are included in the calculation of fully diluted net earnings (loss) per share of common stock if dilutive.
Ovintiv’s stock options with associated Tandem Stock Appreciation Rights (“TSARs”) give the employee the right to purchase shares of common stock of the Company or receive cash. Historically, most holders of options have elected to exercise their TSARs in exchange for a cash payment. As a result, outstanding options are not considered potentially dilutive securities.
23
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation Adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, Beginning of Period |
| $ | 1,013 |
|
| $ | 1,086 |
|
| $ | 1,044 |
|
| $ | 1,042 |
|
Change in Foreign Currency Translation Adjustment |
|
| (94 | ) |
|
| (48 | ) |
|
| (125 | ) |
|
| (4 | ) |
Balance, End of Period |
| $ | 919 |
|
| $ | 1,038 |
|
| $ | 919 |
|
| $ | 1,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and Other Post-Employment Benefit Plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, Beginning of Period |
| $ | 45 |
|
| $ | 31 |
|
| $ | 48 |
|
| $ | 34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Reclassified from Other Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of net actuarial (gains) and losses to net earnings (See Note 16) |
|
| (1 | ) |
|
| (1 | ) |
|
| (5 | ) |
|
| (5 | ) |
Income taxes |
|
| - |
|
|
| - |
|
|
| 1 |
|
|
| 1 |
|
Balance, End of Period |
| $ | 44 |
|
| $ | 30 |
|
| $ | 44 |
|
| $ | 30 |
|
Total Accumulated Other Comprehensive Income |
| $ | 963 |
|
| $ | 1,068 |
|
| $ | 963 |
|
| $ | 1,068 |
|
14. | Accumulated Other Comprehensive Income |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign Currency Translation Adjustment |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance, Beginning of Period |
| $ | 939 |
|
| $ | 1,072 |
|
| $ | 937 |
|
| $ | 1,044 |
|
Change in Foreign Currency Translation Adjustment |
|
| 53 |
|
|
| (59 | ) |
|
| 55 |
|
|
| (31 | ) |
Balance, End of Period |
| $ | 992 |
|
| $ | 1,013 |
|
| $ | 992 |
|
| $ | 1,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Pension and Other Post-Employment Benefit Plans |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance, Beginning of Period |
| $ | 52 |
|
| $ | 47 |
|
| $ | 54 |
|
| $ | 48 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amounts Reclassified from Other Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Reclassification of net actuarial (gains) and losses to net earnings (See Note 17) |
|
| (2 | ) |
|
| (3 | ) |
|
| (4 | ) |
|
| (4 | ) |
Income taxes |
|
| 1 |
|
|
| 1 |
|
|
| 1 |
|
|
| 1 |
|
Balance, End of Period |
| $ | 51 |
|
| $ | 45 |
|
| $ | 51 |
|
| $ | 45 |
|
Total Accumulated Other Comprehensive Income |
| $ | 1,043 |
|
| $ | 1,058 |
|
| $ | 1,043 |
|
| $ | 1,058 |
|
15. | Variable Interest Entities |
Veresen Midstream Limited Partnership
Veresen Midstream Limited Partnership (“VMLP”) provides gathering, compression and processing services under various agreements related to the Company’s development of liquids and natural gas production in the Montney play. As at SeptemberJune 30, 2022,2023, VMLP provides approximately 1,1601,156 MMcf/d of natural gas gathering and compression and 923918 MMcf/d of natural gas processing under long-term service agreements with remaining terms ranging from nineeight to 2322 years and have various renewal terms providing up to a potential maximum of 10 years.
Ovintiv has determined that VMLP is a variable interest entity and that Ovintiv holds variable interests in VMLP. Ovintiv is not the primary beneficiary as the Company does not have the power to direct the activities that most significantly impact VMLP’s economic performance. These key activities relate to the construction, operation, maintenance and marketing of the assets owned by VMLP. The variable interests arise from certain terms under the various long-term service agreements and include: i) a take or pay for volumes in certain agreements; ii) an operating fee of which a portion can be converted into a fixed fee once VMLP assumes operatorship of certain assets; and iii) a potential payout of minimum costs in certain agreements. The potential payout of minimum costs will be assessed in the eighth year of the assets’ service period and is based on whether there is an overall shortfall of total system cash flows from natural gas gathered and compressed under certain agreements. The potential payout amount can be reduced in the event VMLP markets unutilized capacity to third-party users. Ovintiv is not required to provide any financial support or guarantees to VMLP.
As a result of Ovintiv’s involvement with VMLP, the maximum total exposure to loss related to the commitments under the agreements is estimated to be $1,468$1,367 million as at SeptemberJune 30, 2022.2023. The estimate comprises the take or pay volume commitments and the potential payout of minimum costs. The take or pay volume commitments associated with certain gathering and processing assets are included in Note 2021 under Transportation and Processing. The potential payout requirement is highly uncertain as the amount is contingent on future production estimates, pace of development and the amount of capacity contracted to third parties.downstream transportation constraints. As at SeptemberJune 30, 2022,2023, accounts payable and accrued liabilities included $0.5$0.6 million related to the take or pay commitment.
24
|
| Compensation Plans |
Ovintiv has a number of compensation arrangements under which the Company awards various types of long-term incentive grants to eligible employees and Directors. They may include TSARs, Stock Appreciation Rights (“SARs”), TSARs, PSUs, Deferred Share Units (“DSUs”) and RSUs.
Ovintiv accounts for certain PSUs and RSUs as equity-settled stock-based payment transactions provided there is sufficient common stock held in reserve for issuance. SARs, TSARs SARs and DSUs are accounted for as cash-settled stock-based payment transactions. The Company accrues compensation costs over the vesting period based on the fair value of the rights determined using the Black-Scholes-Merton or other appropriate fair value models.
During the secondfirst quarter of 2022,2023, Ovintiv’s shareholders approved an increaseBoard of Directors resolved to settle certain PSU awards and RSU awards with the numberissuance of shares of common stock held in reserve for issuance under the Company’s stock-based compensation plans.common stock. Accordingly, certainthese awards were modified and reclassified as equity-settled share-based payment transactions at the modification date. The modification date fair value of the awards was US$56.7243.80 per share and C$72.1759.47 per share for the U.S. dollar denominated and Canadian dollar denominated awards, respectively. The modification impacted all employeesrespectively, and there was no incremental compensation cost recognized at the modification date.
The following weighted average assumptions were used to determine the fair value of TSARSAR and SARTSAR units outstanding:
|
| As at June 30, 2023 |
|
| As at June 30, 2022 |
| ||||
|
| US$ SAR |
| C$ TSAR |
|
| US$ SAR |
| C$ TSAR |
|
|
| Share Units |
| Share Units |
|
| Share Units |
| Share Units |
|
|
|
|
|
|
|
|
|
|
|
|
Risk Free Interest Rate |
| 4.61% |
| 4.61% |
|
| 3.12% |
| 3.12% |
|
Dividend Yield |
| 3.15% |
| 3.21% |
|
| 2.26% |
| 2.23% |
|
Expected Volatility Rate (1) |
| 59.69% |
| 55.88% |
|
| 107.62% |
| 106.01% |
|
Expected Term |
| 1.4 yrs |
| 1.2 yrs |
|
| 1.7 yrs |
| 1.7 yrs |
|
Market Share Price |
| US$38.07 |
| C$50.42 |
|
| US$44.19 |
| C$56.94 |
|
Weighted Average Grant Date Fair Value |
| US$44.87 |
| C$62.66 |
|
| US$39.92 |
| C$56.97 |
|
|
| As at September 30, 2022 |
|
| As at September 30, 2021 |
| ||||
|
| US$ SAR Share Units |
| C$ TSAR Share Units |
|
| US$ SAR Share Units |
| C$ TSAR Share Units |
|
|
|
|
|
|
|
|
|
|
|
|
Risk Free Interest Rate |
| 3.72% |
| 3.72% |
|
| 0.49% |
| 0.49% |
|
Dividend Yield |
| 2.17% |
| 2.02% |
|
| 1.70% |
| 1.68% |
|
Expected Volatility Rate (1) |
| 107.63% |
| 105.92% |
|
| 106.19% |
| 105.03% |
|
Expected Term |
| 1.6 yrs |
| 1.6 yrs |
|
| 1.5 yrs |
| 1.5 yrs |
|
Market Share Price |
| US$46.00 |
| C$63.58 |
|
| US$32.88 |
| C$41.62 |
|
Weighted Average Grant Date Fair Value |
| US$41.97 |
| C$57.31 |
|
| US$37.63 |
| C$50.46 |
|
|
|
The Company has recognized the following share-based compensation costs:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Compensation Costs of Transactions Classified as Cash-Settled |
| $ | 28 |
|
| $ | 33 |
|
| $ | 118 |
|
| $ | 115 |
|
| $ | 4 |
|
| $ | 1 |
|
| $ | (24 | ) |
| $ | 90 |
|
Total Compensation Costs of Transactions Classified as Equity-Settled |
|
| 26 |
|
|
| 7 |
|
|
| 57 |
|
|
| 25 |
|
|
| 24 |
|
|
| 21 |
|
|
| 45 |
|
|
| 31 |
|
Less: Total Share-Based Compensation Costs Capitalized |
|
| (8 | ) |
|
| (7 | ) |
|
| (24 | ) |
|
| (23 | ) |
|
| (5 | ) |
|
| (7 | ) |
|
| (13 | ) |
|
| (16 | ) |
Total Share-Based Compensation Expense (Recovery) |
| $ | 46 |
|
| $ | 33 |
|
| $ | 151 |
|
| $ | 117 |
|
| $ | 23 |
|
| $ | 15 |
|
| $ | 8 |
|
| $ | 105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Recognized in the Condensed Consolidated Statement of Earnings in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating |
| $ | 9 |
|
| $ | 8 |
|
| $ | 28 |
|
| $ | 26 |
|
| $ | 7 |
|
| $ | 8 |
|
| $ | 11 |
|
| $ | 19 |
|
Administrative |
|
| 37 |
|
|
| 25 |
|
|
| 123 |
|
|
| 91 |
|
|
| 16 |
|
|
| 7 |
|
|
| (3 | ) |
|
| 86 |
|
|
| $ | 46 |
|
| $ | 33 |
|
| $ | 151 |
|
| $ | 117 |
|
| $ | 23 |
|
| $ | 15 |
|
| $ | 8 |
|
| $ | 105 |
|
As at SeptemberJune 30, 2022,2023, the liability for cash-settled share-based payment transactions totaled $125$14 million ($114153 million as at December 31, 2021)2022), of which $115$14 million ($78139 million as at December 31, 2021)2022) is recognized in accounts payable and accrued liabilities and $10 millionnil ($3614 million as at December 31, 2021)2022) is recognized in other liabilities and provisions in the Condensed Consolidated Balance Sheet.
|
The following units were granted primarily in conjunction with the Company’s annual grant of long-term incentive awards. The PSUs and RSUs were granted at the volume-weighted average trading price of shares of Ovintiv common stock for the five days prior to the grant date.
| |||||
|
| ||||
|
| ||||
DSUs |
|
25
| Pension and Other Post-Employment Benefits |
The Company has recognized total benefit plans expense which includes pension benefits and other post-employment benefits (“OPEB”) for the ninesix months ended SeptemberJune 30 as follows:
|
| Pension Benefits |
|
| OPEB |
|
| Total |
|
| Pension Benefits |
|
| OPEB |
|
| Total |
| ||||||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net Defined Periodic Benefit Cost |
| $ | - |
|
| $ | - |
|
| $ | (2 | ) |
| $ | (2 | ) |
| $ | (2 | ) |
| $ | (2 | ) |
| $ | 1 |
|
| $ | - |
|
| $ | (2 | ) |
| $ | (2 | ) |
| $ | (1 | ) |
| $ | (2 | ) |
Defined Contribution Plan Expense |
|
| 17 |
|
|
| 19 |
|
|
| - |
|
|
| - |
|
|
| 17 |
|
|
| 19 |
|
|
| 12 |
|
|
| 12 |
|
|
| - |
|
|
| - |
|
|
| 12 |
|
|
| 12 |
|
Total Benefit Plans Expense |
| $ | 17 |
|
| $ | 19 |
|
| $ | (2 | ) |
| $ | (2 | ) |
| $ | 15 |
|
| $ | 17 |
|
| $ | 13 |
|
| $ | 12 |
|
| $ | (2 | ) |
| $ | (2 | ) |
| $ | 11 |
|
| $ | 10 |
|
Of the total benefit plans expense, $15$11 million (2021(2022 - $18$10 million) was included in operating expense and $4$2 million (2021(2022 - $4$3 million) was included in administrative expense. Excluding service costs, net defined periodic benefit gains of $4$2 million (2021(2022 - gains of $5$3 million) were recorded in other (gains) losses, net.
The net defined periodic benefit cost for the ninesix months ended SeptemberJune 30 is as follows:
|
| Defined Benefits |
|
| OPEB |
|
| Total |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Service Cost |
| $ | - |
|
| $ | - |
|
| $ | 1 |
|
| $ | 1 |
|
| $ | 1 |
|
| $ | 1 |
|
Interest Cost |
|
| 4 |
|
|
| 3 |
|
|
| 1 |
|
|
| 1 |
|
|
| 5 |
|
|
| 4 |
|
Expected Return on Plan Assets |
|
| (3 | ) |
|
| (3 | ) |
|
| - |
|
|
| - |
|
|
| (3 | ) |
|
| (3 | ) |
Amounts Reclassified from Accumulated Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amortization of net actuarial (gains) and losses |
|
| - |
|
|
| - |
|
|
| (4 | ) |
|
| (4 | ) |
|
| (4 | ) |
|
| (4 | ) |
Total Net Defined Periodic Benefit Cost (1) |
| $ | 1 |
|
| $ | - |
|
| $ | (2 | ) |
| $ | (2 | ) |
| $ | (1 | ) |
| $ | (2 | ) |
|
| Defined Benefits |
|
| OPEB |
|
| Total |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service Cost |
| $ | - |
|
| $ | - |
|
| $ | 2 |
|
| $ | 3 |
|
| $ | 2 |
|
| $ | 3 |
|
Interest Cost |
|
| 4 |
|
|
| 3 |
|
|
| 1 |
|
|
| 1 |
|
|
| 5 |
|
|
| 4 |
|
Expected Return on Plan Assets |
|
| (4 | ) |
|
| (4 | ) |
|
| - |
|
|
| - |
|
|
| (4 | ) |
|
| (4 | ) |
Amounts Reclassified from Accumulated Other Comprehensive Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net actuarial (gains) and losses |
|
| - |
|
|
| 1 |
|
|
| (5 | ) |
|
| (6 | ) |
|
| (5 | ) |
|
| (5 | ) |
Total Net Defined Periodic Benefit Cost (1) |
| $ | - |
|
| $ | - |
|
| $ | (2 | ) |
| $ | (2 | ) |
| $ | (2 | ) |
| $ | (2 | ) |
26
|
|
|
| Fair Value Measurements |
The fair values of cash and cash equivalents, accounts receivable and accrued revenues, and accounts payable and accrued liabilities approximate their carrying amounts due to the short-term maturity of those instruments. The fair values of restricted cash and marketable securities included in other assets approximate their carrying amounts due to the nature of the instruments held.
Recurring fair value measurements are performed for risk management assets and liabilities and other derivative contracts, as discussed further in Note 18.19. These items are carried at fair value in the Condensed Consolidated Balance Sheet and are classified within the three levels of the fair value hierarchy in the following tables.
Fair value changes and settlements for amounts related to risk management assets and liabilities are recognized in revenues and foreign exchange gains and losses according to their purpose.
As at June 30, 2023 |
| Level 1 |
|
| Level 2 |
| Level 3 |
|
| Total Fair |
|
| Netting (1) |
|
| Carrying |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Risk Management Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commodity Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current assets |
| $ | 2 |
|
| $ | 134 |
|
| $ | 53 |
|
| $ | 189 |
|
| $ | (27 | ) |
| $ | 162 |
|
Long-term assets |
|
| - |
|
|
| 20 |
|
|
| 7 |
|
|
| 27 |
|
|
| (6 | ) |
|
| 21 |
|
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current assets |
|
| - |
|
|
| 5 |
|
|
| - |
|
|
| 5 |
|
|
| - |
|
|
| 5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Risk Management Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commodity Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current liabilities |
| $ | - |
|
| $ | 32 |
|
| $ | - |
|
| $ | 32 |
|
| $ | (27 | ) |
| $ | 5 |
|
Long-term liabilities |
|
| - |
|
|
| 13 |
|
|
| - |
|
|
| 13 |
|
|
| (6 | ) |
|
| 7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other Derivative Contracts (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current in accounts payable and accrued liabilities |
| $ | - |
|
| $ | 5 |
|
| $ | - |
|
| $ | 5 |
|
| $ | - |
|
| $ | 5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
As at December 31, 2022 |
| Level 1 |
|
| Level 2 |
| Level 3 |
|
| Total Fair |
|
| Netting (1) |
|
| Carrying |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Risk Management Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commodity Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current assets |
| $ | - |
|
| $ | 93 |
|
| $ | 12 |
|
| $ | 105 |
|
| $ | (53 | ) |
| $ | 52 |
|
Long-term assets |
|
| - |
|
|
| 34 |
|
|
| - |
|
|
| 34 |
|
|
| - |
|
|
| 34 |
|
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current assets |
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Risk Management Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Commodity Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current liabilities |
| $ | - |
|
| $ | 128 |
|
| $ | - |
|
| $ | 128 |
|
| $ | (53 | ) |
| $ | 75 |
|
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current liabilities |
|
| - |
|
|
| 11 |
|
|
| - |
|
|
| 11 |
|
|
| - |
|
|
| 11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Other Derivative Contracts (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Long-term in other liabilities and provisions |
| $ | - |
|
| $ | 5 |
|
| $ | - |
|
| $ | 5 |
|
| $ | - |
|
| $ | 5 |
|
As at September 30, 2022 |
| Level 1 Quoted Prices in Active Markets |
|
| Level 2 Other Observable Inputs |
|
| Level 3 Significant Unobservable Inputs |
|
| Total Fair Value |
|
| Netting (1) |
|
| Carrying Amount |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Management Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
| $ | 1 |
|
| $ | 136 |
|
| $ | 23 |
|
| $ | 160 |
|
| $ | (159 | ) |
| $ | 1 |
|
Long-term assets |
|
| - |
|
|
| 46 |
|
|
| - |
|
|
| 46 |
|
|
| (3 | ) |
|
| 43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Management Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
| $ | - |
|
| $ | 645 |
|
| $ | 73 |
|
| $ | 718 |
|
| $ | (159 | ) |
| $ | 559 |
|
Long-term liabilities |
|
| - |
|
|
| 9 |
|
|
| - |
|
|
| 9 |
|
|
| (3 | ) |
|
| 6 |
|
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
| - |
|
|
| 18 |
|
|
| - |
|
|
| 18 |
|
|
| - |
|
|
| 18 |
|
Long-term liabilities |
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| 2 |
|
|
| - |
|
|
| 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Derivative Contracts (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current in accounts receivable and accrued revenues |
| $ | - |
|
| $ | - |
|
| $ | 7 |
|
| $ | 7 |
|
| $ | - |
|
| $ | 7 |
|
Current in accounts payable and accrued liabilities |
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
Long-term in other liabilities and provisions |
|
| - |
|
|
| 5 |
|
|
| - |
|
|
| 5 |
|
|
| - |
|
|
| 5 |
|
As at December 31, 2021 |
| Level 1 Quoted Prices in Active Markets |
|
| Level 2 Other Observable Inputs |
|
| Level 3 Significant Unobservable Inputs |
|
| Total Fair Value |
|
| Netting (1) |
|
| Carrying Amount |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Management Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
| $ | - |
|
| $ | 10 |
|
| $ | - |
|
| $ | 10 |
|
| $ | (10 | ) |
| $ | - |
|
Long-term assets |
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
|
| (1 | ) |
|
| - |
|
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
| - |
|
|
| 5 |
|
|
| - |
|
|
| 5 |
|
|
| (4 | ) |
|
| 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk Management Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
| $ | - |
|
| $ | 536 |
|
| $ | 181 |
|
| $ | 717 |
|
| $ | (10 | ) |
| $ | 707 |
|
Long-term liabilities |
|
| - |
|
|
| 26 |
|
|
| - |
|
|
| 26 |
|
|
| (1 | ) |
|
| 25 |
|
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (4 | ) |
|
| (4 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Derivative Contracts (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current in accounts receivable and accrued revenues |
| $ | - |
|
| $ | - |
|
| $ | 9 |
|
| $ | 9 |
|
| $ | - |
|
| $ | 9 |
|
Current in accounts payable and accrued liabilities |
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
|
| - |
|
|
| 1 |
|
Long-term in other liabilities and provisions |
|
| - |
|
|
| 5 |
|
|
| - |
|
|
| 5 |
|
|
| - |
|
|
| 5 |
|
|
|
|
|
|
The Company’s Level 1 and Level 2 risk management assets and liabilities consist of commodity fixed price contracts, NYMEX three-way options, NYMEX costless collars, NYMEX call options, foreign currency swaps and basis swaps with terms to 2025. Level 2 also includes financial guarantee contracts as discussed in Note 18. The fair values of these contracts are estimated using inputs which are either directly or indirectly observable from active markets, such as exchange and other published prices, broker quotes and observable trading activity throughout the term of the instruments.
