# Ovintiv Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Ovintiv Inc.](/companies/ovv.md) (CIK 1792580)
- Form: 10-Q
- Filed: 2023-11-07
- Accepted by EDGAR: Nov 7, 2023, 17:13 ET
- Period: 2023-09-30
- Accession: 0000950170-23-060397
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1792580/000095017023060397/ovv-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1792580/000095017023060397/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $2.91bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $7.86bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $467.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $1.68bn | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $98.0m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $249.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | −$13.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $214.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $406.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $1.23bn | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $1.47 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $4.73 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $1.48 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $4.80 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 276,300,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 259,700,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-07-01 to 2023-09-30 | $906.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $2.81bn | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-07-01 to 2023-09-30 | $834.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $2.08bn | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-07-01 to 2023-09-30 | $82.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $225.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 3 months, 2023-07-01 to 2023-09-30 | $45.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $373.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $3.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $1.58bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $19.90bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $3.54bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $10.35bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $5.45bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $709.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-09-30 | $9.55bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 87,417 characters.

The MD&A is intended to provide a narrative description of the Company’s business from management’s perspective, which includes an overview of Ovintiv’s condensed consolidated results for the three and nine months ended September 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 September 30, 2023 (“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, 2022, which are included in Items 8 and 7, respectively, of the 2022 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:

- Executive Overview
- Results of Operations
- Liquidity and Capital Resources
- Non-GAAP Measures

### 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-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 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, 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 to maximize cash flow generation from its high-quality assets and renew its premium well inventory in some of the best plays in North America. These assets 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 2022 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 and debt-based metrics such as Debt to Adjusted Capitalization, Debt to EBITDA and 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.

### Highlights

During the first nine months of 2023, the Company focused on executing its 2023 capital investment plan aimed at maximizing profitability through operational and capital efficiencies, minimizing the impact of inflation and delivering cash from operating activities. In 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 nine months of 2023 compared to 2022, primarily resulted from lower average realized prices, excluding the impact of risk management activities. Decreases in average realized natural gas and liquids prices of 53 percent and 26 percent, respectively, were primarily due to lower benchmark prices. Ovintiv continues to focus on optimizing realized prices from the diversification of the Company’s downstream markets.

### Significant Developments

- On September 26, 2023, the Company announced it had received regulatory approval for the renewal of its NCIB program, which enables the Company to purchase, for cancellation or return to treasury, up to approximately 26.7 million shares of common stock over a 12-month period from October 3, 2023 to October 2, 2024. The number of shares authorized for purchase represents 10 percent of Ovintiv’s public float as at September 21, 2023. The Company expects to continue to execute the renewed NCIB program in conjunction with its capital allocation framework.
- On September 13, 2023, the Company purchased one million shares of Ovintiv common stock from the 15 million shares offered for sale in a secondary public offering by NMB Stock Trust, a Delaware statutory trust. The total consideration paid was approximately $45 million, or $45.45 per share, and the shares were cancelled during the third quarter of 2023. The share purchase accelerates Ovintiv’s expected fourth quarter share purchases under its existing shareholder return framework.
- On June 12, 2023, the Company closed its previously announced purchase agreement to acquire substantially all leasehold interest and related assets from Black Swan Oil & Gas, LLC, PetroLegacy II Holdings, LLC, Piedra Energy III Holdings, LLC and Piedra Energy IV Holdings, LLC, which were portfolio companies of funds managed by EnCap Investments L.P. (“Permian Acquisition”). The Company issued approximately 31.8 million shares of Ovintiv common stock and paid approximately $3.2 billion in cash upon closing, for total consideration of approximately $4.4 billion which included customary closing adjustments of approximately $85 million. The acquisition added approximately 65,000 net acres in the Midland Basin and approximately 1,050 net well locations to Ovintiv’s Permian inventory. The transaction had an effective date of January 1, 2023.
- On June 12, 2023, the Company closed its previously announced agreement to sell the entirety of its Bakken assets, comprising approximately 46,000 net acres in the Williston Basin of North Dakota, to Grayson Mill Bakken, LLC, a portfolio company managed by EnCap Investments L.P., for proceeds of approximately $717 million after customary closing adjustments of approximately $108 million. The transaction had an effective date of January 1, 2023.
- On June 12, 2023, the Company announced its inclusion on the S&P 400 index effective June 20, 2023.
- On May 31, 2023, the Company issued $2.3 billion in senior unsecured notes with varying maturity dates and interest rates. The net proceeds from the bond offering were used to finance a portion of the Permian Acquisition.
- On April 3, 2023, the Company announced an increase of 20 percent to its quarterly per share dividend payment representing an annualized dividend of $1.20 per share of common stock as part of Ovintiv’s commitment to returning capital to shareholders.

### Financial Results

#### Three months ended September 30, 2023

- Reported net earnings of $406 million, including net losses on risk management in revenues of $282 million, before tax.
- Generated cash from operating activities of $906 million and Non-GAAP Cash Flow of $1,112 million.
- Purchased for cancellation, one million shares of common stock for total consideration of approximately $45 million.
- Paid dividends of $0.30 per share of common stock totaling $82 million.

#### Nine months ended September 30, 2023

- Reported net earnings of $1,229 million, including net losses on risk management in revenues of $193 million, before tax.
- Generated cash from operating activities of $2,805 million and Non-GAAP Cash Flow of $2,662 million.
- Purchased for cancellation, approximately 8.7 million shares of common stock for total consideration of approximately $373 million.
- Paid dividends of $0.85 per share of common stock totaling $225 million.
- Had approximately $3.1 billion in total liquidity as at September 30, 2023, which included available credit facilities of $3,150 million, available uncommitted demand lines of $273 million, and cash and cash equivalents of $3 million, net of outstanding commercial paper of $359 million.
- Reported Debt to EBITDA of 1.4 times and Non-GAAP Debt to Adjusted EBITDA of 1.5 times.

### Capital Investment

#### During the nine months ended September 30, 2023

- Executed the Company’s 2023 capital plan with expenditures totaling $2,084 million.
- Focused on highly efficient capital activity to minimize the impact of inflation and to benefit from short-cycle high margin and/or low-cost projects which provide flexibility to respond to fluctuations in commodity prices.

### Production

#### During the nine months ended September 30, 2023

- Produced average liquids volumes of 278.9 Mbbls/d, which accounted for 50 percent of total production volumes. Average oil and plant condensate volumes of 189.0 Mbbls/d, represented 68 percent of total liquids production volumes.
- Produced average natural gas volumes of 1,641 MMcf/d, which accounted for 50 percent of total production volumes.
- Produced average total volumes of 552.3 MBOE/d.

### Operating Expenses

#### During the nine months ended September 30, 2023

- Incurred total upstream transportation and processing expenses of $1,219 million or $8.09 per BOE, an increase of $14 million compared to 2022, primarily due to higher volumes in Permian and higher costs relating to the diversification of the Company’s downstream markets, partially offset by lower variable contract rates in Permian.
- Incurred total upstream operating expenses of $604 million or $4.00 per BOE, an increase of $30 million compared to 2022, primarily due to the Permian Acquisition in the second quarter of 2023, increased activity resulting from more wells on production and sustained inflationary pressures, partially offset by the sale of portions of Uinta assets in the third quarter of 2022, higher recoveries from updated operating contract terms and the sale of the Bakken assets in the second quarter of 2023.
- Total upstream transportation and processing, and operating expenses decreased by $0.64 per BOE and $0.16 per BOE, respectively, compared to 2022 due to higher production volumes.
- Incurred total production, mineral and other taxes of $249 million, which represents approximately 4.5 percent of upstream revenues. Total production, mineral and other taxes decreased by $72 million compared to 2022, primarily due to lower production taxes in the USA Operations as a result of lower commodity prices.

