Ovintiv is one of the largest independent
producers of crude oil, condensate
and natural gas in North America. The
Company is committed to preserving
its financial strength, maximizing
profitability through disciplined capital
investments and operational efficiencies
and returning capital to shareholders.
A talented team, in combination with a
culture of innovation and efficiency, fuels
our economic performance, increases
shareholder value and strengthens our
commitment to sustainability in the
communities where we live and work.
Stock Information
Corporate Headquarters
Ovintiv Inc.
370 17th Street
Suite 1700
Denver, Colorado 80202
www.ovintiv.com
Investor Contact
888.525.0304
investor.relations@ovintiv.com
Media Contact
281.210.5253
media.relations@ovintiv.com
Our common stock is traded on the New York Stock
Exchange and the Toronto Stock Exchange under
the symbol “OVV.”
Transfer Agents and Registrar
For information regarding change of address or
other matters concerning your shares, please
contact our transfer agents at:
American Stock Transfer
& Trust Company, LLC
6201 15th Avenue
Brooklyn, New York, 11219
1.877.361.7965
help@astfinancial.com
AST Trust Company (Canada)
P.O. Box 721
Agincourt, Ontario M1S 0A1
1.866.580.7145 (toll free in North America)
1.416.682.3863 (outside North America)
www.astfinancial.com/ca-en
O
v
n
t
i
i
v
I
n
c
.
|
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
0
i
o
v
n
t
i
.
v
c
o
m
2020
Annual Report
233_AR_210301_v15.indd 1
233_AR_210301_v15.indd 1
3/2/21 9:00 AM
3/2/21 9:00 AM
Proving Operational Excellence
The year 2020 was a year like no other, creating challenges for our Company and our
industry. With an engaged Board and a proven management team, guided by a multi-
disciplined pandemic response team, we not only navigated the year, but exited more
efficient and positioned to thrive on the road ahead.
2020 Highlights
Through Cycle
Stability
Drove Capital
Efficiency
Reduced
Debt
Delivered
Results
~$200 MM
2020 Non-GAAP
Free Cash Flow
Generation
~$1.74 B
Fy20 Capex
~$480 MM
Absolute Debt
Reduction
Since 2Q20
215 Mbbls/d
4Q20 Crude &
Condensate
FEBRUARY 26, 2021
Fellow Shareholders:
What a dynamic year 2020 was for our
industry and the world. The combined
effects of a global pandemic and collapse
in oil prices created unprecedented
challenges for our industry, and our focus
early in the year shifted to protecting
our people and the financial health of
our company. Ovintiv ended 2020 on a
high note, posting what arguably could
be our best year ever in safety and
environmental performance and in the
efficient execution of our business.
We enter 2021 with optimism and
enthusiasm for the year ahead.
Early in 2020, we formed a Pandemic Response
Team comprised of experts from across the
company, including medical professionals. This
team helped to guide our decision making and
did an incredible job of keeping our people safe in
the field and office and allowing our business to
run while navigating the complexities created by
COVID-19. We leaned heavily on the flexibility built
into our business and our values of “one, agile and
driven,” and finished 2020 strong.
For the last several years, Ovintiv has been leading
industry’s transition to a new and sustainable
E&P model that focuses on generating free cash,
returning cash to shareholders and disciplined
investments to achieve strong returns. The year
2020 marked our third consecutive year of free
cash generation. Other key accomplishments are
summarized below:
• Delivering leading safety and environmental
performance—Achieved our seventh consecutive
“safest year ever” and published our 16th
annual Sustainability Report. For the first time,
we announced an aggressive goal to reduce
methane intensity emissions 33% by 2025, using
2019 as the benchmark. This metric is now tied to
compensation for all employees. On our way to
achieving this important goal, we flared less than
0.50 percent of our natural gas volumes in the
fourth quarter of 2020—an industry-leading metric.
• Proactively adjusted investments to ensure
financial strength—Activity levels were slowed
dramatically, and spending was reduced by
nearly $1 billion when compared to beginning of
the year forecasts. Total 2020 investments were
approximately $1.74 billion.
•
Focused the organization on reducing
cash costs to preserve margins—Culture of
innovation led to more than $200 million in
durable cash cost reductions and delivered
average 2020 well costs approximately 20%
below 2019 actuals. New “pacesetter” results
were achieved in each of the Core 3 plays.
Ovintiv Inc.
2020 Annual Report | i
• Prioritized debt reduction—In the second
quarter of 2020, we set a goal to reduce debt
by more than $1 billion by year-end 2021. At
the end of 2020, by driving cost savings and
capital efficiencies, we were well on our way to
achieving this target.
• Performance and capital efficiencies offset
price and pace impact to proved reserves—
Excluding the impact of lower oil prices, we
replaced 90% of annual production with the
addition of new reserves. Total proved reserves
decreased by less than 10% to approximately
2 billion barrels of oil equivalent, despite a 30%
decrease in oil prices. About 60% are liquids and
56% proved developed.
Our financial performance in 2020 was impacted by
the pandemic and lower oil prices. We reported a
net loss of $6.1 billion and generated full-year cash
from operating activities of approximately $1.9 billion,
equal to non-GAAP cash flow. After rapidly reducing
our capital program by nearly $1 billion, we delivered
non-GAAP free cash flow of $193 million.
Operational performance in 2020 was strong with
crude and condensate production averaging 204
Mbbls/d and total production was 544 MBOE/d.
Following a second quarter 2020 completion
sabbatical related to low oil prices, a resumption of
activities in the third quarter allowed us to produce
average fourth quarter 2020 crude and condensate
of 215 Mbbls/d, nearly equivalent to where we
entered the year.
The thoughtful decisions made in 2020 have
positioned us well for 2021 and our priorities are clear:
• Accomplish the eighth consecutive safest year
ever and continue to reduce the emissions from
our operations.
• Make substantial progress on our goal to reduce
methane intensity 33% by 2025.
• Generate non-GAAP free cash flow for the fourth
consecutive year and maintain scale in our liquids
production through year-end 2022. All excess
cashflows will be allocated to the balance sheet.
• Reduce absolute debt to $4.5 billion by year-end
2022 including $1 billion in divestiture proceeds.
• Make disciplined capital investments of
approximately $1.5 billion to maintain average
crude and condensate production of 200 Mbbls/d.
• Drive efficiency into every corner of our business
and realize the benefits of legacy costs rolling off.
We have a great combination of world-class assets and a proven team to deliver
differentiated performance and value creation. Our priorities are aligned with our
shareholders and we’ve positioned the company to thrive as we navigate a complex and
ever-changing world. Our values of one, agile and driven and our culture of innovation
underpin everything we do.
We appreciate your continued support and investment in Ovintiv.
Doug Suttles
Ovintiv CEO
ii | 2020 Annual Report
Ovintiv Inc.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2020
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 001-39191
Ovintiv Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
84-4427672
(I.R.S. Employer Identification No.)
Suite 1700, 370 17th Street, Denver, Colorado, 80202, U.S.A.
(Address of principal executive offices)
Registrant’s telephone number, including area code (303) 623-2300
Securities registered pursuant to Section 12(b) of the Act:
Title of each
class
Common Shares
Trading Symbol
OVV
Name of each exchange
on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”
“accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of
the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act
(15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes ☐ No ☒
Aggregate market value of the voting and non-voting common equity held by non-
affiliates of registrant as of June 30, 2020
Number of registrant’s shares of common stock outstanding as of February 10, 2021, at
$0.01 par value
$
2,447,515,148
259,860,778
Documents Incorporated by Reference
Portions of registrant’s definitive proxy statement (“Proxy Statement”) for the registrant’s 2021 annual meeting of
stockholders to be held April 28, 2021 (to be filed with the Securities and Exchange Commission prior to
April 28, 2021) are incorporated by reference in Part III of this Annual Report on Form 10-K.
OVINTIV INC.
FORM 10-K
TABLE OF CONTENTS
PART I
Items 1 and 2. Business and Properties
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of
Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder
Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits and Financial Statement Schedules
Signatures
PART IV
8
32
43
44
44
45
47
48
78
80
143
143
143
144
144
144
144
144
145
152
Ovintiv Inc.
2020 Annual Report | 3
DEFINITIONS
Unless the context otherwise requires or otherwise expressly stated, all references in this Annual Report on Form 10-
K to “Ovintiv,” the “Company,” “us,” “we,” “our” and “ours,” (i) for periods until the Reorganization (as hereinafter
defined), refer to Encana Corporation and its consolidated subsidiaries and (ii) for periods after the Reorganization,
refer to Ovintiv Inc. and its consolidated subsidiaries. In addition, the following are other abbreviations and definitions
of certain terms used within this Annual Report on Form 10-K:
“AECO” means Alberta Energy Company and is the Canadian benchmark price for natural gas.
“ASC” means Accounting Standards Codification.
“ASU” means Accounting Standards Update.
“bbl” or “bbls” means barrel or barrels.
“bbls/d” means barrels per day.
“Bcf” means billion cubic feet.
“Bcf/d” means billion cubic feet per day.
“BOE” means barrels of oil equivalent.
“BOE/d” means barrels of oil equivalent per day.
“Btu” means British thermal units, a measure of heating value.
“DD&A” means depreciation, depletion and amortization expenses.
“FASB” means Financial Accounting Standards Board.
“LIBOR” means London Interbank Offered Rate.
“Mbbls” means thousand barrels.
“Mbbls/d” means thousand barrels per day.
“MBOE” means thousand barrels of oil equivalent.
“MBOE/d” means thousand barrels of oil equivalent per day.
“Mcf” means thousand cubic feet.
“Mcf/d” means thousand cubic feet per day.
“MD&A” means Management’s Discussion and Analysis of Financial Condition and Results of Operations.
“MMbbls” means million barrels.
“MMbbls/d” means million barrels per day.
“MMBOE” means million barrels of oil equivalent.
“MMBOE/d” means million barrels of oil equivalent per day.
“MMBtu” means million Btu.
“MMcf” means million cubic feet.
“MMcf/d” means million cubic feet per day.
“NCIB” means normal course issuer bid.
“NGL” or “NGLs” means natural gas liquids.
“NYMEX” means New York Mercantile Exchange.
“NYSE” means New York Stock Exchange.
“OPEC” means Organization of the Petroleum Exporting Countries.
“SCOOP” means South Central Oklahoma Oil Province.
“SEC” means United States Securities and Exchange Commission.
“SIB” means substantial issuer bid.
“STACK” means Sooner Trend, Anadarko basin, Canadian and Kingfisher counties
4 | 2020 Annual Report
Ovintiv Inc.
“Standardized measure” means the present value of after-tax future net revenues discounted at 10% per annum.
“S&P 400” means Standard and Poor’s MidCap 400 index.
“S&P 500” means Standard and Poor’s 500 index.
“S&P/TSX Composite Index” means Standard and Poor’s index for Canadian equity markets.
“TSX” means Toronto Stock Exchange.
“U.S.” or “United States” or “USA” means United States of America.
“U.S. GAAP” means U.S. Generally Accepted Accounting Principles.
“WTI” means West Texas Intermediate.
CONVERSIONS
In this Annual Report on Form 10-K, a conversion of natural gas volumes to BOE is on the basis of six Mcf to one
bbl. BOE is based on a generic energy equivalency conversion method primarily applicable at the burner tip and does
not represent economic value equivalency at the wellhead. Given that the value ratio based on the current price of oil
as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a
6:1 basis may be misleading as an indication of value, particularly if used in isolation.
CONVENTIONS
Unless otherwise specified, all dollar amounts are expressed in U.S. dollars, all references to “dollars”, “$” or “US$”
are to U.S. dollars and all references to “C$” are to Canadian dollars. All amounts are provided on a before tax basis,
unless otherwise stated. In addition, all information provided herein is presented on an after royalties basis.
The term “liquids” is used to represent oil, NGLs and condensate. The term “liquids rich” is used to represent natural
gas streams with associated liquids volumes. The term “play” is used to describe an area in which hydrocarbon
accumulations or prospects of a given type occur. The Company’s focus of development is on hydrocarbon
accumulations known to exist over a large areal expanse and/or thick vertical section and are developed using
hydraulic fracturing. This type of development typically has a lower geological and/or commercial development risk
and lower average decline rate, when compared to conventional development.
The term “core asset” refers to plays that are the focus of the Company’s current capital investment and development
plan. The Company continually reviews funding for development of its plays based on strategic fit, profitability and
portfolio diversity and, as such, the composition of plays identified as a core asset may change over time.
References to information contained on the Company’s website at www.ovintiv.com are not incorporated by reference
into, and does not constitute a part of, this Annual Report on Form 10-K.
FORWARD-LOOKING STATEMENTS AND RISK
This Annual Report on Form 10-K and documents incorporated herein by reference contain certain forward-looking
statements or information (collectively, “forward-looking statements”) within the meaning of applicable securities
legislation, including the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements
include: composition of the Company’s core assets, including the allocation of capital and focus of development plans;
vision of being a leading North American resource play company; statements with respect to the Company’s strategic
objectives including capital allocation strategy, focus of investment, focus of returning capital to shareholders through
sustainable dividends, operating and capital efficiencies and ability to preserve balance sheet strength; statements
regarding the benefits of the Company’s multi-basin portfolio of assets; ability to leverage technology to reduce
development risks, enhance capital and operating efficiencies and sustainably enhance margins while minimizing the
Company’s environmental footprint; ability to lower costs and improve efficiencies to achieve competitive advantage,
including benefits of integrated supply chain model and self-sourcing; ability to repeat and deploy successful practices
across the Company’s multi-basin portfolio; balancing commodity portfolio; anticipated commodity prices; success
of and benefits from technology and innovation, including cube development approach, precision well targeting and
advanced completion designs; water requirements and anticipated water infrastructure; ability to accelerate activity
Ovintiv Inc.
2020 Annual Report | 5
levels; ability to optimize well and completion designs, including changes to lateral lengths drilled, stage, well spacing
and stacking optimization; future well inventory; anticipated drilling, number of drilling rigs and the success thereof;
anticipated drilling costs and cycle times; anticipated proceeds and future benefits from various joint venture,
partnership and other agreements; expected timing for construction of facilities and costs thereof; estimates of reserves
and resources; expected production and product types; ability to replicate successful test wells to future production;
statements regarding anticipated cash flow, non-GAAP cash flow margin and leverage ratios; anticipated cash and
cash equivalents; anticipated hedging and outcomes of risk management program, including ability to leverage
marketing fundamentals expertise, exposure to certain commodity prices and foreign exchange, amount of hedged
production, market access and physical sales locations; impact of changes in laws and regulations, including U.S. tax
reform and potential changes to free trade agreements; compliance with environmental legislation and claims related
to the purported causes and impact of climate change, and the costs therefrom; adequacy of provisions for
abandonment and site reclamation costs; financial flexibility and discipline; access to cash and cash equivalents and
other methods of funding; ability to meet financial obligations, manage debt and financial ratios, finance growth and
compliance with financial covenants; impact to the Company as a result of changes to its credit rating; access to the
Company's credit facilities; planned annualized dividend and the declaration and payment of future dividends, if any;
statements regarding the Company’s financial flexibility and access to liquidity through commodity cycles; managing
capital structure including adjustments to capital spending or dividends, issuing debt or equity, or repaying existing
debt; adequacy of the Company's provision for taxes and legal claims; projections and expectation of meeting the
targets contained in the Company's corporate guidance; ability to manage cost inflation and expected cost structures,
including expected operating, transportation and processing and administrative expenses; outlook of oil and gas
industry generally and impact of geopolitical environment; returns from the Company’s core assets; anticipated capital
spending plans and source of funding thereof; anticipated staffing levels; expected future interest expense; the
Company’s commitments and obligations and ability to satisfy the same; statements with respect to future ceiling test
impairments; and the possible impact and timing of accounting pronouncements, rule changes and standards.
Readers are cautioned against unduly relying on forward-looking statements which, by their nature, involve numerous
assumptions, risks and uncertainties that may cause such statements not to occur, or results to differ materially from
those expressed or implied. These assumptions include: future commodity prices and differentials; foreign exchange
rates; ability to access credit facilities and shelf prospectuses; assumptions contained in the Company’s corporate
guidance and as specified herein; data contained in key modeling statistics; availability of attractive hedges and
enforceability of risk management program; effectiveness of the Company's drive to productivity and efficiencies;
results from innovations; expectation that counterparties will fulfill their obligations under the gathering, midstream
and marketing agreements; access to transportation and processing facilities where the Company operates; assumed
tax, royalty and regulatory regimes; and expectations and projections made in light of, and generally consistent with,
the Company's historical experience and its perception of historical trends, including with respect to the pace of
technological development, benefits achieved and general industry expectations.
Risks and uncertainties that may affect these outcomes include: ability to generate sufficient cash flow to meet
obligations; commodity price volatility; ability to secure adequate transportation and potential pipeline curtailments;
variability and discretion of the Company's board of directors (the “Board of Directors”) to declare and pay dividends,
if any; timing and costs of well, facilities and pipeline construction; business interruption, property and casualty losses
or unexpected technical difficulties, including impact of weather; counterparty and credit risk; actions of OPEC, its
members and other state-controlled oil companies relating to oil price and production controls; sustained declines in
commodity prices resulting in impairment of assets; impact of a downgrade in credit rating and its impact on access
to sources of liquidity; fluctuations in currency and interest rates; risks associated with inflation rates; risks inherent
in the Company's corporate guidance; failure to achieve cost and efficiency initiatives; risks inherent in marketing
operations; risks associated with technology, including electronic, cyber and physical security breaches; changes in or
interpretation of royalty, tax, environmental, greenhouse gas, carbon, accounting and other laws or regulations,
including potential environmental liabilities that are not covered by an effective indemnity or insurance; risks
associated with existing and potential lawsuits and regulatory actions made against the Company; impact of disputes
arising with its partners, including suspension of certain obligations and inability to dispose of assets or interests in
certain arrangements; the Company's ability to acquire or find additional reserves; imprecision of reserves estimates
and estimates of recoverable quantities, including future net revenue estimates; land, legal, regulatory and ownership
complexities inherent in Canada, the U.S. and other applicable jurisdictions; risks associated with past and future
acquisitions or divestitures of certain assets or other transactions or receipt of amounts contemplated under the
transaction agreements (such transactions may include third-party capital investments, farm-outs or partnerships,
which the Company may refer to from time to time as “partnerships” or “joint ventures” and the funds received in
6 | 2020 Annual Report
Ovintiv Inc.
respect thereof which the Company may refer to from time to time as “proceeds”, “deferred purchase price” and/or
“carry capital”, regardless of the legal form) as a result of various conditions not being met; and other risks described
in Item 1A. Risk Factors of this Annual Report on Form 10-K and risks and uncertainties impacting the Company's
business as described from time to time in the Company's other periodic filings with the SEC incorporated by reference
in this Annual Report on Form 10-K.
Although the Company believes the expectations represented by such forward-looking statements are reasonable,
there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions,
risks and uncertainties referenced above and in the documents incorporated by reference herein are not exhaustive.
Forward-looking statements are made as of the date of this document (or, in the case of a document incorporated by
reference, the date of such document incorporated by reference) and, except as required by law, the Company
undertakes no obligation to update publicly or revise any forward-looking statements. The forward-looking statements
contained or incorporated by reference in this Annual Report on Form 10-K are expressly qualified by these cautionary
statements.
The reader should read carefully the risk factors described in Item 1A. Risk Factors of this Annual Report on Form
10-K and the documents incorporated by reference in this Annual Report on Form 10-K for a description of certain
risks that could, among other things, cause actual results to differ from these forward-looking statements.
Ovintiv Inc.
2020 Annual Report | 7
Items 1 and 2. Business and Properties
GENERAL
PART I
Ovintiv is a leading North American resource play company that is focused on developing its multi-basin portfolio of
top tier oil and natural gas assets located in the United States and Canada. Ovintiv's operations also include the
marketing of oil, NGLs and natural gas. As at December 31, 2020, all of the Company’s reserves and production were
located in North America.
On January 24, 2020, Encana Corporation (“Encana”) completed a corporate reorganization (the “Reorganization”),
which included among other things, (i) a consolidation of Encana shares on the basis of one post-consolidation share
for each five pre-consolidation shares (the “Share Consolidation”). Ovintiv acquired all of the issued and outstanding
common shares of Encana in exchange for shares of Ovintiv on a one-for-one basis and becoming the parent company
of Encana and its subsidiaries and (ii) Ovintiv subsequently migrating from Canada and becoming a Delaware
corporation (the “U.S. Domestication”). Ovintiv and its subsidiaries continue to carry on the business previously
conducted by Encana and its subsidiaries prior to the completion of the Reorganization.
Ovintiv’s principal office is located at 370 – 17th Street, Suite 1700, Denver, Colorado 80202, U.S.A. Ovintiv’s shares
of common stock are listed and posted for trading on the NYSE and the TSX under the symbol “OVV”.
Available Information
Ovintiv is subject to the informational requirements of the United States Securities Exchange Act of 1934, as amended
(the “Exchange Act”) and, in accordance with the Exchange Act, it also files reports with and furnishes other
information to the SEC. The public may obtain any document Ovintiv files with or furnishes to the SEC from the
SEC's Electronic Document Gathering, Analysis, and Retrieval system (“EDGAR”), which can be accessed at
www.sec.gov, or via the System for Electronic Document Analysis and Retrieval (“SEDAR”), which can be accessed
at www.sedar.com, as well as from commercial document retrieval services.
Copies of this Annual Report on Form 10-K and the documents incorporated herein by reference may be obtained on
request without charge from Ovintiv’s Corporate Secretary, 370 – 17th Street, Suite 1700, Denver, Colorado 80202,
U.S.A., telephone: (303) 623-2300. Ovintiv also provides access without charge to all of the Company’s SEC filings,
including copies of this Annual Report on Form 10-K and the documents incorporated herein by reference, current
reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act, as soon as reasonably practicable after filing or furnishing, on Ovintiv’s website located at
www.ovintiv.com.
STRATEGY AND APPROACH
Ovintiv Sustainably Makes Modern Life Possible
Ovintiv is one of the largest producers of oil, natural gas liquids, and natural gas in North America. The Company is
committed to safely producing products to drive progress and improve lives with respect and responsibility. The
Company’s products fuel the world, which in turn supports better education, healthcare and equality opportunities.
Ovintiv pioneers innovative ways to provide safe, reliable and affordable energy.
The Company’s culture is unique and powered by innovation, team-work and discipline. Ovintiv has a track record of
driving efficiency in every part of the business. The Company’s capital allocation is highly disciplined and designed
to achieve the Company’s strategic outcomes. Ovintiv benefits from a high-quality multi-basin portfolio which
positions the Company in the core of some the best liquids-rich basins in North America. Ovintiv’s asset base provides
both geographic and commodity diversity and creates optionality in the Company’s investments, while reducing the
concentration of risks.
8 | 2020 Annual Report
Ovintiv Inc.
Key elements that support the execution of the Company’s strategy include:
• Financial Strength - The Company has ample access to liquidity to allow the business to be managed through
the commodity cycles.
Currently, the Company has access to committed credit facilities totaling $4 billion maturing in July 2024, of
which $3.4 billion remains available and undrawn as at December 31, 2020. The Company is committed to
reducing long-term debt by $1.25 billion by the end of 2021. Since the second quarter of 2020, the Company
has reduced long-term debt by $481 million.
• Leveraging Technology and Capturing Efficiencies - The Company is a leader in innovative horizontal drilling
and completions methods that leverage advanced technology. Applicable technologies and operating practices
are quickly deployed across the Company’s multi-basin portfolio to achieve competitive advantage.
Technology and innovation enable Ovintiv to reduce development risks, enhance capital and operating
efficiencies, and sustainably enhance margins and returns while minimizing its environmental footprint.
Ovintiv also strives to be a leading operator and has a historical track record of safely delivering durable
operational efficiencies and capital cost reductions.
• Multi-Basin Portfolio with Multi-Product Exposure - The Company holds a multi-basin portfolio of prolific oil
and liquids rich plays in North America, including: the Permian in Texas, the Anadarko in Oklahoma and the
Montney in British Columbia and Alberta. Ovintiv’s multi-basin portfolio provides both optionality and
diversification of risk due to the diversity of the Company’s resource plays and their geographic locations. As
of December 31, 2020, the Company’s estimated net proved reserves comprised approximately 30 percent oil,
29 percent natural gas liquids, which includes eight percent plant condensate, and 41 percent natural gas.
• Disciplined Capital Allocation - Ovintiv’s capital investment strategy focuses on a limited number of core
assets to generate cash flow and quality returns. Ovintiv’s investment strategy is flexible to allow for capital
programs to be quickly right-sized in response to the macro commodity-price environment and preserve excess
cash flow to return to shareholders through sustainable dividends and maintain balance sheet strength.
• Risk Management - While Ovintiv’s multi-product, multi-basin portfolio and capital investment strategy
provide optionality and flexibility, the Company also leverages its market fundamentals expertise to support
capital allocation and commodity price risk management. The Company actively monitors and manages market
volatility through diversification of price risks and market access risks to enhance margins and returns.
• Transparency in Environmental, Social and Corporate Governance Performance - Ovintiv embraces
stakeholder and societal expectations to continue to grow and change in response to climate change, diversity
and governance. The Company’s development practices have historically focused on ways to reduce its
environmental footprint and waste through its cube development model. Ovintiv believes that strong
environmental, social and governance performance can directly contribute to increased efficiency, economic
performance, value creation and the ability to be sustainable. Since 2005, the Company has published an annual
Sustainability Report, serving as an effective tool to communicate environment, social and governance
performance and track progress on key issues important to stakeholders.
In addition, commencing in 2021, Ovintiv will include methane intensity reduction targets of 33 percent by
2025, which will be tied to the Company’s annual incentive compensation program for all employees.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations under Item 7 of this
Annual Report on Form 10-K for the impact and response of the coronavirus pandemic during 2020 on the Company.
Ovintiv Inc.
2020 Annual Report | 9
REPORTING SEGMENTS
Ovintiv’s operations are focused on the finding and development of oil, NGLs and natural gas reserves. The Company
is also focused on creating and capturing additional value through its market optimization segment. The Company
conducts a substantial portion of its business through subsidiaries. Ovintiv’s operating and reportable segments are:
(i) USA Operations; (ii) Canadian Operations; and (iii) Market Optimization.
• USA Operations includes the exploration for, development of, and production of oil, NGLs, natural gas and
other related activities within the U.S. Core assets that are part of Ovintiv’s strategic development focus
include: Permian in west Texas and Anadarko in west-central Oklahoma. Other Upstream Operations
comprise assets that are not part of Ovintiv’s current strategic focus and primarily include: Eagle Ford in south
Texas, Bakken in North Dakota and Uinta in central Utah.
• Canadian Operations includes the exploration for, development of, and production of oil, NGLs, natural gas
and other related activities within Canada. Core assets that are part of Ovintiv’s strategic development focus
include Montney in northeast British Columbia and northwest Alberta. Other Upstream Operations comprise
assets that are not part of Ovintiv’s current strategic focus and primarily include: Duvernay in west central
Alberta, Horn River in northeast British Columbia and Wheatland in southern Alberta.
• Market Optimization activities are managed by the Midstream, Marketing & Fundamentals team, which is
primarily responsible for the sale of the Company’s proprietary production to third party customers and
enhancing the associated netback price. Market Optimization activities also include third party purchases and
sales of product to provide operational flexibility and cost mitigation for transportation commitments, product
type, delivery points and customer diversification.
Effective July 31, 2019, the Company terminated its production sharing contract with the China National Offshore Oil
Corporation (“CNOOC”) and exited its China Operations. The Company no longer has operations in China.
For additional information regarding the reporting segments, see Note 2 to the audited Consolidated Financial
Statements under Item 8 of this Annual Report on Form 10-K.
10 | 2020 Annual Report
Ovintiv Inc.
OIL AND GAS PROPERTIES AND ACTIVITIES
The following map reflects the location of Ovintiv’s North American landholdings and assets.
“Core assets” refer to plays that have a deep inventory of drilling opportunities and are the primary focus of Ovintiv’s
capital investment and development, providing a competitive and efficient profile. Other Upstream Operations
comprise base assets that receive limited capital that is directed to maintenance or high margin locations that generate
cash flows and returns.