Level 3 Fair Value Measurements
As at SeptemberJune 30, 2022,2023, the Company’s Level 3 risk management assets and liabilities consist of WTI three-way options and a contingent consideration derivative contract tied to WTI costless collars with terms to 2023.2024. The WTI three-way options are a combination of a sold call, a bought put and a sold put. The WTI costless collars are a combination of a sold call and a bought put. These contracts allow the Company to participate in the upside of commodity prices to the ceiling of the call option and provide the Company with complete (collars) or partial (three-way) downside price protection through the put options. The fair values of these contracts are determined using an option pricing model using observable and unobservable inputs such as implied volatility. The unobservable inputs are obtained from third parties whenever possible and reviewed by the Company for reasonableness.
A summary of changes in Level 3 fair value measurements for risk management positions is presented below:
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Balance, Beginning of Year |
| $ | 12 |
|
| $ | (172 | ) |
Total Gains (Losses) |
|
| 48 |
|
|
| (683 | ) |
Purchases, Sales, Issuances and Settlements: |
|
|
|
|
|
| ||
Purchases, sales and issuances |
|
| - |
|
|
| - |
|
Settlements |
|
| - |
|
|
| 420 |
|
Transfers Out of Level 3 |
|
| - |
|
|
| - |
|
Balance, End of Period |
| $ | 60 |
|
| $ | (435 | ) |
Change in Unrealized Gains (Losses) During the |
|
|
|
|
|
| ||
Period Included in Net Earnings (Loss) |
| $ | 48 |
|
| $ | (263 | ) |
|
| Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
|
|
|
Balance, Beginning of Year |
| $ | (172 | ) |
| $ | (74 | ) |
Total Gains (Losses) |
|
| (435 | ) |
|
| (637 | ) |
Purchases, Sales, Issuances and Settlements: |
|
|
|
|
|
|
|
|
Purchases, sales and issuances (1) |
|
| - |
|
|
| 6 |
|
Settlements |
|
| 564 |
|
|
| 379 |
|
Transfers Out of Level 3 |
|
| - |
|
|
| - |
|
Balance, End of Period |
| $ | (43 | ) |
| $ | (326 | ) |
Change in Unrealized Gains (Losses) During the Period Included in Net Earnings (Loss) |
| $ | 129 |
|
| $ | (258 | ) |
|
|
Quantitative information about unobservable inputs used in Level 3 fair value measurements is presented below as at SeptemberJune 30, 2022:2023:
Valuation Technique | Unobservable Input | Range | Weighted Average (1) | ||||||
Risk Management - WTI Options |
|
|
|
|
|
| Implied Volatility | 28% - 66% | 32% |
A 10 percent increase or decrease in implied volatility for the WTI options would cause an approximate corresponding $4$3 million ($152 million as at December 31, 2021)2022) increase or decrease to net risk management assets and liabilities.
28
|
| Financial Instruments and Risk Management |
A) Financial Instruments
Ovintiv’s financial assets and liabilities are recognized in cash and cash equivalents, accounts receivable and accrued revenues, other assets, accounts payable and accrued liabilities, risk management assets and liabilities, long-term debt, and other liabilities and provisions.
B) Risk Management Activities
Ovintiv uses derivative financial instruments to manage its exposure to fluctuating commodity prices and foreign currency exchange rates. The Company does not apply hedge accounting to any of its derivative financial instruments. As a result, gains and losses from changes in the fair value are recognized in net earnings (loss).
Commodity Price Risk
Commodity price risk arises from the effect that fluctuations in future commodity prices may have on revenues from production. To partially mitigate exposure to commodity price risk, the Company has entered into various derivative financial instruments. The use of these derivative instruments is governed under formal policies and is subject to limits established by the Board of Directors.
Oil and NGLs - To partially mitigate oil and NGL commodity price risk, the Company uses WTI- and NGL-based contracts such as fixed price contracts, options and options.costless collars. Ovintiv has also entered into basis swaps to manage against widening price differentials between various production areas, products and price points.
Natural Gas - To partially mitigate natural gas commodity price risk, the Company uses NYMEX-based contracts such as fixed price contracts, options and costless collars. Ovintiv has also entered into basis swaps to manage against widening price differentials between various production areas and benchmark price points.
Foreign Exchange Risk
Foreign exchange risk arises from changes in foreign currency exchange rates that may affect the fair value or future cash flows from the Company’s financial assets or liabilities. To partially mitigate the effect of foreign exchange fluctuations on future commodity revenues and expenses, the Company may enter into foreign currency derivative contracts. As at SeptemberJune 30, 2022,2023, the Company has entered into $100$266 million notional U.S. dollar denominated currency swaps at an average exchange rate of C$1.28481.3470 to US$1, which mature monthly through the remainder of 2022, and $350 million notional U.S. dollar denominated currency swaps at an average exchange rate of C$1.3083 to US$1, which mature monthly throughout 2023.
|
29
Risk Management Positions as at SeptemberJune 30, 20222023
|
| Notional Volumes |
| Term |
| Average Price |
| Fair Value |
|
| Notional Volumes |
| Term |
| Average Price |
| Fair Value |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Oil and NGL Contracts |
|
|
|
|
| US$/bbl |
|
|
|
|
|
|
|
|
| US$/bbl |
|
|
| |
|
|
|
|
|
|
|
|
|
| |||||||||||
Fixed Price Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
WTI Fixed Price |
| 5.0 Mbbls/d |
| 2022 |
| 60.16 |
| $ | (8 | ) |
| 35.0 Mbbls/d |
| 2023 |
| 76.94 |
| $ | 41 |
|
WTI Fixed Price |
| 12.4 Mbbls/d |
| 2024 |
| 73.69 |
|
| 19 |
| ||||||||||
Ethane Fixed Price |
| 5.0 Mbbls/d |
| 2024 |
| 10.28 |
|
| (1 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
WTI Three-Way Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Sold call / bought put / sold put |
| 75.0 Mbbls/d |
| 2022 |
| 70.79 / 60.82 / 49.33 |
|
| (73 | ) |
| 40.0 Mbbls/d |
| 2023 |
| 111.60 / 65.63 / 50.00 |
|
| 14 |
|
Sold call / bought put / sold put |
| 27.1 Mbbls/d |
| 2023 |
| 116.43 / 65.46 / 50.00 |
|
| 23 |
|
| 8.3 Mbbls/d |
| 2024 |
| 90.13 / 65.00 / 50.00 |
|
| 7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
WTI Costless Collars |
|
|
|
|
|
|
|
|
| |||||||||||
Sold call / bought put |
| 35.0 Mbbls/d |
| 2023 |
| 87.60 / 65.00 |
|
| 10 |
| ||||||||||
Sold call / bought put |
| 37.3 Mbbls/d |
| 2024 |
| 81.34 / 64.67 |
|
| 29 |
| ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Basis Contracts (1) |
|
|
| 2022 |
|
|
|
| 1 |
|
|
|
| 2023 |
|
|
|
| 2 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Other Financial Positions |
|
|
|
|
|
|
|
| - |
| ||||||||||
Oil and NGLs Fair Value Position |
|
|
|
|
|
|
|
| (57 | ) |
|
|
|
|
|
|
|
| 121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Natural Gas Contracts |
|
|
|
|
| US$/Mcf |
|
|
|
|
|
|
|
|
| US$/Mcf |
|
|
| |
|
|
|
|
|
|
|
|
|
| |||||||||||
Fixed Price Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
NYMEX Fixed Price |
| 365 MMcf/d |
| 2022 |
| 2.60 |
|
| (143 | ) |
| 200 MMcf/d |
| 2024 |
| 3.62 |
|
| 6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
NYMEX Three-Way Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Sold call / bought put / sold put |
| 410 MMcf/d |
| 2022 |
| 3.01 / 2.75 / 2.00 |
|
| (146 | ) |
| 395 MMcf/d |
| 2023 |
| 8.90 / 3.85 / 2.76 |
|
| 55 |
|
Sold call / bought put / sold put |
| 322 MMcf/d |
| 2023 |
| 8.02 / 3.60 / 2.54 |
|
| (58 | ) |
| 150 MMcf/d |
| 2024 |
| 4.56 / 3.00 / 2.25 |
|
| (2 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
NYMEX Costless Collars |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Sold call / bought put |
| 200 MMcf/d |
| 2022 |
| 2.85 / 2.55 |
|
| (74 | ) |
| 200 MMcf/d |
| 2023 |
| 3.68 / 3.00 |
|
| 7 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
NYMEX Call Options |
|
|
|
|
|
|
|
|
|
| ||||||||||
Sold call |
| 330 MMcf/d |
| 2022 |
| 2.38 |
|
| (136 | ) | ||||||||||
Sold call / bought put |
| 400 MMcf/d |
| 2024 |
| 4.37 / 3.00 |
|
| (5 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basis Contracts (2) |
|
|
| 2022 |
|
|
|
| 3 |
|
|
|
| 2023 |
|
|
|
| (24 | ) |
|
|
|
| 2023 |
|
|
|
| 68 |
|
|
|
| 2024 |
|
|
|
| 5 |
|
|
|
|
| 2024 - 2025 |
|
|
|
| 25 |
|
|
|
| 2025 |
|
|
|
| 7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Other Financial Positions |
|
|
|
|
|
|
|
| (3 | ) |
|
|
|
|
|
|
|
| 1 |
|
Natural Gas Fair Value Position |
|
|
|
|
|
|
|
| (464 | ) |
|
|
|
|
|
|
|
| 50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Other Derivative Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fair Value Position (3) |
|
|
|
|
|
|
|
| 1 |
|
|
|
|
|
|
|
|
| (5 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Foreign Currency Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Fair Value Position (4) |
|
|
| 2022 - 2023 |
|
|
|
| (20 | ) |
|
|
| 2023 |
|
|
|
| 5 |
|
Total Fair Value Position |
|
|
|
|
|
|
| $ | (540 | ) |
|
|
|
|
|
|
| $ | 171 |
|
|
|
|
|
|
|
|
|
|
Earnings Impact of Realized and Unrealized Gains (Losses) on Risk Management Positions
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Realized Gains (Losses) on Risk Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commodity and Other Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues (1) |
| $ | (821 | ) |
| $ | (371 | ) |
| $ | (2,075 | ) |
| $ | (750 | ) |
| $ | 5 |
|
| $ | (808 | ) |
| $ | (71 | ) |
| $ | (1,254 | ) |
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange |
|
| (1 | ) |
|
| 7 |
|
|
| 1 |
|
|
| 25 |
|
|
| (3 | ) |
|
| 1 |
|
|
| (7 | ) |
|
| 2 |
|
Interest Rate Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Interest Rate (2) |
|
| 1 |
|
|
| - |
|
|
| 1 |
|
|
| - |
| ||||||||||||||||
|
| $ | (822 | ) |
| $ | (364 | ) |
| $ | (2,074 | ) |
| $ | (725 | ) |
| $ | 3 |
|
| $ | (807 | ) |
| $ | (77 | ) |
| $ | (1,252 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized Gains (Losses) on Risk Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commodity and Other Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues (2) |
| $ | 710 |
|
| $ | (579 | ) |
| $ | 211 |
|
| $ | (1,426 | ) | ||||||||||||||||
Revenues (3) |
| $ | 142 |
|
| $ | 513 |
|
| $ | 160 |
|
| $ | (499 | ) | ||||||||||||||||
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange |
|
| (21 | ) |
|
| (11 | ) |
|
| (25 | ) |
|
| (19 | ) |
|
| 9 |
|
|
| (7 | ) |
|
| 15 |
|
|
| (4 | ) |
|
| $ | 689 |
|
| $ | (590 | ) |
| $ | 186 |
|
| $ | (1,445 | ) |
| $ | 151 |
|
| $ | 506 |
|
| $ | 175 |
|
| $ | (503 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Realized and Unrealized Gains (Losses) on Risk Management, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Total Realized and Unrealized Gains (Losses) on Risk Management, net |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Commodity and Other Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues (1) (2) |
| $ | (111 | ) |
| $ | (950 | ) |
| $ | (1,864 | ) |
| $ | (2,176 | ) | ||||||||||||||||
Revenues (1) (3) |
| $ | 147 |
|
| $ | (295 | ) |
| $ | 89 |
|
| $ | (1,753 | ) | ||||||||||||||||
Foreign Currency Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange |
|
| (22 | ) |
|
| (4 | ) |
|
| (24 | ) |
|
| 6 |
|
|
| 6 |
|
|
| (6 | ) |
|
| 8 |
|
|
| (2 | ) |
Interest Rate Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Interest Rate (2) |
|
| 1 |
|
|
| - |
|
|
| 1 |
|
|
| - |
| ||||||||||||||||
|
| $ | (133 | ) |
| $ | (954 | ) |
| $ | (1,888 | ) |
| $ | (2,170 | ) |
| $ | 154 |
|
| $ | (301 | ) |
| $ | 98 |
|
| $ | (1,755 | ) |
|
|
|
|
Reconciliation of Unrealized Risk Management Positions from January 1 to SeptemberJune 30
|
|
|
| 2022 |
|
| 2021 |
|
|
|
| 2023 |
|
| 2022 |
| ||||||||||||
|
|
|
| Fair Value |
|
| Total Unrealized Gain (Loss) |
|
| Total Unrealized Gain (Loss) |
|
|
|
| Fair Value |
|
| Total |
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Fair Value of Contracts, Beginning of Year |
|
|
| $ | (724 | ) |
|
|
|
|
|
|
|
|
|
|
| $ | (4 | ) |
|
|
|
|
|
| ||
Change in Fair Value of Contracts in Place at Beginning of Year and Contracts Entered into During the Period |
|
|
|
| (1,888 | ) |
| $ | (1,888 | ) |
| $ | (2,170 | ) | ||||||||||||||
Change in Fair Value of Contracts in Place at Beginning of Year |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
and Contracts Entered into During the Period |
|
|
|
| 98 |
|
| $ | 98 |
|
| $ | (1,755 | ) | ||||||||||||||
Settlement of Other Derivative Contracts |
|
|
|
| (2 | ) |
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
|
|
|
|
| ||
Fair Value of Contracts Realized During the Period |
|
|
|
| 2,074 |
|
|
| 2,074 |
|
|
| 725 |
|
|
|
|
| 77 |
|
|
| 77 |
|
|
| 1,252 |
|
Fair Value of Contracts, End of Period |
|
|
| $ | (540 | ) |
| $ | 186 |
|
| $ | (1,445 | ) |
|
|
| $ | 171 |
|
| $ | 175 |
|
| $ | (503 | ) |
Risk management assets and liabilities arise from the use of derivative financial instruments and are measured at fair value. See Note 1718 for a discussion of fair value measurements.
|
31
Unrealized Risk Management Positions
|
| As at |
|
| As at |
|
| As at |
|
| As at |
| ||||
|
| September 30, |
|
| December 31, |
|
| June 30, |
|
| December 31, |
| ||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Risk Management Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Current |
| $ | 1 |
|
| $ | 1 |
|
| $ | 167 |
|
| $ | 53 |
|
Long-term |
|
| 43 |
|
|
| - |
|
|
| 21 |
|
|
| 34 |
|
|
|
| 44 |
|
|
| 1 |
|
|
| 188 |
|
|
| 87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Risk Management Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Current |
|
| 577 |
|
|
| 703 |
|
|
| 5 |
|
|
| 86 |
|
Long-term |
|
| 8 |
|
|
| 25 |
|
|
| 7 |
|
|
| - |
|
|
|
| 585 |
|
|
| 728 |
|
|
| 12 |
|
|
| 86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Other Derivative Contract Assets |
|
|
|
|
|
|
|
| ||||||||
Current in accounts receivable and accrued revenues |
|
| 7 |
|
|
| 9 |
| ||||||||
|
|
| 7 |
|
|
| 9 |
| ||||||||
|
|
|
|
|
|
|
|
| ||||||||
Other Derivative Contract Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Current in accounts payable and accrued liabilities |
|
| 1 |
|
|
| 1 |
|
|
| 5 |
|
|
| - |
|
Long-term in other liabilities and provisions |
|
| 5 |
|
|
| 5 |
|
|
| - |
|
|
| 5 |
|
|
|
| 6 |
|
|
| 6 |
|
|
| 5 |
|
|
| 5 |
|
Net Risk Management Assets (Liabilities) and Other Derivative Contracts |
| $ | (540 | ) |
| $ | (724 | ) |
| $ | 171 |
|
| $ | (4 | ) |
C) Credit Risk
Credit risk arises from the potential that the Company may incur a loss if a counterparty to a financial instrument fails to meet its obligation in accordance with agreed terms. While exchange-traded contracts are subject to nominal credit risk due to the financial safeguards established by the exchanges and clearing agencies, over-the-counter traded contracts expose Ovintiv to counterparty credit risk. Counterparties to the Company’s derivative financial instruments consist primarily of major financial institutions and companies within the energy industry. This credit risk exposure is mitigated through the use of credit policies approved by the Board of Directors governing the Company’s credit portfolio including credit practices that limit transactions according to counterparties’ credit quality. Mitigation strategies may include master netting arrangements, requesting collateral, purchasing credit insurance and/or transacting credit derivatives. The Company executes commodity derivative financial instruments under master agreements that have netting provisions that provide for offsetting payables against receivables. Ovintiv actively evaluates the creditworthiness of its counterparties, assigns appropriate credit limits and monitors credit exposures against those assigned limits. As at SeptemberJune 30, 2022,2023, Ovintiv’s maximum exposure of loss due to credit risk from derivative financial instrument assets on a gross and net fair value basis was $213$221 million and $51$188 million, respectively, as disclosed in Note 17.18. The Company had no significant credit derivatives in place and held no collateral at SeptemberJune 30, 2022.2023.
As at September 30, 2022,Any cash equivalents include high-grade, short-term securities, placed primarily with financial institutions with strong investment grade ratings. Any foreign currency agreements entered into are with major financial institutions that have investment grade credit ratings.
A substantial portion of the Company’s accounts receivable are with customers and working interest owners in the oil and gas industry and are subject to normal industry credit risks. As at SeptemberJune 30, 2022,2023, approximately 8886 percent (90(88 percent as at December 31, 2021)2022) of Ovintiv’s accounts receivable and financial derivative credit exposures were with investment grade counterparties.
During 2015 and 2017, the Company entered into agreements resulting from divestitures, which may require Ovintiv to fulfill certain payment obligations on the take or pay volume commitments assumed by the purchasers. The circumstances that would require Ovintiv to perform under the agreements include events where a purchaser fails to make payment to the guaranteed party and/or a purchaser is subject to an insolvency event. The agreements expire in June 2024 with a fair value recognized of $6$5 million as at SeptemberJune 30, 20222023 ($65 million as at December 31, 2021)2022). The maximum potential amount of undiscounted future payments is $40$23 million as at SeptemberJune 30, 2022,2023, and is considered unlikely.
32
|
| Supplementary Information |
Supplemental disclosures to the Condensed Consolidated Statement of Cash Flows are presented below:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts receivable and accrued revenues |
| $ | 205 |
|
| $ | (162 | ) |
| $ | 519 |
|
| $ | (663 | ) |
Accounts payable and accrued liabilities |
|
| (103 | ) |
|
| 242 |
|
|
| (290 | ) |
|
| 395 |
|
Current portion of operating lease liabilities |
|
| (3 | ) |
|
| 11 |
|
|
| 9 |
|
|
| 11 |
|
Income tax receivable and payable |
|
| 45 |
|
|
| 42 |
|
|
| 128 |
|
|
| 44 |
|
|
| $ | 144 |
|
| $ | 133 |
|
| $ | 366 |
|
| $ | (213 | ) |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non-Cash Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
ROU operating lease assets and liabilities |
| $ | (40 | ) |
| $ | (28 | ) |
| $ | (69 | ) |
| $ | (52 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non-Cash Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Property, plant and equipment accruals |
| $ | 93 |
|
| $ | 5 |
|
| $ | 92 |
|
| $ | 46 |
|
Capitalized long-term incentives |
|
| - |
|
|
| (2 | ) |
|
| (2 | ) |
|
| 3 |
|
Property additions/dispositions, including swaps |
|
| 4 |
|
|
| 32 |
|
|
| 22 |
|
|
| 36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non-Cash Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common shares issued in conjunction with the Permian |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Acquisition (See Note 8) |
| $ | (1,169 | ) |
| $ | - |
|
| $ | (1,169 | ) |
| $ | - |
|
|
|
Commitments
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable and accrued revenues |
| $ | 326 |
|
| $ | (25 | ) |
| $ | (337 | ) |
| $ | (287 | ) |
Accounts payable and accrued liabilities |
|
| (289 | ) |
|
| 13 |
|
|
| 106 |
|
|
| 211 |
|
Current portion of operating lease liabilities |
|
| (4 | ) |
|
| (9 | ) |
|
| 7 |
|
|
| (5 | ) |
Income tax receivable and payable |
|
| (2 | ) |
|
| (2 | ) |
|
| 42 |
|
|
| 23 |
|
|
| $ | 31 |
|
| $ | (23 | ) |
| $ | (182 | ) |
| $ | (58 | ) |
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROU operating lease assets and liabilities |
| $ | (2 | ) |
| $ | (4 | ) |
| $ | (54 | ) |
| $ | (22 | ) |
Non-Cash Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment accruals |
| $ | 32 |
|
| $ | 4 |
|
| $ | 78 |
|
| $ | (33 | ) |
Capitalized long-term incentives |
|
| 2 |
|
|
| 5 |
|
|
| 5 |
|
|
| 12 |
|
Property additions/dispositions (swaps) |
|
| 7 |
|
|
| 18 |
|
|
| 43 |
|
|
| 24 |
|
Contingent consideration (See Note 7) |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 6 |
|
|
|
Commitments
The following table outlines the Company’s commitments as at SeptemberJune 30, 2022:2023:
|
| Expected Future Payments |
|
| Expected Future Payments |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
(undiscounted) |
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Thereafter |
|
| Total |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| Thereafter |
|
| Total |
| ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Transportation and Processing |
| $ | 191 |
|
| $ | 780 |
|
| $ | 632 |
|
| $ | 492 |
|
| $ | 479 |
|
| $ | 2,576 |
|
| $ | 5,150 |
|
| $ | 404 |
|
| $ | 722 |
|
| $ | 601 |
|
| $ | 510 |
|
| $ | 484 |
|
| $ | 2,304 |
|
| $ | 5,025 |
|
Drilling and Field Services |
|
| 97 |
|
|
| 72 |
|
|
| 12 |
|
|
| 4 |
|
|
| - |
|
|
| - |
|
|
| 185 |
|
|
| 200 |
|
|
| 31 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 231 |
|
Building Leases |
|
| 2 |
|
|
| 9 |
|
|
| 9 |
|
|
| 8 |
|
|
| 2 |
|
|
| - |
|
|
| 30 |
|
|
| 4 |
|
|
| 7 |
|
|
| 7 |
|
|
| 5 |
|
|
| 4 |
|
|
| 22 |
|
|
| 49 |
|
Total |
| $ | 290 |
|
| $ | 861 |
|
| $ | 653 |
|
| $ | 504 |
|
| $ | 481 |
|
| $ | 2,576 |
|
| $ | 5,365 |
|
| $ | 608 |
|
| $ | 760 |
|
| $ | 608 |
|
| $ | 515 |
|
| $ | 488 |
|
| $ | 2,326 |
|
| $ | 5,305 |
|
Operating leases with terms greater than one year are not included in the commitments table above. The table above includes short-term leases with contract terms less than 12 months, such as drilling rigs and field office leases, as well as non-lease operating cost components associated with building leases.