The Company’s upstream operations refers to the summation of the USA and Canadian operating segments. Additional information on the items above and other expenses can be found in the Results of Operations section of this MD&A.

### 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.

Oil prices for the remainder of 2023 will be impacted by the interplay between recessionary concerns and the resulting direction of global demand for oil, continued OPEC+ production restraint and continued supply uncertainties resulting from geopolitical events. Recessionary concerns continue to have an impact on global demand as central banks maintain tight monetary policies. Supply and the accumulation of global oil inventories will be impacted by changes in OPEC+ production levels, the extent of decline in oil exports from Russia and changes in production by non-OPEC countries.

#### Natural Gas Markets

Natural gas prices are primarily impacted by structural changes in supply and demand as well as deviations from seasonally normal weather.

Natural gas prices for the remainder of 2023 will 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 geopolitical events.

### Company Outlook

The Company will continue to exercise discretion and discipline to optimize capital allocation through the remainder of 2023 as 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. 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 in the second quarter of 2023 and expected increase in production volumes, the Company executed additional oil hedge positions. As at September 30, 2023, the Company has hedged approximately 110.0 Mbbls/d of expected oil and condensate production and 600 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 19 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 2023 capital investment program, focusing on maximizing returns from high margin liquids and generating significant cash flows in excess of capital expenditures.

In November 2023, the Company updated its full year 2023 capital investment guidance range to $2,745 million to $2,785 million which reflects the successful integration of the newly acquired Permian assets, sale of the Bakken assets, execution efficiencies and cost savings. During the third quarter of 2023, the Company invested $834 million, which was below the third quarter guidance range of $840 million to $890 million due to capital efficiencies.

Ovintiv continually strives to improve well performance and lower costs through innovative techniques. 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

During the third quarter of 2023, total average production volumes were 571.8 MBOE/d, which exceeded the third quarter guidance range of 540.0 MBOE/d to 560.0 MBOE/d. Average oil and plant condensate production volumes were 214.2 Mbbls/d and average other NGL production volumes were 86.7 Mbbls/d, which exceeded third quarter guidance ranges of 202.0 Mbbls/d to 208.0 Mbbls/d and 80.0 Mbbls/d to 85.0 Mbbls/d, respectively. Average natural gas production volumes were 1,625 MMcf/d, which is at the top end of the third quarter guidance range of 1,575 MMcf/d to 1,625 MMcf/d.

In November 2023, the Company updated its full year 2023 production volume guidance ranges to reflect strong well performance and the successful integration of the newly acquired Permian assets. The Company expects to meet its full year 2023 total production guidance range of 550.0 MBOE/d to 560.0 MBOE/d, including oil and plant condensate production volumes of approximately 196.0 Mbbls/d to 198.0 Mbbls/d, other NGLs production volumes of approximately 87.0 Mbbls/d to 89.0 Mbbls/d and natural gas production volumes of approximately 1,615 MMcf/d to 1,630 MMcf/d.

#### Operating Expenses

During the first half of 2023, the oil and gas industry experienced continued supply chain constraints and inflationary pressures resulting from the elevated commodity price environment. However, with recent declines in commodity prices and oil and gas activity, the industry has begun to see decreases in inflationary pressures. While some supply chain constraints and inflationary pressures may persist for the remainder of 2023, the Company expects inflation to stabilize. Ovintiv continues 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 overall efficiency of its operations.

The Company is on track to maintain upstream transportation and processing costs of approximately $8.00 per BOE to $8.50 per BOE, operating expenses of approximately $4.00 per BOE to $4.50 per BOE, and total production, mineral and other taxes of approximately four to five percent of upstream revenues.

#### Long-Term Debt

During the second quarter of 2023, the Company closed the Permian Acquisition and funded the cash portion of the transaction with net proceeds of $2,278 million 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.

As at September 30, 2023, the Company had $359 million of commercial paper outstanding under its U.S. commercial paper (“U.S. CP”) programs and $350 million outstanding under its revolving credit facilities.

Additional information on Ovintiv’s long-term debt and liquidity position can be found in Note 11 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 fourth quarter and updated full year 2023 Corporate Guidance can be accessed on the Company’s website at www.ovintiv.com.

#### Environmental, Social and Governance

Ovintiv recognizes climate change as a global concern and the importance of reducing its environmental footprint as part of the solution. The Company voluntarily participates in emission reduction programs 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 alignment with the World Bank Zero Routine Flaring initiative, well ahead of the World Bank’s target date of 2030.

In June 2023, the Company closed 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 profile and the World Bank Zero Routine Flaring initiative. Ovintiv is undergoing an integration period to align the performance of the acquired inventory into the Company’s existing assets. Ovintiv remains committed to its ESG targets.

The Company continues to find innovate approaches to reduce its emissions profile and add value to its business. In October 2023, the Company entered into a partnership agreement with a midstream company which will connect Ovintiv’s natural gas-powered facilities in Montney to British Columbia’s hydro and wind generated electrical grid. This arrangement will reduce the Company’s GHG emissions while adding processing capacity.

Ovintiv is committed to diversity, equity and 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 are included in its most recent Sustainability Report on the Company’s sustainability website at https://sustainability.ovintiv.com.

### Results of Operations

### Selected Financial Information

| ($ millions) Product and Service Revenues | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Upstream product revenues | **$2,049** | $2,653 | **$5,570** | $7,864 |
| Market optimization | **863** | 988 | **2,282** | 3,197 |
| Service revenues (1) | **1** | 2 | **5** | 3 |
| Total Product and Service Revenues | **2,913** | 3,643 | **7,857** | 11,064 |
| Gains (Losses) on Risk Management, Net | **(282)** | (111) | **(193)** | (1,864) |
| Sublease Revenues | **18** | 17 | **53** | 52 |
| Total Revenues | **2,649** | 3,549 | **7,717** | 9,252 |
| Total Operating Expenses (2) | **2,182** | 2,176 | **6,041** | 6,563 |
| Operating Income (Loss) | **467** | 1,373 | **1,676** | 2,689 |
| Total Other (Income) Expenses | **74** | 99 | **233** | 239 |
| Net Earnings (Loss) Before Income Tax | **393** | 1,274 | **1,443** | 2,450 |
| Income Tax Expense (Recovery) | **(13)** | 88 | **214** | 148 |
| Net Earnings (Loss) | **$406** | $1,186 | **$1,229** | $2,302 |

(1) Service revenues include amounts related to the USA and Canadian Operations.

(2) Total Operating Expenses include non-cash items such as DD&A, accretion of asset retirement obligations and long-term incentive costs.