Ovintiv Inc.
2020 Annual Report | 11
USA Operations
Overview: In 2020, the USA Operations had total capital investment of approximately $1,353 million and drilled
approximately 209 net wells primarily in Permian and Anadarko. Production averaged approximately 150.9 Mbbls/d
of oil, approximately 81.4 Mbbls/d of NGLs and approximately 529 MMcf/d of natural gas. At December 31, 2020,
the USA Operations had an established land position of approximately 1.0 million net acres including approximately
182,000 net undeveloped acres. The USA Operations accounted for 67 percent of production revenues, excluding the
impacts of hedging, and 70 percent of total proved reserves as at December 31, 2020.
The following tables summarize the USA Operations landholdings, producing wells and daily production as at and
for the periods indicated.
Landholdings (1)
Developed
Acreage
Undeveloped
Acreage
Total
Acreage
(thousands of acres at December 31, 2020)
Permian
Anadarko
Other Upstream Operations
Eagle Ford
Bakken
Uinta
Other (2)
Total USA Operations
Gross
105
537
44
99
225
201
1,211
Net
93
344
42
64
180
101
824
Gross
35
23
-
8
46
266
378
Net
15
10
-
6
27
124
182
Gross
140
560
44
107
271
467
1,589
Net
108
354
42
70
207
225
1,006
Average
Working
Interest
77%
63%
95%
65%
76%
48%
63%
(1) Excludes interests in royalty acreage.
(2) Other comprises assets that are not part of the Company’s strategic focus.
Producing Wells
(number of wells at December 31, 2020) (1)
Permian
Anadarko
Other Upstream Operations
Eagle Ford
Bakken
Uinta
Other (2)
Total USA Operations
Oil
Natural Gas
Total
Gross
1,537
1,479
437
596
1,200
2
5,251
Net
1,446
685
405
227
939
-
3,702
Gross
9
418
94
11
20
117
669
Net
8
132
90
-
8
100
338
Gross
1,546
1,897
531
607
1,220
119
5,920
Net
1,454
817
495
227
947
100
4,040
(1) Figures exclude wells capable of producing, but not producing.
(2) Other comprises assets that are not part of the Company’s strategic focus.
Production
(average daily)
Permian
Anadarko
Other Upstream Operations
Eagle Ford
Bakken
Uinta
Other (1)
Total USA Operations
Oil
(Mbbls/d)
Plant Condensate
(Mbbls/d)
2020
63.2
43.0
17.7
16.1
10.7
0.2
150.9
2019
64.7
44.4
25.3
14.0
13.9
-
162.3
2020
2.6
6.6
1.0
0.7
0.1
0.1
11.1
2019
2.3
6.0
1.3
0.6
0.2
0.1
10.5
NGLs
Other
(Mbbls/d)
2020
22.7
39.2
4.2
3.6
0.5
0.1
70.3
2019
20.0
38.3
5.9
3.1
0.5
0.1
67.9
Total
(Mbbls/d)
2020
25.3
45.8
5.2
4.3
0.6
0.2
81.4
2019
22.3
44.3
7.2
3.7
0.7
0.2
78.4
Natural Gas
(MMcf/d)
2020
124
331
2019
106
316
31
28
11
4
529
43
23
13
46
547
(1) Other comprises assets that are not part of the Company’s strategic focus. In 2019, Arkoma was divested.
12 | 2020 Annual Report
Ovintiv Inc.
Permian
Permian is an oil play located in west Texas in Midland, Martin, Howard, Glasscock and Upton counties. The
properties within the play are characterized by exposure of up to 10 potential producing horizons spanning
approximately 3,000 feet of stratigraphy or stacked pay, an extensive production history and developed infrastructure.
At December 31, 2020, the Company controlled approximately 108,000 net acres in the play. The current focus of
development is on the Spraberry and Wolfcamp formations in the Midland basin, where Ovintiv holds a large position.
In 2020, production averaged approximately 63.2 Mbbls/d of oil, approximately 25.3 Mbbls/d of NGLs and
approximately 124 MMcf/d of natural gas.
The Company is focused on capturing efficiency improvements and maximizing resource recovery by accessing layers
of the stacked pay simultaneously using the cube development model. This approach utilizes multi-well pads, multi-
rig spreads and frac spreads running in parallel to optimize cycle times and increase capital efficiency, while
minimizing the surface footprint. The Company also captured efficiencies through Simul-Frac techniques, which is
the process of fracking pairs of wells at the same time instead of a single well. The Company’s focus on innovation
and efficiency reduced cycle times and decreased drilling and completions costs by approximately 21 percent. During
2020, the Company drilled 102 horizontal net wells.
Oil and natural gas facilities include field gathering systems, storage batteries, saltwater disposal systems, separation
equipment and pumping units. The majority of Ovintiv’s acreage and associated oil production is dedicated to a
pipeline gathering agreement, which has a total remaining term of 13 years with optional renewal terms. In the event
of pipeline capacity constraints, Ovintiv’s oil production is trucked by various third parties. Natural gas is delivered
by the Company to the purchaser’s meter and pipeline interconnection point in the field.
Anadarko
Anadarko is a liquids rich play located in west-central Oklahoma in Blaine, Canadian, Custer, Dewey, Garvin, Grady,
Kingfisher, Major, McClain and Stephens counties. The majority of the Anadarko properties are located in the black
oil window of the STACK which comprises the Woodford, Meramec and Osage formations spanning up to 800 feet
of stratigraphy and in the SCOOP which comprises the Woodford, Sycamore, Caney and Springer formations
spanning up to 1,150 feet of stratigraphy. The play is characterized by silt, shale and carbonate formations which
provide multiple potential oil and gas targets making the play ideal for cube development and long laterals. At
December 31, 2020, the Company controlled approximately 354,000 net acres in the play. The current focus of
development is on the liquids weighted portions of the basin, including the Woodford, Springer, Meramec and Caney
targets. During 2020, production averaged approximately 43.0 Mbbls/d of oil, approximately 45.8 Mbbls/d of NGLs
and approximately 331 MMcf/d of natural gas.
Since acquiring the asset in February 2019, the Company has utilized its cube development model to optimize
completions design and well spacing, which has resulted in reducing cycle times and decreased drilling and completion
costs by approximately 42 percent. Operational initiatives have also contributed to cost reductions and efficiencies
including Simul-Frac techniques, optimizing gas lift, self-sourced consumables, including sand and chemicals, to
improve supply reliability and the utilization of wet sand in completion activities. During 2020, the Company drilled
71 horizontal net wells.
The play has significant existing infrastructure and has ample access to major production hubs, including Cushing,
Oklahoma, the U.S. Gulf Coast, Mont Belvieu, Texas and Conway, Kansas and a number of Mid-Continent natural
gas market pipelines. Oil and natural gas production are gathered at various production facilities, with the majority of
the oil subsequently transported to sales points by pipeline or sold at and trucked from tank batteries. The majority of
Ovintiv’s acreage and associated production is dedicated to various long-term gathering and processing agreements
with various third parties, which have remaining terms ranging from four to 11 years.
Ovintiv Inc.
2020 Annual Report | 13
Other Upstream Operations
Eagle Ford
Eagle Ford is an oil play located in south Texas in Karnes and Atascosa counties. The focus is on the development of
the thickest portion of the Eagle Ford shale in the Karnes Trough, where Ovintiv holds a largely contiguous position.
At December 31, 2020, the Company controlled approximately 42,000 net acres in the play. Ovintiv is focused on
developing the lower Eagle Ford, as well as optimizing targets in the upper Eagle Ford, expanding development
activity in the Austin Chalk and delineation of Graben, exclusively using horizontal drilling. During 2020, the
Company drilled approximately 18 net wells. Production averaged approximately 17.7 Mbbls/d of oil, approximately
5.2 Mbbls/d of NGLs and approximately 31 MMcf/d of natural gas during the year.
During 2020, the Company continued to focus on precision well targeting, spacing and stacking optimization and
improving completions designs. The Company also focused on capturing operational and production efficiencies
through optimizing artificial gas lift technology, innovative techniques that alleviate frac impacts to reduce workover
costs and automation of well control processes.
The play is located within close proximity to markets and has a well-developed infrastructure. Oil and natural gas
production is gathered at various production facilities, with the majority of the oil subsequently transported to sales
points by pipeline. Ovintiv has access to firm natural gas gathering capacity of up to approximately 45 MMcf/d and
firm processing capacity of up to approximately 80 MMcf/d with third parties with remaining terms of less than five
years, and owns oil processing capacity of 50 Mbbls/d. Ovintiv may also utilize interruptible capacity arrangements
for excess production.
Bakken
Bakken is an oil play located in North Dakota primarily in McKenzie and Dunn counties, and in Montana in Richland
county. The focus of development includes targets in the Bakken and Three Forks formations. During 2020, the
Company continued to focus on maximizing resource recovery through spacing and stacking optimization. Ovintiv
also focused on improving operational design related to casing and completions which reduced costs and improved
well performance.
At December 31, 2020, the Company controlled approximately 70,000 net acres in the play. During 2020, the
Company drilled 10 net wells. Production averaged approximately 16.1 Mbbls/d of oil, approximately 4.3 Mbbls/d of
NGLs and approximately 28 MMcf/d of natural gas.
The majority of Ovintiv’s acreage and associated production is dedicated to a gathering and processing agreement,
which has a remaining term of one year. Ovintiv uses a combination of pipeline and truck to transport oil to sales
points.
Uinta
Uinta is an oil play located in central Utah primarily in Duchesne and Uintah counties. Uinta provides a deep inventory
of multiple stacked oil horizons with approximately 4,000 feet of oil saturated reservoir rock. At December 31, 2020,
the Company controlled approximately 207,000 net acres in the play. During 2020, the Company drilled eight net
wells. Production averaged approximately 10.7 Mbbls/d of oil, approximately 0.6 Mbbls/d of NGLs and
approximately 11 MMcf/d of natural gas.
During 2020, the Company applied its cube development model, drilling eight wells on two pads, and focused
on capturing efficiencies through Simul-Frac techniques.
Oil production from Uinta is waxy ranging from yellow to black and is transported primarily by truck due to the high
heat pour point characteristics of the crude. The Company has crude oil volume minimum delivery commitments with
one refinery in the Salt Lake City area with remaining terms expiring in 2025. Oil production in excess of the minimum
volume commitments are sold monthly in spot markets or transported by rail to other markets such as the Gulf Coast
provided that economics are favorable.
14 | 2020 Annual Report
Ovintiv Inc.
Canadian Operations
Overview: In 2020, the Canadian Operations had total capital investment of approximately $380 million and drilled
approximately 74 net wells primarily in Montney. Production averaged approximately 56.6 Mbbls/d of oil and NGLs
and approximately 1,000 MMcf/d of natural gas. At December 31, 2020, the Canadian Operations had an established
land position in Canada of approximately 1.5 million net acres including approximately 981,000 net undeveloped
acres. The Canadian Operations accounted for 33 percent of production revenues, excluding the impacts of hedging,
and 30 percent of total proved reserves as at December 31, 2020.
In September 2020, the Company terminated its joint venture with PetroChina Canada Ltd. (“PCC”). As part of the
termination, the partners agreed to partition the Duvernay acreage and associated infrastructure. As a result, Ovintiv
holds a 100 percent working interest in the assets retained associated with the joint venture.
The following tables summarize the Canadian Operations landholdings, producing wells and daily production as at
and for the periods indicated.
Landholdings (1)
(thousands of acres at December 31, 2020)
Montney
Other Upstream Operations
Duvernay
Other (2)
Total Canadian Operations
Developed
Acreage
Undeveloped
Acreage
Total
Acreage
Gross
553
53
177
783
Net
369
50
125
544
Gross
597
201
544
1,342
Net
385
198
398
981
Gross
1,150
254
721
2,125
Net
754
248
523
1,525
Average
Working
Interest
66%
98%
73%
72%
(1) Excludes interests in royalty acreage.
(2) Other primarily includes Wheatland and Horn River, as well as assets where the Company may pursue growth opportunities.
Producing Wells
(number of wells at December 31, 2020) (1)
Montney
Other Upstream Operations
Duvernay
Other (2)
Total Canadian Operations
(1) Figures exclude wells capable of producing, but not producing.
(2) Other primarily includes Wheatland and Horn River.
Oil
Natural Gas
Total
Gross
7
14
8
29
Net
6
10
5
21
Gross
1,667
79
565
2,311
Net
1,335
79
470
1,884
Gross
1,674
93
573
2,340
Net
1,341
89
475
1,905
Production
Oil
(Mbbls/d)
Plant Condensate
(Mbbls/d)
NGLs
Other
(Mbbls/d)
Total
(Mbbls/d)
Natural Gas
(MMcf/d)
(average daily)
Montney
Other Upstream Operations
Duvernay
Other (1)
Total Canadian Operations
2020
0.1
2019
0.2
0.5
-
0.6
0.4
-
0.6
2020
37.1
3.9
-
41.0
(1) Other primarily includes Wheatland and Horn River.
2019
36.4
2020
13.9
2019
15.5
2020
51.0
2019
51.9
2020
918
2019
931
6.0
-
42.4
1.1
-
15.0
1.2
-
16.7
5.0
-
56.0
7.2
-
59.1
41
41
1,000
57
42
1,030
Ovintiv Inc.
2020 Annual Report | 15
Montney
Montney is primarily a condensate rich natural gas play located in northeast British Columbia and northwest Alberta.
The play includes properties that are primarily located in the Montney formation, where Ovintiv is currently targeting
the development of condensate rich locations, but also includes landholdings with incremental producing formations
such as Cadomin and Doig. The Montney formation is characterized by up to six stacked horizons spanning over 1,000
feet of stratigraphy and is being developed exclusively with horizontal well technology. In 2020, total production from
the play averaged approximately 51.1 Mbbls/d of oil and NGLs and approximately 918 MMcf/d of natural gas. As at
December 31, 2020, the Company controlled approximately 754,000 net acres and 385,000 net undeveloped acres in
the play.
Ovintiv utilizes the cube development approach which has provided sustained efficiencies resulting in reduced cycle
times and well costs. This development approach utilizes multi-well pads, multiple drilling rigs and completions
spreads simultaneously, and advances technology to optimize well spacing and completions intensity. During 2020,
cost reductions and efficiencies were obtained through trimming down wellsite design and enhancing gas lift through
innovative automation technology. The Company’s focus on innovation and efficiency increased lateral lengths of
wells drilled by approximately 11 percent. In 2020, the Company drilled approximately 73 net horizontal wells.
Ovintiv has access to natural gas processing capacity of approximately 1,565 MMcf/d, of which approximately 1,350
MMcf/d is under contract with third parties under varying terms and duration and approximately 215 MMcf/d of
processing capacity which is owned by the Company. Ovintiv also has access to gathering and compression capacity
of approximately 1,550 MMcf/d, of which approximately 1,450 MMcf/d is under contract with third parties under
varying terms and duration and approximately 100 MMcf/d is owned by the Company. In addition, Ovintiv has access
to liquids handling capacity of approximately 120 Mbbls/d of which approximately 90 Mbbls/d is contracted with
third parties under varying terms and duration, and approximately 30 Mbbls/d is owned by the Company. In October
2020, access to processing capacity under contract with third parties increased by 170 MMcf/d for natural gas and
20 Mbbls/d for liquids related to the commencement of the Pipestone Processing Facility.
Other Upstream Operations:
Duvernay
Duvernay is a liquids rich play located in west central Alberta and includes properties that are primarily located in the
Duvernay formation, which extends across the Simonette, Pinto, Edson and Willesden Green properties, but also holds
potential in other overlapping formations such as the Montney. As at December 31, 2020, the Company controlled
approximately 248,000 net acres, including 198,000 net undeveloped acres in the play. The Company drilled
approximately one net well during the year and production averaged approximately 5.5 Mbbls/d of oil and NGLs and
approximately 41 MMcf/d of natural gas.
Ovintiv owns two Simonette natural gas processing plants and the associated gathering and compression, of which
Ovintiv’s share of natural gas processing capacity is approximately 95 MMcf/d with liquids production capacity of
approximately 18.0 Mbbls/d.
In September 2020, the Company terminated its joint venture with PCC. As part of the termination, the partners agreed
to partition the Duvernay acreage and associated infrastructure. As a result, Ovintiv holds a 100 percent working
interest in the assets retained associated with the joint venture.
16 | 2020 Annual Report
Ovintiv Inc.
Horn River
Horn River is located in northeast British Columbia, where development was historically in the Horn River Basin
shales (Muskwa, Otter Park and Evie), which are upwards of 500 feet thick. In 2020, the Company’s natural gas
production averaged approximately 37 MMcf/d. As at December 31, 2020, the Company had approximately 48 net
producing horizontal wells and controlled approximately 196,000 net acres in the play. Ovintiv owns an interest in
natural gas compression capacity in Horn River of approximately 285 MMcf/d at various facilities in the area. Ovintiv
has a take or pay commitment under the Cabin plant natural gas processing arrangement with a third party, which has
a remaining term of 13 years.
Wheatland
Wheatland is located in southern Alberta and includes producing horizons primarily in the coals and sands of the
Cretaceous Edmonton and Belly River Groups. As at December 31, 2020, the Company had approximately 427 net
producing wells and controlled approximately 143,000 net acres in the play. In 2020, natural gas production averaged
approximately 4 MMcf/d.
Ovintiv Inc.
2020 Annual Report | 17
PROVED RESERVES AND OTHER OIL AND GAS INFORMATION
The process of estimating oil, NGLs and natural gas reserves is complex and requires significant judgment. The
Company’s estimates of proved reserves and associated future net cash flows were evaluated and prepared by the
Company’s internal qualified reserves evaluators (“QREs”) and are the responsibility of management. As a result,
Ovintiv has developed internal policies that prescribe procedures and standards to be followed for preparing,
estimating and recording reserves in compliance with SEC definitions and regulations. Ovintiv’s policies assign
responsibilities for compliance in booking reserves and require that reserve estimates be made by its QREs. QRE is
defined as a registered professional licensed to practice engineering, geology, geophysics and an individual who has
a minimum of five years practical experience, with at least three recent years of experience in the evaluation of
reserves.
Ovintiv’s Corporate Reserves Group, which consists of five staff, report into the Vice-President, Business
Development, Strategy and Reserves who reports to the President of the Company. The Corporate Reserves Group is
responsible for overseeing the internal preparation, review and approval of the reserves estimates and is separate and
independent from the preparation of reserves estimates, which are performed within operations who report to Ovintiv’s
Executive Vice-President & Chief Operating Officer. The Corporate Reserves Group maintains Ovintiv’s internal
policies that prescribe procedures and standards to be followed for preparing, estimating and recording reserves, which
includes the Company’s reserves manual, and conducting periodic internal audits of the procedures, records and
controls relating to the preparation of reserves estimates. Ovintiv’s QREs receive ongoing education on the
fundamentals of SEC definitions and reserves reporting through the review of the Company’s reserves manual and
internal training programs administered by the Corporate Reserves Group. The Corporate Reserves Group also
oversees the engagement of independent qualified reserves evaluators (“IQREs”) or independent qualified reserves
auditors (“IQRAs”), if any, retained by the Company.
As a member of the Corporate Reserves Group, the Company’s Director, Reserves is primarily responsible for
overseeing the preparation of proved reserves estimates. The Director, Reserves has a Bachelor of Science with a
degree in Petroleum Engineering from Colorado School of Mines and is a member of the Society of Petroleum
Evaluation Engineers (Denver Chapter).
Annually, each play is reviewed in detail by the QREs, the Corporate Reserves Group, the Company’s executive
officers and an internal Reserves Review Committee, as appropriate. The Corporate Reserves Group also conducts a
separate review to ensure the effectiveness of the disclosure controls and that the reserves estimates are free from
material misstatement. The final reserves estimates are reviewed by Ovintiv’s Reserves Committee of the Board of
Directors (the “Reserves Committee”), for approval by the Board of Directors. The Reserves Committee comprises
directors that are independent and familiar with estimating oil and gas reserves and disclosure requirements. The
Reserves Committee provides additional oversight to the Company’s reserves process, meeting with management
periodically to review the reserves process, the portfolio of properties, results and related disclosures. The Reserves
Committee is also responsible for reviewing the qualifications and appointment of IQREs or IQRAs, if any, retained
by the Company, including recommending the selection of such IQREs or IQRAs to the Board of Directors for its
approval, and will meet with such IQREs or IQRAs to review their reports.
For year-ended December 31, 2020, the Company involved IQRAs to audit the Company’s internal oil and gas reserve
estimates for certain properties. In 2020, Netherland, Sewell & Associates, Inc. audited 14 percent of the Company’s
estimated U.S. proved reserve volumes and McDaniel & Associates Consultants Ltd. audited both four percent of the
Company’s estimated U.S. proved reserve volumes and 38 percent of the Company’s estimated Canadian proved
reserve volumes. An audit of reserves is an examination of a company’s oil and gas reserves by an independent
petroleum consultant that is conducted for the purpose of expressing an opinion as to whether such estimates, in
aggregate, are reasonable and have been estimated and presented in conformity with generally accepted petroleum
engineering and evaluation methods and procedures.
Proved oil and gas reserves are those quantities of oil, natural gas and NGLs which, by analysis of geoscience and
engineering data, can be estimated with reasonable certainty to be economically producible from known reservoirs
under existing economic conditions, operating methods and government regulations. To be considered proved, oil and
gas reserves must be economically producible before contracts providing the right to operate expire, unless evidence
indicates that renewal is reasonably certain. Also, the project to extract the hydrocarbons must have commenced or
the operator must be reasonably certain that it will commence the project within a reasonable time. Undrilled locations
18 | 2020 Annual Report
Ovintiv Inc.
can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are
scheduled to be drilled within five years.
The Company’s reserve estimates are conducted from fundamental petrophysical, geological, engineering, financial
and accounting data. Data used in reserves assessments may include information obtained directly from the subsurface
through wellbores such as well logs, reservoir core samples, fluid samples, static and dynamic pressure information,
production test data, and surveillance and performance information. Reserves are estimated based on production
decline analysis, analogy to producing offsets, detailed reservoir modeling, volumetric calculations or a combination
of these methods, based on the unique circumstances of each reservoir and the dataset available at the time of the
estimate. The tools used to interpret the data may include proprietary and commercially available reservoir modeling
and simulation software. Reservoir parameters from analogous reservoirs may be used as appropriate. In the case of
producing reserves, the emphasis is on decline analysis where volumetric analysis is considered to limit forecasts to
reasonable levels. Undeveloped reserves are estimated by analogy to producing offsets, with consideration of
volumetric estimates of in place quantities. All locations to which proved undeveloped reserves have been assigned
are subject to a development plan adopted by the Company’s management. In all cases, the Company’s reserve
estimates consider technologies that have been demonstrated in the field to yield repeatable and consistent results,
having regard to economic considerations, as defined in the SEC regulations.
In general, estimates of economically recoverable reserves and the future net cash flows therefrom are based upon a
number of variable factors and assumptions, such as historical production from the properties, production rates,
ultimate reserve recovery, timing and amount of capital expenditures, marketability of crude oil and natural gas,
royalty rates, the assumed effects of regulation by governmental agencies, and future operating costs, all of which may
vary materially from actual results. For those reasons, among others, estimates of the economically recoverable crude
oil and natural gas reserves attributable to any particular group of properties and estimates of future net revenues
associated with reserves may vary and such variations may be material. The actual production, revenues, taxes and
development, and operating expenditures with respect to the reserves associated with the Company's properties may
vary from the information presented herein, and such variations could be material.
The SEC regulations require that proved reserves be estimated using existing economic conditions (constant pricing).
Based on this methodology, the Company’s reserves have been calculated utilizing the 12-month average trailing
historical price for each of the years presented prior to the effective date of the report. The 12-month average is
calculated as an unweighted average of the first-day-of-the-month price for each month. The reserve estimates
provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered.
Ovintiv does not file any estimates of total net proved reserves with any U.S. federal authority or agency other than
the SEC and the Department of Energy (“DOE”). Reserve estimates filed with the SEC correspond with the estimates
of the Company’s reserves contained in its reports. Reserve estimates, for the Company’s U.S. assets, are filed with
the DOE and are based upon the same underlying technical and economic assumptions as the estimates of Ovintiv’s
reserves that are filed with the SEC, however, the DOE requires reports to include the interests of all owners in wells
that Ovintiv operates and to exclude all interests in wells that Ovintiv does not operate. Ovintiv is also required to
provide reserves data prepared in accordance with Canadian securities regulatory requirements, specifically National
Instrument 51-101, Standards of Disclosure for Oil and Gas Activities (“NI 51-101”) which is filed concurrently on
SEDAR at www.sedar.com under Ovintiv’s issuer profile. The primary differences between NI 51-101 reporting
requirements and SEC requirements include the disclosure of proved and probable reserves estimated using forecast
prices and costs, presentation of reserves and production before royalties and more granular product type disclosures.
The reserves data prepared in accordance with NI 51-101 do not form part of this Annual Report on Form 10-K.
The reserves and other oil and gas information set forth below has an effective date of December 31, 2020 and was
prepared as of January 14, 2021. The audit reports prepared by the IQRAs are attached in Exhibits 99.1 and 99.2 of
this Annual Report on Form 10-K.
The following table is a summary of the Company’s proved reserves and estimates of future net cash flows and
discounted future net cash flows from proved reserves information relating to proved reserves which can also be found
in Note 28 to Ovintiv’s audited Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-
K.
Ovintiv Inc.
2020 Annual Report | 19
Proved Reserves
The table below summarizes the Company’s total proved reserves by oil, NGLs and natural gas and by geographic
area for the year ended December 31, 2020 and other summary operating data.
Proved Reserves: (1)
Oil (MMbbls):
Developed
Undeveloped
Total
Natural Gas Liquids (MMbbls):
Developed
Undeveloped
Total
Natural Gas (Bcf):
Developed
Undeveloped
Total
Total Proved Reserves (MMBOE):
Developed
Undeveloped
Total
2020
U.S.
Canada
279.1
311.4
590.5
242.3
186.7
429.1
1,327
941
2,268
742.7
654.9
1,397.6
1.7
-
1.7
76.9
74.5
151.4
1,740
910
2,650
368.7
226.2
594.9
Total
280.9
311.4
592.3
319.3
261.2
580.5
3,067
1,851
4,918
1,111.3
881.1
1,992.5
62%
38%
53%
47%
56%
44%
320.5
1,353
4,679
Percent Proved Developed
Percent Proved Undeveloped
Production (MBOE/d)
Capital Investments (millions)
Total Net Producing Wells (2)
Standardized Measure of Discounted Net Cash Flows: (3)
Pre-Tax (millions)
Taxes (millions)
After-Tax (millions)
(1) Numbers may not add due to rounding.
(2) Total net producing wells includes producing wells and wells mechanically capable of production.
(3) The Pre-Tax standardized measure of discounted cash flows (“standardized measure”) is a non-GAAP measure. The Company believes the
Pre-Tax standardized measure is a useful measure in addition to the After-Tax standardized measure, as it assists in both the estimation of
future cash flows of the current reserves as well as in making relative value comparisons among peer companies. The After-Tax standardized
measure is dependent on the unique tax situation of each individual company, while the Pre-Tax standardized measure is based on prices and
discount factors, which are more consistent between peer companies. See Note 28 to Ovintiv’s audited Consolidated Financial Statements
under Item 8 of this Annual Report on Form 10-K for the standardized measure.
5,931
9
5,922
5,082
9
5,073
543.8
1,733
6,615
223.3
380
1,936
849
-
849
20 | 2020 Annual Report
Ovintiv Inc.
Changes to the Company’s proved reserves during 2020 are summarized in the table below:
Beginning of year
Revisions and improved recovery (2)
Extensions and discoveries
Purchase of reserves in place
Sale of reserves in place
Production
End of year
Developed
Undeveloped
Total
2020 (1)
Oil
(MMbbls)
NGLs
(MMbbls)
723.7
(222.0 )
144.4
10.9
(9.3 )
(55.4 )
592.3
280.9
311.4
592.3
588.5
(62.2 )
105.8
20.0
(21.4 )
(50.3 )
580.5
319.3
261.2
580.5
Natural Gas
(Bcf)
5,259
(484 )
764
140
(201 )
(560 )
4,918
3,067
1,851
4,918
Total
(MMBOE)
2,188.8
(364.9 )
377.5
54.3
(64.1 )
(199.0 )
1,992.5
1,111.3
881.1
1,992.5
(1) Numbers may not add due to rounding.