Included within transportation and processing in the table above are certain commitments associated with midstream service agreements with VMLP as described in Note 14.15. Divestiture transactions can reduce certain commitments disclosed above.
Contingencies
Ovintiv is involved in various legal claims and actions arising in the normal course of the Company’s operations. Although the outcome of these claims cannot be predicted with certainty, the Company does not expect these matters to have a material
33
adverse effect on Ovintiv’s financial position, cash flows or results of operations. Management’s assessment of these matters may change in the future as certain of these matters are in early stages or are subject to a number of uncertainties. For
|
material matters that the Company believes an unfavorable outcome is reasonably possible, the Company discloses the nature and a range of potential exposures. If an unfavorable outcome were to occur, there exists the possibility of a material impact on the Company’s consolidated net earnings or loss for the period in which the effect becomes reasonably estimable. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. Such accruals are based on the Company’s information known about the matters, estimates of the outcomes of such matters and experience in handling similar matters.
|
34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The MD&A is intended to provide a narrative description of the Company’s business from management’s perspective.perspective, which includes an overview of Ovintiv’s condensed consolidated results for the three and six months ended June 30, 2023 and period-over-period comparison. This MD&A should be read in conjunction with the unaudited interim Condensed Consolidated Financial Statements and accompanying notes for the period ended SeptemberJune 30, 20222023 (“Consolidated Financial Statements”), which are included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the audited Consolidated Financial Statements and accompanying notes and MD&A for the year ended December 31, 2021,2022, which are included in Items 8 and 7, respectively, of the 20212022 Annual Report on Form 10‑K.
Common industry terms and abbreviations are used throughout this MD&A and are defined in the Definitions, Conversions and Conventions sections of this Quarterly Report on Form 10-Q. This MD&A includes the following sections:
|
Strategy
Executive Overview
Strategy
Ovintiv is a leading North American energy producer that is focused on developing its multi-basin portfolio of oil, NGLs and natural gas producing plays. Ovintiv is committed to growing long-term shareholder value by safely delivering on its strategic priorities through execution excellence, disciplined capital allocation, commercial acumen and risk management, while driving environmental, social and governance progress. The Company’s strategy is founded on its multi-basin portfolio of top tiertop-tier assets, financial strength, as well as its core and foundational values.
In support of the Company’s commitment to unlocking shareholder value, Ovintiv utilizes its capital allocation framework to increase returns to shareholders while focusing on continued debt reduction.strategic opportunities to strengthen the balance sheet.
Ovintiv is delivering results in a socially and environmentally responsible manner. Thoughtfully developed best practices are deployed across its assets, allowing the Company to capitalize on operational efficiencies and decrease emissions intensity. The Company’s sustainability reporting, which outlines its key metrics, new targets and progress achieved relating to ESG practices can be found in the Company Outlook section of this MD&A and on the Company’s sustainability website.
Ovintiv continually reviews and evaluates its strategy and changing market conditions in order to maximize cash flow generation from its Core Assets locatedhigh-quality assets and renew its premium well inventory in some of the best plays in North America. As at September 30, 2022, the Core Assets comprised Permian and Anadarko in the U.S., and Montney in Canada. These Core Assetsassets form a multi-basin portfolio of oil, NGLs and natural gas producing plays enabling flexible and efficient investment of capital that support the Company’s strategy.
Underpinning Ovintiv’s strategy are core values of one, agile, innovative and driven, which guide the organization to be collaborative, responsive, flexible and determined. The Company is committed to excellence with a passion to drive corporate financial performance and shareholder value.
For additional information on Ovintiv’s strategy, its reporting segments and the plays in which the Company operates, refer to Items 1 and 2 of the 20212022 Annual Report on Form 10-K.
In evaluating its operations and assessing its leverage, Ovintiv reviews performance-based measures such as Non‑GAAP Cash Flow Non-GAAP Cash Flow Margin, Total Costs and debt-based metrics such as Debt to Adjusted Capitalization, Net Debt to EBITDA and Net Debt to Adjusted EBITDA, which are non-GAAP measures and do not have any standardized meaning under U.S. GAAP. These measures may not be similar to measures presented by other issuers and should not be viewed as a substitute for measures reported under U.S. GAAP. Additional information regarding these measures, including reconciliations to the closest GAAP measure, can be found in the Non-GAAP Measures section of this MD&A.
|
35
Highlights
During the first ninesix months of 2022,2023, the Company focused on executing its 20222023 capital investment plan aimed at maximizing profitability through operational and capital efficiencies, minimizing the impact of inflation and delivering cash from operating activities. HigherIn conjunction with closing the Permian Acquisition as discussed below, the Company was also focused on integrating the additional Permian assets into its existing operations. Lower upstream product revenues in the first ninesix months of 20222023 compared to 20212022, primarily resulted from higherlower average realized prices, excluding the impact of risk management activities. IncreasesDecreases in average realized natural gas and realized liquids prices of 8946 percent and 5032 percent, respectively, were primarily due to higherlower benchmark prices. Ovintiv continues to focus on optimizing realized prices from the diversification of the Company’s downstream markets.
Significant Developments
Financial Results
Three months ended June 30, 2023
Six months ended June 30, 2023
36
Capital Investment
During the six months ended June 30, 2023
Production
During the six months ended June 30, 2023
Operating Expenses
During the six months ended June 30, 2023
The Company’s upstream operations refers to the summation of commoditythe USA and foreign exchange risk management positions.
Significant Developments
|
|
|
|
|
|
|
|
|
|
Financial Results
Three months ended September 30, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Investment
|
|
|
|
Production
Three months ended September 30, 2022
|
|
|
|
Nine months ended September 30, 2022
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian operating segments. Additional information on Total Coststhe items above and Total Operating Expenses aboveother expenses can be found in the Results of Operations section of this MD&A.
202237
2023 Outlook
Industry Outlook
Oil Markets
The oil and gas industry is cyclical and commodity prices are inherently volatile. Oil prices reflect global supply and demand dynamics as well as the geopolitical and macroeconomic environment.
During the first nine months of 2022, oil prices have seen significant volatility. Oil prices for the remainder of 20222023 will continue to be impacted by the interplay between recessionary concerns and the resulting direction of global demand for oil, continued OPEC+ production restraint increasing global demand for oil,and continued supply uncertainties resulting from the Russian invasion of UkraineUkraine. Recessionary concerns continue to have an impact on global demand as central banks maintain tight monetary policies. Supply and the pace of recovering U.S. production. The global recessionary concerns and tightening of monetary policies by central banks weighs on market sentiment and could further impact demand, subsequently driving prices down. OPEC+ recently announced that it would decrease oil production starting in November 2022 and will continue to meet to review the stateaccumulation of global oil supply, demandinventories will be impacted by changes in OPEC+ production levels, the extent of decline in oil exports from Russia and inventory levels. Although the COVID-19 pandemicchanges in production by non-OPEC countries.
OPEC+ continues to impact economies withproactively adjust its production in an attempt to stabilize global oil markets. During the emergencesecond quarter of variants, vaccine rollout/uptake2023, OPEC+ announced additional production cuts which are expected to remain in place through 2024 and Russia extended previously announced production cuts which are expected to remain in place until the relaxingend of restrictions have lessened the impact on global markets. 2023.
Natural Gas Markets
Natural gas prices are primarily impacted by structural changes in supply and demand as well as deviations from seasonally normal weather.
Similar to oil prices, natural gas prices have been volatile during the first nine months of 2022. Natural gas prices for the remainder of 20222023 will continue to be impacted by the interplay between natural gas production and associated natural gas from oil production, changes in demand from the power generation sector, changes in export levels of U.S. liquefied natural gas, impacts from seasonal weather, as well as supply chain constraints or other disruptions resulting from the Russian invasion of Ukraine.
Company Outlook
The Company continueswill continue to exercise discretion and discipline to optimize capital allocation throughout 20222023 following the closing of the Permian Acquisition and as oil demand recovers and the commodity price environment evolves. Ovintiv pursues innovative ways to maximize cash flows and minimize the impact of inflation to reduce upstream operating and administrative expenses.
Markets for oil and natural gas are exposed to different price risks and are inherently volatile. While the market price for oil tends to move in the same direction as the global market, regional differentials may develop. Natural gas prices may vary between geographic regions depending on local supply and demand conditions. To mitigate price volatility and provide more certainty around cash flows, the Company enters into derivative financial instruments. With the closing of the Permian Acquisition and the expected additional production volumes in 2023, the Company has undertaken additional oil hedge positions since the agreement was announced. As at SeptemberJune 30, 2022,2023, the Company has hedged approximately 80.0110.0 Mbbls/d of expected oil and condensate production and 1,305595 MMcf/d of expected natural gas production for the remainder of the year. In addition, Ovintiv proactively utilizes transportation contracts to diversify the Company’s sales markets, thereby reducing significant exposure to any given market and regional pricing.
Additional information on Ovintiv’s hedging program can be found in Note 1819 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
|
Capital Investment
The Company continues to execute its 20222023 capital investment program, the majority of which is allocated to the Core Assets, with a focusfocusing on maximizing returns from high margin liquids and minimizinggenerating significant cash flows in excess of capital expenditures.
In June 2023, the impactCompany revised its second quarter and full year 2023 capital investment guidance ranges reflecting the closing of inflationthe Permian Acquisition and sale of the Bakken assets. During the second quarter of 2023, the Company invested $640 million, which was lower than the second quarter guidance range of $670 million to optimize cash flows.$710 million due to capital efficiencies and higher recoveries from updated operating contract terms. In November 2022,July 2023, the Company further updated its full year 20222023 capital investment guidance range to approximately $1.8 billion. The recent divestitures did not have a significant impact on the Company’s capital program and the Company plans to fund the remainder of its 2022 capital investment program using cash from operations.
During the first nine months of 2022, the Company invested $1,473 million and directed $547$2,680 million to Permian, $342$2,850 million to Anadarko, $268 million to Montney, with the remainder primarily directed to other upstream assets.reflect execution efficiencies and cost savings.
38
Ovintiv continually strives to improve well performance and lower costs through innovative techniques. Ovintiv’s redesigned wet sand sourcing model, which incorporates on-site sand storage and delivery systems, helps to prevent mine and trucking delays, thereby increasing truck productivity to enable smooth integration with local mine access. This model increases operational efficiencies and contributes to well cost savings as well as providing increased resiliency against winter weather. Ovintiv's large-scale cube development model utilizes multi-well pads and advanced completion designs to maximize returns and resource recovery from its reservoirs. Ovintiv’s disciplined capital program and continuous innovation create flexibility to allocate capital in changing commodity markets to minimize the impact of inflation and maximize cash flows while preserving the long-term value of the Company’s multi-basin portfolio.
Production
Ovintiv is strategically positioned inIn June 2023, the current environmentCompany updated its second quarter and full year 2023 guidance ranges for oil and condensate, and total production volumes to maintain a flat liquids production profile while generating significant cash flows in excessreflect the closing of capital expenditures.the Permian Acquisition and sale of the Bakken assets.
During the thirdsecond quarter of 2022,2023, total average production volumes were 516.3573.0 MBOE/d, which exceeded the second quarter guidance range of 520.0 MBOE/d to 540.0 MBOE/d. Average oil and plant condensate production volumes were 179.4185.9 Mbbls/d, average other NGL production volumes were 96.8 Mbbls/d and average natural gas production volumes were 1,5001,743 MMcf/d, which were within thirdexceeded second quarter guidance ranges of 178.0175.0 Mbbls/d to 183.0179.0 Mbbls/d, 85.0 Mbbls/d to 90.0 Mbbls/d and 1,4401,575 MMcf/d to 1,5001,625 MMcf/d, respectively. Average other NGL
In July 2023, the Company further updated its full year 2023 production volumes were 86.9 Mbbls/d, which exceeded third quartervolume guidance of 80.0 Mbbls/dranges to 84.0 Mbbls/d.
During the first nine months of 2022, total average production volumes were 505.5 MBOE/d. Average oilreflect strong well performance and plant condensate production volumes were 175.9 Mbbls/d, other NGLs were 84.4 Mbbls/d and natural gas were 1,471 MMcf/d.lower royalty rates in Montney. The Company is on trackexpects to meet its updated full year 20222023 total production guidance range of 505.0535.0 MBOE/d to 515.0550.0 MBOE/d, including oil and plant condensate production volumes of approximately 174.0190.0 Mbbls/d to 176.0196.0 Mbbls/d, and other NGLs production volumes of approximately 84.083.0 Mbbls/d to 86.087.0 Mbbls/d. The Company is also on track to meet its updated full year 2022 guidance range ford and natural gas production volumes of approximately 1,4801,575 MMcf/d to 1,5101,625 MMcf/d. Full year guidance ranges were updated in November 2022 to reflect
Operating Expenses
During the strong performance in Montney, the expected impactfirst six months of returning oil volumes following the resolution of line pressure issues in the Anadarko and the decision to delay the completion of certain wells across the USA Operations to preserve capital discipline.
Operating Expenses
With increased activity in2023, the oil and gas industry experienced continued supply chain constraints and stronginflationary pressures resulting from the elevated commodity price environment. However, with recent declines in commodity prices service and oil and gas activity, the industry has begun to see decreases in inflationary pressures. While some supply costs are expectedchain constraints and inflationary pressures may persist for the remainder of 2023, the Company expects inflation to continue to increase.stabilize. Ovintiv continues to pursue innovative ways to minimize any inflationary pressures with efficiency improvements and effective supply chain management to reduce upstream operating expenses. The Company quickly deploys best practices across its portfolio, ultimately maximizing the performance and administrative expenses.overall efficiency of its operations.
In November 2022, Ovintiv confirmedJuly 2023, the Company updated its full year 2022 Total Costsupstream transportation and processing costs guidance range remains unchanged at $16.35to approximately $8.25 per BOE to $16.60$8.75 per BOE based on updated commodity price assumptions of $94.00 per barrel for WTI oil and $7.00 per MMBtu for NYMEX natural gas. Total Costs for the first nine monthsremainder of 2022 was $16.45the year. The Company is on track to maintain upstream operating expenses of approximately $4.00 per BOE to $4.50 per BOE, and is expectedtotal production, mineral and other taxes of approximately four to remain within the full year guidance range. Total Costs is defined in the Non-GAAP Measures sectionfive percent of this MD&A.upstream revenues.
Total Costs of $17.16 per BOE in the third quarter of 2022 was higher than third quarter guidance of $16.50 per BOE to $17.00 per BOE, based on the commodity prices of $100.00 per barrel for WTI oil and $8.00 per MMBtu for NYMEX natural gas. This increase is primarily due to higher electricity costs associated with higher than expected NYMEX natural gas prices and increased activity related to discretionary workovers.
|
Long-Term Debt Reduction
Ovintiv remains focused on strengthening its balance sheet. SinceDuring the second quarter of 2020,2023, the Company has allocated $3,748closed the Permian Acquisition and funded the cash portion of the transaction with net proceeds of $2,278 million in excessfrom the issuance of senior unsecured notes, cash flows to reduce its total long-term debt balance.
In conjunction withproceeds received from the sale of the Company’s focus on debt reduction, Ovintiv redeemed its $1.0 billion, 5.625 percent senior notes due July 1, 2024 in June 2022, withBakken assets, cash on hand and other existing sources of liquidity. The debt redemption will result in annualized interest savings of approximately $55 million.proceeds from short-term borrowings.
In the first nine months of 2022, the Company also repurchased in the open market, approximately $565 million in principal, plus accrued interest and premiums, which included a portion of its 5.375 percent senior notes due January 2026, its 6.5 percent senior notes due August 2034, its 6.625 percent senior notes due August 2037, its 6.5 percent senior notes due February 2038 and its 5.15 percent senior notes due November 2041. The Company paid premiums of $22 million to complete the open market repurchases. The open market repurchases will result in annualized interest savings of approximately $33 million.
As at SeptemberJune 30, 2022,2023, the Company had $440$330 million of commercial paper outstanding under its U.S. commercial paper (“U.S. CP”) programs and no$350 million outstanding balances under its revolving credit facilities.
Additional information on Ovintiv’s long-term debt and liquidity position can be found in Note 1011 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the Liquidity and Capital Resources section of this MD&A, respectively.
Additional information on Ovintiv’s discrete fourththird quarter and updated full year 20222023 Corporate Guidance can be accessed on the Company’s website at www.ovintiv.com.
39
Environmental, Social and Governance
Ovintiv recognizes climate change as a global concern and the importance of reducing its environmental footprint andas part of the solution. The Company voluntarily participates in certain emission reduction programs. The Companyprograms and has adopted a range of strategies to help reduce emissions from its operations. These strategies include incorporating new and proven technologies and optimizing processes in its operations and working closely with third-party providers to develop best practices. The Company continues to look for innovative techniques and efficiencies to help maintain its commitment to emission reductions.
In May 2023, Ovintiv published its full year 2022 ESG results in its 2023 sustainability report, which highlights the Company’s progress in emissions intensity reductions including an emissions reduction roadmap aimed to meet the Company’s Scope 1&2 GHG emissions target by 2030. As at the end of 2022, the Company has achieved a greater than 30 percent reduction in the Scope 1&2 GHG emissions intensity and is on track to meet its emissions intensity reduction target of 50 percent by 2030. The GHG emissions reduction target is tied to the annual compensation program for all employees.
Ovintiv’s constant pursuit of efficiencies and continuous improvements allowed the Company to eliminate routine flaring in its operations. The Company is in full alignment with the World Bank Zero Routine Flaring initiative, well ahead of the World Bank’s target date of 2030.
During the first quarter of 2022,In June 2023, the Company announced a Scope 1&2 GHGclosed the Permian Acquisition, increasing both oil production volumes and net premium inventory in the Permian. The Company is working to understand the impact of the additional Permian assets on its emissions intensity reduction targetprofile and Ovintiv is undergoing an integration period to align the performance of 50 percent compared to 2019 levels, to be achieved by 2030. The GHG emissions reduction target is tied to the 2022 annual compensation program for all employees.
In May 2022, Ovintiv published its full year 2021 ESG results in its 2022 Sustainability Report which highlightsacquired inventory into the Company’s progress in emissions intensity reductions. During 2021, the Company reducedexisting assets. Ovintiv remains committed to its Scope 1&2 GHG emissions intensity by 24 percent compared to 2019 and reduced its methane emissions intensity by greater than 50 percent compared to 2019.ESG targets.
Ovintiv is committed to diversity, equity and inclusion.inclusion (“DEI”). The Company’s social commitment framework, which is rooted in the Company’s foundational values of integrity, safety, sustainability, trust and respect, fosters a culture of inclusion that respects stakeholders and strengthens communities.
Ovintiv remains committed to protecting the health and safety of its workforce. Safety is a foundational value at Ovintiv and plays a critical role in the Company’s belief that a safe workplace is a strong indicator of a well-managed business. This safety-oriented mindset enables the Company to quickly respond to emergencies and minimize any impacts to employees and business continuity. Safety performance goals are incorporated into the Company’s annual compensation program. Additional information on DEI and employee safety can be found in the Human Capital section of Items 1 and 2 of the 2022 Annual Report on Form 10-K.
Additional information on Ovintiv’s ESG practices and updated metricsare included in its most recent Sustainability Report can be found on the Company’s sustainability website at https://sustainability.ovintiv.com.