### 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

| (average for the period) Oil & NGLs | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| WTI ($/bbl) | **$82.26** | $91.55 | **$77.39** | $98.09 |
| Houston ($/bbl) | **83.81** | 93.24 | **78.78** | 99.59 |
| Edmonton Condensate (C$/bbl) | **104.74** | 114.19 | **103.45** | 124.90 |
| **Natural Gas** |  |  |  |  |
| NYMEX ($/MMBtu) | **$2.55** | $8.20 | **$2.69** | $6.77 |
| AECO (C$/Mcf) | **2.39** | 5.81 | **3.03** | 5.56 |
| Dawn (C$/MMBtu) | **3.04** | 9.75 | **3.16** | 8.19 |

41

### Production Volumes and Realized Prices

| Oil (Mbbls/d, $/bbl) | Three months ended September 30, Production Volumes (1) 2023 | 2022 | Realized Prices (2) 2023 | 2022 | Nine months ended September 30, Production Volumes (1) 2023 | 2022 | Realized Prices (2) 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| USA Operations | **170.8** | 133.3 | **$80.69** | $93.22 | **147.0** | 131.4 | **$76.26** | $98.37 |
| Canadian Operations | **0.1** | 0.1 | **100.64** | 82.86 | **0.1** | 0.1 | **85.74** | 88.58 |
| Total | **170.9** | 133.4 | **80.70** | 93.21 | **147.1** | 131.5 | **76.26** | 98.36 |
| NGLs – Plant Condensate (Mbbls/d, $/bbl) |  |  |  |  |  |  |  |  |
| USA Operations | **11.2** | 11.1 | **59.96** | 66.62 | **10.8** | 10.1 | **58.98** | 78.77 |
| Canadian Operations | **32.1** | 34.9 | **75.67** | 86.65 | **31.1** | 34.3 | **74.48** | 96.59 |
| Total | **43.3** | 46.0 | **71.61** | 81.82 | **41.9** | 44.4 | **70.49** | 92.53 |
| NGLs – Other (Mbbls/d, $/bbl) |  |  |  |  |  |  |  |  |
| USA Operations | **71.8** | 74.1 | **16.91** | 29.82 | **74.5** | 70.5 | **16.29** | 32.69 |
| Canadian Operations | **14.9** | 12.8 | **25.50** | 41.12 | **15.4** | 13.9 | **25.30** | 43.49 |
| Total | **86.7** | 86.9 | **18.39** | 31.49 | **89.9** | 84.4 | **17.83** | 34.46 |
| Total Oil & NGLs (Mbbls/d, $/bbl) |  |  |  |  |  |  |  |  |
| USA Operations | **253.8** | 218.5 | **61.73** | 70.37 | **232.3** | 212.0 | **56.21** | 75.59 |
| Canadian Operations | **47.1** | 47.8 | **59.84** | 74.43 | **46.6** | 48.3 | **58.25** | 81.32 |
| Total | **300.9** | 266.3 | **61.43** | 71.10 | **278.9** | 260.3 | **56.55** | 76.65 |
| Natural Gas (MMcf/d, $/Mcf) |  |  |  |  |  |  |  |  |
| USA Operations | **508** | 502 | **2.22** | 7.55 | **515** | 487 | **2.46** | 6.45 |
| Canadian Operations | **1,117** | 998 | **2.38** | 6.11 | **1,126** | 984 | **2.99** | 5.78 |
| Total | **1,625** | 1,500 | **2.33** | 6.60 | **1,641** | 1,471 | **2.82** | 6.00 |
| Total Production (MBOE/d, $/BOE) |  |  |  |  |  |  |  |  |
| USA Operations | **338.5** | 302.1 | **49.62** | 63.44 | **318.1** | 293.3 | **45.02** | 65.37 |
| Canadian Operations | **233.3** | 214.2 | **23.46** | 45.11 | **234.2** | 212.2 | **25.95** | 45.30 |
| Total | **571.8** | 516.3 | **38.95** | 55.83 | **552.3** | 505.5 | **36.94** | 56.94 |
| Production Mix (%) |  |  |  |  |  |  |  |  |
| Oil & Plant Condensate | **38** | 35 |  |  | **34** | 35 |  |  |
| NGLs – Other | **15** | 17 |  |  | **16** | 16 |  |  |
| Total Oil & NGLs | **53** | 52 |  |  | **50** | 51 |  |  |
| Natural Gas | **47** | 48 |  |  | **50** | 49 |  |  |
| **Production Change** |  |  |  |  |  |  |  |  |
| Year Over Year (%) (3) |  |  |  |  |  |  |  |  |
| Total Oil & NGLs | **13** | (3) |  |  | **7** | (7) |  |  |
| Natural Gas | **8** | (4) |  |  | **12** | (7) |  |  |
| Total Production | **11** | (3) |  |  | **9** | (7) |  |  |

(1) Average daily.

(2) Average per-unit prices, excluding the impact of risk management activities.

(3) Includes production impacts of acquisitions and divestitures.

### Upstream Product Revenues

| ($ millions) | Three months ended September 30, Oil | NGLs - Plant Condensate | NGLs - Other | Natural Gas | Total |
| --- | ---: | ---: | ---: | ---: | ---: |
| **2022 Upstream Product Revenues (1)** | **$1,144** | **$345** | **$251** | **$911** | **$2,651** |
| Increase (decrease) due to: |  |  |  |  |  |
| Sales prices | (197) | (37) | (108) | (635) | (977) |
| Production volumes | 322 | (21) | 2 | 71 | 374 |
| **2023 Upstream Product Revenues (1)** | **$1,269** | **$287** | **$145** | **$347** | **$2,048** |
|  | Nine months ended September 30, |  |  |  |  |
| ($ millions) | **Oil** | **NGLs - Plant Condensate** | **NGLs - Other** | **Natural Gas** | **Total** |
| **2022 Upstream Product Revenues (1)** | **$3,531** | **$1,122** | **$793** | **$2,411** | **$7,857** |
| Increase (decrease) due to: |  |  |  |  |  |
| Sales prices | (888) | (243) | (409) | (1,420) | (2,960) |
| Production volumes | 418 | (72) | 54 | 272 | 672 |
| **2023 Upstream Product Revenues (1)** | **$3,061** | **$807** | **$438** | **$1,263** | **$5,569** |

(1) Revenues for the third quarter and first nine months of 2023 exclude certain other revenue and royalty adjustments with no associated production volumes of $1 million and $1 million, respectively (2022 - $2 million and $7 million, respectively).

### Oil Revenues

#### Three months ended September 30, 2023 versus September 30, 2022

Oil revenues were higher by $125 million compared to the third quarter of 2022 primarily due to:

- Higher average oil production volumes of 37.5 Mbbls/d increased revenues by $322 million. Higher volumes were primarily due to the Permian Acquisition in the second quarter of 2023 (47.6 Mbbls/d) and successful drilling in Permian (12.8 Mbbls/d), partially offset by the sale of the Bakken assets in the second quarter of 2023 (16.4 Mbbls/d) and natural declines in Anadarko (5.8 Mbbls/d); and
- A decrease of $12.51 per bbl, or 13 percent, in the average realized oil prices which decreased revenues by $197 million. The decrease reflected lower WTI and Houston benchmark prices which were both down 10 percent, and the weakening of regional pricing relative to the WTI benchmark price in the USA Operations.

#### Nine months ended September 30, 2023 versus September 30, 2022

Oil revenues were lower by $470 million compared to the first nine months of 2022 primarily due to:

- A decrease of $22.10 per bbl, or 22 percent, in the average realized oil prices which decreased revenues by $888 million. The decrease reflected lower WTI and Houston benchmark prices which were both down 21 percent, and the weakening of regional pricing relative to the WTI benchmark price in the USA Operations; and
- Higher average oil production volumes of 15.6 Mbbls/d increased revenues by $418 million. Higher volumes were primarily due to the Permian Acquisition in the second quarter of 2023 (19.3 Mbbls/d) and successful drilling in Permian (4.4 Mbbls/d), partially offset by natural declines in Anadarko (4.6 Mbbls/d), and the sale of the Bakken assets in the second quarter of 2023 and sale of portions of the Uinta assets in the third quarter of 2022 (3.9 Mbbls/d).