(2) Changes in reserve estimates resulting from application of improved recovery techniques are included in revisions of previous estimates.
In 2020, the Company’s proved reserves decreased by 196.3 MMBOE from 2019 primarily due to negative revisions
from changes in the approved development plan of 382.2 MMBOE and lower 12-month average trailing price of
167.1 MMBOE, partially offset by positive revisions from well performance and development strategy changes of
182.0 MMBOE and from infill drilling locations of 2.4 MMBOE. Extensions and discoveries of 377.5 MMBOE were
the result of successful drilling and technical delineation, as well as new proved undeveloped locations resulting from
development plan changes in the Permian, Montney, Anadarko and Uinta. Approximately 66 percent of the 2020
extensions and discoveries were crude oil, condensate and NGLs.
Production for 2020 was 199.0 MMBOE. Purchases of 54.3 MMBOE were primarily properties with oil and liquids
rich potential in the Permian and as a result of the partition of certain Duvernay shale assets between Ovintiv and
PCC. Sales of 64.1 MMBOE were primarily due to the divestiture of properties in Anadarko and Permian, as well as
the partition of certain Duvernay shale assets between Ovintiv and PCC.
Proved reserves are estimated based on the average beginning-of-month prices during the 12-month period for the
respective year. The average prices used to compute proved reserves at December 31, 2020 were WTI: $39.62 per
bbl, Edmonton Condensate: C$49.77 per bbl, Henry Hub: $1.98 per MMBtu, and AECO: C$2.13 per MMBtu. Prices
for natural gas, oil and NGLs are inherently volatile.
Proved Undeveloped Reserves
Changes to the Company’s proved undeveloped reserves during 2020 are summarized in the table below:
(MMBOE)
Beginning of year
Revisions of prior estimates
Extensions and discoveries
Conversions to developed
Purchase of reserves in place
Sale of reserves in place
End of Year *
*
Numbers may not add due to rounding.
2020
1,147.7
(464.1 )
344.1
(157.3 )
41.4
(30.7 )
881.1
As of December 31, 2020, there were no proved undeveloped reserves that will remain undeveloped for five years or
more.
Extensions and discoveries of 344.1 MMBOE of proved undeveloped reserves were the result of successful drilling
and technical delineation, as well as new proved undeveloped locations resulting from development plan changes in
the Permian, Montney, Anadarko and Uinta. Revisions of prior estimates of proved undeveloped reserves of
464.1 MMBOE were primarily due to development plan changes and the removal of proved undeveloped locations of
382.2 MMBOE as well as lower 12-month average trailing price of 148.3 MMBOE. Development plan changes relate
Ovintiv Inc.
2020 Annual Report | 21
to specific locations that were previously planned to be drilled within five years but were subsequently shifted to a
later development timeframe or removed and replaced with different locations that are included in extensions and
discoveries. The downward revisions were partly offset by positive revisions of 64.2 MMBOE from improved well
performance and 2.2 MMBOE from infill drilling locations.
Conversions of proved undeveloped reserves to proved developed status were 157.3 MMBOE, equating to 14 percent
of the total prior year-end proved undeveloped reserves. Approximately 65 percent of proved undeveloped reserves
conversions occurred primarily in the Permian and Anadarko in the U.S. and 35 percent occurred in the Montney in
Canada. The Company spent approximately $1,269 million to develop proved undeveloped reserves in 2020, of which
approximately 81 percent related to the U.S. properties and 19 percent related to the Canadian properties.
Throughout 2020, the oil and gas industry was adversely impacted by the global COVID-19 pandemic which caused
the deterioration in the worldwide demand and the failure of Saudi Arabia and Russia to reach an agreement on
production cuts resulting in a price war which caused supply to materially exceed demand of hydrocarbons. In
response, Ovintiv revised its 2020 capital budget of approximately $2.7 billion downward by approximately
$0.9 billion, or 33 percent. The reduction to capital spend and corresponding decrease in planned drilling activity
resulted in a 32 percent reduction of proved undeveloped locations and a proved undeveloped conversion ratio of
14 percent, as at December 31, 2020. However, Ovintiv’s five-year rolling average proved undeveloped conversion
ratio is above 20 percent.
Purchases of proved undeveloped reserves of 41.4 MMBOE and sales of proved undeveloped reserves of
30.7 MMBOE relate primarily to properties in the Permian and the partition of certain Duvernay shale assets between
Ovintiv and PCC.
Sales Volumes, Prices and Production Costs
The following table summarizes the Company’s production by final product sold, average sales price, and production
cost per BOE for each of the last three years by geographic area:
Oil
(MMbbls)
Production
NGLs
(MMbbls)
Natural Gas
(Bcf)
55.2
0.2
55.4
59.2
0.2
0.6
60.0
32.7
0.1
32.8
29.8
20.5
50.3
28.6
21.6
-
50.2
10.5
18.0
28.5
194
367
561
200
376
-
576
55
368
423
2020
USA (3)
Canada (4)
Total
2019
USA (3)
Canada (4)
China (5)
Total
2018
USA (3)
Canada (4)
Total
Average Sales Price (1)
Oil
($/bbl)
NGLs
($/bbl)
Natural Gas
($/Mcf)
36.84
32.58
36.83
56.19
53.19
66.37
56.27
64.05
52.54
64.00
11.85
29.37
18.99
15.83
40.25
-
26.33
27.21
48.05
40.31
1.60
2.01
1.87
1.90
2.01
-
1.97
2.28
2.24
2.25
Average
Production
Cost (2)
($/BOE)
7.99
11.45
9.41
8.54
11.76
23.95
9.90
8.19
12.00
10.49
(1) Excludes the impact of commodity derivatives.
(2) Excludes ad valorem, severance and property taxes.
(3) Annual production from fields that comprise greater than 15 percent of the Company’s total proved reserves for the respective periods ended
related to:
- Midland county in Permian: 2020 - 8.1 MMbbls of oil, 4.4 MMbbls of NGLs and 23 Bcf of natural gas; 2019 - 10.2 MMbbls of oil,
4.2 MMbbls of NGLs and 22 Bcf of natural gas; and 2018 - 9.4 MMbbls of oil, 3.5 MMbbls of NGLs and 17 Bcf of natural gas.
- Stack in Anadarko: 2019 - 13.2 MMbbls of oil, 10.0 MMbbls of NGLs and 72 Bcf of natural gas.
(4) Annual production from fields that comprise greater than 15 percent of the Company’s total proved reserves related to B.C. Montney:
2020 - 10.2 MMbbls of NGLs and 272 Bcf of natural gas; 2019 - 12.5 MMbbls of NGLs and 283 Bcf of natural gas; and 2018 - 11.1 MMbbls
of NGLs and 277 Bcf of natural gas. For the 2018 comparative, North Dawson was included in B.C. Montney.
(5) The Company acquired offshore China operations as part of the Newfield acquisition on February 13, 2019. Effective July 31, 2019, the
Company terminated the production sharing contract with CNOOC and exited China. Production reported are presented for the period from
February 14, 2019 through July 31, 2019.
22 | 2020 Annual Report
Ovintiv Inc.
Drilling and other exploratory and development activities (1, 2)
The following tables summarize the Company’s gross participation and net interest in wells drilled for the periods
indicated by geographic area.
Exploratory
Development
Total
Productive
Dry
Productive
Dry
Productive
Dry
Gross
Net Gross
Net Gross
Net Gross
Net Gross
Net Gross
Net
-
-
-
-
1
1
-
1
1
-
-
-
-
1
1
-
1
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
229
97
326
392
125
517
187
213
400
208
74
282
236
91
327
170
138
308
1
-
1
-
-
-
-
-
-
1
-
1
-
-
-
-
-
-
229
97
326
392
126
518
187
214
401
208
74
282
236
92
328
170
139
309
1
-
1
-
-
-
-
-
-
1
-
1
-
-
-
-
-
-
2020
USA
Canada
Total
2019
USA
Canada
Total
2018
USA
Canada
Total
(1) “Gross” wells are the total number of wells in which the Company has a working interest.
(2) “Net” wells are the number of wells obtained by aggregating the Company’s working interest in each of its gross wells.
Drilling and other exploratory and development activities (1, 2)
The following table summarizes the number of wells in the process of drilling or in active completion stages and the
number of wells suspended or waiting on completion by geographic area at December 31, 2020.
Wells in the Process of Drilling
or in Active Completion
Wells Suspended or Waiting on
Completion (3)
Exploratory
Gross
Development
Exploratory
Net Gross
Net Gross
Development
Net
Net Gross
2020
USA
Canada
Total
-
-
-
-
-
-
14
7
21
13
5
18
-
-
-
-
-
-
47
19
66
44
15
59
(1) “Gross” wells are the total number of wells in which the Company has a working interest.
(2) “Net” wells are the number of wells obtained by aggregating the Company’s working interest in each of its gross wells.
(3) Wells suspended or waiting on completion include exploratory and development wells where drilling has occurred, but the wells are awaiting
the completion of hydraulic fracturing or other completion activities or the resumption of drilling in the future.
Oil and gas properties, wells, operations, and acreage
The following table summarizes the number of producing wells and wells mechanically capable of production by
geographic area at December 31, 2020.
Productive Wells (1, 2)
2020
USA
Canada
Total
Oil (3)
Natural Gas (4)
Total
Gross
Net Gross
Net Gross
Net
5,896
29
5,925
4,236
21
4,257
795
2,359
3,154
443
1,915
2,358
6,691
2,388
9,079
4,679
1,936
6,615
(1) “Gross” wells are the total number of wells in which the Company has a working interest.
(2) “Net” wells are the number of wells obtained by aggregating the Company’s working interest in each of its gross wells.
(3)
(4)
Includes 6 gross oil wells (5 net oil wells) containing multiple completions.
Includes 714 gross natural gas wells (645 net natural gas wells) containing multiple completions.
Ovintiv Inc.
2020 Annual Report | 23
The following table summarizes the Company’s developed, undeveloped and total landholdings by geographic area
as at December 31, 2020.
Landholdings (1 - 7)
(thousands of acres)
United States
Total United States
Canada
Total Canada
Total
— Freehold
— Federal
— Fee
— Tribal/Allotted
— State
— Crown (8)
— Freehold
— Fee
917
131
55
84
24
1,211
742
40
1
783
1,994
Developed
Gross
Net
622
99
12
71
20
824
517
26
1
544
1,368
Undeveloped
Gross
Net
Total
Gross
Net
64
29
250
34
1
378
1,285
54
3
1,342
1,720
31
27
94
29
1
182
938
40
3
981
1,163
981
160
305
118
25
1,589
2,027
94
4
2,125
3,714
653
126
106
100
21
1,006
1,455
66
4
1,525
2,531
(1) Fee lands are those lands in which the Company has a fee simple interest in the mineral rights and has either: (i) not leased out all the mineral
zones; (ii) retained a working interest; or (iii) one or more substances or products that have not been leased. The current fee lands acreage
summary includes all fee titles owned by the Company that have one or more zones that remain unleased or available for development.
(2) Crown/Federal/State/Tribal/Allotted lands are those owned by the federal, provincial or state government or First Nations, in which the
Company has purchased a working interest lease.
(3) Freehold lands are owned by individuals (other than a government or the Company), in which the Company holds a working interest lease.
(4) Excludes interests in royalty acreage.
(5) Gross acres are the total area of properties in which the Company has a working interest.
(6) Net acres are the sum of the Company’s fractional working interest in gross acres.
(7) Undeveloped acreage refers to those acres on which wells have not been drilled or completed to a point that would permit the production of
(8)
economic quantities of oil or gas regardless of whether such acreage contains proved reserves.
Includes acreage related to the Deep Panuke natural gas field located offshore Nova Scotia. The Company has permanently ceased production
and the offshore platform and associated infrastructure was substantially decommissioned in 2020.
Of the total 2.5 million net acres, approximately 2.1 million net acres is held by production. The table above includes
acreage subject to leases that will expire over the next three years: 2021 - approximately 181,000 net acres; 2022 -
approximately 239,000 net acres; and 2023 - approximately 32,000 net acres, if the Company does not establish
production or take any other action to extend the terms. For acreage that the Company intends to further develop,
Ovintiv will perform operational and administrative actions to continue the lease terms that are set to expire. As a
result, it is not expected that a significant portion of the Company’s net acreage will expire before such actions occur.
Title to Properties
As is customary in the oil and natural gas industry, a preliminary review of title records, which may include opinions
or reports of appropriate professionals or counsel, is made at the time Ovintiv acquires properties. The Company
believes that title to all of the various interests set forth in the above table is satisfactory and consistent with the
standards generally accepted in the oil and gas industry, subject only to immaterial exceptions that do not detract
substantially from the value of the interests or materially interfere with their use in Ovintiv’s operations. The interests
owned by Ovintiv may be subject to one or more royalty, overriding royalty, or other outstanding interests (including
disputes related to such interests) customary in the industry. The interests may additionally be subject to obligations
or duties under applicable laws, ordinances, rules, regulations, and orders of arbitral or governmental authorities. In
addition, the interests may be subject to burdens such as production payments, net profits interests, liens incident to
operating agreements and current taxes, development obligations under oil and gas leases, and other encumbrances,
easements, and restrictions, none of which detract substantially from the value of the interests or materially interfere
with their use in the Company’s operations.
24 | 2020 Annual Report
Ovintiv Inc.
MARKETING ACTIVITIES
Market Optimization activities are managed by Ovintiv’s Midstream, Marketing & Fundamentals team, which is
responsible for the sale of the Company’s proprietary production and enhancing the associated netback price. In
marketing production, Ovintiv looks to minimize market related curtailment, maximize realized prices and manage
concentration of credit-risk exposure. Market Optimization activities include third party purchases and sales of product
to provide operational flexibility and cost mitigation for transportation commitments, product type, delivery points
and customer diversification. In conjunction with certain divestitures, the Company has also agreed to market and
transport certain portions of the acquirer’s production with remaining terms of less than one year.
Ovintiv’s produced oil, NGLs and natural gas, are primarily marketed to refiners, local distributing companies, energy
marketing companies and aggregators. Prices received by Ovintiv are based primarily upon prevailing market index
prices in the region in which it is sold. Prices are impacted by regional and global supply and demand and by competing
fuels in such markets.
Ovintiv’s oil production is sold under short-term and long-term contracts that range up to five years or under dedication
agreements, for which prices received by Ovintiv are based primarily upon the prevailing index prices in the relevant
region where the product is sold. The Company also has firm transport contracts to deliver oil to other downstream
markets. Ovintiv’s NGLs production is sold under short-term and long-term contracts that range up to eight years, or
under dedication arrangements at the relevant market price at the time the product is sold. Ovintiv's natural gas
production is sold under short-term and long-term delivery contracts with terms ranging up to three years in duration,
at the relevant monthly or daily market price at the time the product is sold. The Company also has firm transport
contracts to deliver natural gas production to other downstream markets, including Dawn.
Ovintiv also seeks to mitigate the market risk associated with future cash flows by entering into various financial
derivative instruments used to manage price risk relating to produced oil, NGLs and natural gas. Details of contracts
related to Ovintiv’s various financial risk management positions are found in Note 25 to Ovintiv’s audited
Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.
The Company enters into various contractual agreements to sell oil, NGLs and natural gas, some of which require the
delivery of fixed and determinable quantities. As of December 31, 2020, the Company was committed to deliver
approximately 66,833 Mbbls of oil and approximately 206 MMcf of natural gas in the USA Operations and
approximately 3,507 Mbbls of oil and NGLs and approximately 104 MMcf of natural gas in the Canadian Operations
with varying contract terms up to five years. The Company has one crude oil minimum volume sales contract related
to Uinta production in Utah. Given the limited access to transportation and refining facilities resulting from the paraffin
content in Uinta oil production, volatility in commodity prices and changes in capital and development plans,
deficiency fees incurred can vary and may be incurred on the remaining committed deliveries of 20 Mbbls/day through
August 2025.
Certain transportation and processing commitments result in the following financial commitments:
($ millions)
Transportation & Processing
USA Operations
Oil & NGLs
Natural Gas
Total USA Operations
Canadian Operations
Oil & NGLs
Natural Gas
Total Canadian Operations
Total USA and Canadian Operations
1 Year
2-3 Years
4-5 Years
> 5 years
Total
53
191
244
80
405
485
729
111
359
470
184
802
986
1,456
115
119
234
184
533
717
951
133
93
226
278
1,675
1,953
2,179
412
762
1,174
726
3,415
4,141
5,315
In general, Ovintiv expects to fulfill delivery commitments with production from proved developed reserves, with
longer term delivery commitments to be filled from the Company’s proved undeveloped reserves. Where proved
reserves are not sufficient to satisfy the Company’s delivery commitments, Ovintiv can and may use spot market
purchases to satisfy the respective commitments. In addition, for the Company’s long-term transportation and
Ovintiv Inc.
2020 Annual Report | 25
processing agreements, Ovintiv also expects to fulfill delivery commitments from the future development of resources
not yet characterized as proved reserves. Likewise, where delivery commitments are not transferred along with
property divestitures, Ovintiv may market and transport certain portions of the acquirer’s production to meet the
delivery requirements.
In addition, production from the Company’s reserves are not subject to any priorities or curtailments that may affect
quantities delivered to its customers or any priority allocations or price limitations imposed by federal or state
regulatory agencies, or any other factors beyond the Company’s control that may affect Ovintiv’s ability to meet
contractual obligations other than those discussed in Item 1A. Risk Factors of this Annual Report on Form 10-K.
MAJOR CUSTOMERS
In connection with the marketing and sale of the Company’s production and purchased oil, NGLs and natural gas for
the year ended December 31, 2020, the Company had one customer, Vitol Inc., which individually accounted for more
than 10 percent of the Company’s consolidated revenues (2019 - one customer, Vitol Inc. and 2018 - one customer,
Royal Dutch Shell). Ovintiv does not believe that the loss of any single customer would have a material adverse effect
on the Company’s financial condition or results of operations. Further information on Ovintiv’s major customers are
found in Note 2 to Ovintiv’s audited Consolidated Financial Statements under Item 8 of this Annual Report on Form
10-K.
COMPETITION
The Company’s competitors include national, integrated and independent oil and gas companies, as well as oil and
gas marketers and other participants in other industries supplying energy and fuel to industrial, commercial and
individual consumers. All aspects of the oil and gas industry are highly competitive and Ovintiv actively competes
with other companies in the industry, particularly in the following areas:
Exploration for and development of new sources of oil, NGLs and natural gas reserves;
•
• Reserves and property acquisitions;
•
• Access to services and equipment to carry out exploration, development and operating activities; and
• Attracting and retaining experienced industry personnel.
Transportation and marketing of oil, NGLs, natural gas and diluents;
The oil and gas industry also competes with other industries focused on providing alternative forms of energy to
consumers. Competitive forces can lead to cost increases or result in an oversupply of oil, NGLs or natural gas.
HUMAN CAPITAL
Ovintiv strives to be one of the most competitive energy companies in North America, bringing together the brightest
minds and best technologies to fuel innovation and maximize operational performance and results. Recruiting,
developing and retaining Ovintiv’s workforce is vital to the Company’s future success. Ovintiv has a history of hiring
top industry talent and recruiting individuals from within and outside of the oil and gas industry who will thrive in the
Company’s unique culture. The Company’s core values of one, agile and driven, and foundational values of safety,
trust, integrity and respect guide behaviour and define what Ovintiv expects of its employees in the workplace. These
expectations reflect and support the Company’s corporate strategy, culture and organizational priorities. Ovintiv is
committed to fair labor practices in its operations and adheres to all applicable workplace and employment standards.
At December 31, 2020, the Company employed 1,916 employees. The following table outlines our employees by
geographic area.
U.S.
Canada
Total
The Company also engages a number of contractors and service providers.
Employees
1,127
789
1,916
26 | 2020 Annual Report
Ovintiv Inc.
Employee Development and Retention
Ovintiv’s success is the direct result of a talented workforce and the Company’s expectation to share ideas and work
together to achieve company goals. Ovintiv’s culture is defined by constant innovation, promoting internal
collaboration as a way for employees to implement successful strategies and best practices across the Company’s
business. Opportunities are provided for Ovintiv’s employees to further develop leadership skills, technical and
business skills through on-the-job work experiences and job rotations, internal career path opportunities, networking
and mentoring circles, as well as formal learning programs and instructor led workshops. The Company also offers
new graduate and intern opportunities in both technical and professional disciplines to support the recruitment of top
talent, hiring an average of 16 new graduates and 37 interns per year over the past three years. In addition, the Company
has a robust approach to succession planning of key personnel which assesses the competencies, experience, leadership
capabilities, and development opportunities of identified succession candidates.
Ovintiv’s compensation and benefits program is designed to attract and retain the talent necessary to achieve the
Company’s business strategy by rewarding individual performance as well as company performance. The Company’s
compensation model is tied to financial and operational metrics which align to Ovintiv’s strategic plan. In addition,
the compensation philosophy is anchored by two key objectives: i) delivering competitive base salaries and benefits
and ii) rewarding short and long-term performance through the grant of an annual cash bonus and long-term incentive
awards (“LTI awards”). LTI awards are primarily performance-based and are designed to incentivize delivery of the
Company’s strategy and long-term value creation with the payout of these awards correlating to Ovintiv’s stock price
performance. Settlement of certain awards can be either in shares or cash at the discretion of the Human Resources
and Compensation Committee of the Board of Directors. Awards that settle in shares do not result in beneficial
ownership until the awards are settled. See Note 22, Compensation Plans and Note 23, Pensions and Other Post-
Employment Benefits to Ovintiv’s audited Consolidated Financial Statements under Item 8 of this Annual Report on
Form 10-K
As of December 31, 2020, the average tenure of our employees is over eight years and voluntary turnover is less
than four percent.
Diversity and Inclusion
The Company values diversity and fosters inclusion, believing that diverse perspectives and experience enhances
Ovintiv’s overall effectiveness and performance. Ovintiv strives to provide equal opportunity in recruitment, career
development, promotion, training and rewards for its employees. The Company actively facilitates professional
development for women and other minority groups through its internal diversity network, targeted succession planning
and formal mentoring programs. Specific to gender diversity, women at Ovintiv comprised approximately 50 percent
of the executive leadership team reporting to the Chief Executive Officer, approximately 27 percent of the senior
leadership group and approximately 30 percent of all employees at December 31, 2020.
Employee Safety
Safety is a foundational value at Ovintiv. Ensuring safety of employees, suppliers, and the community is a tenet of
managing the Company’s operations. Strong safety performance reflects a well-run business and builds confidence in
the communities where Ovintiv operates. As a result, safety metrics under the Company’s Environment, Health and
Safety (“EH&S”) scorecard are tied into the Company’s compensation program, allowing the Board of Directors to
adjust annual bonus payouts up or down based on the Company’s demonstrated EH&S performance. Metrics reflected
in the EH&S scorecard include Total Recordable Injury Frequency, Process Safety Event Frequency, Motor Vehicle
Incident Frequency and Total Reportable Spill Frequency, all of which are described in the Proxy Statement relating
to the Company’s 2021 annual meeting of stockholders, which is incorporated herein by reference.
Ovintiv Inc.
2020 Annual Report | 27
GOVERNMENT AND ENVIRONMENTAL REGULATORY MATTERS
As Ovintiv is an operator of oil and gas properties and facilities in the United States and Canada, the Company is
subject to numerous federal, state, provincial, local, tribal and foreign country laws and regulations. These laws and
regulations relate to matters that include: acquisition of seismic data; issuance of permits; location, drilling and casing
of wells; well design; hydraulic fracturing; well production; use, transportation, storage and disposal of fluids and
materials incidental to oil and gas operations; surface usage and the restoration of properties upon which wells have
been drilled and facilities have been constructed; plugging and abandoning of wells; pollution, protection of the
environment and the handling of hazardous materials; transportation of production; periodic report submittals during
operations; and calculation and disbursement of royalty payments and production and other taxes. The following are
significant areas of government control and regulation affecting Ovintiv’s operations:
Exploration and Development Activities
Certain of our U.S. oil and natural gas leases are granted or approved by the federal government and administered by
the Bureau of Indian Affairs, the Office of Natural Resources Revenue or the Bureau of Land Management (“BLM”),
all of which are federal agencies. BLM leases contain relatively standardized terms and require compliance with
detailed regulations. Many onshore leases contain stipulations limiting activities that may be conducted on the lease.
Some stipulations are unique to particular geographic areas and may limit the time during which activities on the lease
may be conducted, the manner in which certain activities may be conducted or, in some cases, may ban surface activity.
Under certain circumstances, the BLM may require that our operations on federal leases be suspended or terminated.
Any such suspension or termination could materially and adversely affect Ovintiv’s interests.
In Canada, oil and gas mineral rights may be held by individuals, corporations or governments that have jurisdiction
over the area in which such mineral rights are located. Generally, parties holding these mineral rights grant licenses
or leases to third parties to facilitate the exploration and development of these mineral rights. The terms of these leases
and licenses are generally established to require timely development. Notwithstanding the ownership of mineral rights,
the government of the jurisdiction in which the mineral rights are located generally retains authority over the drilling
and operation of oil and gas wells.
Drilling and Production
The Company’s operations also are subject to conservation regulations, including the regulation of the location of
wells, size of drilling and spacing units or proration units; the number of wells that may be drilled in a unit; the rate
of production allowable from oil and gas wells; and the unitization or pooling of oil and gas properties. In the U.S.,
some states allow the forced pooling or integration of tracts to facilitate exploration while other states rely on voluntary
pooling of lands and leases, which make it more difficult to develop oil and gas properties. In addition, conservation
laws generally limit the venting or flaring of natural gas and impose certain requirements regarding the ratable
purchase of production. These regulations limit the amounts of oil and gas that can be produced from the Company’s
wells and the number of wells or the locations that can be drilled.
Royalties
Operations on U.S. Federal or Indian oil and gas leases must comply with numerous regulatory restrictions, including
various non-discrimination statutes, and certain of such operations must be conducted pursuant to certain on-site
security regulations and other permits issued by various tribal and federal agencies, including the BLM and the Office
of Natural Resources Revenue (“ONRR”). The basis for royalty payments due under federal oil and gas leases are
through regulation issued under the applicable statutory authority. State regulatory authorities establish similar
standards for royalty payments due under state oil and gas leases. The basis for royalty payments established by ONRR
and the state regulatory authorities is generally applicable to all federal and state oil and gas leases.
The royalty calculation in Canada is a significant factor in the profitability of Canadian oil and gas production. Oil
and gas crown royalties are determined by provincial and territorial government regulation and are generally calculated
as a percentage of the value of the gross production, net of allowed deductions. The royalty rate is dependent in part
on prescribed references prices, well productivity, geographical locations, recovery methods, as well as type and
quality of the hydrocarbon produced. For pre-payout oil and gas projects, the regulations prescribe lower royalty rates
28 | 2020 Annual Report
Ovintiv Inc.
for oil and gas projects until allowable capital costs have been recovered. The calculation for wells post payout is
based on a percentage of production net of allowed deductions and varies with commodity price.
Royalties payable on production from lands other than federal, state or provincial government lands are determined
through negotiations between the parties.
Sales and Transportation
Although oil and natural gas prices are currently unregulated, Congress historically has been active in the area of oil
and gas regulation. As a result, the Company cannot predict whether new regulation might be proposed.
The availability, terms and transportation significantly affect sales of oil and natural gas. The interstate transportation
and sale for resale of oil and natural gas is subject to federal regulation, including regulation of terms, conditions and
rates for interstate transportation, storage and various other matters, primarily by the Federal Energy Regulatory
Commission (“FERC”). Federal and state regulations govern the price and terms of access to oil and natural gas
pipeline transportation. FERC’s regulations for oil and natural gas transmission in some circumstances may also affect
the intrastate transportation of oil as the transportation of oil in common carrier pipelines is also subject to rate
regulation by the FERC under the Intrastate Commerce Act. To the extent that effective interstate and intrastate rates
are equally applicable to all comparable shippers, the Company believes that the regulation of oil transportation rates
will not affect our operations in any way that is of material difference from those of our competitors.