40
| Results of Operations |
Results of Operations
Selected Financial Information
| Three months ended June 30, |
|
|
| Six months ended June 30, |
| ||||||||||||
($ millions) |
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Product and Service Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Upstream product revenues |
| $ | 1,646 |
|
| $ | 2,887 |
|
|
|
| $ | 3,521 |
|
| $ | 5,211 |
|
Market optimization |
|
| 703 |
|
|
| 1,127 |
|
|
|
|
| 1,419 |
|
|
| 2,209 |
|
Service revenues (1) |
|
| 3 |
|
|
| - |
|
|
|
|
| 4 |
|
|
| 1 |
|
Total Product and Service Revenues |
|
| 2,352 |
|
|
| 4,014 |
|
|
|
|
| 4,944 |
|
|
| 7,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gains (Losses) on Risk Management, Net |
|
| 147 |
|
|
| (295 | ) |
|
|
|
| 89 |
|
|
| (1,753 | ) |
Sublease Revenues |
|
| 18 |
|
|
| 17 |
|
|
|
|
| 35 |
|
|
| 35 |
|
Total Revenues |
|
| 2,517 |
|
|
| 3,736 |
|
|
|
|
| 5,068 |
|
|
| 5,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Operating Expenses (2) |
|
| 1,986 |
|
|
| 2,220 |
|
|
|
|
| 3,859 |
|
|
| 4,387 |
|
Operating Income (Loss) |
|
| 531 |
|
|
| 1,516 |
|
|
|
|
| 1,209 |
|
|
| 1,316 |
|
Total Other (Income) Expenses |
|
| 94 |
|
|
| 94 |
|
|
|
|
| 159 |
|
|
| 140 |
|
Net Earnings (Loss) Before Income Tax |
|
| 437 |
|
|
| 1,422 |
|
|
|
|
| 1,050 |
|
|
| 1,176 |
|
Income Tax Expense (Recovery) |
|
| 101 |
|
|
| 65 |
|
|
|
|
| 227 |
|
|
| 60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Earnings (Loss) |
| $ | 336 |
|
| $ | 1,357 |
|
|
|
| $ | 823 |
|
| $ | 1,116 |
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
| ||||||||||||
($ millions) |
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and Service Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upstream product revenues |
| $ | 2,653 |
|
| $ | 1,948 |
|
|
|
| $ | 7,864 |
|
| $ | 5,265 |
|
Market optimization |
|
| 988 |
|
|
| 771 |
|
|
|
|
| 3,197 |
|
|
| 2,171 |
|
Service revenues (1) |
|
| 2 |
|
|
| 1 |
|
|
|
|
| 3 |
|
|
| 4 |
|
Total Product and Service Revenues |
|
| 3,643 |
|
|
| 2,720 |
|
|
|
|
| 11,064 |
|
|
| 7,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses) on Risk Management, Net |
|
| (111 | ) |
|
| (950 | ) |
|
|
|
| (1,864 | ) |
|
| (2,176 | ) |
Sublease Revenues |
|
| 17 |
|
|
| 19 |
|
|
|
|
| 52 |
|
|
| 55 |
|
Total Revenues |
|
| 3,549 |
|
|
| 1,789 |
|
|
|
|
| 9,252 |
|
|
| 5,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses (2) |
|
| 2,176 |
|
|
| 1,789 |
|
|
|
|
| 6,563 |
|
|
| 5,245 |
|
Operating Income (Loss) |
|
| 1,373 |
|
|
| - |
|
|
|
|
| 2,689 |
|
|
| 74 |
|
Total Other (Income) Expenses |
|
| 99 |
|
|
| 71 |
|
|
|
|
| 239 |
|
|
| 217 |
|
Net Earnings (Loss) Before Income Tax |
|
| 1,274 |
|
|
| (71 | ) |
|
|
|
| 2,450 |
|
|
| (143 | ) |
Income Tax Expense (Recovery) |
|
| 88 |
|
|
| 1 |
|
|
|
|
| 148 |
|
|
| (175 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) |
| $ | 1,186 |
|
| $ | (72 | ) |
|
|
| $ | 2,302 |
|
| $ | 32 |
|
(2) Total Operating Expenses include non-cash items such as DD&A, accretion of asset retirement obligations and long-term incentive costs. Revenues
|
|
|
|
Revenues
Ovintiv’s revenues are substantially derived from sales of oil, NGLs and natural gas production. Increases or decreases in Ovintiv’s revenue, profitability and future production are highly dependent on the commodity prices the Company receives. Prices are market driven and fluctuate due to factors beyond the Company’s control, such as supply and demand, seasonality and geopolitical and economic factors. The Company’s realized prices generally reflect WTI, NYMEX, Edmonton Condensate and AECO benchmark prices, as well as other downstream benchmarks, including Houston and Dawn. The Company proactively mitigates price risk and optimizes margins by entering into firm transportation contracts to diversify market access to different sales points. Realized prices, excluding the impact of risk management activities, may differ from the benchmarks for many reasons, including quality, location, or production being sold at different market hubs.
Benchmark prices relevant to the Company are shown in the table below.
Benchmark Prices
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| |||||||||||||||||||||
(average for the period) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Oil & NGLs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
WTI ($/bbl) |
| $ | 91.55 |
|
| $ | 70.56 |
|
|
| $ | 98.09 |
|
| $ | 64.82 |
|
| $ | 73.78 |
|
| $ | 108.41 |
|
|
| $ | 74.95 |
|
| $ | 101.35 |
| ||
Houston ($/bbl) |
|
| 93.24 |
|
|
| 71.01 |
|
|
|
| 99.59 |
|
|
| 65.80 |
|
|
| 74.94 |
|
|
| 109.81 |
|
|
|
| 76.26 |
|
|
| 102.76 |
| ||
Edmonton Condensate (C$/bbl) |
|
| 114.19 |
|
|
| 87.26 |
|
|
|
| 124.90 |
|
|
| 80.75 |
|
|
| 97.39 |
|
|
| 138.41 |
|
|
|
| 102.82 |
|
|
| 130.25 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Natural Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
NYMEX ($/MMBtu) |
| $ | 8.20 |
|
| $ | 4.01 |
|
|
| $ | 6.77 |
|
| $ | 3.18 |
|
| $ | 2.10 |
|
| $ | 7.17 |
|
|
| $ | 2.76 |
|
| $ | 6.06 |
| ||
AECO (C$/Mcf) |
|
| 5.81 |
|
|
| 3.54 |
|
|
|
| 5.56 |
|
|
| 3.11 |
|
|
| 2.35 |
|
|
| 6.27 |
|
|
|
| 3.34 |
|
|
| 5.43 |
| ||
Dawn (C$/MMBtu) |
|
| 9.75 |
|
|
| 5.13 |
|
|
|
| 8.19 |
|
|
| 4.18 |
|
|
| 2.77 |
|
|
| 9.23 |
|
|
|
| 3.22 |
|
|
| 7.41 |
|
|
41
Production Volumes and Realized Prices
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||||||||||||||||||||
| Production Volumes (1) |
|
|
| Realized Prices (2) |
|
| Production Volumes (1) |
|
|
| Realized Prices (2) |
| ||||||||||||||||||||
| 2023 |
|
| 2022 |
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
|
| 2023 |
|
| 2022 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Oil (Mbbls/d, $/bbl) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
USA Operations |
| 142.4 |
|
|
| 132.7 |
|
|
| $ | 72.83 |
|
| $ | 108.58 |
|
|
| 134.8 |
|
|
| 130.4 |
|
|
| $ | 73.41 |
|
| $ | 101.05 |
|
Canadian Operations |
| - |
|
|
| 0.1 |
|
|
|
| - |
|
|
| 100.11 |
|
|
| 0.1 |
|
|
| 0.1 |
|
|
|
| 71.44 |
|
|
| 91.79 |
|
Total |
| 142.4 |
|
|
| 132.8 |
|
|
|
| 72.83 |
|
|
| 108.57 |
|
|
| 134.9 |
|
|
| 130.5 |
|
|
|
| 73.41 |
|
|
| 101.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
NGLs – Plant Condensate (Mbbls/d, $/bbl) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
USA Operations |
| 10.5 |
|
|
| 10.1 |
|
|
|
| 55.09 |
|
|
| 86.56 |
|
|
| 10.6 |
|
|
| 9.7 |
|
|
|
| 58.46 |
|
|
| 85.87 |
|
Canadian Operations |
| 33.0 |
|
|
| 32.5 |
|
|
|
| 70.99 |
|
|
| 107.78 |
|
|
| 30.6 |
|
|
| 34.0 |
|
|
|
| 73.84 |
|
|
| 101.79 |
|
Total |
| 43.5 |
|
|
| 42.6 |
|
|
|
| 67.14 |
|
|
| 102.74 |
|
|
| 41.2 |
|
|
| 43.7 |
|
|
|
| 69.89 |
|
|
| 98.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
NGLs – Other (Mbbls/d, $/bbl) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
USA Operations |
| 78.1 |
|
|
| 72.6 |
|
|
|
| 13.43 |
|
|
| 34.88 |
|
|
| 76.0 |
|
|
| 68.7 |
|
|
|
| 15.99 |
|
|
| 34.26 |
|
Canadian Operations |
| 18.7 |
|
|
| 14.4 |
|
|
|
| 18.62 |
|
|
| 47.84 |
|
|
| 15.6 |
|
|
| 14.4 |
|
|
|
| 25.20 |
|
|
| 44.56 |
|
Total |
| 96.8 |
|
|
| 87.0 |
|
|
|
| 14.43 |
|
|
| 37.03 |
|
|
| 91.6 |
|
|
| 83.1 |
|
|
|
| 17.56 |
|
|
| 36.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total Oil & NGLs (Mbbls/d, $/bbl) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
USA Operations |
| 231.0 |
|
|
| 215.4 |
|
|
|
| 51.94 |
|
|
| 82.70 |
|
|
| 221.4 |
|
|
| 208.8 |
|
|
|
| 52.99 |
|
|
| 78.36 |
|
Canadian Operations |
| 51.7 |
|
|
| 47.0 |
|
|
|
| 52.06 |
|
|
| 89.39 |
|
|
| 46.3 |
|
|
| 48.5 |
|
|
|
| 57.43 |
|
|
| 84.77 |
|
Total |
| 282.7 |
|
|
| 262.4 |
|
|
|
| 51.96 |
|
|
| 83.90 |
|
|
| 267.7 |
|
|
| 257.3 |
|
|
|
| 53.76 |
|
|
| 79.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Natural Gas (MMcf/d, $/Mcf) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
USA Operations |
| 530 |
|
|
| 485 |
|
|
|
| 1.79 |
|
|
| 6.87 |
|
|
| 518 |
|
|
| 479 |
|
|
|
| 2.57 |
|
|
| 5.86 |
|
Canadian Operations |
| 1,213 |
|
|
| 941 |
|
|
|
| 2.02 |
|
|
| 6.73 |
|
|
| 1,131 |
|
|
| 977 |
|
|
|
| 3.30 |
|
|
| 5.61 |
|
Total |
| 1,743 |
|
|
| 1,426 |
|
|
|
| 1.95 |
|
|
| 6.78 |
|
|
| 1,649 |
|
|
| 1,456 |
|
|
|
| 3.07 |
|
|
| 5.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total Production (MBOE/d, $/BOE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
USA Operations |
| 319.2 |
|
|
| 296.1 |
|
|
|
| 40.56 |
|
|
| 71.39 |
|
|
| 307.7 |
|
|
| 288.8 |
|
|
|
| 42.45 |
|
|
| 66.40 |
|
Canadian Operations |
| 253.8 |
|
|
| 203.9 |
|
|
|
| 20.26 |
|
|
| 51.70 |
|
|
| 234.7 |
|
|
| 211.2 |
|
|
|
| 27.21 |
|
|
| 45.39 |
|
Total |
| 573.0 |
|
|
| 500.0 |
|
|
|
| 31.56 |
|
|
| 63.36 |
|
|
| 542.4 |
|
|
| 500.0 |
|
|
|
| 35.86 |
|
|
| 57.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Production Mix (%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Oil & Plant Condensate |
| 32 |
|
|
| 35 |
|
|
|
|
|
|
|
|
|
| 32 |
|
|
| 35 |
|
|
|
|
|
|
|
| ||||
NGLs – Other |
| 17 |
|
|
| 17 |
|
|
|
|
|
|
|
|
|
| 17 |
|
|
| 16 |
|
|
|
|
|
|
|
| ||||
Total Oil & NGLs |
| 49 |
|
|
| 52 |
|
|
|
|
|
|
|
|
|
| 49 |
|
|
| 51 |
|
|
|
|
|
|
|
| ||||
Natural Gas |
| 51 |
|
|
| 48 |
|
|
|
|
|
|
|
|
|
| 51 |
|
|
| 49 |
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Production Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Year Over Year (%) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total Oil & NGLs |
| 8 |
|
|
| (8 | ) |
|
|
|
|
|
|
|
|
| 4 |
|
|
| (8 | ) |
|
|
|
|
|
|
| ||||
Natural Gas |
| 22 |
|
|
| (11 | ) |
|
|
|
|
|
|
|
|
| 13 |
|
|
| (8 | ) |
|
|
|
|
|
|
| ||||
Total Production |
| 15 |
|
|
| (10 | ) |
|
|
|
|
|
|
|
|
| 8 |
|
|
| (9 | ) |
|
|
|
|
|
|
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
| ||||||||||||||||||||||||||||
| Production Volumes (1) |
|
| Realized Prices (2) |
|
|
| Production Volumes (1) |
|
| Realized Prices (2) |
| ||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (Mbbls/d, $/bbl) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA Operations |
| 133.3 |
|
|
| 136.7 |
|
|
| $ | 93.22 |
|
| $ | 68.69 |
|
|
|
| 131.4 |
|
|
| 143.5 |
|
|
| $ | 98.37 |
|
| $ | 62.82 |
|
Canadian Operations |
| 0.1 |
|
|
| 0.1 |
|
|
|
| 82.86 |
|
|
| 64.95 |
|
|
|
| 0.1 |
|
|
| 0.4 |
|
|
|
| 88.58 |
|
|
| 55.51 |
|
Total |
| 133.4 |
|
|
| 136.8 |
|
|
|
| 93.21 |
|
|
| 68.69 |
|
|
|
| 131.5 |
|
|
| 143.9 |
|
|
|
| 98.36 |
|
|
| 62.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGLs – Plant Condensate (Mbbls/d, $/bbl) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA Operations |
| 11.1 |
|
|
| 11.3 |
|
|
|
| 66.62 |
|
|
| 62.84 |
|
|
|
| 10.1 |
|
|
| 10.5 |
|
|
|
| 78.77 |
|
|
| 56.84 |
|
Canadian Operations |
| 34.9 |
|
|
| 40.6 |
|
|
|
| 86.65 |
|
|
| 68.78 |
|
|
|
| 34.3 |
|
|
| 41.4 |
|
|
|
| 96.59 |
|
|
| 63.62 |
|
Total |
| 46.0 |
|
|
| 51.9 |
|
|
|
| 81.82 |
|
|
| 67.49 |
|
|
|
| 44.4 |
|
|
| 51.9 |
|
|
|
| 92.53 |
|
|
| 62.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGLs – Other (Mbbls/d, $/bbl) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA Operations |
| 74.1 |
|
|
| 69.4 |
|
|
|
| 29.82 |
|
|
| 28.77 |
|
|
|
| 70.5 |
|
|
| 66.6 |
|
|
|
| 32.69 |
|
|
| 23.29 |
|
Canadian Operations |
| 12.8 |
|
|
| 15.5 |
|
|
|
| 41.12 |
|
|
| 31.73 |
|
|
|
| 13.9 |
|
|
| 16.3 |
|
|
|
| 43.49 |
|
|
| 27.38 |
|
Total |
| 86.9 |
|
|
| 84.9 |
|
|
|
| 31.49 |
|
|
| 29.31 |
|
|
|
| 84.4 |
|
|
| 82.9 |
|
|
|
| 34.46 |
|
|
| 24.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Oil & NGLs (Mbbls/d, $/bbl) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA Operations |
| 218.5 |
|
|
| 217.4 |
|
|
|
| 70.37 |
|
|
| 55.63 |
|
|
|
| 212.0 |
|
|
| 220.6 |
|
|
|
| 75.59 |
|
|
| 50.59 |
|
Canadian Operations |
| 47.8 |
|
|
| 56.2 |
|
|
|
| 74.43 |
|
|
| 58.57 |
|
|
|
| 48.3 |
|
|
| 58.1 |
|
|
|
| 81.32 |
|
|
| 53.41 |
|
Total |
| 266.3 |
|
|
| 273.6 |
|
|
|
| 71.10 |
|
|
| 56.23 |
|
|
|
| 260.3 |
|
|
| 278.7 |
|
|
|
| 76.65 |
|
|
| 51.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas (MMcf/d, $/Mcf) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA Operations |
| 502 |
|
|
| 495 |
|
|
|
| 7.55 |
|
|
| 3.80 |
|
|
|
| 487 |
|
|
| 484 |
|
|
|
| 6.45 |
|
|
| 3.13 |
|
Canadian Operations |
| 998 |
|
|
| 1,071 |
|
|
|
| 6.11 |
|
|
| 3.63 |
|
|
|
| 984 |
|
|
| 1,099 |
|
|
|
| 5.78 |
|
|
| 3.18 |
|
Total |
| 1,500 |
|
|
| 1,566 |
|
|
|
| 6.60 |
|
|
| 3.69 |
|
|
|
| 1,471 |
|
|
| 1,583 |
|
|
|
| 6.00 |
|
|
| 3.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Production (MBOE/d, $/BOE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA Operations |
| 302.1 |
|
|
| 300.0 |
|
|
|
| 63.44 |
|
|
| 46.59 |
|
|
|
| 293.3 |
|
|
| 301.2 |
|
|
|
| 65.37 |
|
|
| 42.08 |
|
Canadian Operations |
| 214.2 |
|
|
| 234.7 |
|
|
|
| 45.11 |
|
|
| 30.61 |
|
|
|
| 212.2 |
|
|
| 241.3 |
|
|
|
| 45.30 |
|
|
| 27.38 |
|
Total |
| 516.3 |
|
|
| 534.7 |
|
|
|
| 55.83 |
|
|
| 39.57 |
|
|
|
| 505.5 |
|
|
| 542.5 |
|
|
|
| 56.94 |
|
|
| 35.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Mix (%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil & Plant Condensate |
| 35 |
|
|
| 35 |
|
|
|
|
|
|
|
|
|
|
|
|
| 35 |
|
|
| 36 |
|
|
|
|
|
|
|
|
|
|
NGLs – Other |
| 17 |
|
|
| 16 |
|
|
|
|
|
|
|
|
|
|
|
|
| 16 |
|
|
| 15 |
|
|
|
|
|
|
|
|
|
|
Total Oil & NGLs |
| 52 |
|
|
| 51 |
|
|
|
|
|
|
|
|
|
|
|
|
| 51 |
|
|
| 51 |
|
|
|
|
|
|
|
|
|
|
Natural Gas |
| 48 |
|
|
| 49 |
|
|
|
|
|
|
|
|
|
|
|
|
| 49 |
|
|
| 49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Over Year (%) (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Oil & NGLs |
| (3 | ) |
|
| 1 |
|
|
|
|
|
|
|
|
|
|
|
|
| (7 | ) |
|
| (3 | ) |
|
|
|
|
|
|
|
|
|
Natural Gas |
| (4 | ) |
|
| 9 |
|
|
|
|
|
|
|
|
|
|
|
|
| (7 | ) |
|
| 4 |
|
|
|
|
|
|
|
|
|
|
Total Production |
| (3 | ) |
|
| 5 |
|
|
|
|
|
|
|
|
|
|
|
|
| (7 | ) |
|
| 1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Assets Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (Mbbls/d) |
| 96.8 |
|
|
| 112.2 |
|
|
|
|
|
|
|
|
|
|
|
|
| 97.8 |
|
|
| 109.9 |
|
|
|
|
|
|
|
|
|
|
NGLs – Plant Condensate (Mbbls/d) |
| 44.6 |
|
|
| 50.8 |
|
|
|
|
|
|
|
|
|
|
|
|
| 43.1 |
|
|
| 49.5 |
|
|
|
|
|
|
|
|
|
|
NGLs – Other (Mbbls/d) |
| 78.2 |
|
|
| 78.8 |
|
|
|
|
|
|
|
|
|
|
|
|
| 76.5 |
|
|
| 75.6 |
|
|
|
|
|
|
|
|
|
|
Total Oil & NGLs (Mbbls/d) |
| 219.6 |
|
|
| 241.8 |
|
|
|
|
|
|
|
|
|
|
|
|
| 217.4 |
|
|
| 235.0 |
|
|
|
|
|
|
|
|
|
|
Natural Gas (MMcf/d) |
| 1,409 |
|
|
| 1,487 |
|
|
|
|
|
|
|
|
|
|
|
|
| 1,384 |
|
|
| 1,473 |
|
|
|
|
|
|
|
|
|
|
Total Production (MBOE/d) |
| 454.5 |
|
|
| 489.6 |
|
|
|
|
|
|
|
|
|
|
|
|
| 448.1 |
|
|
| 480.5 |
|
|
|
|
|
|
|
|
|
|
% of Total Production |
| 88 |
|
|
| 92 |
|
|
|
|
|
|
|
|
|
|
|
|
| 89 |
|
|
| 89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42
Upstream Product Revenues
| Three months ended June 30, |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
($ millions) | Oil |
|
| NGLs - Plant Condensate |
|
| NGLs - Other |
|
| Natural Gas |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
2022 Upstream Product Revenues (1) | $ | 1,312 |
|
| $ | 399 |
|
| $ | 294 |
|
| $ | 879 |
|
| $ | 2,884 |
|
Increase (decrease) due to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Sales prices |
| (463 | ) |
|
| (141 | ) |
|
| (202 | ) |
|
| (765 | ) |
|
| (1,571 | ) |
Production volumes |
| 95 |
|
|
| 7 |
|
|
| 37 |
|
|
| 194 |
|
|
| 333 |
|
2023 Upstream Product Revenues | $ | 944 |
|
| $ | 265 |
|
| $ | 129 |
|
| $ | 308 |
|
| $ | 1,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
| Six months ended June 30, |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
($ millions) | Oil |
|
| NGLs - Plant Condensate |
|
| NGLs - Other |
|
| Natural Gas |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
2022 Upstream Product Revenues (1) | $ | 2,387 |
|
| $ | 777 |
|
| $ | 542 |
|
| $ | 1,500 |
|
| $ | 5,206 |
|
Increase (decrease) due to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Sales prices |
| (675 | ) |
|
| (208 | ) |
|
| (304 | ) |
|
| (781 | ) |
|
| (1,968 | ) |
Production volumes |
| 80 |
|
|
| (49 | ) |
|
| 55 |
|
|
| 197 |
|
|
| 283 |
|
2023 Upstream Product Revenues | $ | 1,792 |
|
| $ | 520 |
|
| $ | 293 |
|
| $ | 916 |
|
| $ | 3,521 |
|
| Three months ended September 30, |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) | Oil |
|
| NGLs - Plant Condensate |
|
| NGLs - Other |
|
| Natural Gas |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 Upstream Product Revenues (1) | $ | 865 |
|
| $ | 322 |
|
| $ | 230 |
|
| $ | 530 |
|
| $ | 1,947 |
|
Increase (decrease) due to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales prices |
| 301 |
|
|
| 60 |
|
|
| 17 |
|
|
| 402 |
|
|
| 780 |
|
Production volumes |
| (22 | ) |
|
| (37 | ) |
|
| 4 |
|
|
| (21 | ) |
|
| (76 | ) |
2022 Upstream Product Revenues | $ | 1,144 |
|
| $ | 345 |
|
| $ | 251 |
|
| $ | 911 |
|
| $ | 2,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine months ended September 30, |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ millions) | Oil |
|
| NGLs - Plant Condensate |
|
| NGLs - Other |
|
| Natural Gas |
|
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 Upstream Product Revenues (1) | $ | 2,467 |
|
| $ | 881 |
|
| $ | 545 |
|
| $ | 1,368 |
|
| $ | 5,261 |
|
Increase (decrease) due to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales prices |
| 1,276 |
|
|
| 370 |
|
|
| 241 |
|
|
| 1,139 |
|
|
| 3,026 |
|
Production volumes |
| (212 | ) |
|
| (129 | ) |
|
| 7 |
|
|
| (96 | ) |
|
| (430 | ) |
2022 Upstream Product Revenues | $ | 3,531 |
|
| $ | 1,122 |
|
| $ | 793 |
|
| $ | 2,411 |
|
| $ | 7,857 |
|
|
|
Oil Revenues
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Oil revenues were higherlower by $279$368 million compared to the thirdsecond quarter of 20212022 primarily due to:
|
|
|
|
NineSix months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Oil revenues were higherlower by $1,064$595 million compared to the first ninesix months of 20212022 primarily due to:
|
|
|
|
|
43
NGL Revenues
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
NGL revenues were higherlower by $44$299 million compared to the thirdsecond quarter of 20212022 primarily due to:
|
|
|
|
|
|
NineSix months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
NGL revenues were higherlower by $489$506 million compared to the first ninesix months of 20212022 primarily due to:
• A decrease of $18.48 per bbl, or 51 percent, in the average realized other NGL prices which decreased revenues by $304 million. The decrease reflected lower other NGL benchmark prices and lower regional pricing; • A decrease of $28.37 per bbl, or 29 percent, in the average realized plant condensate prices which decreased revenues by $208 million. The decrease reflected lower WTI and Edmonton Condensate benchmark prices which were down 26 percent and 21 percent, respectively, and lower regional pricing relative to the WTI benchmark price; • Lower average plant condensate production volumes of 2.5 Mbbls/d decreased revenues by $49 million. Lower volumes were primarily due to natural declines in Montney (3.8 Mbbls/d), partially offset by successful drilling in Montney, Permian and Bakken (1.3 Mbbls/d); and • Higher average other NGL production volumes of 8.5 Mbbls/d increased revenues by $55 million. Higher volumes were primarily due to successful drilling in Permian, Bakken and Montney (5.3 Mbbls/d), higher recoveries of other NGLs in Anadarko (2.1 Mbbls/d) and lower effective royalty rates resulting from lower commodity prices in Montney (1.5 Mbbls/d).