### NGL Revenues

#### Three months ended September 30, 2023 versus September 30, 2022

NGL revenues were lower by $164 million compared to the third quarter of 2022 primarily due to:

- A decrease of $13.10 per bbl, or 42 percent, in the average realized other NGL prices which decreased revenues by $108 million. The decrease reflected lower other NGL benchmark prices and lower regional pricing; and
- A decrease of $10.21 per bbl, or 12 percent, in the average realized plant condensate prices which decreased revenues by $37 million. The decrease reflected lower WTI and Edmonton Condensate benchmark prices which were down 10 percent and eight percent, respectively, and lower regional pricing relative to the WTI benchmark price.

#### Nine months ended September 30, 2023 versus September 30, 2022

NGL revenues were lower by $670 million compared to the first nine months of 2022 primarily due to:

- A decrease of $16.63 per bbl, or 48 percent, in the average realized other NGL prices which decreased revenues by $409 million. The decrease reflected lower other NGL benchmark prices and lower regional pricing;
- A decrease of $22.04 per bbl, or 24 percent, in the average realized plant condensate prices which decreased revenues by $243 million. The decrease reflected lower WTI and Edmonton Condensate benchmark prices which were down 21 percent and 17 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 $72 million. Lower volumes were primarily due to natural declines in Montney (4.3 Mbbls/d), partially offset by successful drilling in Montney and Permian (1.5 Mbbls/d); and
- Higher average other NGL production volumes of 5.5 Mbbls/d increased revenues by $54 million. Higher volumes were primarily due to successful drilling in Permian and Montney (4.2 Mbbls/d), the Permian Acquisition in the second quarter of 2023 (2.0 Mbbls/d), and lower effective royalty rates resulting from lower commodity prices in Montney (1.4 Mbbls/d), partially offset by the sale of the Bakken assets in the second quarter of 2023 (1.8 Mbbls/d).

### Natural Gas Revenues

#### Three months ended September 30, 2023 versus September 30, 2022

Natural gas revenues were lower by $564 million compared to the third quarter of 2022 primarily due to:

- A decrease of $4.27 per Mcf, or 65 percent, in the average realized natural gas prices which decreased revenues by $635 million. The decrease reflected lower NYMEX, Dawn and AECO benchmark prices which were down 69 percent, 69 percent and 59 percent, respectively; and
- Higher average natural gas production volumes of 125 MMcf/d increased revenues by $71 million. Higher volumes were primarily due to lower effective royalty rates resulting from lower commodity prices in Montney (148 MMcf/d), successful drilling in Montney and Permian (58 MMcf/d), and the Permian Acquisition in the second quarter of 2023 (26 MMcf/d), partially offset by third-party plant outages and pipeline restrictions in Montney (57 MMcf/d) and the sale of the Bakken assets in the second quarter of 2023 (41 MMcf/d).

#### Nine months ended September 30, 2023 versus September 30, 2022

Natural gas revenues were lower by $1,148 million compared to the first nine months of 2022 primarily due to:

- A decrease of $3.18 per Mcf, or 53 percent, in the average realized natural gas prices which decreased revenues by $1,420 million. The decrease reflected lower Dawn, NYMEX and AECO benchmark prices which were down 61 percent, 60 percent and 46 percent, respectively; and
- Higher average natural gas production volumes of 170 MMcf/d increased revenues by $272 million. Higher volumes were primarily due to lower effective royalty rates resulting from lower commodity prices in Montney (103 MMcf/d) and successful drilling in Montney and Permian (92 MMcf/d), partially offset by third-party plant outages and pipeline restrictions in Montney (21 MMcf/d).

### 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 September 30, 2023 can be found in Note 19 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.

| ($ millions) Realized Gains (Losses) on Risk Management Commodity Price (1) | Three months ended September 30, 2023 2022 | Nine months ended September 30, 2023 2022 |
| --- | ---: | ---: |
| Oil | **$(19)** $(141) | **$(19)** $(519) |
| NGLs - Plant Condensate | **-** (26) | **-** (109) |
| Natural Gas | **28** (654) | **(43)** (1,449) |
| Other (2) | **1** - | **1** 2 |
| Total | **10** (821) | **(61)** (2,075) |
| Unrealized Gains (Losses) on Risk Management | **(292)** 710 | **(132)** 211 |
| Total Gains (Losses) on Risk Management, Net | **$(282)** $(111) | **$(193)** $(1,864) |
|  | Three months ended September 30, | Nine months ended September 30, |
| (Per-unit) | **2023** 2022 | **2023** 2022 |
| Realized Gains (Losses) on Risk Management |  |  |
| Commodity Price (1) |  |  |
| Oil ($/bbl) | **$(1.18)** $(11.47) | **$(0.46)** $(14.44) |
| NGLs - Plant Condensate ($/bbl) | **$-** $(6.09) | **$-** $(8.96) |
| Natural Gas ($/Mcf) | **$0.18** $(4.75) | **$(0.09)** $(3.61) |
| Total ($/BOE) | **$0.17** $(17.28) | **$(0.41)** $(15.05) |

(1) Primarily includes realized gains and losses related to the USA and Canadian Operations.

(2) Other primarily includes realized gains or losses from 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. 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 18 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.

| ($ millions) | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Market Optimization | **$863** | $988 | **$2,282** | $3,197 |

45

#### Three months ended September 30, 2023 versus September 30, 2022

Market Optimization product revenues decreased $125 million compared to the third quarter of 2022 primarily due to:

- Lower oil and natural gas benchmark prices ($232 million), and lower sales of third-party purchased natural gas volumes primarily relating to marketing arrangements for assets divested in prior years ($4 million);

partially offset by:

- Higher sales of third-party purchased liquids volumes primarily relating to price optimization activities in the USA Operations ($111 million).

#### Nine months ended September 30, 2023 versus September 30, 2022

Market Optimization product revenues decreased $915 million compared to the first nine months of 2022 primarily due to:

- Lower oil and natural gas benchmark prices ($852 million), and lower sales of third-party purchased natural gas volumes primarily relating to marketing arrangements for assets divested in prior years ($88 million);

partially offset by:

- Higher sales of third-party purchased liquids volumes primarily relating to price optimization activities in the USA Operations ($25 million).

### 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 10 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.

| ($ millions) | Three months ended September 30, 2023 2022 | Nine months ended September 30, 2023 2022 |
| --- | ---: | ---: |
| USA Operations | **$84** $106 | **$237** $311 |
| Canadian Operations | **5** 3 | **12** 10 |
| Total | **$89** $109 | **$249** $321 |
|  | Three months ended September 30, | Nine months ended September 30, |
| ($/BOE) | **2023** 2022 | **2023** 2022 |
| USA Operations | **$2.71** $3.83 | **$2.73** $3.89 |
| Canadian Operations | **$0.24** $0.12 | **$0.19** $0.15 |
| Production, Mineral and Other Taxes | **$1.70** $2.29 | **$1.65** $2.32 |

#### Three months ended September 30, 2023 versus September 30, 2022

Production, mineral and other taxes decreased $20 million compared to the third quarter of 2022 primarily due to:

- Lower production tax in USA Operations due to lower commodity prices ($23 million) and the sale of the Bakken assets in the second quarter of 2023 ($15 million);

partially offset by:

- Higher volumes in Permian primarily due to the Permian Acquisition ($21 million).