Project Approvals
Approvals and licenses from relevant provincial or federal government or regulatory bodies are required to carryout
or make modifications to the company’s oil and gas activities. The project approval process can involve environmental
assessment, stakeholder and Indigenous consultation and inputs regarding project concerns and public hearings and
may included various conditions and commitments which may arise throughout the process.
In 2019, the Canadian government implemented a new environmental assessment framework in Canada under the
Impact Assessment Act, which may impact the way large energy projects are approved. Though the Company does
not typical own, operate, permit or construct projects which fall under the scope of the Impact Assessment Act, some
of the Company’s business may rely on these projects owned, operated, permitted and constructed by others.
Investment Canada Act
The Investment Canada Act requires Government of Canada approval, in certain cases, of the acquisition of control
of a Canadian business by an entity that is not controlled by Canadians. In certain circumstances, the acquisition of
natural resource properties may be considered to be a transaction requiring such approval.
Environmental and Occupational Regulations
The Company is subject to many federal, state, provincial, local and tribal laws and regulations concerning
occupational health and safety as well as the discharge of materials into, and the protection of, the environment.
Environmental laws and regulations relate to:
•
•
•
•
•
•
•
•
•
•
the discharge of pollutants into federal, provincial and state waters;
assessing the environmental impact of seismic acquisition, drilling or construction activities;
the generation, storage, transportation and disposal of waste materials, including hazardous substances;
the emission of certain gases into the atmosphere;
the protection of private and public surface and ground water supplies;
the sourcing and disposal of water;
the protection of endangered species and habitat;
the monitoring, abandonment, reclamation and remediation of well and other sites, including former
operating sites;
the development of emergency response and spill contingency plans; and
employee health and safety.
Ovintiv Inc.
2020 Annual Report | 29
Failure to comply with these laws and regulations may result in the assessment of sanctions, including administrative,
civil, and criminal penalties; the imposition of investigatory, remedial, and corrective action obligations or the
incurrence of capital expenditures; the occurrence of delays in the permitting, development or expansion of projects;
and the issuance of injunctions restricting or prohibiting some or all of the Company’s activities in a particular area.
Although environmental requirements have a substantial impact upon the energy industry as a whole, Ovintiv does
not believe that these requirements affect the Company differently, to any material degree, as compared to other
companies in the oil and natural gas industry. For further information regarding regulations relating to environmental
protection, see Item 1A. Risk Factors of this Annual Report on Form 10-K.
Operating and capital costs incurred to comply with the requirements of these laws and regulations are necessary
business costs in the oil and gas industry. As a result, Ovintiv has established policies for continuing compliance with
environmental laws and regulations. The Environment, Health and Safety Committee of the Board of Directors
reviews and recommends environmental policy to the Board of Directors for approval and oversees compliance with
government laws and regulations. Monitoring and reporting programs for environmental, health and safety
performance in day-to-day operations, as well as inspections and assessments, are designed to provide assurance that
environmental and regulatory standards are met. The Company has established operating procedures and training
programs designed to limit the environmental impact of the Company’s field facilities and identify, communicate and
comply with changes in existing laws and regulations. Contingency plans are in place for a timely response to an
environmental event and remediation/reclamation programs are in place and utilized to restore the environment. In
addition, the Board of Directors is advised of significant contraventions thereof, and receives updates on trends, issues
or events which could have a significant impact on the Company.
The Company believes that it is in material compliance with existing environmental and occupational health and safety
regulations. Further, the Company believes that the cost of maintaining compliance with these existing laws and
regulations will not have a material adverse effect on its business, financial condition or results of operations. In
addition, Ovintiv maintains insurance coverage for insurable risks against certain environmental and occupational
health and safety risks that is consistent with insurance coverage held by other similarly situated industry participants,
but the Company is not fully insured against all such risks. However, it is possible that developments, such as new or
more stringently applied existing laws and regulations as well as claims for damages to property or persons resulting
from the Company’s operations, could result in substantial costs and liabilities to the Company. As a result, Ovintiv
is unable to predict with any reasonable degree of certainty future exposures concerning such matters.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Company’s Executive Officers are set out in the table below:
Years Served
as Executive
Name
Age (1)
Officer (2) Corporate Office
Douglas J. Suttles
Joanne L. Cox
Corey D. Code
Gregory D. Givens
Brendan M. McCracken
Rachel M. Moore
Renee E. Zemljak
60
54
47
47
45
49
56
8 Chief Executive Officer
6 Executive Vice-President, General Counsel & Corporate Secretary
2 Executive Vice-President & Chief Financial Officer
2 Executive Vice-President & Chief Operating Officer
2
1 Executive Vice-President, Corporate Services
11 Executive Vice-President, Midstream, Marketing & Fundamentals
President
(1) As of February 10, 2021.
(2)
Includes the years served as executive officer of Encana.
Mr. Suttles was appointed Chief Executive Officer of the Company in June 2013. Prior to 2013, Mr. Suttles was an
independent businessman performing consulting services in the oil and gas industry and serving on the boards of one
public and one private company from 2011 until 2013. Mr. Suttles was also Chief Operating Officer at BP Exploration
& Production from 2009 until 2011.
Ms. Cox was appointed Executive Vice-President, General Counsel & Corporate Secretary of the Company in January
2015. Prior to that, Ms. Cox was Senior Vice-President, General Counsel and Corporate Secretary of Precision Drilling
Corporation (a public oil and gas services company) from 2008 to 2014.
30 | 2020 Annual Report
Ovintiv Inc.
Mr. Code was appointed Executive Vice-President & Chief Financial Officer of the Company in May 2019. Mr. Code
joined one of the Company’s predecessor companies in 1999 and assumed a variety of leadership roles, including his
previous position as Vice-President, Investor Relations and Strategy in 2018, Vice-President, Investor Relations in
2017, and Treasurer and Vice President, Portfolio Management in 2013.
Mr. Givens was appointed Executive Vice-President & Chief Operating Officer of the Company in September 2019.
Mr. Givens joined the Company in 2018 serving as Vice-President and General Manager of Texas Operations. Prior
to joining the Company, Mr. Givens was Vice-President Eagle Ford of EP Energy (a public oil and gas company)
from 2012 to 2017 and worked in various technical and leadership roles from 1996 onwards for El Paso Exploration
& Production Company and Sonat Exploration Company which were predecessor companies to EP Energy.
Mr. McCracken was appointed President of the Company in December 2020. Mr. McCracken joined one of the
Company’s predecessor companies in 1997 and assumed a variety of leadership roles, including his previous positions
as Executive Vice-President, Corporate Development & External Affairs in September 2019 and Vice-President &
General Manager of Canadian Operations in 2017.
Ms. Moore was appointed Executive Vice-President, Corporate Services of the Company in June 2020. Ms. Moore
joined the Company in 2015 serving as Vice-President, Human Resources. Prior to joining the Company, Ms. Moore
was Executive Vice-President, Human Resources of Savanna Energy Services Corporation (a privately held oil and
gas services company) from 2010 to 2015 and was Vice President, Human Resources of Enerflex Ltd. (a public oil
and gas services company) from 2003 to 2010.
Ms. Zemljak was appointed Executive Vice-President, Midstream, Marketing & Fundamentals of the Company in
November 2009. Ms. Zemljak joined one of the Company’s predecessor companies in 2000 and assumed a variety of
leadership roles, including her previous position as Vice-President of USA Marketing in 2002. Prior to joining the
Company, Ms. Zemljak worked in various roles for Montana Power (formerly a public power company).
Ovintiv Inc.
2020 Annual Report | 31
ITEM 1A. Risk Factors
If any event arising from the risk factors set forth below occurs, Ovintiv’s business, prospects, financial condition,
results of operations, cash flows or the trading prices of securities and in some cases its reputation could be materially
adversely affected. When assessing the materiality of the foregoing risk factors, Ovintiv takes into account a number
of qualitative and quantitative factors, including, but not limited to, financial, operational, environmental, regulatory,
reputational and safety aspects of the identified risk factor.
Market Risks
A substantial or extended decline in oil, NGLs or natural gas prices and price differentials could have a material
adverse effect on Ovintiv’s financial condition.
Ovintiv’s financial performance and condition are substantially dependent on the prevailing prices of oil, NGLs and
natural gas. Low oil, NGLs and natural gas prices and significant U.S. and Canadian price differentials will have an
adverse effect on the Company’s operations and financial condition and the value and amount of its reserves. Prices
for oil, NGLs and natural gas fluctuate in response to changes in the supply and demand for the commodities and
related products, market uncertainty and a variety of additional factors beyond the Company’s control.
Oil prices are largely determined by international and domestic supply and demand. Factors which affect oil prices
include the actions of the OPEC, world economic conditions, government regulation, political stability in the Middle
East and elsewhere, the foreign and domestic supply of oil, the price of foreign imports, the availability of alternate
fuel sources, transportation and infrastructure constraints and weather conditions. Historically, NGLs prices have
generally been correlated with oil prices, and are determined based on supply and demand in international and
domestic NGLs markets. Natural gas prices realized by Ovintiv are affected primarily by North American supply and
demand, weather conditions, transportation and infrastructure constraints, prices and availability of alternate sources
of energy (including refined products, coal, and renewable energy initiatives) and by technological advances affecting
energy consumption.
A substantial or extended decline in the price of oil, NGLs and natural gas could result in a delay or cancellation of
existing or future drilling, development or construction programs or curtailment or shut-in of production at some
properties or could result in unutilized long-term transportation and drilling commitments, all of which could have an
adverse effect on the Company’s revenues, profitability and cash flows.
Oil and natural gas producers in North America, and particularly in Canada, currently receive discounted prices for
their production relative to certain international prices due to constraints on their ability to transport and sell such
production to international markets. A failure to resolve such constraints may result in continued discounted or reduced
commodity prices realized by oil and natural gas producers, including Ovintiv.
On at least an annual basis, Ovintiv conducts an assessment of the carrying value of its assets in accordance with the
applicable accounting standards. If oil, NGLs and natural gas prices decline further, the carrying value of Ovintiv’s
assets could be subject to financial downward revisions, and the Company’s net earnings could be adversely affected.
A pandemic, epidemic or other widespread outbreak of an infectious disease, such as the ongoing outbreak of
COVID-19, could affect the operation of our business.
On March 11, 2020, the World Health Organization escalated the status of the COVID-19 outbreak from epidemic to
pandemic. In an effort to mitigate the spread of COVID-19, governmental authorities in the United States, Canada and
around the world have implemented, among other measures, limitations on cross-border travel, restrictions on mass
gatherings, stay-at-home orders and mandatory closures of non-essential businesses. In the event such restrictions
remain in place for an extended period of time, the Company’s ability to maintain ordinary staffing levels, secure
operational inputs, and execute on portions of its business could be impacted. Although the Company has contingency
plans in place to manage the potential workplace impacts of global outbreaks, including COVID-19, restrictions
implemented by governments in jurisdictions in which the Company operates could prevent employees, contractors
or suppliers from accessing the Company’s properties or performing critical services, or negatively impact the
availability of the Company’s key personnel. In addition, if a significant subset of the Company’s employees are
32 | 2020 Annual Report
Ovintiv Inc.
required to work remotely, the Company may experience a higher rate of cyber-attacks and exposure to vulnerabilities
related to digital technologies.
Concerns over the prolonged negative effects of the COVID-19 pandemic on economic and business prospects across
the world have contributed to increased market and oil price volatility and diminished expectations for the performance
of the global economy. The COVID-19 pandemic has resulted in, and may continue to result in, significant market
uncertainty, including substantial fluctuations in currency exchange rates, inflation, interest rates, counterparty credit
and performance risk, and general levels of investing and consumption. An extended period of decreased global
demand and/or oversupply of production may result in refiners curtailing operations or refinery utilization rates, which
could contribute to storage constraints or a widening of price differentials in jurisdictions in which the Company
operates. Further, low commodity prices could impact the value and amount of the Company’s reserves and may result
in the recognition of future ceiling test impairments.
The full impact of the COVID-19 pandemic is uncertain and will depend on a number of factors, including the location
and severity of the virus's spread and the effectiveness of mitigation actions taken by governmental authorities.
Ongoing market uncertainty and an extended period of low commodity prices could result in changes to the Company's
spending and operating plans, substantial fluctuations in the Company’s stock price and credit ratings, and affect the
Company's financial condition, operations and access to liquidity.
The market price of shares of common stock of Ovintiv may be subject to volatility.
The market price of the shares of common stock of Ovintiv may be volatile. The value of an investment in the shares
of common stock of Ovintiv may decrease or increase abruptly, and such volatility may bear little or no relation to
Ovintiv’s performance. The price of the shares of common stock of Ovintiv may fall in response to market appraisal
of the Company’s strategy or if Company’s results of operations and/or prospects are below the expectations of market
analysts or stockholders. In addition, stock markets have, from time to time, experienced significant price and volume
fluctuations that have affected the market price of securities, and may, in the future, experience similar fluctuations
which may be unrelated to Ovintiv’s operating performance and prospects but nevertheless affect the price of the
shares of common stock of Ovintiv. Broad market fluctuations, as well as economic conditions generally may
adversely affect the market price of the shares of common stock of Ovintiv.
Fluctuations in exchange rates could affect expenses or result in realized and unrealized losses.
Worldwide prices for oil and natural gas are set in U.S. dollars. Following the U.S. Domestication, the functional
currency of Ovintiv is U.S. dollars and the financial results are consolidated in U.S. dollars. However, the Canadian
dollar continues to be the functional currency for Ovintiv’s Canadian subsidiaries. As Ovintiv has operations in
Canada, a portion of the Company’s revenues and expenses are denominated in Canadian dollars. Fluctuations in the
exchange rate between the U.S. dollar and the Canadian dollar could impact the Company’s revenue and expenses
and have an adverse effect on the Company’s financial performance and condition.
In addition, Ovintiv’s Canadian subsidiaries may hold U.S. dollar denominated assets and liabilities. Fluctuations in
the exchange rate between the U.S. dollar and the Canadian dollar could result in realized and unrealized losses.
Operational Risks
Ovintiv’s ability to operate and complete projects is dependent on factors outside of its control which may have a
material adverse effect on its business, financial condition or results of operations.
The Company’s ability to operate, generate sufficient cash flows, and complete projects depends upon numerous
factors beyond the Company’s control. In addition to commodity prices and continued market demand for its products,
these non-controllable factors include general business and market conditions, economic recessions and financial
market turmoil, the overall state of the capital markets, including investor appetite for investments in the oil and gas
industry generally and the Company’s securities in particular, the ability to secure and maintain cost effective
financing for its commitments, legislative, environmental and regulatory matters, changes to free trade agreements,
reliance on industry partners and service providers, unexpected cost increases, royalties, taxes, volatility in oil, NGLs
and natural gas prices, the availability of drilling and other equipment, the ability to access lands, the ability to access
water for hydraulic fracturing operations, physical impacts from adverse weather conditions and other natural
Ovintiv Inc.
2020 Annual Report | 33
disasters, the availability and proximity of processing and pipeline capacity, transportation interruptions and
constraints, technology failures, accidents, the availability of skilled labour and reservoir quality. In addition, some of
these risks may be magnified due to the concentrated nature of funding certain assets within the Company’s portfolio
of oil and natural gas properties that are operated within limited geographic areas. As a result, a number of the
Company’s assets could experience any of the same risks and conditions at the same time, resulting in a relatively
greater impact on the Company’s financial condition and results of operations compared to other companies that may
have a more geographically diversified portfolio of properties.
Fluctuations in oil, NGLs and natural gas prices can create fiscal challenges for the oil and gas industry. These
conditions have impacted companies in the oil and gas industry and the Company’s spending and operating plans and
may continue to do so in the future. There may be unexpected business impacts from market uncertainty, including
volatile changes in currency exchange rates, inflation, interest rates, defaults of suppliers and general levels of
investing and consuming activity, as well as a potential impact on the Company’s credit ratings, which could affect
its liquidity and ability to obtain financing.
The Company undertakes a variety of projects including exploration and development projects and the construction
or expansion of facilities and pipelines. Project delays may delay expected revenues and project cost overruns could
make projects uneconomic.
All of Ovintiv’s operations are subject to regulation and intervention by governments that can affect or prohibit the
drilling, completion and tie-in of wells, production, the construction or expansion of facilities and the operation and
abandonment of fields. Contract rights can be cancelled or expropriated. Changes to government regulation could
impact the Company’s existing and planned projects.
Ovintiv’s proved reserves are estimates and any material inaccuracies in our reserves estimates or assumptions
underlying our reserves estimates could cause quantities and net present value of our reserves to be overstated or
understated.
There are numerous uncertainties inherent in estimating quantities of oil, NGLs and natural gas reserves, including
many factors beyond the Company’s control. The reserves data in this Annual Report on Form 10-K and other
published reserves and resources data represents estimates only. In general, estimates of economically recoverable oil,
NGLs and natural gas reserves and the future net cash flows therefrom are based upon a number of variable factors
and assumptions, such as commodity prices, future operating and capital costs, availability of future capital, historical
production from the properties and the assumed effects of regulation by governmental agencies, including with respect
to royalty payments, all of which may vary considerably from actual results. All such estimates are to some degree
uncertain, and classifications of reserves and resources are only attempts to define the degree of uncertainty involved.
For those reasons, estimates of the economically recoverable oil, NGLs and natural gas reserves attributable to any
particular group of properties, classification of such reserves based on risk of recovery and estimates of future net
revenues expected therefrom, prepared by different engineers or by the same engineers at different times, may vary
substantially. Ovintiv’s actual production, revenues, taxes and development and operating expenditures with respect
to its reserves may vary from such estimates, and such variances could be material. Estimates with respect to reserves
that may be developed and produced in the future are often based upon volumetric calculations and upon analogy to
similar types of reserves, rather than upon actual production history. Estimates based on these methods generally are
less reliable than those based on actual production history. Subsequent evaluation of the same reserves based upon
production history will result in variations, which may be material, in the estimated reserves.
The estimates of reserves included in this Annual Report on Form 10-K are prepared in accordance with SEC
regulations and require, subject to limited exceptions, that proved undeveloped reserves may only be classified as
proved reserves if the related wells are scheduled to be drilled within five years after the date of booking. Reserves to
be developed and produced in the future are based upon certain expectations and assumptions, including the allocation
of capital, which may be subject to change. Proved undeveloped reserves may be reclassified to unproved due to
delays in the development of reserves, or projects becoming uneconomical due to increases in costs to drill such
reserves, or lower future net revenues from further decreases in commodity prices.
Commodity prices used to estimate reserves included in this Annual Report on Form 10-K are calculated as the average
oil and natural gas price during the 12 months ending in the current reporting period, determined as the unweighted
34 | 2020 Annual Report
Ovintiv Inc.
arithmetic average of prices on the first day of each month within the 12-month period. Significant future price changes
can have a material effect on the quantity and value of the Company's proved reserves. The standardized measure of
discounted future net cash flows included in this Annual Report on Form 10-K will not represent the current market
value of Ovintiv’s estimated reserves. In addition, these reserve estimates do not include any value for probable or
possible reserves that may exist, nor do they include any value for unproved undeveloped acreage.
If Ovintiv fails to acquire or find additional reserves, the Company’s reserves and production will decline materially
from their current levels.
Ovintiv’s future oil, NGLs and natural gas reserves and production, and therefore its cash flows, are highly dependent
upon its success in developing its current reserves base and acquiring, discovering or developing additional reserves.
Without reserves additions through exploration, acquisition or development activities, the Company’s reserves and
production will decline over time as reserves are depleted.
The business of exploring for, developing or acquiring reserves is capital intensive. In addition, part of Ovintiv’s
strategy is focused on a limited number of core assets which results in a concentration of capital and increased potential
risks. To the extent that cash flows from the Company’s operations are insufficient and external sources of capital
become limited, Ovintiv’s ability to make the necessary capital investments to maintain and expand its oil, NGLs and
natural gas reserves and production will be impaired. In addition, there can be no certainty that Ovintiv will be able to
find and develop or acquire additional reserves to replace production at acceptable costs.
In addition, Ovintiv’s operations utilize horizontal multi-pad drilling, tighter drill spacing and completions techniques
that evolve over time as learnings are captured and applied. The use of this technology may increase the risk of
unintentional communication with other wells and the potential for acceleration of current reserves or an increase in
recovery factor from the reservoir. If drilling and completions results are less than anticipated, the production volumes
may be lower than anticipated.
Ovintiv may not realize anticipated benefits or be subject to unknown risks from acquisitions.
Ovintiv has completed a number of acquisitions to strengthen its position and to create the opportunity to realize
certain benefits. Acquiring oil and natural gas properties requires the Company to assess reservoir and infrastructure
characteristics, including estimated recoverable reserves, future production, commodity prices, revenues, development
and operating costs and potential environmental and other liabilities. Such assessments are inexact and inherently
uncertain and, as such, the acquired properties may not produce as expected, may not have the anticipated reserves
and may be subject to increased costs and liabilities.
Although the acquired properties are reviewed prior to completion of an acquisition, such reviews are not capable of
identifying all existing or potentially adverse conditions. This risk may be magnified where the acquired properties
are in geographic areas where the Company has not historically operated. Further, the Company may not be able to
obtain or realize upon contractual indemnities from the seller for liabilities created prior to an acquisition and it may
be required to assume the risk of the physical condition of the properties that may not perform in accordance with its
expectations.
Ovintiv is dependent on partners to fund development projects conducted through joint ventures and partnerships,
which, if such funding is unavailable, may adversely affect the Company’s operations and financial condition.
Some of Ovintiv’s projects are conducted through joint ventures, partnerships or other arrangements, where Ovintiv
is dependent on its partners to fund their contractual share of the capital and operating expenditures related to such
projects. If these partners do not approve or are unable to fund their contractual share of certain capital or operating
expenditures, suspend or terminate such arrangements or otherwise fulfill their obligations, this may result in project
delays or additional future costs to Ovintiv, all of which may affect the viability of such projects.
These partners may also have strategic plans, objectives and interests that do not coincide with and may conflict with
those of Ovintiv. While certain operational decisions may be made solely at the discretion of Ovintiv in its capacity
as operator of certain projects, major capital and strategic decisions affecting such projects may require agreement
among the partners. While Ovintiv and its partners generally seek consensus with respect to major decisions
concerning the direction and operation of the project assets, no assurance can be provided that the future demands or
Ovintiv Inc.
2020 Annual Report | 35
expectations of any party, including Ovintiv, relating to such assets will be met satisfactorily or in a timely manner.
Failure to satisfactorily meet such demands or expectations may affect Ovintiv’s or its partners’ participation in the
operation of such assets or the timing for undertaking various activities, which could negatively affect Ovintiv’s
operations and financial results. Further, Ovintiv is involved from time to time in disputes with its partners and, as
such, it may be unable to dispose of assets or interests in certain arrangements if such disputes cannot be resolved in
a satisfactory or timely manner.
Ovintiv does not operate all of its properties and assets and has limited control over factors that could adversely
affect the Company’s financial performance.
Other companies operate a portion of the assets in which Ovintiv has ownership interests. Ovintiv may have limited
ability to exercise influence over operation of these assets or their associated costs. Ovintiv’s dependence on the
operator and other working interest owners for these properties and assets, and its limited ability to influence
operations and associated costs, could materially adversely affect the Company’s financial performance. The success
and timing of Ovintiv’s activities on assets operated by others therefore will depend upon factors that are outside of
the Company’s control, including timing and amount of capital expenditures, timing and amount of operating and
maintenance expenditures, the operator’s expertise and financial resources, approval of other participants, selection
of technology and risk management practices.
The inability of our customers and other contractual counterparties to satisfy their obligations to Ovintiv may have
a material adverse effect on the Company.
Ovintiv is exposed to the risks associated with counterparty performance including credit risk and performance risk.
Ovintiv may experience material financial losses in the event of customer payment default for commodity sales and
financial derivative transactions. Ovintiv’s liquidity may also be impacted if any lender under the Company’s existing
credit facilities is unable to fund its commitment. Performance risk can impact Ovintiv’s operations by the non-
delivery of contracted products or services by counterparties, which could impact project timelines or operational
efficiency.
The Company has certain indemnification obligations to certain counterparties that could have a material adverse
effect on Ovintiv.
The Company has agreed to indemnify or be indemnified by numerous counterparties for certain liabilities and
obligations associated with businesses or assets retained or transferred by the Company. Specifically, in relation to a
corporate reorganization to split into two independent publicly traded energy companies, Encana and Cenovus Energy
Inc. (“Cenovus”) each agreed to indemnify the other for certain liabilities and obligations associated with, among
other things, in the case of Encana’s indemnity, the business and assets retained by Encana, and in the case of
Cenovus’s indemnity, the business and assets transferred to Cenovus. The Company also has indemnification
obligations under certain acquisition and divestiture activities it has undertaken.
Ovintiv cannot determine whether it will be required to indemnify certain counterparties for any substantial
obligations. Ovintiv also cannot be assured that, if a counterparty is required to indemnify Ovintiv and its affiliates
for any substantial obligations, such counterparties will be able to satisfy such obligations. Any indemnification claims
against Ovintiv pursuant to the provisions of the transaction agreements could have a material adverse effect on
Ovintiv.
The Company may be unable to dispose of certain assets and may be required to retain liabilities for certain matters.
The Company may identify certain assets for disposition, which could increase capital available for other activities or
reduce the Company’s existing indebtedness. Various factors could materially affect the Company’s ability to dispose
of those assets or complete announced transactions, including current commodity prices, the availability of purchasers
willing to purchase certain assets at prices and on terms acceptable to the Company, approval by the Board of
Directors, associated asset retirement obligations, due diligence, favourable market conditions, the assignability of
joint venture, partnership or other arrangements and stock exchange, regulatory and third party approvals. These
factors may also reduce the proceeds or value to Ovintiv.
36 | 2020 Annual Report
Ovintiv Inc.
The Company may also retain certain liabilities for certain matters in a sale transaction. The magnitude of any such
retained liabilities or indemnification obligations may be difficult to quantify at the time of the transaction and could
ultimately be material. Further, certain third parties may be unwilling to release the Company from guarantees or other
credit support provided prior to the sale of the divested assets. As a result, after the sale of certain assets, the Company
may remain secondarily liable for the obligations guaranteed or supported to the extent that the purchaser of the assets
fails to perform its obligations.
The Company’s operations may be affected by indigenous treaty, title and other rights.
Indigenous peoples have claimed indigenous treaty, title and other rights in respect of areas within the United States
and Canada. The legal basis of an indigenous land claim is a matter of considerable legal complexity and the impact
of the assertion of such a claim, or the possible effect of a settlement of such claim, upon the Company cannot be
predicted with any degree of certainty. In addition, no assurance can be given that any recognition of indigenous rights
or claims whether by way of a negotiated settlement or by judicial pronouncement (or through the grant of an
injunction prohibiting exploration or development activities pending resolution of any such claim) would not delay or
even prevent the Company’s exploration and development activities. If a material claim were to arise and be
successful, such claim could have a material and adverse effect on the Company’s business, financial condition and
results of operations. In addition, the process of addressing such claim, regardless of the outcome, could be expensive
and time consuming and could result in delays which could have a material and adverse effect on the Company’s
business, financial condition and results of operations.
In addition to the foregoing, the Company may become subject to various laws and regulations that apply to operators
and other parties operating within the boundaries of Native American reservations in the United States. These laws
and regulations may result in the imposition of certain fees, taxes, environmental standards, lease conditions or
requirements to employ specified contractors or service providers. Any one of these requirements, or any delay in
obtaining the approvals or permits necessary to operate within the boundaries of Native American tribal lands, could
adversely impact the Company’s operations and ability to explore and develop new properties.