|
|
|
|
|
|
Natural Gas Revenues
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Natural gas revenues were higherlower by $381$571 million compared to the thirdsecond quarter of 20212022 primarily due to:
|
|
|
|
NineSix months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Natural gas revenues were higherlower by $1,043$584 million compared to the first ninesix months of 20212022 primarily due to:
|
|
|
44
|
|
Gains (Losses) on Risk Management, Net
As a means of managing commodity price volatility, Ovintiv enters into commodity derivative financial instruments on a portion of its expected oil, NGLs and natural gas production volumes. Additional information on the Company’s commodity price positions as at SeptemberJune 30, 20222023 can be found in Note 1819 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
The following tables provide the effects of the Company’s risk management activities on revenues.
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| ||||||||||
($ millions) |
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Realized Gains (Losses) on Risk Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commodity Price (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Oil |
| $ | - |
|
| $ | (235 | ) |
|
|
| $ | - |
|
| $ | (378 | ) |
NGLs - Plant Condensate |
|
| - |
|
|
| (51 | ) |
|
|
|
| - |
|
|
| (83 | ) |
Natural Gas |
|
| 5 |
|
|
| (522 | ) |
|
|
|
| (71 | ) |
|
| (795 | ) |
Other (2) |
|
| - |
|
|
| - |
|
|
|
|
| - |
|
|
| 2 |
|
Total |
|
| 5 |
|
|
| (808 | ) |
|
|
|
| (71 | ) |
|
| (1,254 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized Gains (Losses) on Risk Management |
|
| 142 |
|
|
| 513 |
|
|
|
|
| 160 |
|
|
| (499 | ) |
Total Gains (Losses) on Risk Management, Net |
| $ | 147 |
|
| $ | (295 | ) |
|
|
| $ | 89 |
|
| $ | (1,753 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| ||||||||||
(Per-unit) |
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Realized Gains (Losses) on Risk Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commodity Price (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Oil ($/bbl) |
| $ | - |
|
| $ | (19.41 | ) |
|
|
| $ | - |
|
| $ | (16.00 | ) |
NGLs - Plant Condensate ($/bbl) |
| $ | - |
|
| $ | (13.07 | ) |
|
|
| $ | - |
|
| $ | (10.48 | ) |
Natural Gas ($/Mcf) |
| $ | 0.03 |
|
| $ | (4.00 | ) |
|
|
| $ | (0.24 | ) |
| $ | (3.00 | ) |
Total ($/BOE) |
| $ | 0.10 |
|
| $ | (17.66 | ) |
|
|
| $ | (0.72 | ) |
| $ | (13.83 | ) |
|
| Three months ended September 30, |
|
|
|
| Nine months ended September 30, |
| ||||||||||
($ millions) |
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized Gains (Losses) on Risk Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Price (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil |
| $ | (141 | ) |
| $ | (194 | ) |
|
|
| $ | (519 | ) |
| $ | (478 | ) |
NGLs - Plant Condensate |
|
| (26 | ) |
|
| (39 | ) |
|
|
|
| (109 | ) |
|
| (99 | ) |
NGLs - Other |
|
| - |
|
|
| (42 | ) |
|
|
|
| - |
|
|
| (81 | ) |
Natural Gas |
|
| (654 | ) |
|
| (97 | ) |
|
|
|
| (1,449 | ) |
|
| (96 | ) |
Other (2) |
|
| - |
|
|
| 1 |
|
|
|
|
| 2 |
|
|
| 4 |
|
Total |
|
| (821 | ) |
|
| (371 | ) |
|
|
|
| (2,075 | ) |
|
| (750 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Gains (Losses) on Risk Management |
|
| 710 |
|
|
| (579 | ) |
|
|
|
| 211 |
|
|
| (1,426 | ) |
Total Gains (Losses) on Risk Management, Net |
| $ | (111 | ) |
| $ | (950 | ) |
|
|
| $ | (1,864 | ) |
| $ | (2,176 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, |
|
|
|
| Nine months ended September 30, |
| ||||||||||
(Per-unit) |
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized Gains (Losses) on Risk Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Price (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($/bbl) |
| $ | (11.47 | ) |
| $ | (15.38 | ) |
|
|
| $ | (14.44 | ) |
| $ | (12.16 | ) |
NGLs - Plant Condensate ($/bbl) |
| $ | (6.09 | ) |
| $ | (8.15 | ) |
|
|
| $ | (8.96 | ) |
| $ | (7.01 | ) |
NGLs - Other ($/bbl) |
| $ | - |
|
| $ | (5.45 | ) |
|
|
| $ | - |
|
| $ | (3.59 | ) |
Natural Gas ($/Mcf) |
| $ | (4.75 | ) |
| $ | (0.67 | ) |
|
|
| $ | (3.61 | ) |
| $ | (0.22 | ) |
Total ($/BOE) |
| $ | (17.28 | ) |
| $ | (7.57 | ) |
|
|
| $ | (15.05 | ) |
| $ | (5.09 | ) |
(2) Other primarily includes realized gains or losses from Market Optimization and other derivative contracts with no associated production volumes.
|
|
|
|
Ovintiv recognizes fair value changes from its risk management activities each reporting period. The changes in fair value result from new positions and settlements that occur during each period, as well as the relationship between contract prices and the associated forward curves. Realized gains or losses on risk management activities related to commodity price mitigation are included in the USA Operations, Canadian Operations and Market Optimization revenues as the contracts are cash settled.settled. Unrealized gains or losses on fair value changes of unsettled contracts are included in the Corporate and Other segment. Additional information on fair value changes can be found in Note 1718 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
|
Market Optimization Revenues
Market Optimization product revenues relate to activities that provide operational flexibility and cost mitigation for transportation commitments, product type, delivery points and customer diversification. Ovintiv also purchases and sells third-party volumes under marketing arrangements associated with the Company’s previous divestitures.
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| |||||||||||||||||||||
($ millions) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Market Optimization |
| $ | 988 |
|
| $ | 771 |
|
|
| $ | 3,197 |
|
| $ | 2,171 |
|
| $ | 703 |
|
| $ | 1,127 |
|
|
| $ | 1,419 |
|
| $ | 2,209 |
|
45
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Market Optimization product revenues increased $217decreased $424 million compared to the thirdsecond quarter of 20212022 primarily due to:
• Lower oil and natural gas benchmark prices ($420 million), and lower sales of third-party purchased natural gas volumes primarily relating to marketing arrangements for assets divested in prior years ($28 million);
|
|
partially offset by:
|
|
NineSix months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Market Optimization product revenues increased $1,026decreased $790 million compared to the first ninesix months of 20212022 primarily due to:
• Lower oil and natural gas benchmark prices ($620 million), lower sales of third-party purchased liquids volumes primarily relating to price optimization activities in the USA Operations ($86 million) and lower sales of third-party purchased natural gas volumes primarily relating to marketing arrangements for assets divested in prior years ($84 million).
|
|
partially offset by:
|
|
Sublease Revenues
Sublease revenues primarily include amounts related to the sublease of office space in The Bow office building recorded in the Corporate and Other segment. Additional information on office sublease income can be found in Note 910 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
|
Operating Expenses
Production, Mineral and Other Taxes
Production, mineral and other taxes include production and property taxes. Production taxes are generally assessed as a percentage of oil, NGLs and natural gas production revenues. Property taxes are generally assessed based on the value of the underlying assets.
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| |||||||||||||||||||||
($ millions) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
USA Operations |
| $ | 106 |
|
| $ | 75 |
|
|
| $ | 311 |
|
| $ | 199 |
|
| $ | 73 |
|
| $ | 115 |
|
|
| $ | 153 |
|
| $ | 205 |
| ||
Canadian Operations |
|
| 3 |
|
|
| 2 |
|
|
|
| 10 |
|
|
| 11 |
|
|
| 3 |
|
|
| 3 |
|
|
|
|
| 7 |
|
|
| 7 |
| |
Total |
| $ | 109 |
|
| $ | 77 |
|
|
| $ | 321 |
|
| $ | 210 |
|
| $ | 76 |
|
| $ | 118 |
|
|
| $ | 160 |
|
| $ | 212 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| |||||||||||||||||||||
($/BOE) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
USA Operations |
| $ | 3.83 |
|
| $ | 2.71 |
|
|
| $ | 3.89 |
|
| $ | 2.42 |
|
| $ | 2.49 |
|
| $ | 4.25 |
|
|
| $ | 2.74 |
|
| $ | 3.92 |
| ||
Canadian Operations |
| $ | 0.12 |
|
| $ | 0.13 |
|
|
| $ | 0.15 |
|
| $ | 0.17 |
|
| $ | 0.14 |
|
| $ | 0.15 |
|
|
| $ | 0.17 |
|
| $ | 0.16 |
| ||
Production, Mineral and Other Taxes |
| $ | 2.29 |
|
| $ | 1.57 |
|
|
| $ | 2.32 |
|
| $ | 1.42 |
|
| $ | 1.43 |
|
| $ | 2.58 |
|
|
| $ | 1.63 |
|
| $ | 2.33 |
|
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Production, mineral and other taxes increased $32decreased $42 million compared to the thirdsecond quarter of 20212022 primarily due to:
|
|
NineSix months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Production, mineral and other taxes increased $111decreased $52 million compared to the first ninesix months of 20212022 primarily due to:
• Lower production tax in USA Operations due to lower commodity prices ($52 million) and the sale of the Bakken assets in the second quarter of 2023 ($3 million). 46 |
|
|
partially offset by:
|
|
Transportation and Processing
Transportation and processing expense includes transportation costs incurred to move product from production points to sales points including gathering, compression, pipeline tariffs, trucking and storage costs. Ovintiv also incurs costs related to processing provided by third parties or through ownership interests in processing facilities.
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| |||||||||||||||||||||
($ millions) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
USA Operations |
| $ | 170 |
|
| $ | 122 |
|
|
| $ | 464 |
|
| $ | 361 |
|
| $ | 148 |
|
| $ | 159 |
|
|
| $ | 295 |
|
| $ | 294 |
| ||
Canadian Operations |
|
| 257 |
|
|
| 231 |
|
|
|
| 741 |
|
|
| 703 |
|
|
| 268 |
|
|
| 253 |
|
|
|
|
| 535 |
|
|
| 484 |
| |
Upstream Transportation and Processing |
|
| 427 |
|
|
| 353 |
|
|
|
| 1,205 |
|
|
| 1,064 |
|
|
| 416 |
|
|
| 412 |
|
|
|
|
| 830 |
|
|
| 778 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Market Optimization |
|
| 41 |
|
|
| 44 |
|
|
|
| 122 |
|
|
| 130 |
|
|
| 36 |
|
|
| 41 |
|
|
|
| 77 |
|
|
| 81 |
| ||
Total |
| $ | 468 |
|
| $ | 397 |
|
|
| $ | 1,327 |
|
| $ | 1,194 |
|
| $ | 452 |
|
| $ | 453 |
|
|
|
| $ | 907 |
|
| $ | 859 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| |||||||||||||||||||||
($/BOE) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
USA Operations |
| $ | 6.14 |
|
| $ | 4.43 |
|
|
| $ | 5.80 |
|
| $ | 4.40 |
|
| $ | 5.10 |
|
| $ | 5.91 |
|
|
| $ | 5.29 |
|
| $ | 5.62 |
| ||
Canadian Operations |
| $ | 13.01 |
|
| $ | 10.68 |
|
|
| $ | 12.78 |
|
| $ | 10.68 |
|
| $ | 11.57 |
|
| $ | 13.67 |
|
|
| $ | 12.59 |
|
| $ | 12.66 |
| ||
Upstream Transportation and Processing |
| $ | 8.99 |
|
| $ | 7.17 |
|
|
| $ | 8.73 |
|
| $ | 7.19 |
|
| $ | 7.97 |
|
| $ | 9.08 |
|
|
| $ | 8.45 |
|
| $ | 8.60 |
|
|
Three months ended SeptemberJune 30, 2023 versus June 30, 2022
Transportation and processing expense decreased $1 million compared to the second quarter of 2022 primarily due to:
partially offset by:
Six months ended June 30, 2023 versus SeptemberJune 30, 20212022
Transportation and processing expense increased $71 million compared to the third quarter of 2021 primarily due to:
|
|
partially offset by:
|
|
Nine months ended September 30, 2022 versus September 30, 2021
Transportation and processing expense increased $133$48 million compared to the first ninesix months of 20212022 primarily due to:
• Higher costs relating to the diversification of the Company’s downstream markets ($34 million), higher gas volumes in Bakken and Permian ($26 million), rate escalation of transportation contracts in Uinta and Bakken ($25 million), higher flow-through rates resulting from increased third-party plant operating costs in Montney ($24 million) and third-party plant turnarounds in Montney ($11 million);
|
|
partially offset by:
|
|
47
Operating
Operating expense includes costs paid by the Company, net of amounts capitalized, on oil and natural gas properties in which Ovintiv has a working interest. These costs primarily include labor, service contract fees, chemicals, fuel, water hauling, electricity and workovers.
|
| Three months ended September 30, |
|
|
|
| Nine months ended September 30, |
| ||||||||||
($ millions) |
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA Operations |
| $ | 187 |
|
| $ | 122 |
|
|
|
| $ | 478 |
|
| $ | 368 |
|
Canadian Operations |
|
| 34 |
|
|
| 25 |
|
|
|
|
| 96 |
|
|
| 78 |
|
Upstream Operating Expense |
|
| 221 |
|
|
| 147 |
|
|
|
|
| 574 |
|
|
| 446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Optimization |
|
| 7 |
|
|
| 5 |
|
|
|
|
| 22 |
|
|
| 19 |
|
Corporate & Other |
|
| - |
|
|
| 1 |
|
|
|
|
| - |
|
|
| 1 |
|
Total |
| $ | 228 |
|
| $ | 153 |
|
|
|
| $ | 596 |
|
| $ | 466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, |
|
|
|
| Nine months ended September 30, |
| ||||||||||
($/BOE) |
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
| ||||
�� |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA Operations |
| $ | 6.73 |
|
| $ | 4.38 |
|
|
|
| $ | 5.96 |
|
| $ | 4.47 |
|
Canadian Operations |
| $ | 1.69 |
|
| $ | 1.20 |
|
|
|
| $ | 1.65 |
|
| $ | 1.17 |
|
Upstream Operating Expense (1) |
| $ | 4.64 |
|
| $ | 2.98 |
|
|
|
| $ | 4.16 |
|
| $ | 3.00 |
|
|
|
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Operating expense increased $75decreased $5 million compared to the second quarter of 2022 primarily due to:
partially offset by:
|
|
|
NineSix months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Operating expense increased $130$13 million compared to the first ninesix months of 20212022 primarily due to:
• Increased activity due to more wells on production and sustained inflationary pressures ($67 million) and the Permian Acquisition in the second quarter of 2023 ($10 million);
|
|
partially offset by:
• The sale of portions of Uinta assets in the third quarter of 2022 ($26 million), updates to operating contract terms, including a recovery of prior years’ costs ($23 million), lower long-term incentive costs resulting from a decrease in the Company’s share price compared to an increase in 2022 ($8 million) and the sale of the Bakken assets in the second quarter of 2023 ($5 million).
|
|
Additional information on the Company’s long-term incentive costs can be found in Note 1516 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
48
Purchased Product
Purchased product expense includes purchases of oil, NGLs and natural gas from third parties that are used to provide operational flexibility and cost mitigation for transportation commitments, product type, delivery points and customer diversification. Ovintiv also purchases and sells third-party volumes under marketing arrangements associated with the Company’s previous divestitures.
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
| Three months ended June 30, |
|
|
| Six months ended June 30, |
| ||||||||||||||||||||||
($ millions) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
| 2023 |
|
| 2022 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Market Optimization |
| $ | 973 |
|
| $ | 759 |
|
|
| $ | 3,154 |
|
| $ | 2,096 |
|
| $ | 692 |
|
| $ | 1,115 |
|
|
| $ | 1,393 |
|
| $ | 2,181 |
|
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Purchased product expense increased $214decreased $423 million compared to the thirdsecond quarter of 20212022 primarily due to:
• Lower oil and natural gas benchmark prices ($420 million), and lower third-party purchased natural gas volumes primarily relating to marketing arrangements for assets divested in prior years ($28 million);
|
|
partially offset by:
|
|
NineSix months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Purchased product expense increased $1,058decreased $788 million compared to the first ninesix months of 20212022 primarily due to:
|
|
partially offset by:
|
|
|
Depreciation, Depletion & Amortization
Proved properties within each country cost centrecenter are depleted using the unit-of-production method based on proved reserves as discussed in Note 1 to the Consolidated Financial Statements included in Item 8 of the 20212022 Annual Report on Form 10-K.10-K. Depletion rates are impacted by impairments, acquisitions, divestitures and foreign exchange rates, as well as fluctuations in 12-month average trailing prices which affect proved reserves volumes. Corporate assets are carried at cost and depreciated on a straight-line basis over the estimated service lives of the assets.
Additional information can be found under Upstream Assets and Reserve Estimates in the Critical Accounting Estimates section of the MD&A included in Item 7 of the 20212022 Annual Report on Form 10-K.