#### Nine months ended September 30, 2023 versus September 30, 2022

Production, mineral and other taxes decreased $72 million compared to the first nine months of 2022 primarily due to:

- Lower production tax in USA Operations due to lower commodity prices ($80 million) and the sale of the Bakken assets in the second quarter of 2023 ($17 million);

partially offset by:

- Higher volumes in Permian primarily due to the Permian Acquisition ($26 million).

### 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.

| ($ millions) | Three months ended September 30, 2023 2022 | Nine months ended September 30, 2023 2022 |
| --- | ---: | ---: |
| USA Operations | **$124** $170 | **$419** $464 |
| Canadian Operations | **265** 257 | **800** 741 |
| Upstream Transportation and Processing | **389** 427 | **1,219** 1,205 |
| Market Optimization | **44** 41 | **121** 122 |
| Total | **$433** $468 | **$1,340** $1,327 |
|  | Three months ended September 30, | Nine months ended September 30, |
| ($/BOE) | **2023** 2022 | **2023** 2022 |
| USA Operations | **$3.98** $6.14 | **$4.82** $5.80 |
| Canadian Operations | **$12.36** $13.01 | **$12.51** $12.78 |
| Upstream Transportation and Processing | **$7.40** $8.99 | **$8.09** $8.73 |

#### Three months ended September 30, 2023 versus September 30, 2022

Transportation and processing expense decreased $35 million compared to the third quarter of 2022 primarily due to:

- Lower variable contract rates in Permian ($55 million), the sale of the Bakken assets in the second quarter of 2023 ($19 million) and a higher U.S./Canadian dollar exchange rate ($7 million);

partially offset by:

- Higher volumes in Permian ($38 million) and higher costs relating to the diversification of the Company’s downstream markets ($17 million).

#### Nine months ended September 30, 2023 versus September 30, 2022

Transportation and processing expense increased $13 million compared to the first nine months of 2022 primarily due to:

- Higher volumes in Permian and Bakken ($72 million), higher costs relating to the diversification of the Company’s downstream markets ($51 million), higher flow-through rates resulting from increased third-party plant operating costs in Montney ($26 million), rate escalation of transportation contracts in Uinta ($19 million) and third-party plant turnarounds in Montney ($8 million);

partially offset by:

- Lower variable contract rates in Permian ($100 million), a higher U.S./Canadian dollar exchange rate ($34 million) and the sale of the Bakken assets in the second quarter of 2023 ($25 million).

### 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.

| ($ millions) | Three months ended September 30, 2023 2022 | Nine months ended September 30, 2023 2022 |
| --- | ---: | ---: |
| USA Operations | **$208** $187 | **$545** $478 |
| Canadian Operations | **28** 34 | **59** 96 |
| Upstream Operating Expense | **236** 221 | **604** 574 |
| Market Optimization | **7** 7 | **20** 22 |
| Total | **$243** $228 | **$624** $596 |
|  | Three months ended September 30, | Nine months ended September 30, |
| ($/BOE) | **2023** 2022 | **2023** 2022 |
| USA Operations | **$6.66** $6.73 | **$6.27** $5.96 |
| Canadian Operations | **$1.30** $1.69 | **$0.92** $1.65 |
| Upstream Operating Expense | **$4.48** $4.64 | **$4.00** $4.16 |

#### Three months ended September 30, 2023 versus September 30, 2022

Operating expense increased $15 million compared to the third quarter of 2022 primarily due to:

- The Permian Acquisition in the second quarter of 2023 ($62 million);

partially offset by:

- The sale of the Bakken assets in the second quarter of 2023 ($23 million), the sale of portions of Uinta assets in the third quarter of 2022 ($10 million) and decreased workover activity in Anadarko ($8 million).

#### Nine months ended September 30, 2023 versus September 30, 2022

Operating expense increased $28 million compared to the first nine months of 2022 primarily due to:

- The Permian Acquisition in the second quarter of 2023 ($72 million) and increased activity due to more wells on production and sustained inflationary pressures ($60 million);

partially offset by:

- The sale of portions of Uinta assets in the third quarter of 2022 ($36 million), updates to operating contract terms, including a recovery of prior years’ costs ($29 million), the sale of the Bakken assets in the second quarter of 2023 ($27 million) and lower long-term incentive costs resulting from a decrease in the Company’s share price compared to an increase in 2022 ($11 million).

Additional information on the Company’s long-term incentive costs can be found in Note 16 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

### 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.

| ($ millions) | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Market Optimization | **$846** | $973 | **$2,239** | $3,154 |

48

#### Three months ended September 30, 2023 versus September 30, 2022

Purchased product expense decreased $127 million compared to the third quarter of 2022 primarily due to:

- Lower oil and natural gas benchmark prices ($234 million), and lower third-party purchased natural gas volumes primarily relating to marketing arrangements for assets divested in prior years ($3 million);

partially offset by:

- Higher third-party purchased liquids volumes primarily relating to price optimization activities in the USA Operations ($110 million).

#### Nine months ended September 30, 2023 versus September 30, 2022

Purchased product expense decreased $915 million compared to the first nine months of 2022 primarily due to:

- Lower oil and natural gas benchmark prices ($855 million), and lower third-party purchased natural gas volumes primarily relating to marketing arrangements for assets divested in prior years ($85 million);

partially offset by:

- Higher third-party purchased liquids volumes primarily relating to price optimization activities in the USA Operations ($25 million).

### Depreciation, Depletion & Amortization

Proved properties within each country cost center 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 2022 Annual Report on Form 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 2022 Annual Report on Form 10-K.

| ($ millions) | Three months ended September 30, 2023 2022 | Nine months ended September 30, 2023 2022 |
| --- | ---: | ---: |
| USA Operations | **$409** $225 | **$1,039** $642 |
| Canadian Operations | **72** 61 | **215** 176 |
| Upstream DD&A | **481** 286 | **1,254** 818 |
| Corporate & Other | **5** 5 | **15** 15 |
| Total | **$486** $291 | **$1,269** $833 |
|  | Three months ended September 30, | Nine months ended September 30, |
| ($/BOE) | **2023** 2022 | **2023** 2022 |
| USA Operations | **$13.15** $8.11 | **$11.97** $8.03 |
| Canadian Operations | **$3.34** $3.09 | **$3.36** $3.04 |
| Upstream DD&A | **$9.15** $6.03 | **$8.32** $5.93 |

#### Three months ended September 30, 2023 versus September 30, 2022

DD&A increased $195 million compared to the third quarter of 2022 primarily due to:

- Higher depletion rates in the USA and Canadian Operations ($157 million and $7 million, respectively) and higher production volumes in the USA and Canadian Operations ($27 million and $5 million, respectively).

The depletion rate in the USA Operations increased $5.04 per BOE compared to the third quarter of 2022 primarily due to a higher depletable base associated with the Permian Acquisition.

#### Nine months ended September 30, 2023 versus September 30, 2022

DD&A increased $436 million compared to the first nine months of 2022 primarily due to:

- Higher depletion rates in the USA and Canadian Operations ($342 million and $30 million, respectively) and higher production volumes in the USA and Canadian Operations ($54 million and $17 million, respectively);

partially offset by:

- Higher U.S./Canadian dollar exchange rate ($8 million).

The depletion rate in the USA Operations increased $3.94 per BOE compared to the first nine months of 2022 primarily due to a higher depletable base associated with the Permian Acquisition.