Further, in Canada, the province of British Columbia enacted legislation to implement the United Nations Declaration
on the Rights of Indigenous Peoples (“UNDRIP”) in the fall of 2019 and the Canadian federal government has
announced its intention to do the same. In British Columbia the legislation provides a framework for recognizing the
constitutional and human rights of indigenous peoples and aligning British Columbia’s laws with the internationally
recognized standards of UNDRIP. As the legislation is at an early stage of implementation, Ovintiv is unable to predict
the total impact of the potential regulations upon its business. Although the Company does not anticipate any near-
term impacts to its business as a result of such legislation, the enactment of provincial and federal legislation to
implement the standards of UNDRIP has the potential to increase permitting times and change the processes and costs
associated with project development and operations.
Ovintiv’s operations are subject to the risk of business interruption, property and casualty losses. The Company’s
insurance may not fully protect us against these risks and liabilities.
The Company’s business is subject to the operating risks normally associated with the exploration for, development
of and production of oil, NGLs and natural gas and the operation of midstream facilities. These risks include blowouts,
explosions, fire, gaseous leaks or other emissions, migration of harmful substances and liquid spills, loss of well
control, surface spills and uncontrolled ground releases of fluids during hydraulic fracturing or other similar activities,
and acts of vandalism and terrorism, any of which could cause personal injury, result in damage to, or destruction of,
oil and natural gas wells or formations or production facilities and other property, equipment and the environment, as
well as interrupt operations.
In addition, all of Ovintiv’s operations will be subject to all of the risks normally incident to the transportation,
processing, storing and marketing of oil, NGLs and natural gas and other related products, drilling and completion of
oil and natural gas wells, and the operation and development of oil and natural gas properties, including encountering
unexpected formations or pressures, premature declines of reservoir pressure or productivity, blowouts, equipment
failures and other accidents, sour gas releases or other emissions, uncontrollable flows of oil, natural gas or well fluids,
adverse weather conditions and other natural disasters, spills and migration of hazardous chemicals, pollution and
other environmental risks.
Ovintiv Inc.
2020 Annual Report | 37
The Company maintains insurance against some, but not all, of these risks and losses. The occurrence of a significant
event against which Ovintiv is not fully insured could have a material adverse effect on the Company’s financial
position.
Environmental Risks
The Company’s business is subject to environmental regulation in all jurisdictions in which it operates and any
changes in such regulation could negatively affect its results of operations.
All phases of the oil, NGLs and natural gas businesses are subject to environmental regulation pursuant to a variety
of U.S. and Canadian federal, and other state, provincial, territorial, tribal, and municipal laws and regulations
(collectively, “environmental regulation”).
Environmental regulation imposes, among other things, restrictions, liabilities and obligations in connection with the
use, generation, handling, storage, transportation, treatment and disposal of chemicals, hazardous substances and
waste associated with the finding, production, transmission and storage of the Company’s products including the
hydraulic fracturing of wells, the decommissioning of facilities and in connection with spills, releases and emissions
of various substances to the environment. It also imposes restrictions, liabilities and obligations in connection with
the availability and management of fresh, potable or brackish water sources that are being used, or whose use is
contemplated, in connection with oil and natural gas operations.
Environmental regulation also requires that wells, facility sites and other properties associated with Ovintiv’s
operations be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities.
In addition, certain types of operations, including exploration and development projects and changes to certain existing
projects, may require the submission and approval of environmental impact assessments or permit applications.
Compliance with environmental regulation can require significant expenditures, including expenditures for clean-up
costs and damages arising out of contaminated properties and failure to comply with environmental regulation may
result in the imposition of fines and penalties.
Although it is not expected that the costs of complying with environmental regulation will have a material adverse
effect on Ovintiv’s financial condition or results of operations, no assurance can be made that the costs of complying
with environmental regulation in the future will not have such an effect as discussed below.
Climate Change - A number of federal, provincial and state governments have announced intentions to regulate
greenhouse gases and certain air pollutants. These governments are currently developing and/or implementing
regulatory and policy frameworks to deliver on their announcements. The Government of Canada released their
updated climate plan on December 11, 2020. The new plan announced the Government’s intention to exceed their
previously released emissions reduction targets, significantly increase the carbon tax and implement substantive
climate-related policy and regulation. The Government’s new plan commits Canada to exceeding Canada’s Paris
Climate Agreement emissions reduction target of 30 percent below 2005 levels and achieve national net-zero
emissions by 2050. Canada’s revised climate plan includes the intention to raise the Federal carbon tax from the
current C$30/tonne of carbon dioxide equivalent (“CO2e”) to C$170/ tonne CO2e by 2030, increasing by C$10/tonne
of CO2e a year from 2021-2023 and then increasing to C$15/tonne of CO2e per year until 2030. Additionally, the
Alberta and British Columbia governments remain committed to achieving a 45 percent reduction in methane gas
emissions from oil and gas operations by 2025, relative to 2014 levels, to be achieved through equipment replacement
and leak detection and repair regulations. Both Alberta’s and British Columbia’s provincial industrial emission
programs allow for the generation of offsets and other rebates to incent emission reduction projects and mitigate
carbon tax costs which Ovintiv actively participates in. The Company expects to continue to be able to utilize these
programs in the future to migrate its carbon tax costs. In the United States, policy makers at both the federal and state
levels have introduced legislation and proposed new regulations designed to quantify and limit the emission of
greenhouse gases. For example, both the U.S. Environmental Protection Agency and the U.S. Department of Interior
have previously issued regulations for the control of methane emissions, which include oil and natural gas production
leak detection and repair requirements. Given the new Congress and the incoming Biden Administration, it is
reasonable to expect new regulations will be proposed that may impose new costs on the oil and natural gas industry
in an effort to accelerate reductions of greenhouse gas emissions from both the production and consumption of energy.
In addition to Federal action, many state and local officials have stated their intent to intensify efforts to regulate
greenhouse gas emissions, including methane, from the oil and gas industry. Ovintiv’s cost of complying with
38 | 2020 Annual Report
Ovintiv Inc.
emerging climate and cost of carbon regulations is not currently forecast to be material to the Company, however as
these and additional federal and regional programs are in their early implementation stage or under development,
Ovintiv is unable to predict the total future impact of the potential regulations upon its business. Therefore, it is
possible that the Company could face future increases in operating costs in order to comply with legislation governing
emissions. Further, certain local governments, stakeholders and other groups have made claims against companies in
the oil and gas industry, including the Company, relating to the purported causes and impact of climate change. These
claims have, among other things, resulted in litigation, stockholder proposals and local ballot initiatives targeted
against certain companies and the oil and gas industry generally. As these claims are in their early stages, the Company
is unable to assess the impact of such claims on its business, but the defense of such matters may be costly and time
consuming and could have a material adverse effect on the Company’s reputation.
Hydraulic Fracturing - The U.S. federal government and certain U.S. state and Canadian federal and provincial
governments continue to review certain aspects of the scientific, regulatory and policy framework under which
hydraulic fracturing operations are conducted. Most of these governments are primarily engaged in the collection,
review and assessment of technical information regarding the hydraulic fracturing process and have not provided
specific details with respect to any significant actual, proposed or contemplated changes to the hydraulic fracturing
regulatory construct. However, certain environmental and other groups continue to suggest that additional federal,
provincial, territorial, state and municipal laws and regulations may be needed to more closely regulate the hydraulic
fracturing process and have made claims that hydraulic fracturing techniques are harmful to surface water and drinking
water sources.
Further, certain governments in jurisdictions where the Company does not currently operate have considered or
implemented moratoriums on hydraulic fracturing until further studies can be completed and some governments have
adopted, and others have considered adopting, regulations that could impose more stringent permitting, disclosure and
well construction requirements on hydraulic fracturing operations. Any new laws, regulations or permitting
requirements regarding hydraulic fracturing could lead to operational delays, increased operating costs or third party
or governmental claims, and could increase the Company’s cost of compliance and doing business as well as reduce
the amount of oil and natural gas that the Company is ultimately able to produce from its reserves. The Company
recognizes that additional hydraulic fracturing ballot initiatives and/or federal, state, provincial and/or local rule-
making, including rules specific to U.S. federal lands, limiting or restricting oil and gas development activities are a
possibility in the future.
As these federal and regional programs are in their early implementation stage or under development, Ovintiv is unable
to predict the total impact of the potential regulations upon its business. Therefore, it is possible that the Company
could face increases in operating costs or curtailment of production in order to comply with legislation governing
hydraulic fracturing.
Seismic Activity - Some areas of North America are experiencing increasing localized frequency of seismic activity
which has been associated with oil and gas operations. Although the occurrence and risk of seismicity in relation to
oil and gas operations is generally very low, it has been linked to deep disposal of wastewater and has been correlated
with hydraulic fracturing activities which has prompted legislative and regulatory initiatives intended to address these
concerns. These initiatives have the potential to require additional monitoring, restrict the injection of produced water
in certain disposal wells and/or modify or curtail hydraulic fracturing operations which could lead to operational
delays, increase compliance costs or otherwise adversely impact the Company’s operations.
Financial and Liquidity Risk
Downgrades in Ovintiv’s credit ratings could increase its cost of capital and limit its access to capital, suppliers or
counterparties.
Rating agencies regularly evaluate the Company, basing their ratings of long-term and short-term debt on a number
of factors. This includes the Company’s financial strength as well as factors not entirely within its control, including
conditions affecting the oil and gas industry generally and the wider state of the economy. Two of the Company’s
credit ratings are below an investment-grade credit rating. There can be no assurance that the Company’s other credit
ratings will not also be downgraded, including below an investment-grade credit rating.
Ovintiv Inc.
2020 Annual Report | 39
The Company’s borrowing costs and ability to raise funds are directly impacted by its credit ratings. A downgrade
may increase the cost of borrowing under the Company’s existing credit facilities, limit access to commercial paper
programs maintained by the Company and its subsidiaries, limit access to private and public markets to raise short-
term and long-term debt, and negatively impact the Company’s cost of capital.
Credit ratings may also be important to suppliers or counterparties when they seek to engage in certain transactions.
Downgrades in one or more of the Company’s credit ratings below investment-grade may require the Company to
post collateral, letters of credit, cash or other forms of security as financial assurance of the Company’s performance
under certain contractual arrangements with marketing counterparties, facility construction contracts, and pipeline and
midstream service providers. Additionally, certain of these arrangements contain financial assurance language that
may, under certain circumstances, permit the Company’s counterparties to request additional collateral.
In connection with certain over-the-counter derivatives contracts and other trading agreements, the Company could
be required to provide additional collateral or to terminate transactions with certain counterparties based on its credit
rating. The occurrence of any of the foregoing could adversely affect the Company’s ability to execute portions of its
business strategy, including hedging, and could have a material adverse effect on its liquidity and capital position.
The Company’s level of indebtedness may limit its financial flexibility.
As at December 31, 2020, the Company had outstanding long-term unsecured notes of $5,859 million, $352 million
in outstanding commercial paper and $598 million drawn on its revolving credit facilities. The terms of the Company’s
various financing arrangements, including but not limited to the indentures relating to its outstanding senior notes and
its revolving credit facilities, impose restrictions on its ability and, in some cases, the ability of the Company’s
subsidiaries, to take a number of actions that it or they may otherwise desire to take, including: (i) incurring additional
debt, including guarantees of indebtedness; (ii) creating liens on the Company’s or its subsidiaries’ assets; and (iii)
selling certain of the Company’s or its subsidiaries’ assets.
The Company’s level of indebtedness could affect its operations by:
• requiring it to dedicate a portion of cash flows from operations to service its indebtedness, thereby reducing the
availability of cash flow for other purposes;
• reducing its competitiveness compared to similar companies that have less debt;
• limiting its ability to obtain additional future financing for working capital, capital investments and acquisitions;
• limiting its flexibility in planning for, or reacting to, changes in its business and industry; and
• increasing its vulnerability to general adverse economic and industry conditions.
The Company’s ability to meet its debt obligations and service those debt obligations depends on future performance.
General economic conditions, oil, NGLs or natural gas prices, and financial, business and other factors affect the
Company’s operations and future performance. Many of these factors are beyond the Company’s control. If the
Company is unable to satisfy its obligations with cash on hand, the Company could attempt to refinance debt or repay
debt with proceeds from a public offering of securities or selling certain assets. No assurance can be given that the
Company will be able to generate sufficient cash flows to pay the interest obligations on its debt, or that funds from
future borrowings, equity financings or proceeds from the sale of assets will be available to pay or refinance its debt,
or on terms that will be favourable to the Company. Further, future acquisitions may decrease the Company’s liquidity
by using a significant portion of its available cash or borrowing capacity to finance such acquisitions, and such
acquisitions could result in a significant increase in the Company’s interest expense or financial leverage if it incurs
additional debt to finance such acquisitions.
Ovintiv’s risk management activities may prevent the Company from fully benefiting from price increases and
expose the Company to other risks.
The nature of the Company’s operations results in exposure to fluctuations in commodity prices and foreign currency
exchange rates. The Company monitors its exposure to such fluctuations and, where the Company deems it
appropriate, utilizes derivative financial instruments and physical delivery contracts to mitigate the potential impact
of declines in oil, NGLs and natural gas prices and fluctuations in foreign currency exchange rates.
40 | 2020 Annual Report
Ovintiv Inc.
Under U.S. GAAP, derivative financial instruments that do not qualify or are not designated as hedges for accounting
purposes are fair valued with the resulting changes recognized in current period net earnings. The utilization of
derivative financial instruments may therefore introduce significant volatility into the Company’s reported net
earnings.
The terms of the Company’s various risk management agreements and the amount of estimated production hedged
may limit the benefit to the Company of commodity price increases. The Company may also suffer financial loss if
the Company is unable to produce oil, NGLs and natural gas, or if counterparties to the Company’s risk management
agreements fail to fulfill their obligations under the agreements, particularly during periods of declining commodity
prices.
The decision to pay dividends and the amount of such dividends is subject to the discretion of the Board of Directors
based on numerous factors and may vary from time to time.
Although the Company currently intends to pay quarterly cash dividends to its stockholders, these cash dividends may
vary from time to time and could be increased, reduced or suspended. The amount of cash available to the Company
to pay dividends, if any, can vary significantly from period to period for a number of reasons, including, among other
things: Ovintiv’s operational and financial performance; fluctuations in the costs to produce oil, NGLs and natural
gas; the amount of cash required or retained for debt service or repayment; amounts required to fund capital
expenditures and working capital requirements; access to equity markets; foreign currency exchange rates and interest
rates; and the risk factors set forth in this Annual Report on Form 10-K.
The decision whether or not to pay dividends and the amount of any such dividends are subject to the discretion of the
Board of Directors, which regularly evaluates the Company’s proposed dividend payments and the requirements under
Delaware General Corporation Law (“DGCL”). In addition, the level of dividends per share of common stock will be
affected by the number of outstanding shares of common stock and other securities that may be entitled to receive
cash dividends or other payments. Dividends may be increased, reduced or suspended depending on the Company’s
operational success and the performance of its assets. The market value of the shares of common stock may deteriorate
if the Company is unable to meet dividend expectations in the future, and that deterioration may be material.
Regulation and Litigation Risk
Changes to, or the interpretation of, regulations related to income tax laws, royalty regimes, environmental laws
or other regulations could adversely affect the Company’s business, financial position, cash flows or results of
operations.
Income tax laws, royalty regimes, environmental laws, free trade agreements or other laws and regulations may be
interpreted in a manner that adversely affects the Company or its securityholders. Changes to existing laws and
regulations or the adoption of new laws and regulations could also increase the Company’s cost of compliance and
adversely affect the Company’s business, financial position, cash flows or results of operations.
Tax authorities having jurisdiction over the Company or its stockholders could change their administrative practices
or may disagree with the manner in which the Company calculates its tax liabilities or structures its arrangements, to
the detriment of the Company or its securityholders. There are tax matters under review for which the timing of
resolution is uncertain. While Ovintiv believes that the provision for income taxes is adequate, the completion of the
Reorganization may affect the timing of audit and reassessment of taxes by certain tax authorities, which reassessments
may lack technical merit and may possibly be material.
The Company is subject to claims, litigation, administrative proceedings and regulatory actions that may not be
resolved in the Company’s favour.
Ovintiv may be subject to claims, litigation, administrative proceedings and regulatory actions. The outcome of these
matters may be difficult to assess or quantify, and there cannot be any assurance that such matters will be resolved in
the Company’s favour. If Ovintiv is unable to resolve such matters favourably, the Company or its directors, officers
or employees may become involved in legal proceedings that could result in an onerous or unfavourable decision,
including fines, sanctions, monetary damages or the inability to engage in certain operations or transactions. The
defence of such matters may also be costly, time consuming and could divert the attention of management and key
Ovintiv Inc.
2020 Annual Report | 41
personnel from the Company’s operations. Ovintiv may also be subject to adverse publicity associated with such
matters, regardless of whether such allegations are valid or whether the Company is ultimately found liable. As a
result, such matters could have a material adverse effect on the Company’s reputation, financial position, results of
operations or liquidity. See Item 3 of this Annual Report on Form 10-K.
The enforcement of rights against Ovintiv in Canada may be limited.
Ovintiv is incorporated in Delaware and many of the Company’s directors, officers and experts reside outside of
Canada. Accordingly, it may not be possible for Ovintiv stockholders to effect service of process within Canada upon
Ovintiv or many of its directors, officers or experts, or to enforce judgments obtained in Canadian courts against
Ovintiv or many of its directors, officers or experts.
Tax Risks
The Company’s ability to use net operating losses and certain other tax attributes to offset future taxable income
may be limited.
The Company currently has substantial U.S. federal net operating loss (“NOL”) carry forwards with various expiration
dates and other tax attributes. Our ability to use these tax attributes to reduce our future U.S. federal and state income
tax obligations depends on many factors, including our future taxable income, the timing of which is uncertain. In
addition, our ability to use NOL carryforwards and other tax attributes may be subject to significant limitations under
Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).
Under Section 382 of the Code and corresponding provisions of state law, if a corporation undergoes an ownership
change, which is generally defined as a greater than 50 percent change in its equity ownership over a three-year period,
the company’s ability to utilize U.S. NOL carryforwards and other tax attributes, may be limited. Determining the
limitation under Section 382 of the Code is highly complex and the Company believes its U.S. NOL carryforwards
and other tax attributes, other than tax attributes related to prior stock acquisitions, are not currently subject to a
limitation as a result of an ownership change. However, it is possible that an ownership change may occur in the future
which may materially impact the Company’s ability to use the U.S. NOL carryforwards and other tax attributes to
reduce U.S. federal and state taxable income. Such a limitation could adversely affect the Company’s net income and
cash flows.
The Reorganization may result in material Canadian federal income tax (including material Canadian “emigration
tax”) and/or material U.S. federal income tax for the Company.
The U.S. Domestication, which occurred as part of the Reorganization, caused Ovintiv to cease to be resident in
Canada for the purpose of the Income Tax Act (Canada) and as a result, Ovintiv was deemed to have a taxation year
end immediately prior to the U.S. Domestication. Ovintiv was deemed to have disposed of each of its properties
immediately before its deemed taxation year end for proceeds of disposition equal to the fair market value of such
properties and be subject to an additional “emigration tax” calculated using the fair market value of its properties.
While the Company expects that the deemed disposition of Ovintiv’s properties that occurred as part of the
Reorganization and the computation relevant for emigration tax will not result in any material Canadian federal income
tax at the estimates of fair market value, there is no certainty that the fair market value of the properties of Ovintiv as
estimated will be accepted by Canadian federal tax authorities, which may result in additional taxes payable as a result
of the Reorganization.
For U.S. federal income tax purposes, based on and subject to certain assumptions and estimates of fair market value,
the Company does not expect the Reorganization to give rise to material corporate-level U.S. federal income tax.
However, Ovintiv could be subject to U.S. federal income taxation in connection with the U.S. Domestication to the
extent, if any, that, at the time of such U.S. Domestication (a) the aggregate fair market value of all of the outstanding
shares of common stock of Ovintiv exceeds (b) the U.S. tax basis in Ovintiv’s assets (computed under U.S. federal
income tax principles) less liabilities assumed by Ovintiv. There can be no assurance that the fair market value of the
shares of common stock of Ovintiv as estimated and the determination of Ovintiv’s U.S. tax basis in its assets will be
accepted by the IRS or that the IRS will not otherwise challenge the Company’s position that it is not subject to U.S.
federal income tax in connection with the Reorganization.
42 | 2020 Annual Report
Ovintiv Inc.
General Risks
Ovintiv relies on certain key personnel, and if the Company is unable to attract and retain key personnel necessary
for its business, Ovintiv’s operations may be negatively impacted.
The Company relies on certain key personnel for the development of its business. The experience, knowledge and
contributions of the Company’s existing management team and directors to the immediate and near-term operations
and direction of the Company are likely to continue to be of central importance for the foreseeable future. As such,
the unexpected loss of services from or retirement of such key personnel could have a material adverse effect on the
Company. In addition, the competition for qualified personnel in the oil and gas industry means there can be no
assurance that the Company will be able to attract and retain such personnel with the required specialized skills
necessary for its business.
The Company could be adversely affected by security threats, including cyber-security threats and related
disruptions.
The Company has become increasingly dependent upon information technology systems to conduct daily operations.
The Company depends on various information technology systems to estimate reserve quantities, process and record
financial and operating data, analyze seismic and drilling information, and communicate with employees and third-
party partners. This growing dependence on technology is accompanied by greater sensitivity to cyber-attacks and
information systems breaches. Unauthorized access to information systems by employees or third parties could lead
to corruption or exposure of confidential, fiduciary or proprietary information, interruption to communications or
operations or disruption to the Company’s business activities or its competitive position. In addition, the Company’s
vendors, suppliers and other business partners may separately suffer disruptions as a result of such security breaches.
The potential for such occurrences subjects the Company’s operations to increased risks that could have a material
adverse effect on the Company’s business, financial condition and results of operations. To protect its information
assets and systems, the Company applies technical and process controls, which are reviewed by the appropriate senior
management with oversight from the Company’s Board of Directors. These controls are in line with industry standards
and are reviewed annually with peer companies in order to guide Ovintiv’s focus on information security initiatives.
However, these controls may not adequately prevent cyber-security breaches.
There is no assurance that the Company will not suffer losses associated with cyber-security breaches in the future.
As cyber-attacks continue to evolve, the Company may be required to expend additional resources to investigate,
mitigate and remediate any potential vulnerabilities. The Company may also be subject to regulatory investigations or
litigation relating to cyber-security issues.
Item 1B. Unresolved Staff Comments
None.
Ovintiv Inc.
2020 Annual Report | 43
Item 3. Legal Proceedings
Ovintiv is involved in various legal claims and actions arising in the normal course of the Company’s operations.
Although the outcome of these claims cannot be predicted with certainty, the Company does not expect these matters
to have a material adverse effect on Ovintiv’s financial position, cash flows or results of operations. If an unfavourable
outcome were to occur, there exists the possibility of a material impact on the Company’s consolidated net earnings
or loss for the period in which the effect becomes reasonably estimable. See Item 1A. Risk Factors, “The Company is
subject to claims, litigation, administrative proceedings and regulatory actions that may not be resolved in the
Company’s favour.” of this Annual Report on Form 10-K.
In July 2020, the Company received a Notice of Violation (“NOV”) from the U.S. Environmental Protection Agency
(“EPA”) and the Utah Department of Environmental Quality, Division of Air Quality (“UDAQ”). The NOV alleges
violations under the federal Clean Air Act, the State of Utah’s State Implementation Plan, and the State of Utah’s air
quality regulations for the oil and gas industry, at certain of the Company facilities located in the Uinta Basin. The
Company has exchanged information with the EPA and UDAQ and is engaged in discussions aimed at resolving the
allegations. The Company is unable to predict the financial impact of the NOV or the timing of its resolution at this
time. Resolution of the matter may result in monetary sanctions of more than $300,000.
For additional information, see Note 27 to Ovintiv’s audited Consolidated Financial Statements under Item 8 of this
Annual Report on Form 10-K.
Item 4. Mine Safety Disclosures
Not applicable.
44 | 2020 Annual Report
Ovintiv Inc.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
MARKET INFORMATION, STOCKHOLDERS, AND DIVIDEND INFORMATION
Market Information
Ovintiv’s shares of common stock are listed and posted for trading on the NYSE and TSX under the symbol “OVV”.
Holders
The Company is authorized to issue up to 775,000,000 shares of stock consisting of: (i) 750,000,000 shares of common
stock, par value US$0.01 per share, and (ii) 25,000,000 shares of preferred stock, par value US$0.01 per share. As at
February 10, 2021, there were 259,860,778 shares of common stock outstanding held by 5,002 stockholders of record,
and no shares of preferred stock outstanding.
Dividend Information
In 2020, the Company paid a quarterly dividend of US$0.09375 per share (2019: US$0.09375 per share) and US$0.375
per share annually (2019: US$0.375 per share annually). On February 17, 2021 the Board of Directors declared a
dividend of US$0.09375 per share of Ovintiv common stock payable on March 31, 2021 to common stockholders of
record as of March 15, 2021.
Dividend payments are not guaranteed and the amount of cash to be distributed as dividends in the future may change.
Any decision to pay dividends will be determined at the discretion of the Board of Directors after consideration of
numerous factors including: (i) the earnings of the Company; (ii) financial requirements for the Company’s operations;
(iii) the satisfaction by the Company of dividend requirements in the DGCL; and (iv) any agreements relating to the
Company’s indebtedness that restrict the declaration and payment of dividends. See Item 1A. Risk Factors of this
Annual Report on Form 10-K, “The decision to pay dividends and the amount of such dividends is subject to the
discretion of the Board of Directors based on numerous factors and may vary from time to time”. The Company
currently pays dividends quarterly to stockholders of record as of the 15th day (or the previous business day) of the
last month of each calendar quarter, with the last business day of the same month being the corresponding payment
date.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Information concerning securities authorized for issuance under equity compensation plans is set forth in the Proxy
Statement relating to the Company’s 2021 annual meeting of stockholders, which is incorporated herein by reference.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PERSONS
There were no purchases of equity securities by the issuer during the three months ended December 31, 2020.
RECENT SALES OF UNREGISTERED EQUITY SECURITIES
None.
PERFORMANCE GRAPH
The following performance graph and related information shall not be deemed “soliciting material” or to be “filed”
with the SEC, nor shall information be incorporated by reference into any future filing under the Securities Act of
1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent that the Company specifically
incorporates it by reference into such filing.
Ovintiv Inc.
2020 Annual Report | 45
The following graph compares the cumulative five-year total return to stockholders of the Company’s common shares
relative to the cumulative total returns of the S&P 400 and the SPDR Oil & Gas Exploration & Production ETF (“XOP
U.S. Equity”). The graph was prepared assuming $100 was invested on December 31, 2015 in the Company’s common
shares, the S&P 400 and the XOP U.S. Equity, and dividends have been reinvested subsequent to the initial investment.
The graph is included for historical comparative purposes only and should not be considered indicative of future share
performance.
Comparison of 5-Year Cumulative Total Return Among
Ovintiv, the S&P 400 and XOP U.S. Equity
(US$100 Invested in Base Period)
Fiscal Year Ended December 31
Ovintiv
S&P 400
XOP US Equity
S&P 500 (1)
PSU Peer Group (2)
2015
2016
2017
2018
$ 100.00 $ 232.30 $ 265.20 $ 115.70 $
100.00
100.00
100.00
100.00
120.73
138.31
111.95
146.27
140.32
125.19
136.38
139.51
124.75
89.99
130.39
101.57
2019
95.20 $
157.40
81.49
171.44
108.47
2020
62.00
178.88
51.85
202.96
74.24
(1)
(2)
In connection with the U.S. Domestication, the Company has selected to use the Mid-Cap S&P 400 as the index includes companies that are
of comparable market capitalization to Ovintiv which will replace the S&P 500 index go forward.
In connection with the U.S. Domestication, the Company has selected to use the XOP U.S. Equity index as the published industry index. In
prior years the Company used select Canadian and U.S. peer companies including: Antero Resources Corporation; Apache Corporation;
Baytex Energy Corporation; Cabot Oil & Gas Corporation; Canadian Natural Resources Ltd.; Chesapeake Energy Corporation; Concho
Resources Inc.; Continental Resources Inc.; Crescent Point Energy Corporation; Devon Energy Corporation; Enerplus Corporation; EOG
Resources Inc.; Hess Corporation; Marathon Oil Corporation; Murphy Oil Corporation; Obsidian Energy Ltd.; Pioneer Natural Resources
Company; Range Resources Corporation; Southwestern Energy Company; Vermilion Energy Inc.; and Whiting Petroleum Corporation.