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| |||||||||||||||||||||
($ millions) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
USA Operations |
| $ | 225 |
|
| $ | 207 |
|
|
| $ | 642 |
|
| $ | 635 |
|
| $ | 336 |
|
| $ | 217 |
|
|
| $ | 630 |
|
| $ | 417 |
| ||
Canadian Operations |
|
| 61 |
|
|
| 83 | �� |
|
|
| 176 |
|
|
| 265 |
|
|
| 78 |
|
|
| 56 |
|
|
|
|
| 143 |
|
|
| 115 |
| |
Upstream DD&A |
|
| 286 |
|
|
| 290 |
|
|
|
| 818 |
|
|
| 900 |
|
|
| 414 |
|
|
| 273 |
|
|
|
|
| 773 |
|
|
| 532 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Corporate & Other |
|
| 5 |
|
|
| 7 |
|
|
|
| 15 |
|
|
| 16 |
|
|
| 5 |
|
|
| 5 |
|
|
|
|
| 10 |
|
|
| 10 |
| |
Total |
| $ | 291 |
|
| $ | 297 |
|
|
| $ | 833 |
|
| $ | 916 |
|
| $ | 419 |
|
| $ | 278 |
|
|
| $ | 783 |
|
| $ | 542 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| |||||||||||||||||||||
($/BOE) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
USA Operations |
| $ | 8.11 |
|
| $ | 7.52 |
|
|
| $ | 8.03 |
|
| $ | 7.73 |
|
| $ | 11.56 |
|
| $ | 8.05 |
|
|
| $ | 11.31 |
|
| $ | 7.98 |
| ||
Canadian Operations |
| $ | 3.09 |
|
| $ | 3.82 |
|
|
| $ | 3.04 |
|
| $ | 4.02 |
|
| $ | 3.36 |
|
| $ | 3.04 |
|
|
| $ | 3.37 |
|
| $ | 3.01 |
| ||
Upstream DD&A |
| $ | 6.03 |
|
| $ | 5.90 |
|
|
| $ | 5.93 |
|
| $ | 6.08 |
|
| $ | 7.93 |
|
| $ | 6.00 |
|
|
| $ | 7.87 |
|
| $ | 5.88 |
|
49
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
DD&A decreased $6increased $141 million compared to the thirdsecond quarter of 20212022 primarily due to:
• Higher depletion rates in the USA and Canadian Operations ($102 million and $11 million, respectively) and higher production volumes in the USA and Canadian Operations ($17 million and $13 million, respectively).
|
|
partially offset by:
|
|
The depletion rate in the USA and Canadian Operations increased $0.59$3.51 per BOE and $0.32 per BOE, respectively compared to the thirdsecond quarter of 20212022 primarily due to a higher depletable base. The depletion rate in the Canadian Operations decreased $0.73 per BOE compared to the third quarter of 2021 primarily due to higher reserve volumes.
NineSix months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
DD&A decreased $83increased $241 million compared to the first ninesix months of 20212022 primarily due to:
• Higher depletion rates in the USA and Canadian Operations ($185 million and $23 million, respectively) and higher production volumes in the USA and Canadian Operations ($27 million and $12 million, respectively);
|
|
partially offset by:
• Higher U.S./Canadian dollar exchange rate ($7 million).
|
|
The depletion rate in the USA and Canadian Operations increased $0.30$3.33 per BOE and $0.36 per BOE, respectively compared to the first ninesix months of 20212022 primarily due to a higher depletable base. The depletion rate in the Canadian Operations decreased $0.98 per BOE compared to the first nine months 2021 primarily due to higher reserve volumes.
|
Administrative
Administrative
Administrative expense represents costs associated with corporate functions provided by Ovintiv staff. CostsThese expenses primarily include salaries and benefits, operating lease, office, information technology, restructuringtransaction and long-term incentive costs.
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| ||||||||||
($ millions) |
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Administrative, excluding Long-Term Incentive, |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Transaction and Legal Costs, and Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Expected Credit Losses (1) |
| $ | 66 |
|
| $ | 62 |
|
|
|
| $ | 137 |
|
| $ | 128 |
|
Long-term incentive costs |
|
| 16 |
|
|
| 7 |
|
|
|
|
| (3 | ) |
|
| 86 |
|
Transaction and legal costs |
|
| 86 |
|
|
| - |
|
|
|
|
| 92 |
|
|
| (1 | ) |
Current expected credit losses |
|
| - |
|
|
| 2 |
|
|
|
|
| - |
|
|
| 2 |
|
Total Administrative |
| $ | 168 |
|
| $ | 71 |
|
|
|
| $ | 226 |
|
| $ | 215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| ||||||||||
($/BOE) |
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Administrative, excluding Long-Term Incentive, |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Transaction and Legal Costs, and Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Expected Credit Losses (1) |
| $ | 1.28 |
|
| $ | 1.36 |
|
|
|
| $ | 1.39 |
|
| $ | 1.41 |
|
Long-term incentive costs |
|
| 0.30 |
|
|
| 0.15 |
|
|
|
|
| (0.03 | ) |
|
| 0.95 |
|
Transaction and legal costs |
|
| 1.65 |
|
|
| - |
|
|
|
|
| 0.94 |
|
|
| (0.01 | ) |
Current expected credit losses |
|
| - |
|
|
| 0.05 |
|
|
|
|
| - |
|
|
| 0.03 |
|
Total Administrative |
| $ | 3.23 |
|
| $ | 1.56 |
|
|
|
| $ | 2.30 |
|
| $ | 2.38 |
|
|
| Three months ended September 30, |
|
|
|
| Nine months ended September 30, |
| ||||||||||
($ millions) |
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative, excluding Long-Term Incentive, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and Legal Costs, and Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected Credit Losses (1) |
| $ | 66 |
|
| $ | 70 |
|
|
|
| $ | 194 |
|
| $ | 219 |
|
Long-term incentive costs |
|
| 37 |
|
|
| 25 |
|
|
|
|
| 123 |
|
|
| 91 |
|
Restructuring and legal costs |
|
| - |
|
|
| 6 |
|
|
|
|
| (1 | ) |
|
| 37 |
|
Current expected credit losses |
|
| - |
|
|
| - |
|
|
|
|
| 2 |
|
|
| (1 | ) |
Total Administrative |
| $ | 103 |
|
| $ | 101 |
|
|
|
| $ | 318 |
|
| $ | 346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three months ended September 30, |
|
|
|
| Nine months ended September 30, |
| ||||||||||
($/BOE) |
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative, excluding Long-Term Incentive, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and Legal Costs, and Current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected Credit Losses (1) |
| $ | 1.39 |
|
| $ | 1.44 |
|
|
|
| $ | 1.40 |
|
| $ | 1.50 |
|
Long-term incentive costs |
|
| 0.77 |
|
|
| 0.51 |
|
|
|
|
| 0.89 |
|
|
| 0.61 |
|
Restructuring and legal costs |
|
| - |
|
|
| 0.11 |
|
|
|
|
| (0.01 | ) |
|
| 0.24 |
|
Current expected credit losses |
|
| - |
|
|
| - |
|
|
|
|
| 0.02 |
|
|
| (0.01 | ) |
Total Administrative |
| $ | 2.16 |
|
| $ | 2.06 |
|
|
|
| $ | 2.30 |
|
| $ | 2.34 |
|
|
|
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Administrative expense increased $2$97 million compared to the thirdsecond quarter of 20212022 primarily due to:
|
|
partially offset by:50
|
|
Nine
Six months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Administrative expense decreased $28increased $11 million compared to the first ninesix months of 20212022 primarily due to:
• Transaction costs mainly related to the Permian Acquisition in the second quarter of 2023 ($82 million) and increases in legal and operating lease costs ($16 million);
|
|
partially offset by:
• Recovery of long-term incentive costs resulting from a decrease in the Company’s share price in the first six months of 2023 compared to an increase in 2022 ($89 million).
|
|
Additional information on the Company’s long-term incentive costs can be found in Note 1516 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q10-Q..
|
Other (Income) Expenses
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| |||||||||||||||||||||
($ millions) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest |
| $ | 83 |
|
| $ | 77 |
|
|
| $ | 248 |
|
| $ | 263 |
|
| $ | 80 |
|
| $ | 91 |
|
|
| $ | 151 |
|
| $ | 165 |
| ||
Foreign exchange (gain) loss, net |
|
| 19 |
|
|
| - |
|
|
|
| 21 |
|
|
| (15 | ) | |||||||||||||||||||
Other (gains) losses, net |
|
| (3 | ) |
|
| (6 | ) |
|
|
| (30 | ) |
|
| (31 | ) | |||||||||||||||||||
Foreign Exchange (Gain) Loss, Net |
|
| 25 |
|
|
| 3 |
|
|
|
| 22 |
|
|
| 2 |
| |||||||||||||||||||
Other (Gains) Losses, Net |
|
| (11 | ) |
|
| - |
|
|
|
|
| (14 | ) |
|
| (27 | ) | ||||||||||||||||||
Total Other (Income) Expenses |
| $ | 99 |
|
| $ | 71 |
|
|
| $ | 239 |
|
| $ | 217 |
|
| $ | 94 |
|
| $ | 94 |
|
|
| $ | 159 |
|
| $ | 140 |
|
Interest
Interest expense primarily includes interest on Ovintiv’s long-term debt. Additional information on changes in interest can be found in Note 4 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Interest expense increased $6decreased $11 million compared to the thirdsecond quarter of 20212022 primarily due to:
• A make-whole interest payment of $47 million resulting from the early redemption of the Company’s 2024 senior notes in June 2022 and interest savings related to the redemption of certain other senior notes in 2022 ($18 million);
|
|
partially offset by:
|
|
NineSix months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Interest expense decreased $15$14 million compared to the first ninesix months of 20212022 primarily due to:
• A make-whole interest payment of $47 million resulting from the early redemption of the Company’s 2024 senior notes in June 2022 and interest savings related to the redemption of certain other senior notes in 2022 ($34 million);
|
|
partially offset by:
|
|
Additional information on the early debt redemption of the Company’s 2024 senior notes in June 2022 of $30 million, interest expense related to outstanding balances under the Company’s U.S. CP program and open market repurchases can be foundrevolving credit facilities ($19 million), interest expense related to senior unsecured notes issued in Note 10May 2023 ($11 million) and an assessment related to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the Liquidity and Capital Resources section of this MD&A.certain prior years’ tax items ($8 million).
51
Foreign Exchange (Gain) Loss, Net
Foreign exchange gains and losses primarily result from the impact of fluctuations in the Canadian to U.S. dollar exchange rate. Additional information on changes in foreign exchange gains or losses can be found in Note 5 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Additional information on foreign exchange rates and the effects of foreign exchange rate changes can be found in Part I, Item 3 of this Quarterly Report on Form 10-Q.
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Net foreign exchange loss was $19losses increased $22 million compared to nil in the thirdsecond quarter of 20212022 primarily due to:
|
|
|
partially offset by:
|
|
NineSix months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Net foreign exchange loss of $21losses increased $20 million compared to a gain of $15 million the first ninesix months of 20212022 primarily due to:
• Foreign exchange losses on the translation and settlement of intercompany notes ($25 million), realized foreign exchange losses on the settlement of U.S. dollar risk management contracts issued from Canada compared to gains in 2022 ($9 million) and higher losses on other monetary revaluations ($6 million);
|
|
partially offset by:
• Unrealized foreign exchange gain on the translation of U.S. dollar risk management contracts issued from Canada compared to losses in 2022 ($19 million).
|
|
Other (Gains) Losses, Net
Other (gains) losses, net, primarily includes other non-recurring revenues or expenses and may also include items such as interest income, interest received from tax authorities, reclamation charges relating to decommissioned assets, government stimulus programs and adjustments related to other assets.
Other gains in the first ninesix months of 2023 includes interest income of $7 million primarily generated from short-term investments. Other gains in the first six months of 2022 includes interest income of $24$23 million (2021 - $13 million) primarily associated with the resolution of prior years’ tax items.
Income Tax
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| |||||||||||||||||||||
($ millions) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
| 2022 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Current Income Tax Expense (Recovery) |
| $ | - |
|
| $ | - |
|
|
| $ | 10 |
|
| $ | (156 | ) |
| $ | 54 |
|
| $ | 7 |
|
|
| $ | 116 |
|
| $ | 10 |
| ||
Deferred Income Tax Expense (Recovery) |
|
| 88 |
|
|
| 1 |
|
|
|
| 138 |
|
|
| (19 | ) |
|
| 47 |
|
|
| 58 |
|
|
|
|
| 111 |
|
|
| 50 |
| |
Income Tax Expense (Recovery) |
| $ | 88 |
|
| $ | 1 |
|
|
| $ | 148 |
|
| $ | (175 | ) |
| $ | 101 |
|
| $ | 65 |
|
|
| $ | 227 |
|
| $ | 60 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Effective Tax Rate |
| 6.9% |
|
| (1.4% | ) |
|
| 6.0% |
|
| 122.4% |
|
| 23.1% |
|
| 4.6% |
|
|
| 21.6% |
|
| 5.1% |
|
Income Tax Expense (Recovery)
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
In the thirdsecond quarter of 2022,2023, Ovintiv recorded a higher income tax expense of $36 million compared to 2021 ($87 million),2022 primarily due to the changes in valuation allowances.allowances and the expected full utilization of Ovintiv’s operating losses in Canada, resulting in current tax in 2023.
Nine52
Six months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
In the first ninesix months of 2022,2023, Ovintiv recorded anhigher income tax expense of $148$167 million compared to an income tax recovery of $175 million in 2021,2022 primarily due to the resolution of prior years’ tax items recognized in 2021 and the changes in valuation allowances.
|
allowances and the expected full utilization of Ovintiv’s operating losses in Canada, resulting in current tax in 2023.
Effective Tax Rate
Ovintiv’s interim income tax expense is determined using the estimated annual effective income tax rate applied to year‑to‑date net earnings before income tax plus the effect of legislative changes and amounts in respect of prior periods. The estimated annual effective income tax rate is impacted by expected annual earnings, changes in valuation allowances, income tax related to foreign operations, state taxes, the effect of legislative changes, non-taxable items and tax differences on transactions, which can produce interim effective tax rate fluctuations.
For the thirdsecond quarter and the first ninesix months of 2023, the Company’s effective tax rate was 23.1 percent and 21.6 percent, respectively, which are higher than the U.S. federal statutory rate of 21 percent primarily due to state taxes.
For the second quarter and the first six months of 2022, the Company’s effective tax rates were 6.9rate was 4.6 percent and 6.05.1 percent, respectively, which are lower than the U.S. federal statutory tax rate of 21 percent primarily due to the lower annual effective income tax rate resulting from a reduction in valuation allowances.
The Company’s effective tax rate was (1.4) percent for the third quarter of 2021, which waswere lower than the U.S federal statutory tax rate of 21 percent primarily due to the changea lower annual effective income tax rate resulting from a reduction in valuation allowances. The Company’s effective tax rate was 122.4 percent for the first nine months of 2021, which was higher than the U.S federal statutory tax rate of 21 percent primarily due to the resolution of prior years’ tax items and the change in valuation allowances.
The determination of income and other tax liabilities of the Company and its subsidiaries requires interpretation of complex domestic and foreign tax laws and regulations, that are subject to change. The Company’s interpretation of tax laws may differ from the interpretation of the tax authorities. As a result, there are tax matters under review for which the timing of resolution is uncertain. The Company believes that the provision for income taxes is adequate.
Additional information on income taxes can be found in Note 6 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Liquidity and Capital Resources |
Liquidity and Capital Resources
Sources of Liquidity
The Company has the flexibility to access cash equivalents and a range of funding alternatives at competitive rates through committed revolving credit facilities as well as debt and equity capital markets. Ovintiv closely monitors the accessibility of cost-effective credit and ensuresseeks to ensure that sufficient liquidity is in place to fund capital expenditures and dividend payments. In addition, the Company may use cash and cash equivalents, cash from operating activities, or proceeds from asset divestitures to fund its operations and capital allocation framework or to manage its capital structure as discussed below. At SeptemberJune 30, 2022, $152023, $46 million in cash and cash equivalents was held by Canadian subsidiaries. The cash held by Canadian subsidiaries is accessible and may be subject to additional U.S. income taxes and Canadian withholding taxes if repatriated.
The Company’s capital structure consists of total shareholders’ equity plus long-term debt, including any current portion. The Company’s objectives when managing its capital structure are to maintain financial flexibility to preserve Ovintiv’s access to capital markets and its ability to meet financial obligations and finance internally generated growth, as well as potential acquisitions. Ovintiv has a practice of maintaining capital discipline and strategically managing its capital structure by adjusting capital spending, adjusting dividends paid to shareholders, issuing new shares of common stock, purchasing shares of common stock for cancellation or return to treasury, issuing new debt and repaying or repurchasing existing debt.
|
| As at September 30, |
| |||||
($ millions, except as indicated) |
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents |
| $ | 18 |
|
| $ | 8 |
|
Available Credit Facilities (1) |
|
| 3,500 |
|
|
| 4,000 |
|
Available Uncommitted Demand Lines (2) |
|
| 296 |
|
|
| 278 |
|
Issuance of U.S. Commercial Paper |
|
| (440 | ) |
|
| - |
|
Total Liquidity |
| $ | 3,374 |
|
| $ | 4,286 |
|
|
|
|
|
|
|
|
|
|
Long-Term Debt, including current portion |
| $ | 3,618 |
|
| $ | 4,791 |
|
Total Shareholders’ Equity (3) |
| $ | 6,550 |
|
| $ | 3,797 |
|
|
|
|
|
|
|
|
|
|
Debt to Capitalization (%) (4) |
|
| 36 |
|
|
| 56 |
|
Debt to Adjusted Capitalization (%) (5) |
|
| 20 |
|
|
| 29 |
|
|
53
|
| As at June 30, |
| |||||
($ millions, except as indicated) |
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Cash and Cash Equivalents |
| $ | 52 |
|
| $ | 8 |
|
Available Credit Facilities (1) |
|
| 3,150 |
|
|
| 3,500 |
|
Available Uncommitted Demand Lines (2) |
|
| 278 |
|
|
| 308 |
|
Issuance of U.S. Commercial Paper |
|
| (330 | ) |
|
| (215 | ) |
Total Liquidity |
| $ | 3,150 |
|
| $ | 3,601 |
|
|
|
|
|
|
|
| ||
Long-Term Debt, including current portion |
| $ | 6,134 |
|
| $ | 3,902 |
|
Total Shareholders’ Equity (3) |
| $ | 9,316 |
|
| $ | 5,821 |
|
|
|
|
|
|
|
| ||
Debt to Capitalization (%) (4) |
|
| 40 |
|
|
| 40 |
|
Debt to Adjusted Capitalization (%) (5) |
|
| 26 |
|
|
| 22 |
|
|
|
|
|
|
|
|
|
|
|
In March, the Company commenced negotiations to amend and restate its committed revolving credit facilities. Effective April 1, 2022, theThe Company has full access to two committed revolving U.S. dollar denominated credit facilities totaling $3.5 billion, which include a $2.2 billion revolving credit facility for Ovintiv Inc. and a $1.3 billion revolving credit facility for a Canadian subsidiary (collectively, the “Credit Facilities”). Maturity dates for both credit facilities were extended to July 2026 and the Company has full access to these Credit Facilities. The Credit Facilities, which mature in July 2026, provide financial flexibility and allow the Company to fund its operations or capital investment program. At SeptemberJune 30, 2022, there were no2023, $350 million was outstanding amounts under the revolving Credit Facilities.
During the first quarter of 2022, Ovintiv’s credit rating was upgraded to investment grade by one of its credit rating agencies driven by Ovintiv’s significant debt reductions and improved commodity price assumptions used by the rating agency. All of Ovintiv’s credit ratings are investment grade as at September 30, 2022.
Depending on the Company’s credit rating and market demand, the Company may issue from its two U.S. CP programs, which include a $1.5 billion program for Ovintiv Inc. and a $1.0 billion program for a Canadian subsidiary. As at SeptemberJune 30, 2022,2023, the Company had approximately $440$330 million of commercial paper outstanding under its U.S. CP programsprogram maturing at various dates with a weighted average interest rate of approximately 5.98 percent, which is supported by the Company’s Credit Facilities. All of Ovintiv’s credit ratings are investment grade as at June 30, 2023.
The Credit Facilities, uncommitted demand lines, and cash and cash equivalents, net of outstanding commercial paper, provide Ovintiv with total liquidity of approximately $3.4$3.2 billion as at SeptemberJune 30, 2022.2023. At SeptemberJune 30, 2022,2023, Ovintiv also had approximately $23$48 million in undrawn letters of credit issued in the normal course of business primarily as collateral security related to transportation arrangementssales arrangements.
On June 12, 2023, the Company closed the Permian Acquisition and to support future abandonment liabilities.issued approximately 31.8 million shares of Ovintiv common stock and paid approximately $3.2 billion in cash, for total consideration of approximately $4.4 billion, which included customary closing adjustments. The cash portion of the acquisition was funded through a combination of net proceeds from the issuance of senior unsecured notes, cash proceeds received from the sale of the Company’s Bakken assets, cash on hand and proceeds from short-term borrowings.
Ovintiv has a U.S. shelf registration statement under which the Company may issue from time to time, debt securities, common stock, preferred stock, warrants, units, share purchase contracts and share purchase units in the U.S. The U.S. shelf registration statement expireswas renewed in March 2023.
The ability to issue securitiesobligations under the U.S. shelf registration statement is dependent upon market conditionsCompany’s existing debt securities are fully and securities law requirements.unconditionally guaranteed on a senior unsecured basis by Ovintiv Canada ULC, an indirect wholly-owned subsidiary of the Company. Additional information on the Company’s Canadian Operations segment and the Bow office lease can be found in the Results of Operations section in this MD&A and the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the MD&A and audited Consolidated Financial Statements and accompanying notes for the year ended December 31, 2022, which are included in Items 7 and 8, respectively, of the 2022 Annual Report on Form 10-K.