### Administrative

Administrative expense represents costs associated with corporate functions provided by Ovintiv staff. These expenses primarily include salaries and benefits, operating lease, office, information technology, transaction and long-term incentive costs.

| ($ millions) Administrative, excluding Long-Term Incentive, Transaction and Legal Costs, and Current | Three months ended September 30, 2023 2022 | Nine months ended September 30, 2023 2022 |
| --- | ---: | ---: |
| Expected Credit Losses (1) | **$66** $66 | **$203** $194 |
| Long-term incentive costs | **12** 37 | **9** 123 |
| Transaction and legal costs | **2** - | **94** (1) |
| Current expected credit losses | **-** - | **-** 2 |
| Total Administrative | **$80** $103 | **$306** $318 |
|  | Three months ended September 30, | Nine months ended September 30, |
| ($/BOE) | **2023** 2022 | **2023** 2022 |
| Administrative, excluding Long-Term Incentive, |  |  |
| Transaction and Legal Costs, and Current |  |  |
| Expected Credit Losses (1) | **$1.27** $1.39 | **$1.34** $1.40 |
| Long-term incentive costs | **0.23** 0.77 | **0.06** 0.89 |
| Transaction and legal costs | **0.03** - | **0.63** (0.01) |
| Current expected credit losses | **-** - | **-** 0.02 |
| Total Administrative | **$1.53** $2.16 | **$2.03** $2.30 |

(1) The third quarter and first nine months of 2023 include costs related to The Bow office lease of $29 million and $86 million, respectively (2022 - $30 million and $88 million, respectively), half of which is recovered from sublease revenues.

#### Three months ended September 30, 2023 versus September 30, 2022

Administrative expense decreased $23 million compared to the third quarter of 2022 primarily due to:

- Lower long-term incentive costs resulting from a lower share price impact compared to 2022 ($25 million).

#### Nine months ended September 30, 2023 versus September 30, 2022

Administrative expense decreased $12 million compared to the first nine months of 2022 primarily due to:

- Lower long-term incentive costs resulting from a decrease in the Company’s share price in the first nine months of 2023 compared to an increase in 2022 ($114 million);

partially offset by:

- Transaction costs mainly related to the Permian Acquisition in the second quarter of 2023 ($84 million) and increases in legal and operating lease costs ($16 million).

Additional information on the Company’s long-term incentive costs can be found in Note 16 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

### Other (Income) Expenses

| ($ millions) | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Interest | **$98** | $83 | **$249** | $248 |
| Foreign Exchange (Gain) Loss, Net | **(22)** | 19 | **-** | 21 |
| Other (Gains) Losses, Net | **(2)** | (3) | **(16)** | (30) |
| Total Other (Income) Expenses | **$74** | $99 | **$233** | $239 |

### Interest

Interest expense primarily includes interest on Ovintiv’s short-term and 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 September 30, 2023 versus September 30, 2022

Interest expense increased $15 million compared to the third quarter of 2022 primarily due to:

- Interest expense related to senior unsecured notes issued in May 2023 ($36 million) and interest expense related to outstanding balances under the Company’s U.S. CP program and revolving credit facilities ($11 million);

partially offset by:

- Premiums of $22 million related to the Company’s open market repurchases of senior notes in 2022 and an interest recovery due to the resolution of certain tax items in the third quarter of 2023 relating to prior taxation years ($8 million).

#### Nine months ended September 30, 2023 versus September 30, 2022

Interest expense increased $1 million compared to the first nine months of 2022 primarily due to:

- Interest expense related to senior unsecured notes issued in May 2023 ($47 million), the acceleration of the fair value amortization related to the early redemption of the Company’s 2024 senior notes in June 2022 of $30 million and interest expense related to outstanding balances under the Company’s U.S. CP program and revolving credit facilities ($30 million);

partially offset by:

- A make-whole interest payment of $47 million resulting from the early redemption of the Company’s 2024 senior notes in June 2022, interest savings related to the redemption of certain other senior notes in 2022 ($33 million) and premiums of $22 million related to the Company’s open market repurchases of senior notes in 2022.

### 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 September 30, 2023 versus September 30, 2022

Net foreign exchange gain of $22 million compared to a loss of $19 million in the third quarter of 2022 primarily due to:

- Unrealized foreign exchange gains on the translation of intercompany notes ($25 million), lower unrealized foreign exchange losses of U.S. dollar risk management contracts issued from Canada ($14 million) and lower foreign exchange losses on the settlements of U.S. dollar financing debt issued from Canada ($12 million);

partially offset by:

- Lower gains on other monetary revaluations ($9 million).

#### Nine months ended September 30, 2023 versus September 30, 2022

Net foreign exchange of nil compared to a loss of $21 million during the first nine months of 2022 primarily due to:

- Unrealized foreign exchange gain on the translation of U.S. dollar risk management contracts and foreign exchange gain on the settlements of U.S. dollar financing debt issued from Canada compared to losses in 2022 ($33 million and $13 million, respectively);

partially offset by:

- Losses on other monetary revaluations compared to gains in 2022 ($15 million) and foreign exchange losses on the settlement of U.S. dollar risk management contracts issued from Canada and intercompany notes compared to gains in 2022 ($8 million and $7 million, respectively).

### 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 nine months of 2023 includes interest income of $8 million primarily generated from short-term investments. Other gains in the first nine months of 2022 includes interest income of $24 million primarily associated with the resolution of prior years’ tax items.

### Income Tax

| ($ millions) | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Current Income Tax Expense (Recovery) | **$65** | $- | **$181** | $10 |
| Deferred Income Tax Expense (Recovery) | **(78)** | 88 | **33** | 138 |
| Income Tax Expense (Recovery) | **$(13)** | $88 | **$214** | $148 |
| Effective Tax Rate | **(3.3%)** | 6.9% | **14.8%** | 6.0% |

### Income Tax Expense (Recovery)

#### Three months ended September 30, 2023 versus September 30, 2022

In the third quarter of 2023, Ovintiv recorded an income tax recovery of $13 million compared to an income tax expense of $88 million in 2022 primarily due to the recognition of U.S. federal and state research and development credits in 2023 of $107 million and $15 million, respectively, associated with eligible drilling and completion costs incurred in prior years.

#### Nine months ended September 30, 2023 versus September 30, 2022

In the first nine months of 2023, Ovintiv recorded higher income tax expense of $66 million compared to 2022 primarily due to changes in valuation allowances and the expected full utilization of Ovintiv’s operating losses in Canada, resulting in current tax in 2023, partially offset by the recognition of U.S. federal and state research and development credits in 2023 of $107 million and $15 million, respectively, associated with eligible drilling and completion costs incurred in prior years.

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not the tax position will be sustained upon audit by the taxing authorities. During the third quarter of 2023, the Company recorded unrecognized U.S. federal and state tax benefits of $110 million and $31 million, respectively, resulting from research and development expenditures related to drilling and completions costs incurred in prior years. If all, or a portion of, the unrecognized tax benefit is sustained upon examination by the taxing authorities, the tax benefit will be recognized as a reduction to the Company’s deferred tax liability and will affect the Company’s effective tax rate in the period recognized.

### 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 third quarter and the first nine months of 2023, the Company’s effective tax rates were (3.3) percent and 14.8 percent, respectively, which were lower than the U.S federal statutory tax rate of 21 percent primarily due to the recognition of research and development credits noted above.