46 | 2020 Annual Report
Ovintiv Inc.
Item 6: Selected Financial Data
The following table sets forth selected financial data of the Company and its consolidated subsidiaries over the five-
year period ended December 31, 2020, which has been derived from the Company’s audited Consolidated Financial
Statements. The financial information below should be read in conjunction with Item 7 and Item 8 of this Annual
Report on Form 10-K.
Year Ended December 31 (US$ millions, unless otherwise specified)
Statement of Earnings Data (1)
Revenues
Impairments
Operating Income (Loss)
Gain (Loss) on Divestitures, Net
Net Earnings (Loss) Attributable to Common Stockholders
Per Share Data
Net Earnings (Loss) per Share of Common Stock
Basic & Diluted
Dividends Declared per Share of Common Stock
Weighted Average Shares of Common Stock Outstanding (millions)
Basic & Diluted
Balance Sheet Data (1)
Cash and Cash Equivalents
Total Assets
Finance Lease Obligations (2)
Long-Term Debt, Including Current Portion
Total Shareholders’ Equity
Statement of Cash Flow Data (1)
Cash From (Used In) Operating Activities
Non-GAAP Cash Flow (3)
Capital Expenditures
Net Acquisitions & (Divestitures)
Foreign Exchange Rates (US$ per C$1)
Average
Period End
Production Volumes
Oil (Mbbls/d)
NGLs - Plant Condensate (Mbbls/d)
Oil & Plant Condensate (Mbbls/d)
Total Oil & NGLs (Mbbls/d)
Natural Gas (MMcf/d)
Total Production (MBOE/d)
2020
2019
2018
2017
2016
6,087 6,726 5,939 4,443 2,918
5,580
- 1,396
598 1,694 1,068 (1,881 )
(5,397 )
390
-
(944 )
(6,097 )
5
234 1,069
404
827
3
-
-
0.90
(23.47 )
0.375 0.375
5.57
0.30
4.25
0.30
(5.35 )
0.30
259.8 261.2 192.0 194.6 176.5
10
190 1,058
834
14,469 21,487 15,344 15,267 14,653
121 1,435 1,639 1,570
6,885 6,974 4,198 4,197 4,198
3,837 9,930 7,447 6,728 6,126
719
39
625
1,895 2,921 2,300 1,050
1,929 2,931 2,115 1,343
838
1,736 2,626 1,975 1,796 1,132
(682 ) (1,052 )
(476 )
(132 )
(70 )
0.746
0.754
0.785 0.770
0.772
0.733
0.771
0.797
0.755
0.745
52.1
89.9
39.0
151.5 164.4
52.9
73.7
76.3
20.3
26.3
203.6 217.3 128.9 102.6
94.0
288.9 301.9 168.1 129.1 122.1
1,529 1,577 1,158 1,104 1,383
543.8 564.9 361.2 313.2 352.7
Commodity Prices, Including Realized Gains (Losses) on Risk Management
Oil ($/bbl)
NGLs - Plant Condensate ($/bbl)
Oil & Plant Condensate ($/bbl)
Total Oil & NGLs ($/bbl)
Natural Gas ($/Mcf)
Total ($/BOE)
44.68 57.40 56.84 49.76 48.68
40.89 51.95 49.56 48.92 39.84
43.70 56.08 54.64 49.55 47.19
33.58 44.29 47.71 43.61 38.85
2.10
23.82 30.05 31.06 26.51 21.69
2.13
2.76
2.28
2.42
(1)
Items that affect the comparability of the above five-year selected financial data include the January 1, 2019 adoption of ASC Topic 842,
Leases, and the Newfield acquisition as described in Note 8 of the audited Consolidated Financial Statements under Item 8 of this Annual
Report on Form 10-K.
(2) Upon adoption of ASC Topic 842, Leases, on January 1, 2019, The Bow office building was determined to be an operating lease.
(3) Non-GAAP Cash Flow is a non-GAAP measure and has no standardized meaning under U.S. GAAP. It is used by Management and investors
to help assist in measuring Ovintiv’s ability to finance capital programs and meet financial obligations. It is not intended to replace cash from
(used in) operating activities as a measure. Non-GAAP Cash Flow is defined and reconciled in the Non-GAAP Measures section under Item 7,
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Supplemental Quarterly Financial Information (Unaudited)
See Note 29 of Ovintiv’s audited Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K.
Ovintiv Inc.
2020 Annual Report | 47
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The MD&A is intended to provide a narrative description of the Company’s business from management’s perspective.
This MD&A should be read in conjunction with the audited Consolidated Financial Statements and accompanying
notes for the year ended December 31, 2020 (“Consolidated Financial Statements”), which are included in Item 8 of
this Annual Report on Form 10-K.
On January 24, 2020, Encana Corporation (“Encana”) completed a corporate reorganization, which included a Share
Consolidation, as described in Items 1 and 2 of this Annual Report on Form 10-K and Note 1 of the Consolidated
Financial Statements included in Item 8 of this Annual Report on Form 10-K. Subsequent to the corporate
reorganization, Ovintiv Inc. and its subsidiaries (collectively, “Ovintiv”) continue to carry on the business which was
previously conducted by Encana and its subsidiaries.
Common industry terms and abbreviations are used throughout this MD&A and are defined in the Definitions,
Conversions and Conventions sections of this Annual Report on Form 10-K. This MD&A includes the following
sections:
• Executive Overview
• Results of Operations
• Liquidity and Capital Resources
• Accounting Policies and Estimates
• Non-GAAP Measures
Executive Overview
Strategy
Ovintiv is focused on developing its multi-basin portfolio of oil, NGLs and natural gas producing plays as part of its
strategy outlined in Items 1 and 2 of this Annual Report on Form 10-K. Ovintiv is committed to growing long-term
stockholder value through a combination of profitable growth and generating cash flows. The Company is pursuing
the key business objectives of preserving financial strength, maximizing profitability through operational and capital
efficiencies, paying sustainable dividends, and generating cash flows through a disciplined capital allocation strategy
by investing in a limited number of core assets with high margin liquids. To support the Company’s business
objectives, Ovintiv actively monitors and manages market volatility through the diversification of price risks and
market access risks to enhance returns and maintain a consistent cash flow stream. In conjunction with Ovintiv’s focus
on preserving financial strength, the Company plans to allocate all excess cash flows over the next four quarters to
reduce total long-term debt.
Ovintiv is also committed to 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 decreasing emissions intensity. The Company’s annual Sustainability Report outlining its key metrics and
progress achieved relating to environmental, social, and governance practices can be found on the Company’s website.
In executing its strategy, Ovintiv focuses on its core values of One, Agile and Driven, which guide the organization
to be flexible, responsive, innovative and determined. The Company is committed to excellence with a passion to
drive corporate financial performance and succeed as a team.
Ovintiv continually reviews and evaluates its strategy and changing market conditions in order to maximize cash flow
generation from its top tier assets located in some of the best plays in North America, referred to as the “Core Assets”.
As at December 31, 2020, the Core Assets comprised Permian and Anadarko in the U.S., and Montney in Canada.
These Core 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.
For additional information on reporting segments and the plays in which the Company operates, refer to Items 1 and
2 of this Annual Report on Form 10-K. For additional information on the segmented results, refer to Note 2 to the
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
48 | 2020 Annual Report
Ovintiv Inc.
In evaluating its operations and assessing its leverage, Ovintiv reviews performance-based measures such as Non-
GAAP Cash Flow, Non-GAAP Cash Flow Margin, Total Costs and debt-based metrics such as Debt to Adjusted
Capitalization and Net Debt to Adjusted EBITDA, which are non-GAAP measures and do not have any standardized
meaning under U.S. GAAP. These measures may not be similar to measures presented by other issuers and should not
be viewed as a substitute for measures reported under U.S. GAAP. Additional information regarding these measures,
including reconciliations to the closest GAAP measure, can be found in the Non-GAAP Measures section of this
MD&A.
For the year ended December 31, 2020, the Company elected to exclude from this MD&A the discussion of the results
of operations for the year ended December 31, 2018, being the earliest of the three years included in the Consolidated
Financial Statements, as set forth in the SEC’s amendment to Item 303 of Regulation S-K, which was effective May
2, 2019. For additional information on the Company’s financial condition, changes in financial condition and results
of operations for the year ended December 31, 2018, refer to Item 7 of the 2019 Annual Report on Form 10-K.
Highlights
In early 2020, the Company decreased its capital program for the remainder of the year to focus on production from
the Core Assets generating the highest returns and/or with the lowest costs in response to the low commodity price
environment resulting from the global coronavirus (“COVID-19”) pandemic and excess global oil production.
During 2020, the Company delivered significant cash from operating activities and maximized profitability through
operational and capital efficiencies, while executing its reduced capital plan. Lower upstream product revenues in
2020 compared to 2019 resulted from lower average realized prices, excluding the impact of risk management
activities, and lower total production volumes. Decreases in average realized liquids and natural gas prices of 34
percent and five percent, respectively, were primarily due to lower WTI and NYMEX benchmark prices. Ovintiv
remains focused on optimizing realized prices from the diversification of the Company’s downstream markets.
Despite lower average commodity prices and lower production volumes for the majority of the year, the Company
delivered significant cash from operating activities with a notable reduction in its capital program and reduced its total
long-term debt balance. Cash from operating activities of $1,895 million included a net realized gain of $711 million
on settlement of risk management positions.
Significant Developments
• On January 24, 2020, Encana completed a corporate reorganization, which included a plan of arrangement
(the “Arrangement”) that involved, among other things, a share consolidation by Encana on the basis of one
post-consolidation share for each five pre-consolidation shares (the “Share Consolidation”), and Ovintiv Inc.
ultimately acquired all of the issued and outstanding common shares of Encana in exchange for shares of
common stock of Ovintiv Inc. on a one-for-one basis. Following completion of the Arrangement, Ovintiv
Inc. migrated from Canada and became a Delaware corporation, domiciled in the U.S. (the “U.S.
Domestication”). The Arrangement and the U.S. Domestication together are referred to as the
“Reorganization”. Additional information on the Reorganization can be found in Note 1 of the Consolidated
Financial Statements included in Item 8 of this Annual Report on Form 10-K.
•
In June 2020, Ovintiv undertook a plan to reduce its workforce by approximately 25 percent as part of a
company-wide reorganization in response to the low commodity price environment resulting from the global
pandemic and the Company’s planned reductions in capital spending. The Company incurred restructuring
charges of $90 million and expects total restructuring charges to be approximately $95 million.
• On September 1, 2020, Ovintiv closed an agreement with PetroChina Canada Ltd. (“PCC”) to terminate its
joint venture with PCC and transfer the ownership and operation of certain Duvernay shale assets in west-
central Alberta. In connection with the closing, Ovintiv and PCC have agreed to partition the Duvernay
acreage and associated infrastructure.
Ovintiv Inc.
2020 Annual Report | 49
• On October 13, 2020, Ovintiv announced the start-up of the Pipestone processing facility, a natural gas
processing and liquids stabilization plant owned by Keyera Partnership. Under a fee-for-service midstream
agreement, the facility will provide Ovintiv with additional net processing capacity to support the Company’s
condensate-rich Montney development.
Financial Results
• Reported net loss of $6,097 million, including a non-cash ceiling test impairment of $5,580 million, before
tax, net gains on risk management in revenues of $507 million, before tax, restructuring costs of $90 million,
before tax, as well as a deferred income tax valuation allowance of $568 million.
• Generated cash from operating activities of $1,895 million, Non-GAAP Cash Flow of $1,929 million and
Non-GAAP Cash Flow Margin of $9.69 per BOE. Cash from operating activities exceeded capital
expenditures by $159 million.
• Paid dividends of $0.375 per share of common stock totaling $97 million.
• Repurchased in the open market $302 million in principal amount of the Company’s senior notes resulting
in gains of $30 million.
• Had $3.3 billion in total liquidity as at December 31, 2020, which included available credit facilities of $3.4
billion, available uncommitted demand lines of $269 million, and cash and cash equivalents of $10 million,
net of outstanding commercial paper of $352 million.
• Reported Net Debt to Adjusted EBITDA of 3.1 times.
Capital Investment
• Reported total capital spending of $1,736 million, which was less than the updated full year 2020 investment
plan of $1.8 billion.
• Directed $1,439 million, or 83 percent, of total capital spending to the Core Assets.
• Focused on highly efficient capital activity and short-cycle high margin projects providing flexibility to
respond to fluctuations in commodity prices.
Production
• Produced average liquids volumes of 288.9 Mbbls/d which accounted for 53 percent of total production
volumes. Average oil and plant condensate volumes of 203.6 Mbbls/d, or 70 percent of total liquids
production volumes, exceeded full year 2020 expectation of 200.0 Mbbls/d.
• Produced average natural gas volumes of 1,529 MMcf/d which accounted for 47 percent of total production
volumes.
Operating Expenses
•
Incurred Total Costs in 2020 of $2,313 million, or $11.60 per BOE, a decrease of $289 million or $0.99 per
BOE compared to 2019. Total Costs is defined in the Non-GAAP Measures section of this MD&A.
Significant items in 2020 impacting Total Costs include:
o Lower upstream operating expenses, excluding long-term incentive costs, in 2020 compared to 2019
of $118 million, primarily due to lower activity as a result of the economic downturn and cost saving
initiatives including workforce reductions, as well as operating efficiencies achieved in 2020;
o Lower production, mineral and other taxes, in 2020 compared to 2019 of $81 million, primarily due
to lower commodity prices;
o Lower administrative expenses, excluding long-term incentive costs, restructuring costs and current
expected credit losses, in 2020 compared to 2019 of $47 million, primarily due to cost saving
initiatives including the 2020 workforce reduction and synergies achieved in 2020; and
50 | 2020 Annual Report
Ovintiv Inc.
o Lower upstream transportation and processing expenses in 2020 compared to 2019 of $43 million,
primarily due to the expiration of certain transportation contracts and the sale of the Arkoma natural
gas assets.
• Total Operating Expenses in 2020 of $11,484 million increased by $5,356 million primarily due to the non-
cash ceiling test impairments of $5,580 million.
Additional information on Total Costs items and Total Operating Expenses above can be found in the Results of
Operations section of this MD&A.
Subsequent Event
In February 2021, the Company agreed to sell its Duvernay assets for approximately $263 million, which includes
about $12 million in contingency payments based on future commodity prices. The sale is subject to ordinary closing
conditions, regulatory approvals and other adjustments, and is expected to close in the second quarter of 2021.
2021 Outlook
Industry Outlook
Oil Markets
The oil and gas industry is cyclical and commodity prices are inherently volatile. Oil prices reflects global supply and
demand dynamics as well as the geopolitical and macroeconomic environment.
In early 2020, governments worldwide took action to contain the effects of the COVID-19 pandemic by partially
closing economies. During the midst of the pandemic, Saudi Arabia and Russia failed to reach an agreement on
production cuts, resulting in a price war which intensified the oversupply of oil. As a result of the COVID-19 pandemic
and the price war, global crude oil demand fell significantly while product storage facilities filled up at unprecedented
rates with supply materially exceeding demand. In April 2020, OPEC and a group of 10 non-OPEC member nations
(collectively, “OPEC+”) agreed to cut oil production through April 2022 to address the existing imbalance of global
supply and demand, with the deepest cuts in May and June 2020, and easing off afterwards over the remaining
agreement period.
As the imbalance of global supply and demand in oil markets grew increasingly pronounced, the oil and gas industry
responded by reducing capital spending and implementing market-based supply shut-ins. Global restrictions began to
ease in the latter half of the second quarter, and consequently oil demand increased, supporting a modest recovery of
oil prices. However, oil demand did not return to pre-pandemic levels by the end of the year. Certain economic sectors
are still restricted and additional lockdowns due to the resurgence of COVID-19 in some countries continue to impact
oil demand. Given the market conditions, capital spending in the oil and gas industry is not expected to increase
significantly in 2021 and production is likely to remain flat.
Commodity prices during 2021 will continue to be impacted by the global containment of the virus, pace of economic
recovery, as well as changes to OPEC+ production levels. There is increased economic optimism going into 2021 as
governments worldwide distribute the COVID-19 vaccines. As well, in January 2021, Saudi Arabia announced a
significant unilateral production cut in addition to OPEC+ reaffirming current production cut levels, which extend
through March 2021. OPEC+ continues to meet regularly to review the state of global oil supply, demand and
inventory levels. Despite signs of economic recovery centered on the COVID-19 vaccine and the production cuts, oil
markets remain volatile.
Natural Gas Markets
Natural gas prices in 2021 will be affected by changes in both supply and demand and the effects of seasonal weather.
Higher-than-average inventory levels from oversupply in 2020 and lower demand have prolonged the downward
pressure on natural gas prices, which remain volatile in both Canada and the U.S. from uncertainties stemming from
the COVID-19 pandemic and weather. Natural gas prices continue to be impacted by lower associated natural gas
production resulting from declines in North American oil production due to low oil prices, as well as a slow demand
recovery and seasonal fluctuations.
Ovintiv Inc.
2020 Annual Report | 51
Company Outlook
Despite the low commodity price environment experienced in the first half of the year and modest recovery in the
second half, Ovintiv delivered on its reduced full year capital plan while generating positive Non-GAAP Cash Flow
in excess of capital expenditures. In response to the rapid decline in crude oil prices witnessed in early 2020, the
Company took immediate action to reduce its second quarter 2020 capital investments by $500 million. Concurrently,
the Company ceased operating 16 drilling rigs and shut in total production of 32 MBOE/d, which further reduced the
Company’s expected 2020 capital investment profile. By the end of the fourth quarter, previously shut-in and curtailed
production were back on-line.
In conjunction with the reduction to its 2020 capital investment, Ovintiv also implemented cost saving measures,
which reduced full year 2020 costs by nearly $300 million. The Company will continue to exercise discretion and
discipline to optimize capital allocation in 2021 as oil demand recovers and the commodity price environment evolves.
Ovintiv pursues innovative ways to reduce upstream operating and administrative expenses and expects to benefit
from efficiency improvements to maximize cash flows.
Markets for crude oil and natural gas are exposed to different price risks and are inherently volatile. While the market
price for crude oil tends to move in the same direction as the global market, regional differentials may develop. Natural
gas prices may vary between geographic regions depending on local supply and demand conditions. To mitigate price
volatility and help sustain revenues, particularly during periods of low commodity prices, the Company enters into
derivative financial instruments. As at January 31, 2021, the Company has hedged approximately 127.0 Mbbls/d of
expected crude oil and condensate production and 1,038 MMcf/d of expected natural gas production for 2021. 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 25 to the Consolidated Financial
Statements included in Item 8 of this Annual Report on Form 10-K.
Capital Investment
The Company plans to spend approximately $1.5 billion on its 2021 capital investment program, with the majority
allocated to the Core Assets with a focus on maximizing returns from high margin liquids to optimize operating cash
flows. Ovintiv will continue to evaluate its capital investment plans as the global economic environment evolves.
Ovintiv continually strives to improve well performance and lower costs through innovative techniques. Operating
initiatives such as applying Simul-Frac techniques, a process of fracking pairs of wells at the same time instead of a
single well, increases operational efficiencies and contributes to well cost savings. Ovintiv's large-scale cube
development model utilizes multi-well pads and advanced completion designs to maximize returns and resource
recovery from its reservoirs. The impact of Ovintiv’s disciplined capital program and continuous innovation create
flexibility to allocate capital in changing commodity markets and to maximize cash flows while preserving the long-
term value of the Company’s multi-basin portfolio.
Production
Ovintiv is strategically positioned in the current economic environment to maintain a flat liquids production profile
while generating cash flows in excess of capital expenditures. In 2021, the Company expects to maintain average oil
and plant condensate production volumes of approximately 200.0 Mbbls/d, other NGLs production volumes of
approximately 80.0 Mbbls/d and natural gas production volumes of approximately 1,550 MMcf/d.
Operating Expenses
In response to the low commodity price environment during the majority of 2020, Ovintiv implemented cost saving
measures to reduce its full year costs. These cost savings primarily include reductions to operating expenses reflected
in Total Costs of about $200 million and reductions in other costs. During June 2020, Ovintiv reduced its workforce
to better align staffing levels and organizational structure with the Company’s planned activity levels. By the end of
2020, the reduction in the Company’s workforce and other cost saving measures have resulted in cost savings of nearly
$300 million. The Company expects to benefit from its cost saving measures throughout 2021.
52 | 2020 Annual Report
Ovintiv Inc.
Total Costs per BOE is expected to increase slightly for 2021 primarily due to higher production taxes resulting from
expected strengthening of commodity prices, higher transportation and processing costs relating to new agreements,
and the effects of foreign exchange rate changes, partially offset by sustainable cost saving measures. For 2021,
Ovintiv expects Total Costs of approximately $12.25 per BOE to $12.50 per BOE. Total Costs is defined in the Non-
GAAP Measures section of this MD&A.
Other Expenses and Impairments
Full year cost savings included reductions to cash outflows and other expenses, such as interest expense. Following
the 2020 open market repurchases of $302 million in principal amount of Ovintiv’s fixed rate senior notes, the
Company expects to incur lower interest expense of approximately $10 million on an annualized basis on the reduced
fixed long-term debt balances.
Ovintiv remains focused on strengthening its balance sheet and liquidity position. In the second quarter of 2020, the
Company committed to allocate all excess cash flows to reducing its total long-term debt and expects to achieve total
long-term debt reduction of at least $1.25 billion by the end of 2021, exceeding the original announced debt reduction
target of $1.0 billion. To date, the Company has repaid $481 million towards its total 2021 long-term debt reduction
target. Additional information on Ovintiv’s long-term debt and liquidity position can be found in Note 15 to the
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K and the Liquidity and
Capital Resources section of this MD&A, respectively.
If a low oil price environment persists for an extended period of time, Ovintiv may be subject to additional impairments
of its oil and natural gas properties and other long-term assets. Additional information on the Company’s ceiling test
impairment can be found in the Results of Operations section of this MD&A.
Additional information on Ovintiv’s 2021 Corporate Guidance can be accessed on the Company’s website at
www.ovintiv.com.
Environmental, Social and Governance
Ovintiv recognizes the importance of reducing its environmental footprint and voluntarily participates in emission
reduction programs. The Company has targeted a 33 percent reduction in methane intensity to be achieved by the end
of 2025 and this target will be tied to its annual incentive compensation program beginning in 2021. Additional
information on Ovintiv’s environmental, social and governance practices are outlined in Items 1 and 2 of this Annual
Report on Form 10-K, as well as in Ovintiv’s annual Sustainability Report on the Company’s website.
Ovintiv Inc.
2020 Annual Report | 53
Results of Operations
Selected Financial Information
($ millions)
Product and Service Revenues
Upstream product revenues
Market optimization
Service revenues
Total Product and Service Revenues
Gains (Losses) on Risk Management, Net
Sublease Revenues
Total Revenues
Total Operating Expenses (2)
Operating Income (Loss)
Total Other (Income) Expenses
Net Earnings (Loss) Before Income Tax
Income Tax Expense (Recovery)
2020
2019 (1)
$
4,044 $
1,459
6
5,509
507
71
6,087
11,484
(5,397 )
333
(5,730 )
367
5,847
1,159
7
7,013
(361 )
74
6,726
6,128
598
283
315
81
234
Net Earnings (Loss)
$
(6,097 ) $
(1) Subsequent to the completion of the Newfield acquisition on February 13, 2019, the post-acquisition results of the operations of Newfield are
included in the Company’s consolidated results beginning February 14, 2019.
(2) Total Operating Expenses include non-cash items such as DD&A, impairments, 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 USA Operations realized prices generally reflect WTI
and NYMEX benchmark prices, as well as other downstream oil benchmarks, including Houston. The Canadian
Operations realized prices are linked to Edmonton Condensate and AECO, as well as other downstream natural gas
benchmarks, including Dawn. The other downstream benchmarks reflect the diversification of the Company’s
markets. Recent trends in benchmark prices relevant to the Company are shown in the table below.
Benchmark Prices
(average for the period)
Oil & NGLs
WTI ($/bbl)
Houston ($/bbl)
Edmonton Condensate (C$/bbl)
Natural Gas
NYMEX ($/MMBtu)
AECO (C$/Mcf)
Dawn (C$/MMBtu)
$
$
2020
2019
39.40 $
41.05
49.45
2.08 $
2.24
2.50
57.03
62.12
70.15
2.63
1.62
3.19
54 | 2020 Annual Report
Ovintiv Inc.
Production Volumes and Realized Prices
Production Volumes (1)
2020
2019
Realized Prices (2)
2020
2019
Oil (Mbbls/d, $/bbl)
USA Operations
Canadian Operations
China Operations (3)
Total
NGLs – Plant Condensate (Mbbls/d, $/bbl)
USA Operations
Canadian Operations
Total
NGLs – Other (Mbbls/d, $/bbl)
USA Operations
Canadian Operations
Total
Total Oil & NGLs (Mbbls/d, $/bbl)
USA Operations
Canadian Operations
China Operations (3)
Total
Natural Gas (MMcf/d, $/Mcf)
USA Operations
Canadian Operations
Total
Total Production (MBOE/d, $/BOE)
USA Operations
Canadian Operations
China Operations (3)
Total
Production Mix (%)
Oil & Plant Condensate
NGLs – Other
Total Oil & NGLs
Natural Gas
Production Change – Year Over Year (%) (4)
Total Oil & NGLs
Natural Gas
Total Production
Core Assets Production
Oil (Mbbls/d)
NGLs – Plant Condensate (Mbbls/d)
NGLs – Other (Mbbls/d)
Total Oil & NGLs (Mbbls/d)
Natural Gas (MMcf/d)
Total Production (MBOE/d)
% of Total Production
56.19
53.19
66.37
56.27
44.05
51.79
50.25
11.44
11.11
11.37
43.04
40.36
66.37
42.63
1.90
2.01
1.97
34.36
19.35
66.37
28.29
150.9
0.6
-
151.5
11.1
41.0
52.1
70.3
15.0
85.3
232.3
56.6
-
288.9
529
1,000
1,529
320.5
223.3
-
543.8
37
16
53
47
(4 )
(3 )
(4 )
106.3
46.3
75.8
228.4
1,373
457.2
84
162.3 $
0.6
1.5
164.4
36.84 $
32.58
-
36.83
26.68
35.87
33.92
9.52
11.53
9.87
28.09
29.40
-
28.34
1.60
2.01
1.87
23.00
16.42
-
20.30
10.5
42.4
52.9
67.9
16.7
84.6
240.7
59.7
1.5
301.9
547
1,030
1,577
331.9
231.5
1.5
564.9
38
15
53
47
80
36
56
109.3
44.7
73.8
227.8
1,353
453.5
80
(1) Average daily.
(2) Average per-unit prices, excluding the impact of risk management activities.
(3) Effective July 31, 2019, the production sharing contract with China National Offshore Oil Corporation (“CNOOC”) was terminated and the
Company exited its China Operations. Production from China Operations is presented for the period from February 14, 2019 through July 31,
2019.
Includes production impacts of acquisitions and divestitures.
(4)
Ovintiv Inc.
2020 Annual Report | 55
Upstream Product Revenues
($ millions)
2019 Upstream Product Revenues
Increase (decrease) due to:
Sales prices
Production volumes
2020 Upstream Product Revenues
NGLs -
Plant
Oil
Condensate
NGLs -
Other
Natural
Gas
Total (1)
$
3,376 $
971 $
351 $
1,136 $
5,834
(1,068 )
(266 )
2,042 $
(310 )
(14 )
647 $
$
(47 )
4
308 $
(57 )
(32 )
1,047 $
(1,482 )
(308 )
4,044
(1) Revenues for 2019 exclude certain other revenue and royalty adjustments with no associated production volumes of $13 million.