54
Ovintiv is currently in compliance with, and expects that it will continue to be in compliance with, all financial covenants under the Credit Facilities. Management monitors Debt to Adjusted Capitalization, which is a non-GAAP measure defined in the Non-GAAP Measures section of this MD&A, as a proxy for Ovintiv’s financial covenant under the Credit Facilities, which requires Debt to Adjusted Capitalization to be less than 60 percent. As at SeptemberJune 30, 2022,2023, the Company’s Debt to Adjusted Capitalization was 2026 percent. The definitions used in the covenant under the Credit Facilities adjust capitalization for cumulative historical ceiling test impairments recorded in conjunction with the Company’s January 1, 2012 adoption of U.S. GAAP. Additional information on financial covenants can be found in Note 1514 to the Consolidated Financial Statements included in Item 8 of the 20212022 Annual Report on Form 10‑K.
The Company’s debt-based metrics have increased over the prior year primarily due to the increase in long-term debt resulting from the Permian Acquisition.
|
Sources and Uses of Cash
In the third quarter and first ninesix months of 2022,2023, Ovintiv primarily generated cash through operating activities.activities and received net proceeds from the Company’s debt issuance to fund a portion of the Permian Acquisition. The following table summarizes the sources and uses of the Company’s cash and cash equivalents.
|
|
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| ||||||||||
($ millions) | Activity Type |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Sources of Cash, Cash Equivalents and Restricted Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash from operating activities | Operating |
|
| $ | 831 |
|
| $ | 1,344 |
|
|
|
| $ | 1,899 |
|
| $ | 2,029 |
|
Proceeds from divestitures | Investing |
|
|
| 717 |
|
|
| 4 |
|
|
|
|
| 729 |
|
|
| 5 |
|
Net issuance of revolving long-term debt | Financing |
|
|
| 100 |
|
|
| 215 |
|
|
|
|
| 287 |
|
|
| 215 |
|
Issuance of long-term debt | Financing |
|
|
| 2,278 |
|
|
| - |
|
|
|
|
| 2,278 |
|
|
| - |
|
Other | Investing |
|
|
| 155 |
|
|
| - |
|
|
|
|
| 89 |
|
|
| 48 |
|
|
|
|
|
| 4,081 |
|
|
| 1,563 |
|
|
|
|
| 5,282 |
|
|
| 2,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Uses of Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Capital expenditures | Investing |
|
|
| 640 |
|
|
| 511 |
|
|
|
|
| 1,250 |
|
|
| 962 |
|
Acquisitions | Investing |
|
|
| 15 |
|
|
| 7 |
|
|
|
|
| 214 |
|
|
| 22 |
|
Corporate acquisition, net of cash acquired | Investing |
|
|
| 3,225 |
|
|
| - |
|
|
|
|
| 3,225 |
|
|
| - |
|
Repayment of long-term debt (1) | Financing |
|
|
| - |
|
|
| 1,103 |
|
|
|
|
| - |
|
|
| 1,109 |
|
Purchase of shares of common stock | Financing |
|
|
| 89 |
|
|
| 135 |
|
|
|
|
| 328 |
|
|
| 206 |
|
Dividends on shares of common stock | Financing |
|
|
| 82 |
|
|
| 64 |
|
|
|
|
| 143 |
|
|
| 116 |
|
Other | Financing |
|
|
| 1 |
|
|
| 2 |
|
|
|
|
| 72 |
|
|
| 66 |
|
|
|
|
|
| 4,052 |
|
|
| 1,822 |
|
|
|
|
| 5,232 |
|
|
| 2,481 |
|
Foreign Exchange Gain (Loss) on Cash, Cash Equivalents |
|
|
| (3 | ) |
|
| (4 | ) |
|
|
|
| (3 | ) |
|
| (3 | ) | |
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash |
|
| $ | 26 |
|
| $ | (263 | ) |
|
|
| $ | 47 |
|
| $ | (187 | ) |
|
|
|
| Three months ended September 30, |
|
|
|
| Nine months ended September 30, |
| ||||||||||
($ millions) | Activity Type |
|
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources of Cash, Cash Equivalents and Restricted Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from operating activities | Operating |
|
| $ | 962 |
|
| $ | 812 |
|
|
|
| $ | 2,991 |
|
| $ | 2,389 |
|
Proceeds from divestitures | Investing |
|
|
| 225 |
|
|
| (8 | ) |
|
|
|
| 230 |
|
|
| 1,017 |
|
Net issuance of revolving long-term debt | Financing |
|
|
| 225 |
|
|
| - |
|
|
|
|
| 440 |
|
|
| - |
|
Other | Investing |
|
|
| 34 |
|
|
| 6 |
|
|
|
|
| 82 |
|
|
| - |
|
|
|
|
|
| 1,446 |
|
|
| 810 |
|
|
|
|
| 3,743 |
|
|
| 3,406 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Uses of Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures | Investing |
|
|
| 511 |
|
|
| 365 |
|
|
|
|
| 1,473 |
|
|
| 1,098 |
|
Acquisitions | Investing |
|
|
| 12 |
|
|
| - |
|
|
|
|
| 34 |
|
|
| 3 |
|
Net repayment of revolving long-term debt | Financing |
|
|
| - |
|
|
| - |
|
|
|
|
| - |
|
|
| 950 |
|
Repayment of long-term debt (1) | Financing |
|
|
| 525 |
|
|
| 518 |
|
|
|
|
| 1,634 |
|
|
| 1,137 |
|
Purchase of shares of common stock | Financing |
|
|
| 325 |
|
|
| - |
|
|
|
|
| 531 |
|
|
| - |
|
Dividends on shares of common stock | Financing |
|
|
| 62 |
|
|
| 37 |
|
|
|
|
| 178 |
|
|
| 86 |
|
Other | Investing/Financing |
|
|
| 2 |
|
|
| 2 |
|
|
|
|
| 68 |
|
|
| 134 |
|
|
|
|
|
| 1,437 |
|
|
| 922 |
|
|
|
|
| 3,918 |
|
|
| 3,408 |
|
Foreign Exchange Gain (Loss) on Cash, Cash Equivalents and Restricted Cash Held in Foreign Currency |
|
|
| 1 |
|
|
| (2 | ) |
|
|
|
| (2 | ) |
|
| - |
| |
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash |
|
| $ | 10 |
|
| $ | (114 | ) |
|
|
| $ | (177 | ) |
| $ | (2 | ) |
|
|
Operating Activities
Net cash from operating activities in the thirdsecond quarter and first ninesix months of 20222023 was $962$831 million and $2,991$1,899 million, respectively, and was primarily a reflection of the impacts from higherlower average realized commodity prices, partially offset by the effects of the commodity price mitigation program andlower realized losses on risk management in revenues, changes in non‑cash working capital.capital and higher production volumes.
Additional detail on changes in non-cash working capital can be found in Note 1920 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Ovintiv expects it will continue to meet the payment terms of its suppliers.
Non-GAAP Cash Flow in the thirdsecond quarter and first ninesix months of 20222023 was $948$699 million and $3,215$1,550 million, respectively, and was primarily impacted by the items affecting cash from operating activities which are discussed below and in the Results of Operations section of this MD&A.
55
Three months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Net cash from operating activities increased $150decreased $513 million compared to the thirdsecond quarter of 20212022 primarily due to:
• Lower realized commodity prices ($1,571 million), higher administrative expenses, excluding non-cash long-term incentive costs ($83 million) and increase in current income taxes ($47 million);
|
|
partially offset by:
|
|
|
NineSix months ended SeptemberJune 30, 20222023 versus SeptemberJune 30, 20212022
Net cash from operating activities increased $602decreased $130 million compared to the first ninesix months of 20212022 primarily due to:
• Lower realized commodity prices ($1,968 million), increase in current income taxes ($106 million), higher administrative expenses, excluding non-cash long-term incentive costs ($59 million), higher transportation and processing expense ($48 million), higher operating expense, excluding non-cash long-term incentive costs ($19 million) and lower interest income ($16 million);
|
|
partially offset by:
• Lower realized losses on risk management in revenues compared to 2022 ($1,183 million), changes in non-cash working capital ($579 million), higher production volumes ($283 million) and lower production, mineral and other taxes ($52 million).
|
|
Investing Activities
Cash used in investing activities in the first ninesix months of 20222023 was $1,195$3,871 million primarily due to acquisitions and capital expenditures. Capital expenditures increased $375 million compared to the first nine months of 2021, primarily due to timing of projects and inflationary cost pressures.
Acquisitions in the first nine months of 2022 were $34 million (2021 - $3 million), which primarily included property purchases with oil and liquids rich potential.
Divestitures in the first nine months of 2022 were $230 million, which primarily included the sale of portions of the Uinta assets located in northeastern Utah and Bakken assets location in northeastern Montana, as well as certain properties that did not complement Ovintiv’s existing portfolio of assets.
Divestitures in the first nine months of 2021 were $1,017 million, which primarily included the sale of the Eagle Ford assets in south Texas and Duvernay assets in west central Alberta, as well as certain properties that did not complement Ovintiv’s existing portfolio of assets.
Capital expenditures, and acquisition and divestiture activityactivities are summarized in Notes 2 and 7, respectively, to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Capital expenditures increased $288 million compared to the first six months of 2022, primarily due to a higher capital expenditure plan, inflationary cost pressures and timing of projects.
Acquisitions in the first six months of 2023 were $214 million, which primarily included property purchases with oil and liquids rich potential (2022 - $22 million).
Corporate acquisition in the first six months of 2023 was $3,225 million, which relates to the Permian Acquisition in the second quarter of 2023. Additional information regarding the Permian Acquisition can be found in Note 8 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Divestitures in the first six months of 2023 were $729 million, which primarily included the sale of the Bakken assets in North Dakota and certain properties that did not complement Ovintiv’s existing portfolio of assets. Divestitures in the first six months of 2022 were $5 million, which primarily included certain properties that did not complement Ovintiv’s existing portfolio of assets.
Financing Activities
Net cash from and/or used in financing activities has been impacted by the Company’s bond offering in the second quarter of 2023 and Ovintiv’s strategic objective to return value to shareholders by repaying or repurchasing existing debt, purchasing shares of common stock and paying dividends.
Net cash from financing activities in the first six months of 2023 was $2,022 million compared to net cash used in financing activities of $1,282 million in the first nine months of 2022 decreased by $300 million compared to 2021.2022. The decreasechange was primarily due to the net issuance of long-term debt in 2023 of $2,278 million as discussed below compared to a repayment in 2022 of $1,109 million and net issuance of revolving long-term debt compared to a net repayment in 2021 ($1,39072 million), partially offset by increased purchases of shares of common stock under the Company’s NCIB program in 20222023 compared to 20212022 ($531 million), higher repayment of long-term debt associated with open market repurchases in 2022 and the early redemption of the Company’s 2024 senior notes in June 2022 compared to the early redemption of the Company’s 2022 senior notes in June 2021 ($497122 million) and an increase in dividend payments in 20222023 ($9227 million).
56
From time to time, Ovintiv may seek to retire or purchase the Company’s outstanding debt through cash purchases and/or exchanges for other debt or equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors.In the first nine months of 2022, the Company repurchased in the open market, approximately $565 million in principal, plus accrued interest and premiums, which included a portion of its 5.375 percent senior notes due January 2026, its 6.5 percent senior notes due August 2034, its 6.625 percent senior notes due August 2037, its 6.5 percent senior notes due February 2038 and its 5.15 percent senior notes due November 2041. The Company paid premiums of $22 million to complete the open market repurchases.
In June 2022, Ovintiv redeemed its $1.0 billion, 5.625 percent senior notes due July 1, 2024, with cash on hand and other existing sources of liquidity. The redemption resulted in a one-time make-whole payment of $47 million.
|
The Company’s long-term debt, including the current portion of $440$680 million, totaled $3,618$6,134 million at SeptemberJune 30, 2022.2023. The Company’s long-term debt at December 31, 2021 totaled $4,786 million. There was no2022, including the current portion outstanding at December 31, 2021.of $393 million, totaled $3,570 million. As at SeptemberJune 30, 2022,2023, the Company has no fixed rate long-term debt due until 20262025 and beyond.
On May 31, 2023, Ovintiv completed a public offering of senior unsecured notes of $600 million with a coupon rate of 5.65 percent due May 15, 2025, $700 million with a coupon rate of 5.65 percent due May 15, 2028, $600 million with a coupon rate of 6.25 percent due July 15, 2033 and $400 million with a coupon rate of 7.10 percent due July 15, 2053. The net proceeds of the offering, totaling $2,278 million, were used to fund a portion of the Company’s Permian Acquisition.
In support of the Company’s commitment to unlocking shareholder value, Ovintiv utilizes its capital allocation framework to increase returns to shareholders and maintainto focus on strategic opportunities to strengthen the Company’s progress on debt reduction. Since the second quarter of 2020, the Company has allocated $3,748 million in excess cash flowsbalance sheet. Ovintiv expects to reduce its total long-term debt balance. On July 6, 2022, Ovintiv electedcontinue to accelerate the increase in cash returns to shareholders as a result of the Company’s continued strong financial performance and the asset sales that closed during the third quarter of 2022. During the third quarter of 2022, the Company increased its cash return to shareholders from 25 percent to 50 percent of Non-GAAP Cash Flow in excess of capital expenditures and base dividends. Ovintiv delivered thedeliver additional shareholder returns through share buybacks under its NCIB program.
For additional information on long-term debt refer to Note 1011 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Further details on the Company’s debt-based metrics can be found in the Non-GAAP measures section of this MD&A.
Dividends
The Company pays quarterly dividends to common shareholders at the discretion of the Board of Directors.
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| |||||||||||||||||||||||
($ millions, except as indicated) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Dividend Payments |
| $ | 62 |
|
| $ | 37 |
|
|
| $ | 178 |
|
| $ | 86 |
|
| $ | 82 |
|
| $ | 64 |
|
|
| $ | 143 |
|
| $ | 116 |
| ||
Dividend Payments ($/share) |
| $ | 0.25 |
|
| $ | 0.14 |
|
|
| $ | 0.70 |
|
| $ | 0.3275 |
|
| $ | 0.30 |
|
| $ | 0.25 |
|
|
| $ | 0.55 |
|
| $ | 0.45 |
|
On November 8, 2022,July 27, 2023, the Board of Directors declared a dividend of $0.25$0.30 per share of common stock payable on December 30, 2022September 29, 2023, to common shareholders of record as of DecemberSeptember 15, 2022.2023.
Dividends increased $92$27 million compared to the first ninesix months of 2021,2022 as a result of Ovintiv increasing its quarterly dividend payments to an annualized dividend of $0.80to $1.00 per share of common stock duringin the firstsecond quarter of 2022 and a further increase to an annualized dividend of $1.00$1.20 per share of common stock in the second quarter of 2022.2023. The dividend increases reflectincrease reflects the Company’s commitment to returning capital to shareholders.
Normal Course Issuer Bid
On September 28, 2022, the Company announced it had received regulatory approval for the renewal of its NCIB program, that enables the Company to purchase, for cancellation or return to treasury, up to approximately 24.8 million shares of common stock over a 12-month period from October 3, 2022 to October 2, 2023. The number of shares authorized for purchase represents approximately 10 percent of Ovintiv’s issued and outstanding shares of common stock as at September 19, 2022. The Company willexpects to continue to execute the renewed NCIB program in conjunction with its capital allocation framework.
In the thirdsecond quarter and first ninesix months of 2022,2023, under the previouscurrent NCIB program, which extended from October 1, 2021 to September 30, 2022, the Company purchased, for cancellation, approximately 6.72.5 million and 11.27.7 million, respectively, shares of common stock for total consideration of approximately $325$89 million and $531$328 million, respectively.
57
Material Cash Requirements
For information on material cash requirements, refer to the Material Cash Requirements section of the MD&A included in Item 7 of the 20212022 Annual Report on Form 10-K.
Commitments and Contingencies
For information on commitments and contingencies, refer to Note 2021 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Estimates
There have been no significant changes to the Company’s critical accounting policies and use of estimates from the disclosures reported in the “Critical Accounting Estimates” section of the MD&A included in Item 7 of the 2022 Annual Report on Form 10-K. The Company evaluated the impact of the Permian Acquisition, and the use of estimates and key judgments used in the preliminary purchase price allocation are disclosed in Note 8 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
58
| Non-GAAP Measures |
Non-GAAP Measures
Certain measures in this document do not have any standardized meaning as prescribed by U.S. GAAP and, therefore, are considered non-GAAP measures. These measures may not be comparable to similar measures presented by other issuers and should not be viewed as a substitute for measures reported under U.S. GAAP. These measures are commonly used in the oil and gas industry and by Ovintiv to provide shareholders and potential investors with additional information regarding the Company’s liquidity and its ability to generate funds to finance its operations. Non-GAAP measures include: Non-GAAP Cash Flow, Non-GAAP Cash Flow Margin, Total Costs, Debt to Adjusted Capitalization, Net Debt to EBITDA and Net Debt to Adjusted EBITDA. Management’s use of these measures is discussed further below.
Non-GAAP Cash Flowfrom Operating Activities and Non-GAAP Cash Flow Margin
Non-GAAP Cash Flow is a non-GAAP measure defined as cash from (used in) operating activities excluding net change in other assets and liabilities, and net change in non-cash working capital and current tax on sale of assets.capital.
Non-GAAP Cash Flow Margin is a non-GAAP measure defined as Non-GAAP Cash Flow per BOE of production.
Management believes these measures arethis measure is useful to the Company and its investors as a measure of operating and financial performance across periods and against other companies in the industry, and areis an indication of the Company’s ability to generate cash to finance capital investment programs, to service debt and to meet other financial obligations. These measures areThis measure is used, along with other measures, in the calculation of certain performance targets for the Company’s management and employees.
|
| Three months ended September 30, |
|
|
| Nine months ended September 30, |
|
| Three months ended June 30, |
|
|
|
| Six months ended June 30, |
| |||||||||||||||||||||
($ millions, except as indicated) |
| 2022 |
|
| 2021 |
|
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash From (Used in) Operating Activities |
| $ | 962 |
|
| $ | 812 |
|
|
| $ | 2,991 |
|
| $ | 2,389 |
|
| $ | 831 |
|
| $ | 1,344 |
|
|
| $ | 1,899 |
|
| $ | 2,029 |
| ||
(Add back) deduct: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net change in other assets and liabilities |
|
| (17 | ) |
|
| (10 | ) |
|
|
| (42 | ) |
|
| (21 | ) |
|
| (12 | ) |
|
| (13 | ) |
|
|
| (17 | ) |
|
| (25 | ) | ||
Net change in non-cash working capital |
|
| 31 |
|
|
| (23 | ) |
|
|
| (182 | ) |
|
| (58 | ) |
|
| 144 |
|
|
| 133 |
|
|
|
| 366 |
|
|
| (213 | ) | ||
Current tax on sale of assets |
|
| - |
|
|
| - |
|
|
|
| - |
|
|
| - |
| |||||||||||||||||||
Non-GAAP Cash Flow |
| $ | 948 |
|
| $ | 845 |
|
|
| $ | 3,215 |
|
| $ | 2,468 |
|
| $ | 699 |
|
| $ | 1,224 |
|
|
|
| $ | 1,550 |
|
| $ | 2,267 |
| |
Divided by: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Production Volumes (MMBOE) |
|
| 47.5 |
|
|
| 49.2 |
|
|
|
| 138.0 |
|
|
| 148.1 |
| |||||||||||||||||||
Non-GAAP Cash Flow Margin ($/BOE) |
| $ | 19.96 |
|
| $ | 17.17 |
|
|
| $ | 23.30 |
|
| $ | 16.66 |
|
|
Total Costs
Total Costs is a non-GAAP measure which includes the summation of production, mineralDebt to Capitalization and other taxes, upstream transportation and processing expense, upstream operating expense and administrative expense, excluding the impact of long-term incentive, restructuring and legal costs, and current expected credit losses. It is calculated as total operating expenses excluding non-upstream operating costs and non-cash items, which include operating expenses from the Market Optimization and Corporate and Other segments, depreciation, depletion and amortization, impairments, accretion of asset retirement obligation, long-term incentive, restructuring and legal costs, and current expected credit losses. When presented on a per BOE basis, Total Costs is divided by production volumes. Management believes this measure is useful to the Company and its investors as a measure of operational efficiency across periods.
|
| Three months ended September 30, |
|
|
|
| Nine months ended September 30, |
| ||||||||||
($ millions, except as indicated) |
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
| $ | 2,176 |
|
| $ | 1,789 |
|
|
|
| $ | 6,563 |
|
| $ | 5,245 |
|
Deduct (add back): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market optimization operating expenses |
|
| 1,021 |
|
|
| 808 |
|
|
|
|
| 3,298 |
|
|
| 2,245 |
|
Corporate & other operating expenses |
|
| - |
|
|
| 1 |
|
|
|
|
| - |
|
|
| 1 |
|
Depreciation, depletion and amortization |
|
| 291 |
|
|
| 297 |
|
|
|
|
| 833 |
|
|
| 916 |
|
Accretion of asset retirement obligation |
|
| 4 |
|
|
| 5 |
|
|
|
|
| 14 |
|
|
| 17 |
|
Long-term incentive costs |
|
| 44 |
|
|
| 31 |
|
|
|
|
| 145 |
|
|
| 112 |
|
Restructuring and legal costs |
|
| - |
|
|
| 6 |
|
|
|
|
| (1 | ) |
|
| 37 |
|
Current expected credit losses |
|
| - |
|
|
| - |
|
|
|
|
| 2 |
|
|
| (1 | ) |
Total Costs |
| $ | 816 |
|
| $ | 641 |
|
|
|
| $ | 2,272 |
|
| $ | 1,918 |
|
Divided by: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production Volumes (MMBOE) |
|
| 47.5 |
|
|
| 49.2 |
|
|
|
|
| 138.0 |
|
|
| 148.1 |
|
Total Costs ($/BOE) (1) |
| $ | 17.16 |
|
| $ | 13.03 |
|
|
|
| $ | 16.45 |
|
| $ | 12.97 |
|
|
|
Debt to Adjusted Capitalization
Debt to Adjusted Capitalization is a non-GAAP measure which adjusts capitalization for historical ceiling test impairments that were recorded as at December 31, 2011. Management monitors Debt to Adjusted Capitalization as a proxy for the Company’s financial covenant under the Credit Facilities which require debtDebt to adjusted capitalizationAdjusted Capitalization to be less than 60 percent. Adjusted Capitalization includes debt, total shareholders’ equity and an equity adjustment for cumulative historical ceiling test impairments recorded as at December 31, 2011 in conjunction with the Company’s January 1, 2012 adoption of U.S. GAAP.