For the third quarter and the first nine months of 2022, the Company’s effective tax rates were 6.9 percent and 6.0 percent, respectively, which were lower than the U.S federal statutory tax rate of 21 percent primarily due to a lower annual effective income tax rate resulting from a reduction 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

### 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 seeks 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.

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.

| ($ millions, except as indicated) | As at September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Cash and Cash Equivalents | **$3** | $18 |
| Available Credit Facilities (1) | **3,150** | 3,500 |
| Available Uncommitted Demand Lines (2) | **273** | 296 |
| Issuance of U.S. Commercial Paper | **(359)** | (440) |
| Total Liquidity | **$3,067** | $3,374 |
| Long-Term Debt, including current portion (3) | **$6,163** | $3,618 |
| Total Shareholders’ Equity (3) | **$9,552** | $6,550 |
| Debt to Capitalization (%) (4) | **39** | 36 |
| Debt to Adjusted Capitalization (%) (5) | **26** | 20 |

(1) 2023 includes available credit facilities of $1.85 billion in the U.S. and $1.3 billion in Canada (2022 - $2.2 billion and $1.3 billion, respectively).

(2) Includes three uncommitted demand lines totaling $322 million, net of $49 million in related undrawn letters of credit (2022 - $319 million and $23 million, respectively).

(3) Includes the impact of long-term debt and shares of common stock issued in conjunction with the Permian Acquisition.

(4) Calculated as long-term debt, including the current portion, divided by shareholders’ equity plus long-term debt, including the current portion.

(5) A non-GAAP measure which is defined in the Non-GAAP Measures section of this MD&A.

The 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”). The Credit Facilities, which mature in July 2026, provide financial flexibility and allow the Company to fund its operations or capital investment program. At September 30, 2023, $350 million was outstanding under the revolving Credit Facilities.

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 September 30, 2023, the Company had $359 million of commercial paper outstanding under its U.S. CP program maturing at various dates with a weighted average interest rate of approximately 6.25 percent, which is supported by the Company’s Credit Facilities. All of Ovintiv’s credit ratings are investment grade as at September 30, 2023.

The available credit facilities, uncommitted demand lines, and cash and cash equivalents, net of outstanding commercial paper, provide Ovintiv with total liquidity of approximately $3.1 billion as at September 30, 2023. At September 30, 2023, Ovintiv also had approximately $49 million in undrawn letters of credit issued in the normal course of business primarily as collateral security related to sales arrangements.

On June 12, 2023, the Company closed the Permian Acquisition and 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 was renewed in March 2023.

The obligations under the Company’s existing debt securities are fully and 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.

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 September 30, 2023, the Company’s Debt to Adjusted Capitalization was 26 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 14 to the Consolidated Financial Statements included in Item 8 of the 2022 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 first nine months of 2023, Ovintiv primarily generated cash through operating 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.

| ($ millions) Activity Type Sources of Cash, Cash Equivalents and Restricted Cash | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Cash from operating activities Operating | **$906** | $962 | **$2,805** | $2,991 |
| Proceeds from divestitures Investing | **12** | 225 | **741** | 230 |
| Net issuance of revolving debt Financing | **29** | 225 | **316** | 440 |
| Issuance of long-term debt Financing | **-** | - | **2,278** | - |
| Other Investing | **27** | 34 | **116** | 82 |
|  | **974** | 1,446 | **6,256** | 3,743 |
| Uses of Cash and Cash Equivalents |  |  |  |  |
| Capital expenditures Investing | **834** | 511 | **2,084** | 1,473 |
| Acquisitions Investing | **59** | 12 | **273** | 34 |
| Corporate acquisition, net of cash acquired Investing | **-** | - | **3,225** | - |
| Repayment of long-term debt (1) Financing | **-** | 525 | **-** | 1,634 |
| Purchase of shares of common stock Financing | **45** | 325 | **373** | 531 |
| Dividends on shares of common stock Financing | **82** | 62 | **225** | 178 |
| Other Financing | **3** | 2 | **75** | 68 |
|  | **1,023** | 1,437 | **6,255** | 3,918 |
| Foreign Exchange Gain (Loss) on Cash, Cash Equivalents and Restricted Cash Held in Foreign Currency | **-** | 1 | **(3)** | (2) |
| Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | **$(49)** | $10 | **$(2)** | $(177) |

(1) Includes open market repurchases and redemption of the Company’s $1.0 billion senior notes in 2022.

### Operating Activities

Net cash from operating activities in the third quarter and first nine months of 2023 was $906 million and $2,805 million, respectively, and was primarily a reflection of the impacts from average realized commodity prices, realized gains/losses on risk management, production volumes and changes in non‑cash working capital.

Additional detail on changes in non-cash working capital can be found in Note 20 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 third quarter and first nine months of 2023 was $1,112 million and $2,662 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.

#### Three months ended September 30, 2023 versus September 30, 2022

Net cash from operating activities decreased $56 million compared to the third quarter of 2022 primarily due to:

- Lower realized commodity prices ($977 million), changes in non-cash working capital ($223 million), increase in current income taxes ($65 million), higher interest expense ($31 million) and higher operating expense, excluding non-cash long-term incentive costs ($18 million);

partially offset by:

- Realized gains on risk management in revenues compared to losses in 2022 ($831 million), higher production volumes ($374 million), lower transportation and processing expense ($35 million), and lower production, mineral and other taxes ($20 million).

#### Nine months ended September 30, 2023 versus September 30, 2022

Net cash from operating activities decreased $186 million compared to the first nine months of 2022 primarily due to:

- Lower realized commodity prices ($2,960 million), increase in current income taxes ($171 million), higher administrative expenses, excluding non-cash long-term incentive costs ($60 million), higher operating expense, excluding non-cash long-term incentive costs ($37 million), higher interest expense ($27 million), lower interest income ($16 million) and higher transportation and processing expense ($13 million);

partially offset by:

- Lower realized losses on risk management in revenues compared to 2022 ($2,014 million), higher production volumes ($672 million), changes in non-cash working capital ($356 million) and lower production, mineral and other taxes ($72 million).

### Investing Activities

Cash used in investing activities in the first nine months of 2023 was $4,725 million primarily due to acquisitions and capital expenditures. Capital expenditures, and acquisition and divestiture activities 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 $611 million compared to the first nine months of 2022, primarily due to a higher capital expenditure plan, additional capital spending associated with the Permian assets acquired in the second quarter of 2023 and sustained inflationary cost pressures.

Acquisitions in the first nine months of 2023 were $273 million, which primarily included property purchases with oil and liquids rich potential in the USA Operations (2022 - $34 million).

Corporate acquisition in the first nine 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 nine months of 2023 were $741 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 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 located in northeastern Montana, as well as 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 nine months of 2023 was $1,921 million compared to net cash used in financing activities of $1,971 million in 2022. The change 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 $1,634 million and decreased purchases of shares of common stock in 2023 compared to 2022 ($158 million), partially offset by a decrease in net issuance of revolving long-term debt ($124 million) and an increase in dividend payments in 2023 ($47 million).

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.

The Company’s long-term debt, including the current portion of $709 million, totaled $6,163 million at September 30, 2023. The Company’s long-term debt at December 31, 2022, including the current portion of $393 million, totaled $3,570 million. As at September 30, 2023, the Company has no fixed rate long-term debt due until 2025 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 to focus on strategic opportunities to strengthen the balance sheet. Ovintiv expects to continue to deliver additional shareholder returns through share buybacks.