Oil Revenues
2020 versus 2019
Oil revenues decreased $1,334 million compared to 2019 primarily due to:
• Lower average realized oil prices of $19.44 per bbl, or 35 percent, decreased revenues by $1,068 million. The
decrease reflected lower Houston and WTI benchmark prices which were down 34 percent and 31 percent,
respectively, and weakening regional pricing relative to the WTI benchmark price in the USA Operations; and
• Lower average oil production volumes of 12.9 Mbbls/d decreased revenues by $266 million. Lower volumes
were primarily due to natural declines in Eagle Ford, Anadarko and Uinta (15.6 Mbbls/d), production shut-ins
due to the economic downturn (3.0 Mbbls/d) and the termination of the Company’s production sharing contract
in its China Operations in the third quarter of 2019 (1.4 Mbbls/d), partially offset by the Newfield acquisition
in 2019 (8.7 Mbbls/d).
NGL Revenues
2020 versus 2019
NGL revenues decreased $367 million compared to 2019 primarily due to:
• Lower average realized plant condensate prices of $16.33 per bbl, or 32 percent, decreased revenues by
$310 million. The decrease reflected lower WTI and Edmonton Condensate benchmark prices which were
down 31 percent and 30 percent, respectively, as well as declines in regional pricing relative to the WTI
benchmark price;
• Lower average realized other NGL prices of $1.50 per bbl, or 13 percent, decreased revenues by $47 million
reflecting lower other NGL benchmark prices and lower regional pricing in the USA Operations;
• Lower average plant condensate production volumes of 0.8 Mbbls/d decreased revenues by $14 million. Lower
volumes were primarily due to natural declines in Duvernay (2.1 Mbbls/d), partially offset by successful drilling
in Montney (1.4 Mbbls/d); and
• Higher average other NGL production volumes of 0.7 Mbbls/d increased revenues by $4 million. Higher
volumes were primarily due to the Newfield acquisition in 2019 (4.3 Mbbls/d), partially offset by natural
declines in Anadarko and Eagle Ford (3.7 Mbbls/d).
56 | 2020 Annual Report
Ovintiv Inc.
Natural Gas Revenues
2020 versus 2019
Natural gas revenues decreased $89 million compared to 2019 primarily due to:
• Lower average realized natural gas prices of $0.10 per Mcf, or five percent, decreased revenues by $57 million.
The decrease reflected lower Dawn and NYMEX benchmark prices which were down 22 percent and 21
percent, respectively, partially offset by a higher AECO benchmark price which was up 38 percent and
strengthening of regional pricing in USA Operations; and
• Lower average natural gas production volumes of 48 MMcf/d decreased revenues by $32 million primarily due
to natural declines in Anadarko, Duvernay and Eagle Ford (47 MMcf/d), the sale of the Arkoma natural gas
assets in the third quarter of 2019 (35 MMcf/d) and increased third-party plant downtime in Montney (12
MMcf/d), partially offset by the Newfield acquisition in 2019 (44 MMcf/d).
Gains (Losses) on Risk Management, Net
As a means of managing commodity price volatility, Ovintiv enters into commodity derivative financial instruments
on a portion of its expected oil, NGLs and natural gas production volumes. The Company’s commodity price
mitigation program reduces volatility and helps sustain revenues during periods of lower prices. Additional
information on the Company’s commodity price positions as at December 31, 2020 can be found in Note 25 to the
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
The following table provides the effects of the Company’s risk management activities on revenues.
Realized Gains (Losses) on Risk Management
Commodity Price (1)
Oil ($/bbl)
NGLs - Plant Condensate ($/bbl)
NGLs - Other ($/bbl)
Natural Gas ($/Mcf)
Other (2)
Total ($/BOE)
Unrealized Gains (Losses) on Risk Management
Total Gains (Losses) on Risk Management, Net
$ millions
2020
2019
Per-Unit
2020
2019
$
$
435 $
133
(14 )
148
9
711
(204 )
507 $
$
$
$
$
$
$
68
33
82
180
6
369
(730 )
(361 )
7.85 $
6.97 $
(0.46 ) $
0.26 $
- $
3.52 $
1.13
1.70
2.67
0.31
-
1.76
Includes realized gains and losses related to the USA and Canadian Operations.
(1)
(2) Other primarily includes realized gains or losses from Market Optimization and other derivative contracts with no associated production
volumes.
Ovintiv recognizes fair value changes from its risk management activities each reporting period. The changes in fair
value result from new positions and settlements that occur during each period, as well as the relationship between
contract prices and the associated forward curves. Realized gains or losses on risk management activities related to
commodity price mitigation are included in the USA Operations, Canadian Operations and Market Optimization
revenues as the contracts are cash settled. Unrealized gains or losses on fair value changes of unsettled contracts are
included in the Corporate and Other segment.
Ovintiv Inc.
2020 Annual Report | 57
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)
Market Optimization
2020 versus 2019
2020
$
1,459 $
2019
1,159
Market Optimization product revenues increased $300 million compared to 2019 primarily due to:
• Higher sales of third-party purchased liquid volumes primarily relating to price optimization activities in the
USA Operations ($747 million) and higher sales of third-party purchased natural gas volumes primarily relating
to marketing arrangements for assets divested in prior years ($67 million);
partially offset by:
• Lower oil and NYMEX benchmark prices, as well as lower regional natural gas pricing ($514 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
14 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
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.
USA Operations
Canadian Operations
Total
2020 versus 2019
$ millions
2020
2019
$
$
158 $
15
173 $
238
16
254
$
$
$
$/BOE
2020
1.34 $
0.18 $
0.87 $
2019
1.96
0.19
1.23
Production, mineral and other taxes decreased $81 million compared to 2019 primarily due to:
• Lower production tax in USA Operations due to lower commodity prices ($71 million), as well as the sale of
the Arkoma natural gas assets and the termination of the Company’s production sharing contract in its China
Operations in the third quarter of 2019 ($2 million).
58 | 2020 Annual Report
Ovintiv Inc.
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.
USA Operations
Canadian Operations
Upstream Transportation and Processing
Market Optimization
Total
2020 versus 2019
$ millions
2020
2019
$
$
453 $
829
1,282
466
859
1,325
$
$
$
220
1,502 $
233
1,558
$/BOE
2020
3.86 $
10.12 $
6.44 $
2019
3.85
10.16
6.42
Transportation and processing expense decreased $56 million compared to 2019 primarily due to:
• The expiration of certain transportation contracts in the USA Operations as well as expired contracts relating
to decommissioned and previously divested assets, the sale of the Arkoma natural gas assets in the third quarter
of 2019, the decommissioning of Deep Panuke, lower U.S/Canadian dollar exchange rate and lower flow-
through operating costs due to a third-party plant turnaround in Montney in 2019;
partially offset by:
• Higher costs from increased production volumes relating to the Newfield acquisition in 2019 and the
diversification of the Company’s downstream markets, as well as rate escalation in certain transportation
contracts relating to previously divested assets.
Operating
Operating expense includes costs paid by the Company, net of amounts capitalized, on oil and natural gas properties
in which the Company has a working interest. These costs primarily include labor, service contract fees, chemicals,
fuel, water hauling, electricity and workovers.
USA Operations
Canadian Operations
China Operations (1)
Upstream Operating Expense (2)
Market Optimization
Corporate & Other
Total
$ millions
2020
2019
$
$
485 $
100
-
585
22
(2 )
605 $
$
$
$
$
566
125
16
707
28
(3 )
732
$/BOE
2020
4.12 $
1.21 $
- $
2.92 $
2019
4.65
1.46
27.79
3.41
(1) Effective July 31, 2019, the production sharing contract with CNOOC was terminated and the Company exited its China Operations. Upstream
Operating Expense from China Operations is presented for the period from February 14, 2019 through July 31, 2019.
(2) 2020 Upstream Operating Expense per BOE includes long-term incentive costs of $0.04/BOE (2019 - long-term incentive costs of
$0.06/BOE).
Ovintiv Inc.
2020 Annual Report | 59
2020 versus 2019
Operating expense decreased $127 million compared to 2019 primarily due to:
• Decreased activity mainly as a result of the economic downturn and cost saving initiatives ($110 million), lower
salaries and benefits due to decreased headcount ($51 million), the sale of the Arkoma natural gas assets and
the termination of the Company’s production sharing contract in its China Operations in the third quarter of
2019 ($25 million), as well as lower long-term incentive costs resulting from a higher decrease in the
Company’s share price in 2020 compared to 2019 ($6 million);
partially offset by:
• Lower capitalization of overhead costs ($63 million) and the Newfield acquisition in 2019 ($11 million).
Additional information on the Company’s long-term incentives can be found in Note 22 to the Consolidated Financial
Statements included in Item 8 of this Annual Report on Form 10-K.
Purchased Product
Purchased product expense includes purchases of oil, NGLs and natural gas from third parties that are used to provide
operational flexibility and cost mitigation for transportation commitments, product type, delivery points and customer
diversification. The Company also purchases and sells third-party volumes under marketing arrangements associated
with the Company’s previous divestitures.
($ millions)
Market Optimization
2020 versus 2019
2020
$
1,366 $
2019
1,043
Purchased product expense increased $323 million compared to 2019 primarily due to:
• Higher third-party purchased liquid volumes primarily relating to price optimization activities in the USA
Operations ($744 million) and higher third-party purchased natural gas volumes primarily relating to marketing
arrangements for assets divested in prior years ($60 million);
partially offset by:
• Lower oil and NYMEX benchmark prices, as well as lower regional natural gas pricing ($481 million).
Depreciation, Depletion & Amortization
Proved properties within each country cost centre 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 this 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 this MD&A.
USA Operations
Canadian Operations
Upstream DD&A
Corporate & Other
Total
$ millions
2020
2019
$
$
1,378 $
427
1,805
1,593
383
1,976
$
$
$
29
1,834 $
39
2,015
$/BOE
2020
11.75 $
5.21 $
9.06 $
2019
13.15
4.53
9.61
60 | 2020 Annual Report
Ovintiv Inc.
2020 versus 2019
DD&A decreased $181 million compared to 2019 primarily due to:
• Lower depletion rates in the USA Operations ($165 million) and lower production volumes in the USA and
Canadian Operations ($50 million and $12 million, respectively), partially offset by higher depletion rates in
the Canadian Operations ($60 million).
The depletion rate in the USA Operations decreased $1.40 per BOE compared to 2019 primarily due to the ceiling
test impairments recognized in the second and third quarter of 2020. The depletion rate in the Canadian Operations
increased $0.68 per BOE, compared to 2019 primarily due to a higher depletable base.
Impairments
Under full cost accounting, the carrying amount of Ovintiv’s oil and natural gas properties within each country cost
centre is subject to a ceiling test performed quarterly. Ceiling test impairments are recognized when the capitalized
costs, net of accumulated depletion and the related deferred income taxes, exceed the sum of the estimated after-tax
future net cash flows from proved reserves as calculated under SEC requirements using the 12-month average trailing
prices and discounted at 10 percent. The 12-month average trailing price is calculated as the average of the price on
the first day of each month within the trailing 12-month period.
In 2020, the Company recognized a before-tax non-cash ceiling test impairment of $5,580 million in the USA
Operations. The non-cash ceiling test impairments primarily resulted from the decline in the 12-month average trailing
prices, which reduced proved reserves.
The 12-month average trailing prices used in the ceiling test calculations were based on the benchmark prices below.
The benchmark prices were adjusted for basis differentials to determine local reference prices, transportation costs
and tariffs, heat content and quality.
12-Month Average Trailing Reserves Pricing (1)
2020
2019
Oil & NGLs
Natural Gas
WTI
($/bbl)
Edmonton
Condensate
(C$/bbl)
Henry Hub
($/MMBtu)
AECO
(C$/MMBtu)
39.62
55.93
49.77
68.80
1.98
2.58
2.13
1.76
(1) All prices were held constant in all future years when estimating net revenues and reserves.
Due to the low commodity price environment, further declines in the 12-month average trailing prices are expected
and could reduce proved reserves volumes and values and result in the recognition of future ceiling test impairments.
However, future ceiling test impairments are difficult to reasonably predict and depend on commodity prices, as well
as changes to reserves estimates, future development costs, capitalized costs, unproved property costs transferred to
the depletable base of the full cost pool, as well as proceeds received from upstream divestitures which are generally
deducted from the Company’s capitalized costs and can reduce the likelihood of ceiling test impairments.
The Company has calculated the estimated effects that certain price changes would have had on its ceiling test
impairment for the period ended December 31, 2020. Using forecast commodity prices as at December 31, 2020, for
the three months ending March 31, 2021, the estimated 12-month average trailing prices for the period ended
December 31, 2020 would have been $38.00 per bbl for WTI, C$47.17 per bbl for Edmonton Condensate, $2.26 per
MMBtu for Henry Hub and C$2.51 per MMBtu for AECO. Based on these estimated prices, a ceiling test impairment
of less than $150 million for the USA Operations could be recognized in the first quarter of 2021. If a low commodity
price environment is sustained, further ceiling test impairments and related allowances on deferred tax assets may be
recognized.
The additional estimated before-tax ceiling test impairment is not expected to impact proved undeveloped reserves for
the USA Operations. Due to uncertainties in estimating proved reserves, the additional before-tax ceiling test
impairment described and resulting implications may not be indicative of Ovintiv’s future development plans,
operating or financial results.
Ovintiv Inc.
2020 Annual Report | 61
The Company believes that the discounted after-tax future net cash flows from proved reserves required to be used in
the ceiling test calculation are not indicative of the fair market value of Ovintiv’s oil and natural gas properties or the
future net cash flows expected to be generated from such properties. The discounted after-tax future net cash flows do
not consider the fair market value of unamortized unproved properties, or probable or possible liquids and natural gas
reserves. In addition, there is no consideration given to the effect of future changes in commodity prices. Ovintiv
manages its business using estimates of reserves and resources based on forecast prices and costs. Additional
information on the ceiling test calculation can be found in Note 10 to the Consolidated Financial Statements included
in Item 8 of this Annual Report on Form 10-K.
Administrative
Administrative expense represents costs associated with corporate functions provided by Ovintiv staff. Costs primarily
include salaries and benefits, operating lease, office, information technology, restructuring and long-term incentive
costs.
$ millions
2020
2019
Administrative, excluding Long-Term Incentive Costs,
Restructuring Costs and Current Expected Credit Losses (1)
Long-term incentive costs
Restructuring costs
Current expected credit losses (2)
Total Administrative
$
$
281 $
23
90
1
395 $
328
23
138
-
489
$
$
$/BOE
2020
1.41 $
0.12
0.45
-
1.98 $
2019
1.59
0.11
0.67
-
2.37
Includes $110 million related to The Bow office lease, half of which is recovered from sublease revenues (2019 - $113 million).
(1)
(2) On January 1, 2020, Ovintiv adopted ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial
Instruments” under Topic 326. Further details on the adoption of ASU 2016-13 can be found in Note 1 to the Consolidated Financial
Statements included in Item 8 of this Annual Report on Form 10-K.
2020 versus 2019
Administrative expense in 2020 decreased $94 million compared to 2019 primarily due to lower restructuring costs
incurred in 2020 ($48 million), lower salaries and benefits due to decreased headcount ($18 million), lower consulting
costs ($12 million) and lower non-recurring integration and administrative expenses relating to the Newfield
acquisition in 2019 ($11 million).
During 2019, the Company completed workforce reductions in conjunction with the Newfield acquisition to better
align staffing levels and the organizational structure. In June 2020, the Company completed further workforce
reductions as part of a company-wide reorganization to better align with the Company’s planned activity levels.
Additional information on restructuring charges can be found in Note 21 to the Consolidated Financial Statements
included in Item 8 of this Annual Report on Form 10-K.
Other (Income) Expenses
($ millions)
Interest
Foreign exchange (gain) loss, net
(Gain) loss on divestitures, net
Other (gains) losses, net
Total Other (Income) Expenses
Interest
2020
371 $
17
-
(55 )
333 $
2019
382
(119 )
(3 )
23
283
$
$
Interest expense primarily includes interest on Ovintiv’s long-term debt. Additional information on changes in interest
can be found in Note 4 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form
10-K.
62 | 2020 Annual Report
Ovintiv Inc.
2020 versus 2019
Interest expense decreased $11 million compared to 2019 primarily due to:
• Lower interest expense resulting from the repayment of the Company’s $500 million senior note in the second
quarter of 2019 ($13 million) and interest savings related to open market repurchases in 2020 ($11 million);
partially offset by:
• Higher interest expense on long-term debt primarily relating to the assumption of Newfield’s outstanding senior
notes, interest expense relating to amounts drawn on the Company’s credit facilities and issuances under the
Company’s U.S. commercial paper (“U.S. CP”) program ($16 million).
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 Item 8 of this Annual Report on Form 10-K. Additional information
on foreign exchange rates and the effects of foreign exchange rate changes can be found in Items 6 and 7A of this
Annual Report on Form 10-K.
Following the completion of the Reorganization, including the U.S. Domestication, on January 24, 2020, as described
in the Highlights section of this MD&A, the U.S. dollar denominated unsecured notes issued by Encana Corporation
from Canada were assumed by Ovintiv Inc., a company incorporated in Delaware with a U.S. dollar functional
currency. Accordingly, these U.S. dollar denominated unsecured notes, along with certain intercompany notes, no
longer attract foreign exchange translation gains or losses.
2020 versus 2019
In 2020, the Company recorded a net foreign exchange loss of $17 million compared to a gain in 2019 of $119 million
primarily due to:
• Unrealized foreign exchange losses on the translation of U.S. dollar financing debt issued from Canada
compared to gains in 2019 ($258 million) and realized foreign exchange losses on intercompany notes and the
settlement of U.S. dollar financing debt issued from Canada compared to gains in 2019 ($76 million and $26
million, respectively);
partially offset by:
• Unrealized foreign exchange gains on the translation of intercompany notes compared to losses in 2019
($223 million).
Other (Gains) Losses, Net
Other (gains) losses, net, primarily includes other non-recurring revenues or expenses and may also include items such
as interest income, interest received from tax authorities, transaction costs relating to acquisitions, reclamation charges
relating to decommissioned assets, gains on debt repurchases, government stimulus programs and adjustments related
to other assets.
Other gains in 2020 primarily includes gains of $30 million, relating to the repurchase of the Company’s fixed long-
term debt on the open market as discussed in the Liquidity and Capital Resources section of this MD&A and interest
income of $5 million.
Other losses in 2019 primarily included legal fees and transaction costs related to the Newfield acquisition of $33
million, partially offset by interest income on short-term investments of $10 million.
Ovintiv Inc.
2020 Annual Report | 63
Income Tax
($ millions)
Current Income Tax Expense (Recovery)
Deferred Income Tax Expense (Recovery)
Income Tax Expense (Recovery)
Effective Tax Rate (1)
$
$
2020
(14 ) $
381
367 $
2019
(13 )
94
81
(6.4%)
25.7%
(1) Following the U.S. Domestication as described in the Highlights section of this MD&A, the applicable statutory rate became the U.S. federal
income tax rate of 21 percent.
Income Tax Expense (Recovery)
2020 versus 2019
In 2020, income tax expense increased $286 million compared to 2019, which included an increase in the valuation
allowance of $568 million in Canada related to prior years’ deferred tax assets, partially offset by the tax benefit
resulting from current year losses arising from non-cash ceiling test impairments and a lower effective tax rate due to
the current year valuation allowance discussed below.
Deferred income tax assets are routinely assessed for realizability. During 2020, the Company determined, after
weighing both positive and negative evidence, that a valuation allowance should be recorded to reduce the associated
deferred tax assets in the United States and in Canada. The Company is in a cumulative three-year loss position as of
December 31, 2020 in both the United States and Canada. The cumulative losses and increased uncertainty in the
timing as to when the realization of deferred tax assets will occur, is significant negative evidence to overcome, and
consequently, it is more likely than not that the deferred tax assets will not be realizable. If it is determined that the
deferred tax assets are realizable in the future, a reduction in the valuation allowance will be recorded. Additional
information on the determination of the valuation allowance can be found in Note 6 to the Consolidated Financial
Statements included in Item 8 of this Annual Report on Form 10-K.
As part of the U.S. Domestication in the first quarter of 2020, Ovintiv recognized a capital loss and recorded a deferred
income tax benefit in the amount of $1.2 billion for Canadian income tax purposes due to the decline in the Company’s
share value compared to the historical tax basis of its properties that were transferred as part of the U.S. Domestication.
Ovintiv assessed the realizability of these capital losses against capital gains and concluded that it is more likely than
not that the deferred tax asset will not be realizable. Therefore, Ovintiv has recorded a corresponding valuation
allowance against the deferred tax asset. If it is determined the capital loss can be utilized at a future date, a reduction
in the valuation allowance will be recorded.
Effective Tax Rate
The Company’s annual effective income tax rate is primarily impacted by earnings, valuation allowances related to
current year losses, state taxes, income tax related to foreign operations, the effect of legislative changes, non-taxable
capital gains and losses, and tax differences on divestitures and transactions. Additional information on income taxes
can be found in Note 6 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form
10-K.
The Company’s effective tax rate was (6.4) percent for 2020, which is lower than the U.S. federal statutory tax rate of
21 percent primarily due to valuation allowances recorded relating to current year losses arising from ceiling test
impairments and an increase in the valuation allowance of $568 million in Canada related to prior years’ deferred tax
assets.
The effective tax rate of 25.7 percent for 2019, was higher than the U.S. federal statutory tax rate of 21 percent
primarily due to state taxes and the re-measurement of the Company’s deferred tax position resulting from the Alberta
corporate tax rate reduction, partially offset by partnership tax allocations in excess of funding in Canada as well as
the resolution of certain tax items relating to prior taxation years. On June 28, 2019, Alberta Bill 3, the Job Creation
Tax Cut (Alberta Corporate Tax Amendment) Act, was signed into law resulting in a phased-in reduction of the
Alberta corporate tax rate from 12 percent to eight percent over a period of four years. During 2019, the deferred tax
64 | 2020 Annual Report
Ovintiv Inc.
expense of $94 million included an adjustment of $55 million resulting from the re-measurement of the Company’s
deferred tax position due to the Alberta tax rate reduction.
On June 29, 2020, Alberta announced the previously phased-in rate reduction will be accelerated with the Alberta rate
reducing to eight percent effective July 1, 2020. This legislation was enacted in December 2020 and the impact
resulting from the announcement was not material for the Company’s tax position.
The Company continues to evaluate the various stimulus and fiscal measures announced in the U.S. and Canada in
response to the COVID-19 pandemic. The tax impact of these measures is reflected in the Company’s tax and financial
position.
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
taxation 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.
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 ensures 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 or to manage its capital structure as discussed below. At
December 31, 2020, $5.0 million in cash and cash equivalents was held by Canadian subsidiaries. The cash held by
Canadian subsidiaries is accessible and may be subject to additional U.S. income taxes and Canadian withholding
taxes if repatriated.
The Company’s capital structure consists of total shareholders’ equity plus long-term debt, including any current
portion. The Company’s objectives when managing its capital structure are to maintain financial flexibility to preserve
Ovintiv’s access to capital markets and its ability to meet financial obligations and finance internally generated growth,
as well as potential acquisitions. Ovintiv has a practice of maintaining capital discipline and strategically managing
its capital structure by adjusting capital spending, adjusting dividends paid to shareholders, issuing new shares of
common stock, purchasing shares of common stock for cancellation, issuing new debt, repaying or repurchasing
existing debt.
($ millions, except as indicated)
Cash and Cash Equivalents
Available Credit Facilities (1)
Available Uncommitted Demand Lines (2)
Issuance of U.S. Commercial Paper
Total Liquidity
Long-Term Debt, including current portion (3)
Total Shareholders’ Equity (4)
Debt to Capitalization (%) (5)
Debt to Adjusted Capitalization (%) (6)
$
$
$
$
2020
10 $
3,402
269
(352 )
3,329 $
6,885 $
3,837 $
64
37
2019
190
4,000
199
(698 )
3,691
6,974
9,930
41
28
(1)
(2)
Includes available credit facilities of $2.1 billion (2019 - $1.5 billion) in the U.S. and $1.3 billion (2019 - $2.5 billion) in Canada as at
December 31, 2020 (collectively, the “Credit Facilities”).
Includes three uncommitted demand lines totaling $336 million, net of $67 million in related undrawn letters of credit (2019 - $331 million
and $132 million, respectively).
(3) Long-Term Debt as at December 31, 2020, includes outstanding U.S. CP totaling $352 million and $598 million drawn on the Credit Facilities.
(4) Shareholders’ Equity reflects the common shares purchased, for cancellation, under the Company’s 2019 NCIB and substantial issuer bid
programs.
(5) Calculated as long-term debt, including the current portion, divided by shareholders’ equity plus long-term debt, including the current portion.
(6) A non-GAAP measure which is defined in the Non-GAAP Measures section of this MD&A.
Ovintiv Inc.
2020 Annual Report | 65
The Company has access to two committed revolving U.S. dollar denominated credit facilities totaling $4.0 billion,
which include a $2.5 billion revolving credit facility for Ovintiv Inc. and a $1.5 billion revolving credit facility for a
Canadian subsidiary, both maturing in July 2024. The Credit Facilities provide financial flexibility and allow the
Company to fund its operations or capital program. At December 31, 2020, $405 million and $193 million were
outstanding under the revolving credit facility for Ovintiv Inc. and for the Canadian subsidiary, respectively.
During 2020, Ovintiv’s credit rating was downgraded to below investment grade by one of its credit rating agencies
following updates to commodity price assumptions used by the rating agency. As a result of the downgrade, the cost
of short-term borrowing on the revolving credit facility for Ovintiv Inc. has increased marginally. Ovintiv continues
to have full access to its Credit Facilities and the credit rating downgrade has not impacted the Company’s ability to
fund its operations or capital program. While Ovintiv currently has both investment and non-investment grade credit
ratings, further reductions in the Company’s credit ratings could increase the cost of short-term borrowings on the
existing Credit Facilities or other sources of liquidity and limit access to the Company’s commercial paper program.
A prolonged period of low commodity prices and the global impact of the COVID-19 pandemic could affect the
Company’s credit ratings in the future.
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 December 31, 2020, the Company had approximately $352 million of commercial paper outstanding under its
U.S. CP programs with an average remaining term of approximately 38 days and a weighted average interest rate of
approximately 1.04 percent, which is supported by the Company’s Credit Facilities. As a result of the Company’s
recent credit rating downgrade, the Company’s access to commercial paper may be limited. If future access to the U.S.
CP programs is unavailable when the outstanding commercial paper comes due, the Company intends to repay any
maturing balances using advances from the Company’s Credit Facilities or available cash on hand.
The Credit Facilities, uncommitted demand lines, and cash and cash equivalents provide Ovintiv with total liquidity
of approximately $3.3 billion. At December 31, 2020, Ovintiv also had approximately $68 million in undrawn letters
of credit issued in the normal course of business primarily as collateral security, related to transportation arrangements
and to support future abandonment liabilities. Further downgrades in the Company’s credit ratings could trigger
additional collateral requirements to support existing agreements and such amounts could be material.
In 2020, Ovintiv filed a U.S. shelf registration statement and a Canadian shelf prospectus, 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. and/or Canada. At December 31, 2020, $6.0 billion remained accessible under
the Canadian shelf prospectus. The ability to issue securities under the U.S. shelf registration statement or Canadian
shelf prospectus is dependent upon market conditions and securities law requirements.
Ovintiv is currently in compliance with, and expects that it will continue to be in compliance with, all financial
covenants under the Credit Facilities. Management monitors Debt to Adjusted Capitalization, which is a non-GAAP
measure defined in the Non-GAAP Measures section of this MD&A, as a proxy for Ovintiv’s financial covenant under
the Credit Facilities, which requires Debt to Adjusted capitalization to be less than 60 percent. As at December 31,
2020, the Company’s Debt to Adjusted Capitalization was 37 percent. The definitions used in the covenant under the
Credit Facilities adjust capitalization for cumulative historical ceiling test impairments recorded in conjunction with
the Company’s January 1, 2012 adoption of U.S. GAAP. Ovintiv does not expect the current COVID-19 pandemic to
impact the Company’s ability to remain in compliance with its financial covenants under the Credit Facilities.
Additional information on financial covenants can be found in Note 15 to the Consolidated Financial Statements
included in Item 8 of this Annual Report on Form 10-K.