($ millions, except as indicated) |
| September 30, 2022 |
|
| December 31, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Long-Term Debt, including current portion |
| $ | 3,618 |
|
| $ | 4,786 |
| ||||||||
|
|
|
|
|
|
| ||||||||||
Debt (Long-Term Debt, including Current Portion) |
| $ | 6,134 |
|
| $ | 3,570 |
| ||||||||
Total Shareholders’ Equity |
|
| 9,316 |
|
|
| 7,689 |
| ||||||||
Capitalization |
| $ | 15,450 |
|
| $ | 11,259 |
| ||||||||
Debt to Capitalization |
| 40% |
|
| 32% |
| ||||||||||
|
|
|
|
|
|
| ||||||||||
Debt (Long-Term Debt, including Current Portion) |
| $ | 6,134 |
|
| $ | 3,570 |
| ||||||||
Total Shareholders’ Equity |
|
| 6,550 |
|
|
| 5,074 |
|
|
| 9,316 |
|
|
| 7,689 |
|
Equity Adjustment for Impairments at December 31, 2011 |
|
| 7,746 |
|
|
| 7,746 |
|
|
| 7,746 |
|
|
| 7,746 |
|
Adjusted Capitalization |
| $ | 17,914 |
|
| $ | 17,606 |
|
| $ | 23,196 |
|
| $ | 19,005 |
|
Debt to Adjusted Capitalization |
| 20% |
|
| 27% |
|
| 26% |
|
| 19% |
|
|
NetThe increase in Debt to Capitalization and Net Debt to Adjusted EBITDACapitalization are primarily due to the increase in long-term debt resulting from the Permian Acquisition.
Net 59
Debt to EBITDA and NetDebt to Adjusted EBITDA
Debt to EBITDA and Debt to Adjusted EBITDA are non-GAAP measures whereby Net Debt is defined as long-term debt, including the current portion, less cash and cash equivalents and Adjustedmeasures. EBITDA is defined as trailing 12-month net earnings (loss) before income taxes, depreciation, depletion and amortization, and interest. Adjusted EBITDA is EBITDA adjusted for impairments, accretion of asset retirement obligation, interest, unrealized gains/losses on risk management, foreign exchange gains/losses, gains/losses on divestitures and other gains/losses.
Management believes these measures are useful to the Company and its investors as a measure of financial leverage and the Company’s ability to service its debt and other financial obligations. These measures are used, along with other measures, in the calculation of certain financial performance targets for the Company’s management and employees.
($ millions, except as indicated) |
| September 30, 2022 |
|
| December 31, 2021 |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Long-Term Debt, including current portion |
| $ | 3,618 |
|
| $ | 4,786 |
| ||||||||
Less: |
|
|
|
|
|
|
|
| ||||||||
Cash and cash equivalents |
|
| 18 |
|
|
| 195 |
| ||||||||
Net Debt |
|
| 3,600 |
|
|
| 4,591 |
| ||||||||
Debt (Long-Term Debt, including Current Portion) |
| $ | 6,134 |
|
| $ | 3,570 |
| ||||||||
|
|
|
|
|
|
| ||||||||||
Net Earnings (Loss) |
|
| 3,344 |
|
|
| 3,637 |
| ||||||||
Add back (deduct): |
|
|
|
|
|
| ||||||||||
Depreciation, depletion and amortization |
|
| 1,354 |
|
|
| 1,113 |
| ||||||||
Interest |
|
| 297 |
|
|
| 311 |
| ||||||||
Income tax expense (recovery) |
|
| 90 |
|
|
| (77 | ) | ||||||||
EBITDA |
| $ | 5,085 |
|
| $ | 4,984 |
| ||||||||
Debt to EBITDA (times) |
|
| 1.2 |
|
|
| 0.7 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net Earnings (Loss) |
|
| 3,686 |
|
|
| 1,416 |
|
|
| 3,344 |
|
|
| 3,637 |
|
Add back (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Depreciation, depletion and amortization |
|
| 1,107 |
|
|
| 1,190 |
|
|
| 1,354 |
|
|
| 1,113 |
|
Accretion of asset retirement obligation |
|
| 19 |
|
|
| 22 |
|
|
| 17 |
|
|
| 18 |
|
Interest |
|
| 325 |
|
|
| 340 |
|
|
| 297 |
|
|
| 311 |
|
Unrealized (gains) losses on risk management |
|
| (1,149 | ) |
|
| 488 |
|
|
| (1,400 | ) |
|
| (741 | ) |
Foreign exchange (gain) loss, net |
|
| 13 |
|
|
| (23 | ) |
|
| 35 |
|
|
| 15 |
|
Other (gains) losses, net |
|
| (36 | ) |
|
| (37 | ) |
|
| (20 | ) |
|
| (33 | ) |
Income tax expense (recovery) |
|
| 146 |
|
|
| (177 | ) |
|
| 90 |
|
|
| (77 | ) |
Adjusted EBITDA (trailing 12-month) |
| $ | 4,111 |
|
| $ | 3,219 |
| ||||||||
Net Debt to Adjusted EBITDA (times) |
|
| 0.9 |
|
|
| 1.4 |
| ||||||||
Adjusted EBITDA |
| $ | 3,717 |
|
| $ | 4,243 |
| ||||||||
Debt to Adjusted EBITDA (times) |
|
| 1.7 |
|
|
| 0.8 |
|
The increase in Debt to EBITDA and Debt to Adjusted EBITDA are primarily due to the increase in long-term debt resulting from the Permian Acquisition. EBITDA and Adjusted EBITDA only include the results of operations from the acquired Permian assets for the post-acquisition period from June 12, 2023 to June 30, 2023.
|
60
Item 3: Quantitative and Qualitative Disclosures About Market Risk
The primary objective of the following information is to provide forward-looking quantitative and qualitative information about Ovintiv’s potential exposure to market risks. The term “market risk” refers to the Company’s risk of loss arising from adverse changes in oil, NGL and natural gas prices, foreign currency exchange rates and interest rates. The following disclosures are not meant to be precise indicators of expected future losses but rather indicators of reasonably possible losses. The forward-looking information provides indicators of how the Company views and manages ongoing market risk exposures.
COMMODITY PRICE RISK
Commodity price risk arises from the effect fluctuations in future commodity prices, including oil, NGLs and natural gas, may have on future revenues, expenses and cash flows. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot market prices applicable to the Company’s natural gas production. Pricing for oil, NGLs and natural gas production is volatile and unpredictable as discussed in Part 1, Item 2 of this Quarterly Report on Form 10‑Q in the Executive Overview section in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Item 1A. “Risk Factors” of the 20212022 Annual Report on Form 10‑K. To partially mitigate exposure to commodity price risk, the Company may enter into various derivative financial instruments including futures, forwards, swaps, options and costless collars. The use of these derivative instruments is governed under formal policies and is subject to limits established by the Board of Directors and may vary from time to time. Both exchange traded and over-the-counter traded derivative instruments may be subject to margin-deposit requirements, and the Company may be required from time to time to deposit cash or provide letters of credit with exchange brokers or counterparties to satisfy these margin requirements. For additional information relating to the Company’s derivative and financial instruments, see Note 1819 to the Condensed Consolidated Financial Statements under Part I, Item 1 of this Quarterly Report on Form 10‑Q.
The table below summarizes the sensitivity of the fair value of the Company’s risk management positions to fluctuations in commodity prices, with all other variables held constant. The Company has used a 10 percent variability to assess the potential impact of commodity price changes. Fluctuations in commodity prices could have resulted in unrealized gains (losses) impacting pre-tax net earnings as follows:
|
| September 30, 2022 |
|
| June 30, 2023 |
| ||||||||||
(US$ millions) |
| 10% Price Increase |
|
| 10% Price Decrease |
|
| 10% Price |
|
| 10% Price |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Crude oil price |
| $ | (78 | ) |
| $ | 70 |
|
| $ | (169 | ) |
| $ | 186 |
|
NGL price |
|
| (2 | ) |
|
| 2 |
| ||||||||
Natural gas price |
|
| (77 | ) |
|
| 75 |
|
|
| (69 | ) |
|
| 67 |
|
FOREIGN EXCHANGE RISK
Foreign exchange risk arises from changes in foreign exchange rates that may affect the fair value or future cash flows from the Company’s financial assets or liabilities. As Ovintiv operates primarily in the United States and Canada, fluctuations in the exchange rate between the U.S. and Canadian dollars can have a significant effect on the Company’s reported results.
The table below summarizes selected foreign exchange impacts on Ovintiv’s financial results when compared to the same periods in 2021.2022.
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| $ millions |
|
| $/BOE |
|
| $ millions |
|
| $/BOE |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
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Increase (Decrease) in: |
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Capital Investment |
| $ | (5 | ) |
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| $ | (10 | ) |
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Transportation and Processing Expense (1) |
|
| (12 | ) |
| $ | (0.24 | ) |
|
| (27 | ) |
| $ | (0.28 | ) |
Operating Expense (1) |
|
| (2 | ) |
|
| (0.02 | ) |
|
| (4 | ) |
|
| (0.04 | ) |
Administrative Expense |
|
| (2 | ) |
|
| (0.04 | ) |
|
| (7 | ) |
|
| (0.07 | ) |
Depreciation, Depletion and Amortization (1) |
|
| (3 | ) |
|
| (0.05 | ) |
|
| (7 | ) |
|
| (0.07 | ) |
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| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
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| $ millions |
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| $/BOE |
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| $ millions |
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| $/BOE |
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Increase (Decrease) in: |
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Capital Investment |
| $ | (4 | ) |
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| $ | (7 | ) |
|
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|
Transportation and Processing Expense (1) |
|
| (8 | ) |
| $ | (0.17 | ) |
|
| (17 | ) |
| $ | (0.13 | ) |
Operating Expense (1) |
|
| (1 | ) |
|
| (0.02 | ) |
|
| (2 | ) |
|
| (0.01 | ) |
Administrative Expense |
|
| (2 | ) |
|
| (0.04 | ) |
|
| (4 | ) |
|
| (0.03 | ) |
Depreciation, Depletion and Amortization (1) |
|
| (3 | ) |
|
| (0.06 | ) |
|
| (6 | ) |
|
| (0.04 | ) |
|
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Foreign exchange gains and losses also arise when monetary assets and monetary liabilities denominated in foreign currencies are translated and settled, and primarily include:
• U.S. dollar denominated financing debt issued from Canada • U.S. dollar denominated risk management assets and liabilities held in Canada • U.S. dollar denominated cash and short-term investments held in Canada • Foreign denominated intercompany loans
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To partially mitigate the effect of foreign exchange fluctuations on future commodity revenues and expenses, the Company may enter into foreign currency derivative contracts. As at SeptemberJune 30, 2022,2023, Ovintiv has entered into $100$266 million notional U.S. dollar denominated currency swaps at an average exchange rate of C$1.28481.3470 to US$1, which mature monthly through the remainder of 2022 and $350 million notional U.S. dollar denominated currency swaps at an average exchange rate of C$1.3083 to US$1, which mature monthly throughout 2023.
As at SeptemberJune 30, 2022,2023, Ovintiv had $18 million ofdid not have any U.S. dollar denominated financing debt issued from Canada that was subject to foreign exchange exposure.
The table below summarizes the sensitivity to foreign exchange rate fluctuations, with all other variables held constant. The Company has used a 10 percent variability to assess the potential impact from Canadian to U.S. foreign currency exchange rate changes. Fluctuations in foreign currency exchange rates could have resulted in unrealized gains (losses) impacting pre-tax net earnings as follows:
|
| September 30, 2022 |
|
| June 30, 2023 |
| ||||||||||
(US$ millions) |
| 10% Rate Increase |
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| 10% Rate Decrease |
|
| 10% Rate |
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| 10% Rate |
| ||||
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Foreign currency exchange |
| $ | (31 | ) |
| $ | 38 |
|
| $ | 125 |
|
| $ | (153 | ) |
INTEREST RATE RISK
Interest rate risk arises from changes in market interest rates that may affect the fair value or future cash flows from the Company’s financial assets or liabilities. The Company may partially mitigate its exposure to interest rate changes by holding a mix of both fixed and floating rate debt and may also enter into interest rate derivatives to partially mitigate effects of fluctuations in market interest rates.
As at SeptemberJune 30, 2022,2023, Ovintiv had floating rate revolving credit and term loan borrowings of $440$680 million. Accordingly, on a before-tax basis, the sensitivity for each one percent change in interest rates on floating rate revolving credit and term loan borrowings was $4$7 million.
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62
Item 4: Controls and Procedures
DISCLOSURE CONTROLS AND PROCEDURES
Ovintiv’s Chief Executive Officer and Chief Financial Officer performed an evaluation of the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of SeptemberJune 30, 2022.2023.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
ThereFor the second quarter ended June 30, 2023, management’s assessment of, and conclusion on, the effectiveness of internal controls over financial reporting did not include the internal controls related to the Permian Acquisition that closed on June 12, 2023. Upon closing, the Permian Acquisition’s total assets acquired represented 33 percent of the Company’s consolidated total assets as of March 31, 2023. The assets acquired generated revenues of $67 million for the period from June 12, 2023, to June 30, 2023, which represented three percent and one percent of the Company’s consolidated total revenues for the three and six months ended June 30, 2023, respectively. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal controls over financial reporting for a period of up to one year following an acquisition while integration occurs. The Company is in the process of assessing the internal controls over financial reporting of the Permian Acquisition. Except as noted above, there were no changes in Ovintiv’sthe Company’s internal controlcontrols over financial reporting during the thirdsecond quarter of 20222023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controlcontrols over financial reporting.
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63
PART II
Item 1. Legal Proceedings
Please refer to Item 3 of the 20212022 Annual Report on Form 10‑K and Note 20 of Ovintiv’s21 to the Condensed Consolidated Financial Statements under Part I, Item 1 of this Quarterly Report on Form 10‑Q.
In July 2020, the Company received a Notice of Violation (“NOV”) from the U.S. Environmental Protection Agency (“EPA”) and the Utah Department of Environmental Quality, Division of Air Quality (“UDAQ”). The NOV alleges violations under the federal Clean Air Act, the State of Utah’s State Implementation Plan, and the State of Utah’s air quality regulations for the oil and natural gas industry, at certain of the Company facilities located in the Uinta Basin. The Company has exchanged information with the EPA and UDAQ and is engaged in discussions aimed at resolving the allegations. The Company is unable to predict the financial impact of the NOV or the timing of its resolution at this time. Resolution of the matter may result in monetary sanctions of more than $300,000.
Item 1A. Risk Factors
There have been no material changes fromto the risk factors previously disclosed in Item 1A. Risk Factors in the 2021, "Risk Factors" of our Annual Report on Form 10‑K.10-K for the year ended December 31, 2022 and our Quarterly Report on Form 10-Q for the three months ended March 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchase of Equity Securities
On September 28, 2021,2022, the Company announced it had received regulatory approval to purchase, for cancellation or return to treasury, up to approximately 2624.8 million shares of common stock pursuant to a NCIB over a 12-month period from October 1, 20213, 2022 to September 30, 2022.October 2, 2023. The number of shares of common stock authorized for purchase represents 10 percent of Ovintiv’s public floatissued and outstanding shares of common stock as at September 20, 2021.19, 2022.
During the three months ended SeptemberJune 30, 2022,2023, the Company purchased approximately 6.72.5 million shares of common stock for total consideration of approximately $325$90 million at a weighted average price of $48.86.$35.84. The following table presents the common shares purchased during the three months ended June 30, 2023.
Period | Total Number of |
|
| Average |
|
| Total Number of Shares |
|
| Maximum Number of Shares |
| |||||
April 1 to April 30, 2023 |
|
| - |
|
| $ | - |
|
|
| - |
|
|
| 16,158,179 |
|
May 1 to May 31, 2023 |
|
| 391,750 |
|
|
| 32.80 |
|
|
| 391,750 |
|
|
| 15,766,429 |
|
June 1 to June 30, 2023 |
|
| 2,119,514 |
|
|
| 36.40 |
|
|
| 2,119,514 |
|
|
| 13,646,915 |
|
Total |
|
| 2,511,264 |
|
| $ | 35.84 |
|
|
| 2,511,264 |
|
|
| 13,646,915 |
|
Period |
Total Number of Shares Purchased (1) |
|
| Average Price Paid per Share (2) |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs |
| |||||
July 1 to July 31, 2022 |
|
| 1,784,477 |
|
| $ | 44.23 |
|
|
| 1,784,477 |
|
|
| 16,679,528 |
|
August 1 to August 31, 2022 |
|
| 3,813,079 |
|
|
| 50.32 |
|
|
| 3,813,079 |
|
|
| 12,866,449 |
|
September 1 to September 30, 2022 |
|
| 1,053,477 |
|
|
| 51.45 |
|
|
| 1,053,477 |
|
|
| 11,812,972 |
|
Total |
|
| 6,651,033 |
|
| $ | 48.86 |
|
|
| 6,651,033 |
|
|
| 11,812,972 |
|
(2) Includes commissions but excludes excise taxes.
|
|
|
|
On September 28, 2022, the TSX accepted the Company’s notice of intention to renew its NCIB to purchase up to 24,846,855 common shares, or ten percent of its public float as calculated pursuant to TSX rules (approximately 10% of the Company’s issued and outstanding shares), during the 12-month period commencing October 3, 2022 and ending October 2, 2023. The number of shares authorized for purchase represents 10 percent of Ovintiv’s public float as of September 19, 2022.
In the first quarter of 2022, Ovintiv obtained an exemption order (the “NCIB Exemption”) from the Alberta Securities Commission and the Ontario Securities Commission, which permits Ovintiv to make repurchases (the “Proposed Bids”), under its current and any future normal course issuer bids, through the facilities of the NYSE and other U.S.-based trading systems (collectively, “U.S. Markets”), in excess of the maximum allowable purchases under applicable Canadian securities laws. The NCIB Exemption applies to any Proposed Bid commenced within 36 months of the date of the exemption order and is subject to several other conditions, including that Ovintiv remain a U.S. and SEC foreign issuer under applicable Canadian securities laws. The purchases of common stock under a Proposed Bid must also be made in compliance with other applicable Canadian securities laws and applicable U.S. rules. Additionally, the NCIB Exemption imposed restrictions on the number of shares of common stock that may be acquired under the exemption, including that: (a) Ovintiv may not acquire common stock in reliance upon the exemption under subsection 4.8(3) of Canadian National Instrument 62-104 – Take-Over Bids and Issuer Bids (“NI 62-104”) from the requirements applicable to issuer bids (the “Other Published Markets Exemption”) if the aggregate number of shares of common stock purchased by Ovintiv, and any person or company acting jointly or in concert with Ovintiv, in
64
reliance on the NCIB Exemption and the Other Published Markets Exemption within any period of 12 months exceeds 5% of the outstanding common stock on the first day of such 12-month period; and (b) the aggregate number of shares of common stock purchased pursuant to (i) a Proposed Bid in reliance on the NCIB Exemption;
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(ii) exempt issuer bid purchases made in the normal course through the facilities of the TSX; and (iii) the Other Published Markets Exemption does not exceed, over the 12-month period of its current NCIB, 10% of Ovintiv'sOvintiv’s public float. As a result, the NCIB Exemption effectively allows Ovintiv to purchase up to 10% of its public float on U.S. Markets under its NCIB. Without the NCIB Exemption this amount would be limited to 5% of Ovintiv’s outstanding common stock within a 12-month period under applicable Canadian securities law.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
65
Item 6. Exhibits
Exhibit No | Description | |
| ||
4.1 | ||
4.2 | ||
4.3 | ||
4.4 | ||
4.5 | ||
4.6 | ||
10.1 | ||
10.2 | ||
31.1 | ||
31.2 | ||
| Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350. | |
| Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. | |
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Schema Document. | |
101.CAL | Inline XBRL Calculation Linkbase Document. | |
101.DEF | Inline XBRL Definition Linkbase Document. | |
101.LAB | Inline XBRL Label Linkbase Document. | |
101.PRE | Inline XBRL Presentation Linkbase Document. | |
104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended |
* Management contractCertain annexes, schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Ovintiv Inc. hereby undertakes to furnish supplemental copies of any of the omitted annexes, schedules and exhibits upon request by the SEC.
** The certifications on Exhibits 32.1 and 32.2 hereto are deemed not “filed” for purposes of Section 18 of the Exchange Act or compensatory arrangementotherwise subject to the liability of that section. Such certifications will not be deemed incorporated by reference to any filings under the Securities Act or the Exchange Act.
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66
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Ovintiv Inc. | |||
By: | /s/ Corey D. Code | ||
Name: | Corey D. Code | ||
Title: | Executive Vice-President & Chief Financial Officer |
Dated: November 8, 2022July 27, 2023
67
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