For additional information on long-term debt refer to Note 11 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.

| ($ millions, except as indicated) | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Dividend Payments | **$82** | $62 | **$225** | $178 |
| Dividend Payments ($/share) | **$0.30** | $0.25 | **$0.85** | $0.70 |

On November 7, 2023, the Board of Directors declared a dividend of $0.30 per share of common stock payable on December 29, 2023, to common shareholders of record as of December 15, 2023.

Dividends increased $47 million compared to the first nine months of 2022 as a result of Ovintiv increasing its annualized dividend to $1.00 per share of common stock in the second quarter of 2022 and a further increase to an annualized dividend of $1.20 per share of common stock in the second quarter of 2023. The dividend increase reflects the Company’s commitment to returning capital to shareholders.

#### Normal Course Issuer Bid and Other Share Buybacks

On September 26, 2023, the Company announced it had received regulatory approval for the renewal of its NCIB program, which enables the Company to purchase, for cancellation or return to treasury, up to approximately 26.7 million shares of common stock over a 12-month period from October 3, 2023 to October 2, 2024. The number of shares authorized for purchase represents 10 percent of Ovintiv’s public float as at September 21, 2023. The Company expects to continue to execute the renewed NCIB program in conjunction with its capital allocation framework.

In the third quarter and first nine months of 2023, under the previous NCIB program, which extended from October 3, 2022 to October 2, 2023, the Company purchased, for cancellation of approximately, nil and 7.7 million, respectively, shares of common stock for total consideration of approximately nil and $328 million, respectively.

On September 13, 2023, the Company purchased one million shares of Ovintiv common stock from the 15 million shares offered for sale in a secondary public offering by NMB Stock Trust, a Delaware statutory trust. The total consideration paid was approximately $45 million, or $45.45 per share, and the shares were cancelled during the third quarter of 2023. The share purchase accelerates Ovintiv’s expected fourth quarter share purchases under its existing shareholder return framework.

### 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 2022 Annual Report on Form 10-K.

### Commitments and Contingencies

For information on commitments and contingencies, refer to Note 21 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.

### 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, Debt to Adjusted Capitalization, Debt to EBITDA and Debt to Adjusted EBITDA. Management’s use of these measures is discussed further below.

### Cash from Operating Activities and Non-GAAP Cash Flow

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.

Management believes this 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 is an indication of the Company’s ability to generate cash to finance capital investment programs, to service debt and to meet other financial obligations. This measure is used, along with other measures, in the calculation of certain performance targets for the Company’s management and employees.

| ($ millions, except as indicated) | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Cash From (Used in) Operating Activities | **$906** | $962 | **$2,805** | $2,991 |
| (Add back) deduct: |  |  |  |  |
| Net change in other assets and liabilities | **(14)** | (17) | **(31)** | (42) |
| Net change in non-cash working capital | **(192)** | 31 | **174** | (182) |
| Non-GAAP Cash Flow | **$1,112** | $948 | **$2,662** | $3,215 |

### Debt to Capitalization and 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 Debt to Adjusted 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, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Debt (Long-Term Debt, including Current Portion) | **$6,163** | $3,570 |
| Total Shareholders’ Equity | **9,552** | 7,689 |
| Capitalization | **$15,715** | $11,259 |
| Debt to Capitalization | **39%** | 32% |
| Debt (Long-Term Debt, including Current Portion) | **$6,163** | $3,570 |
| Total Shareholders’ Equity | **9,552** | 7,689 |
| Equity Adjustment for Impairments at December 31, 2011 | **7,746** | 7,746 |
| Adjusted Capitalization | **$23,461** | $19,005 |
| Debt to Adjusted Capitalization | **26%** | 19% |

The increases in Debt to Capitalization and Debt to Adjusted Capitalization are primarily due to the increase in long-term debt resulting from the Permian Acquisition.

### Debt to EBITDA and Debt to Adjusted EBITDA

Debt to EBITDA and Debt to Adjusted EBITDA are non-GAAP measures. 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, 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, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Debt (Long-Term Debt, including Current Portion) | **$6,163** | $3,570 |
| Net Earnings (Loss) | **2,564** | 3,637 |
| Add back (deduct): |  |  |
| Depreciation, depletion and amortization | **1,549** | 1,113 |
| Interest | **312** | 311 |
| Income tax expense (recovery) | **(11)** | (77) |
| EBITDA | **$4,414** | $4,984 |
| Debt to EBITDA (times) | **1.4** | 0.7 |
| Net Earnings (Loss) | **2,564** | 3,637 |
| Add back (deduct): |  |  |
| Depreciation, depletion and amortization | **1,549** | 1,113 |
| Accretion of asset retirement obligation | **18** | 18 |
| Interest | **312** | 311 |
| Unrealized (gains) losses on risk management | **(398)** | (741) |
| Foreign exchange (gain) loss, net | **(6)** | 15 |
| Other (gains) losses, net | **(19)** | (33) |
| Income tax expense (recovery) | **(11)** | (77) |
| Adjusted EBITDA | **$4,009** | $4,243 |
| Debt to Adjusted EBITDA (times) | **1.5** | 0.8 |

The increases 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 September 30, 2023.

## Market risk

As filed, 6,269 characters.

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 2022 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 19 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:

| (US$ millions) | September 30, 2023 10% Price Increase | 10% Price Decrease |
| --- | ---: | ---: |
| Crude oil price | $(202) | $170 |
| NGL price | (2) | 2 |
| Natural gas price | (56) | 54 |

### 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 2022.

| Increase (Decrease) in: | Three Months Ended September 30, $ millions | $/BOE | Nine Months Ended September 30, $ millions | $/BOE |
| --- | ---: | ---: | ---: | ---: |
| Capital Investment | $(3) |  | $(13) |  |
| Transportation and Processing Expense (1) | (7) | $(0.13) | (34) | $(0.22) |
| Operating Expense (1) | (1) | (0.02) | (5) | (0.03) |
| Administrative Expense | (1) | (0.02) | (8) | (0.05) |
| Depreciation, Depletion and Amortization (1) | (1) | (0.03) | (8) | (0.05) |

(1) Reflects upstream operations.

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

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 September 30, 2023, Ovintiv has entered into $133 million notional U.S. dollar denominated currency swaps at an average exchange rate of C$1.3470 to US$1, which mature monthly through the remainder of 2023, and $200 million notional U.S. dollar denominated currency swaps at an average exchange rate of C$1.3501 to US$1, which mature monthly throughout the first half of 2024.

As at September 30, 2023, Ovintiv did 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:

| (US$ millions) | September 30, 2023 10% Rate Increase | 10% Rate Decrease |
| --- | ---: | ---: |
| Foreign currency exchange | $117 | $(143) |

### 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 September 30, 2023, Ovintiv had floating rate revolving credit and term loan borrowings of $709 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 $7 million.

## Controls and procedures

As filed, 2,423 characters.

### 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 September 30, 2023.

### CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

For the third quarter ended September 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 $519 million for the period from June 12, 2023, to September 30, 2023, which represented seven percent of the Company’s consolidated total revenues for the nine months ended September 30, 2023. 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 the Company’s internal controls over financial reporting during the third quarter of 2023 that have materially affected, or are reasonably likely to affect, the Company’s internal controls over financial reporting.

## Risk factors

As filed, 256 characters.

There have been no material changes to the risk factors previously disclosed in Item 1A., "Risk Factors" of our Annual Report on Form 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.

Filed Nov 7, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-060397. Last ingested by Listed: Oct 26, 2026, 06:52 ET. No prices; not investment advice.