66 | 2020 Annual Report
Ovintiv Inc.
Sources and Uses of Cash
During 2020, the Company primarily generated cash through operating activities. The following table summarizes the
sources and uses of the Company’s cash and cash equivalents.
($ millions)
Activity Type
2020
2019
Sources of Cash, Cash Equivalents and Restricted Cash
Cash from operating activities
Proceeds from divestitures
Corporate acquisition, net of cash and restricted cash acquired
Net issuance of revolving long-term debt
Operating $
Investing
Investing
Financing
Uses of Cash and Cash Equivalents
Capital expenditures
Acquisitions
Repayment of long-term debt (1)
Purchase of shares of common stock
Dividends on shares of common stock
Other
Foreign Exchange Gain (Loss) on Cash, Cash Equivalents
and Restricted Cash Held in Foreign Currency
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
(1)
Includes open market repurchases.
Operating Activities
Investing
Investing
Financing
Financing
Financing
Investing/Financing
$
1,895 $
89
-
252
2,236
1,736
19
272
-
97
287
2,411
(5 )
(180 ) $
2,921
197
94
698
3,910
2,626
65
500
1,250
102
240
4,783
5
(868 )
Net cash from operating activities in 2020 was $1,895 million and was primarily a reflection of the impacts from lower
average realized commodity prices and production volumes, partially offset by the Newfield acquisition in 2019, the
effects of the commodity price mitigation program and changes in non-cash working capital.
Additional detail on changes in non-cash working capital can be found in Note 26 to the Consolidated Financial
Statements included in Item 8 of this Annual Report on Form 10-K. Ovintiv expects it will continue to meet the
payment terms of its suppliers.
Non-GAAP Cash Flow in 2020 was $1,929 million 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.
2020 versus 2019
Net cash from operating activities decreased $1,026 million compared to 2019 primarily due to:
• Lower realized commodity prices ($1,482 million), lower production volumes ($308 million) and higher
decommissioning payments primarily related to Deep Panuke ($69 million);
partially offset by:
• Higher realized gains on risk management in revenues ($342 million), lower operating expenses, excluding
non-cash long-term incentive costs ($152 million), lower administrative expense, excluding non-cash long-
term incentive costs and current expected credit losses ($105 million), which includes restructuring costs of
$48 million, lower production, mineral and other taxes ($81 million), lower transportation and processing
expenses ($56 million), changes in non-cash working capital ($52 million) and acquisition costs incurred in
2019 ($33 million).
Ovintiv Inc.
2020 Annual Report | 67
Investing Activities
The Company’s primary investing activities are capital expenditures, divestitures and acquisitions, and are
summarized in Notes 2, 8 and 9 to the Consolidated Financial Statements included in Item 8 of this Annual Report on
Form 10-K.
2020 and 2019
Net cash used in investing activities in 2020 was $1,864 million primarily due to capital expenditures. Capital
expenditures decreased $890 million compared to 2019 due to the Company’s reduced capital program in response to
the volatile market conditions in 2020, as discussed in the 2021 Outlook section of this MD&A.
Acquisitions in 2020 were $19 million, which primarily included property purchases with oil and liquids rich potential.
Acquisitions in 2019 were $65 million, which primarily included seismic purchases, water rights and property
purchases with liquids-rich potential.
Corporate acquisition in 2019 was $94 million which reflected the net cash acquired upon the Newfield business
combination.
Divestitures in 2020 were $89 million, which primarily included the sale of certain properties that did not complement
Ovintiv’s existing portfolio of assets. Divestitures in 2019 were $197 million, which primarily included the sale of the
Company’s Arkoma natural gas assets in Oklahoma, comprising approximately 140,000 net acres. Proceeds from the
sale of the Arkoma natural gas assets were used to reduce the Company’s long-term debt.
Financing Activities
Net cash used in financing activities has been impacted by the Company’s strategy to enhance liquidity, strengthen its
balance sheet by repaying or repurchasing existing debt, and returning value to stockholders through the purchase of
shares of common stock and paying dividends.
2020 versus 2019
Net cash used in financing activities in 2020 decreased $1,032 million compared to 2019. The decrease was primarily
due to the purchase of common shares under a NCIB and substantial issuer bid in 2019 ($1,250 million) as discussed
in more detail below, and the repayment of long-term debt in 2019 ($500 million), partially offset by a decrease in net
issuance of revolving long-term debt in 2020 ($446 million) and the open market repurchases of long-term debt in
2020 ($272 million) as discussed below.
From time to time, Ovintiv may seek to retire or purchase the Company’s outstanding debt through cash purchases
and/or exchanges for other debt or equity securities, in open market purchases, privately negotiated transactions or
otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, the Company’s
liquidity requirements, contractual restrictions and other factors. In 2020, the Company repurchased $302 million in
principal amount of its senior notes in the open market for an aggregate cash payment of approximately $272 million,
plus accrued interest, and recognized gains of approximately $30 million. Ovintiv utilized funds available from the
Company’s credit facilities, cash on hand and cash from implementing cost savings initiatives to complete these open
market repurchases. For additional information on the open market repurchases, refer to Note 15 to the Consolidated
Financial Statements included in Item 8 of this Annual Report on Form 10-K.
The Company’s long-term debt, including the current portion of $518 million which is due November 2021, totaled
$6,885 million at December 31, 2020 (2019 - $6,974 million). There was no current portion of long-term debt
outstanding at December 31, 2019. As at December 31, 2020, over 80 percent of the Company’s fixed rate long-term
debt is not due until 2024 and beyond. Since the second quarter of 2020, the Company has applied all excess cash
flows to reduce its total long-term debt, and expects to achieve total long-term debt reduction of at least $1.25 billion
by the end of 2021, exceeding the original announced debt reduction target of $1.0 billion. To date, the Company has
repaid $481 million towards its total 2021 long-term debt reduction target. Total long-term debt includes revolving
credit facilities and commercial paper balances. For additional information on long-term debt, refer to Note 15 to the
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
68 | 2020 Annual Report
Ovintiv Inc.
Dividends
The Company pays quarterly dividends to common stockholders at the discretion of the Board of Directors.
($ millions, except as indicated)
Dividend Payments
Dividend Payments ($/share) (1)
2020
97 $
0.375 $
2019
102
0.375
$
$
(1) Dividend payments per share reflect the Share Consolidation. Accordingly, the comparative period has been restated.
On February 17, 2021, the Board of Directors declared a dividend of $0.09375 per share of common stock payable on
March 31, 2021 to common stockholders of record as of March 15, 2021.
Substantial Issuer Bid
In 2019, the Company used cash on hand and issued commercial paper to purchase, for cancellation, approximately
47.3 million of its outstanding common shares, on a pre-Share Consolidation basis, or approximately 9.5 million
common shares, on a post-Share Consolidation basis, for total consideration of approximately $213 million under its
previously announced substantial issuer bid.
For additional information on the substantial issuer bid, refer to Note 18 to the Consolidated Financial Statements
included in Item 8 of this Annual Report on Form 10-K.
Normal Course Issuer Bid
In 2019, the Company used cash on hand to purchase, for cancellation, approximately 149.4 million common shares,
on a pre-Share Consolidation basis or approximately 29.9 million common shares, on a post-Share Consolidation
basis, for total consideration of approximately $1,037 million under its previous NCIB program.
For additional information on the NCIB, refer to Note 18 to the Consolidated Financial Statements included in Item 8
of this Annual Report on Form 10-K.
Off-Balance Sheet Arrangements
The Company may enter into off-balance sheet arrangements and transactions that can give rise to material off-balance
sheet obligations. The Company’s material off-balance sheet arrangements include transportation and processing
agreements, and short-term leases and non-lease components associated with drilling rigs and building leases, as
outlined in the Contractual Obligations table below, as well as undrawn letters of credit and minimum volumes sales
contracts, all of which are customary agreements in the oil and gas industry. Other than the items discussed above,
there are no other transactions, arrangements, or relationships with unconsolidated entities or persons that are
reasonably likely to materially affect the Company’s liquidity or the availability of, or requirements for, capital
resources.
Ovintiv Inc.
2020 Annual Report | 69
Contractual Obligations
Contractual obligations arising from long-term debt, operating and finance leases, risk management liabilities and
asset retirement obligations are recognized on the Company’s Consolidated Balance Sheet. The following table
outlines the Company’s undiscounted obligations and commitments at December 31, 2020:
($ millions)
2021 2022-2023 2024-2025 Thereafter
Total
Expected Future Payments
Long-Term Debt
Interest Payments on Long-Term Debt
Operating Leases (1)
Finance Leases (2)
Risk Management Liabilities
Asset Retirement Obligation
Obligations
Transportation and Processing
Drilling and Field Services (3)
Building Leases (3)
Commitments
Total Contractual Obligations
Sublease Income
$
$
$
518 $
374
121
87
132
39
1,271
729
36
13
778
2,049 $
(52 ) $
600 $
655
198
16
118
34
1,621
1,456
-
16
1,472
3,093 $
(94 ) $
1,950 $
555
177
17
15
15
2,729
951
-
11
962
3,691 $
(92 ) $
3,741 $
1,883
1,036
13
-
1,832
8,505
2,179
-
2
2,181
10,686 $
(521 ) $
6,809
3,467
1,532
133
265
1,920
14,126
5,315
36
42
5,393
19,519
(759 )
(1)
(2)
(3)
Includes The Bow office building.
Includes interest payments totaling $12 million.
Includes short-term leases with terms less than 12 months and non-lease operating cost components.
Interest Payments on Long-Term Debt and Finance Leases represent scheduled cash payments on the respective
obligations. Additional information can be found in Notes 15 and 14 to the Consolidated Financial Statements included
in Item 8 of this Annual Report on Form 10-K.
Operating Leases include drilling rigs, compressors, camps, office and buildings, certain land easements and various
equipment utilized in the development and production of oil, NGLs and natural gas. The Company has also subleased
approximately 50 percent of The Bow office space under the lease agreement. Sublease Income in the table above
include the amounts expected to be recovered from the sublease. Additional information on leases can be found in
Note 14 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Finance Leases relates to an office building and the remaining 2021 obligation related to the Deep Panuke Production
Field Centre. Additional information can be found in Note 14 to the Consolidated Financial Statements included in
Item 8 of this Annual Report on Form 10-K.
Risk Management Liabilities represents Ovintiv’s net liability position with counterparties. Additional information can
be found in Note 25 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Asset Retirement Obligation represents estimated costs arising from the obligation to fund the disposal of long-lived
assets upon their abandonment. The majority of Ovintiv’s asset retirement obligations relate to the plugging of wells
and related abandonment of oil and gas properties including processing plants and land restoration. Revisions to
estimated retirement obligations can result from changes in regulatory requirements, changes in retirement cost
estimates, revisions to estimated inflation rates and estimated timing of abandonment. Additional information can be
found in Note 17 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Transportation and Processing commitments relate to contractual obligations for capacity rights with third-party
pipelines and processing facilities. Drilling and Field Services commitments represent minimum future expenditures
for drilling, well servicing and equipment commitment rights. Certain development commitments with joint interest
partners are partially satisfied by Commitments included in the table above. Building Leases consist of various field
and office building leases used in Ovintiv’s daily operations. Drilling and Field Services, and Building Leases include
short-term leases with terms less than 12 months and non-lease operating cost components. Additional information
can be found in Notes 14 and 27 to the Consolidated Financial Statements included in Item 8 of this Annual Report
on Form 10-K.
70 | 2020 Annual Report
Ovintiv Inc.
Further to the commitments disclosed above, Ovintiv also has various obligations that become payable if certain events
occur including variable interests arising from gathering and compression agreements and guarantees on transportation
commitments resulting from completed property divestitures as described in Notes 20, 25 and 27, respectively, to the
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
In addition, Ovintiv has purchase orders for the purchase of inventory and other goods and services, which typically
represent authorization to purchase rather than binding agreements. The Company also has obligations to fund its
defined benefit pension and other post-employment benefit plans, as well as unrecognized tax benefits where the
settlement is not expected within the next 12 months as described in Notes 23 and 6, respectively, to the Consolidated
Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Ovintiv may have potential exposures related to previously divested properties where the purchasers typically assume
all obligations to plug, abandon, and decommission the associated wells, structures, and facilities acquired. One or
more of the counterparties in these transactions could, either as a result of the severe decline in oil and natural gas
prices or other factors related to the historical or future operations of their respective businesses, face financial
problems that may have a significant impact on their solvency and ability to continue as a going concern. If a purchaser
becomes the subject of a proceeding under relevant insolvency laws or otherwise fails to perform required
abandonment obligations, Ovintiv could be required to perform such actions under applicable federal laws and
regulations. While the Company believes that the risk of such event occurring is low, the Company could be forced
to use available cash to cover the costs of such liabilities and obligations should they arise.
Contingencies
For information on contingencies, refer to Note 27 to the Consolidated Financial Statements included in Item 8 of this
Annual Report on Form 10-K.
Ovintiv Inc.
2020 Annual Report | 71
Accounting Policies and Estimates
Critical Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make informed
judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. For a discussion
of the Company’s significant accounting policies refer to Note 1 to the Consolidated Financial Statements included in
Item 8 of this Annual Report on Form 10-K. Changes in facts and circumstances or additional information may result
in revised estimates, and actual results may differ from these estimates. Management considers the following to be its
most critical accounting estimates that involve judgment. The following discussion outlines the accounting policies
and practices involving the use of estimates that are critical to determining Ovintiv’s financial results. Changes in the
estimates and assumptions discussed below could materially affect the amount or timing of the financial results of the
Company.
Description
Judgments and Uncertainties
Upstream Assets and Reserve Estimates
As Ovintiv follows full cost accounting for oil, NGLs and natural gas
activities, reserves estimates are a key input to the Company’s
depletion, gain or loss on divestitures and ceiling test impairment
calculations. In addition, these reserves are the basis for the Company’s
supplemental oil and gas disclosures.
Ovintiv estimates its proved oil and gas reserves according to the
definition of proved reserves provided by the SEC. The Company’s
estimates of proved reserves are made using available geological and
reservoir data as well as production performance data and must
demonstrate with reasonable certainty to be economically producible in
future periods from known reservoirs under existing economic
conditions, operating methods and government regulations. The
estimation of reserves is a subjective process.
Due to the inter-relationship of various judgments made to
reserve estimates and the volatile nature of commodity prices, it
is generally not possible to predict the timing or magnitude of
ceiling test impairments.
Revisions to reserve estimates are necessary due to changes in
and among other things, development plans, projected future
rates of production, the timing of future expenditures, reservoir
performance, economic conditions, governmental restrictions as
well as changes in the expected recovery associated with infill
drilling, all of which are subject to numerous uncertainties and
various interpretations. Downward revisions in proved reserve
estimates due to changes in reserve estimates may increase
depletion expense and may also result in a ceiling test
impairment.
Reserves are calculated using an unweighted arithmetic average of
commodity prices in effect on the first day of each of the previous 12
months, held flat for the life of the production, except where prices are
defined by contractual arrangements.
Decreases in prices may result in reductions in certain proved
reserves due to reaching economic limits at an earlier projected
date and impact earnings through depletion expense and ceiling
test impairments.
Ovintiv manages its business using estimates of reserves and resources
based on forecast prices and costs as it gives consideration to probable
and possible reserves and future changes in commodity prices.
Ovintiv believes that the discounted after-tax future net cash
flows from proved reserves required to be used in the ceiling test
calculation are not indicative of the fair market value of Ovintiv’s
oil and natural gas properties or the future net cash flows
expected to be generated from such properties.
Business Combinations
Ovintiv follows the acquisition method of accounting for business
combinations. Assets acquired and liabilities assumed are recognized at
the date of acquisition at their respective estimated fair values. Any
excess of the purchase price over the fair value amounts assigned to
assets and liabilities is recorded as goodwill. Any deficiency of the
purchase price over the estimated fair values of the net assets acquired
is recorded as a gain in net earnings.
Fair value estimates are determined based on information that existed
at the time of the acquisition, utilizing expectations and assumptions
that would be available to and made by a market participant. When
market-observable prices are not available to value assets and liabilities,
the Company may use the cost, income, or market valuation approaches
depending on the quality of information available to support
management’s assumptions.
The most significant assumptions relate to the estimated fair
values assigned to proved and unproved oil and natural gas
properties. The assumptions made in performing these valuations
include discount rates, future commodity prices and costs, the
timing of development activities, projections of oil and gas
reserves, estimates to abandon and reclaim producing wells and
tax amortization benefits available to a market participant.
Changes in key assumptions may cause the acquisition
accounting to be revised, including the recognition of additional
goodwill or discount on acquisition. There is no assurance the
underlying assumptions or estimates associated with the
valuation will occur as initially expected.
Estimated fair values assigned to assets acquired can have a
significant effect on results of operations in the future through
impairments of goodwill. In addition, differences between the
future commodity prices when acquiring assets and the historical
12-month average trailing price to calculate ceiling test
impairments of upstream assets may impact net earnings.
72 | 2020 Annual Report
Ovintiv Inc.
Description
Goodwill Impairments
Goodwill is assessed for impairment at least annually in December, at the
reporting unit level which are Ovintiv’s country cost centres. To assess
impairment, the carrying amount of each reporting unit is determined and
compared to the fair value of each respective reporting unit. Any excess
of the carrying value of the reporting unit, including goodwill, over its fair
value is recognized as an impairment and charged to net earnings. The
impairment charge measured is limited to the total amount of goodwill
allocated to that reporting unit. Subsequent measurement of goodwill is at
cost less any accumulated impairments.
Judgments and Uncertainties
The most significant assumptions used to determine a reporting
unit’s fair value include estimations of oil and natural gas
reserves, including both proved reserves and risk-adjusted
unproved reserves, estimates of market prices considering
forward commodity price curves as of the measurement date,
market discount rates and estimates of operating, administrative,
and capital costs adjusted for inflation. In addition, management
may support fair value estimates determined with comparable
companies that are actively traded in the public market, recent
comparable asset transactions, and transaction premiums. This
would require management to make certain judgments about the
selection of comparable companies utilized.
Because quoted market prices for the Company’s reporting units are not
available, management applies judgment in determining the estimated
fair value of reporting units for purposes of performing goodwill
impairment tests. Ovintiv may use a combination of the income and the
market valuation approaches.
Downward revisions of estimated reserves quantities, increases
in future cost estimates, sustained decreases in oil or natural gas
prices, or divestiture of a significant component of the reporting
unit could reduce expected future cash flows and fair value
estimates of the reporting units and possibly result in an
impairment of goodwill in future periods.
The Company has assessed its goodwill for impairment at December
31, 2020 and no impairment was recognized. The reporting units’ fair
values were substantially in excess of the carrying values and as a result
was not at risk of failing the impairment test as at December 31, 2020.
Asset Retirement Obligation
Asset retirement obligations are those legal obligations where the
Company will be required to retire tangible long-lived assets such as
producing well sites, processing plants, and restoring land at the end of
oil and gas production operations. The fair value of estimated asset
retirement obligations is recognized on the Consolidated Balance Sheet
when incurred and a reasonable estimate of fair value can be made. The
asset retirement cost, equal to the initially estimated fair value of the
asset retirement obligation, is capitalized as part of the cost of the
related long-lived asset. Changes in the estimated obligation are
recognized as a change in the asset retirement obligation and the related
asset retirement cost. Actual expenditures incurred are charged against
the accumulated asset retirement obligation. Accretion expense is
recognized over time as the discounted liability is accreted to its
expected settlement value.
Derivative Financial Instruments
Ovintiv uses derivative financial instruments to manage its exposure to
market risks relating to commodity prices, foreign currency exchange
rates and interest rates. The Company’s policy is not to utilize derivative
financial instruments for speculative purposes. Realized gains or losses
from financial derivatives are recognized in net earnings as the contracts
are settled. Unrealized gains and losses are recognized in net earnings
at the end of each respective reporting period based on the changes in
fair value of the contracts.
Derivative financial instruments are measured at fair value with changes
in fair value recognized in net earnings. Fair value estimates are
determined using quoted prices in active markets, inferred based on
market prices of similar assets and liabilities or valued using internally
developed estimates. The Company may use various valuation techniques
including the discounted cash flow or option valuation models.
As Ovintiv has chosen not to elect hedge accounting treatment for the
Company’s derivative financial instruments, changes in the fair values
of derivative financial instruments can have a significant impact on
Ovintiv’s results of operations. Generally, changes in fair values of
derivative financial instruments do not impact the Company’s liquidity
or capital resources. Settlements of derivative financial instruments do
have an impact on the Company’s liquidity and results of operation.
Asset removal technologies and costs are constantly changing, as
are regulatory, political, environmental, safety, and public
relations considerations. The asset retirement obligation is
estimated by discounting the expected future cash flows of the
settlement. The discounted cash flows are based on estimates of
such factors as reserves lives, retirement costs, timing of
settlements, credit-adjusted risk-free rates and inflation rates.
Changes in these estimates impact net earnings through accretion
of the asset retirement obligation in addition to depletion of the
asset retirement cost included in property, plant and equipment.
Ovintiv’s derivative financial instruments primarily relate to
commodities including oil, NGLs and natural gas. The most
significant assumptions used in determining the fair value to the
Company’s commodity derivatives financial instruments include
estimates of future commodity prices, implied volatilities of
commodity prices, discount rates and estimates of counterparty
credit risk. These pricing and discounting variables are sensitive
to the period of the contract and market volatility as well as
regional price differentials. Changes in these estimates and
assumptions can impact net earnings through decreased revenues
or increased expenses.
Ovintiv Inc.
2020 Annual Report | 73
Description
Income Taxes
Ovintiv follows the liability method of accounting for income taxes.
Under this method, deferred income taxes are recorded for the effect of
any temporary difference between the accounting and income tax basis
of an asset or liability, using the enacted income tax rates and laws
expected to apply when the assets are realized and liabilities are settled.
Current income taxes are measured at the amount expected to be
recoverable from or payable to the taxing authorities based on the
income tax rates and laws enacted at the end of the reporting period.
The effect of a change in the enacted tax rates or laws is recognized in
net earnings in the period of enactment.
Deferred income tax assets are routinely assessed for realizability. If it
is more likely than not that deferred tax assets will not be realized, a
valuation allowance is recorded to reduce the deferred tax assets.
Ovintiv’s interim income tax expense is determined using an 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.
Ovintiv recognizes the financial statement effects of a tax position when
it is more likely than not, based on the technical merits, that the position
will be sustained upon examination by a taxing authority. A recognized
tax position is initially and subsequently measured as the largest amount
of tax benefit that is greater than 50 percent likely of being realized upon
settlement with a taxing authority. Liabilities for unrecognized tax
benefits that are not expected to be settled within the next 12 months
are included in other liabilities and provisions.
The Company’s unremitted earnings from its foreign subsidiaries are
considered to be permanently reinvested, as a result the Company does
not calculate a deferred tax liability for domestic income taxes on these
foreign earnings.
Contingent Liabilities
Ovintiv is subject to various legal proceedings, environmental
remediation, commercial and regulatory claims and liabilities that arise
in the ordinary course of business. The Company accrues losses when
such losses are probable and reasonably estimable, except for
contingencies acquired in a business combination which are recorded at
fair value at the time of the acquisition. If a loss is probable but the
Company cannot estimate a specific amount for that loss, the best
estimate within the range is accrued and if no amount is better within
the range, the minimum amount is accrued.
Judgments and Uncertainties
Tax interpretations, regulations and legislation, including U.S.
Tax Reform, and potential Treasury Department regulations and
guidance, in the various jurisdictions in which the Company and
its subsidiaries operate are subject to change and interpretation.
As such, income taxes are subject to measurement uncertainty
and the interpretations can impact net earnings through the
income tax expense arising from the changes in deferred income
tax assets or liabilities.
Ovintiv considers available positive and negative evidence when
assessing the realizability of deferred tax assets, including
historic and expected future taxable earnings, available tax
planning strategies and carry forward periods. Numerous
judgments and assumptions are inherent in the determination of
future taxable income, including factors such as future operating
conditions, particularly related to oil and gas prices. As a result,
the assumptions used in determining expected future taxable
earnings are consistent with those used in the goodwill
impairment assessment.
The estimated annual effective income tax rate is impacted by
expected annual earnings, statutory rate and other foreign
differences, non-taxable capital gains and losses, tax differences
on divestitures and transactions, and partnership tax allocations
in excess of funding.
The Company routinely assesses potential uncertain tax positions
and, if required, establishes accruals for such amounts. The
accruals are adjusted based on changes
in facts and
circumstances. Material changes to Ovintiv’s income tax
accruals may occur in the future based on the progress of ongoing
audits, changes in legislation or resolution of pending matters.
Determination of unrecognized deferred income tax liabilities is
not practicable due to the significant uncertainty in assumptions
that would be required including determining the nature of any
future remittances, that could be distributions in the form of non-
taxable returns of capital or taxable earnings and associated
withholding taxes, or determining the tax rates on any future
remittances that could vary significantly depending on the
available approaches to repatriate the earnings.
The establishment and evaluation of a contingent loss is based
on advice from legal counsel, advisors or consultants and
management’s judgement. Actual costs can vary from such
estimates for various reasons including: i) differing interpretation
of the law, opinions on responsibility and assessments on the
amount of damages; ii) changes in status of litigation or claims
and information available; iii) differing interpretation of
regulations by regulators or the courts; iv) changes in laws and
regulations; and v) additional or developing information relating
to extent and nature of environmental remediation and
technology improvements. The Company continually monitors
known and potential legal, environmental and other claims or
contingencies based on available information. Future changes in
facts and circumstances not currently foreseeable could result in
the actual liabilities recorded exceeding the estimated amounts
accrued.
Recent Accounting Pronouncements
For recently issued accounting policies, refer to Note 1 to the Consolidated Financial Statements included in Item 8
of this Annual Report on Form 10-K.
74 | 2020 Annual Report
Ovintiv Inc.
Non-GAAP Measures
Certain measures in this document do not have any standardized meaning as prescribed by U.S. GAAP and, therefore,
are considered non-GAAP measures. These measures may not be comparable to similar measures presented by other
issuers and should not be viewed as a substitute for measures reported under U.S. GAAP. These measures are
commonly used in the oil and gas industry and by Ovintiv to provide shareholders and potential investors with
additional information regarding the Company’s liquidity and its ability to generate funds to finance its operations.
Non-GAAP measures include: Non-GAAP Cash Flow, Non-GAAP Cash Flow Margin, Total Costs, Debt to Adjusted
Capitalization and Net Debt to Adjusted EBITDA. Management’s use of these measures is discussed further below.
Non-GAAP Cash Flow and Non-GAAP Cash Flow Margin
Non-GAAP Cash Flow is a non-GAAP measure defined as cash from (used in) operating activities excluding net
change in other assets and liabilities, net change in non-cash working capital and current tax on sale of assets.
Non-GAAP Cash Flow Margin is a non-GAAP measure defined as Non-GAAP Cash Flow per BOE of production.
Management believes these measures are 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 are an indication of the
Company’s ability to generate cash to finance capital programs, to service debt and to meet other financial obligations.
These measures are used, along with other measures, in the calculation of certain performance targets for the
Company’s management and employees.
($ millions, except as indicated)
Cash From (Used in) Operating Activities
(Add back) deduct:
Net change in other assets and liabilities
Net change in non-cash working capital
Current tax on sale of assets
Non-GAAP Cash Flow (1)
Divided by:
Production Volumes (MMBOE)
Non-GAAP Cash Flow Margin ($/BOE)
2020
$
1,895 $
(173 )
139
-
1,929 $
199.0
9.69 $
$
$
2019
2,921
(97 )
87
-
2,931
206.2
14.21
(1) 2020 include restructuring costs of $90 million. 2019 includes restructuring costs of $138 million and acquisition costs of $33 million.
Ovintiv Inc.
2020 Annual Report | 75
Total Costs
Total Costs is a non-GAAP measure which includes the summation of production, mineral and other taxes, upstream
transportation and processing expense, upstream operating expense and administrative expense, excluding the impact
of long-term incentive costs, restructuring costs and current expected credit losses. It is calculated as total operating
expenses excluding non-upstream operating costs and non-cash items which include operating expenses from the
Market Optimization and Corporate and Other segments, depreciation, depletion and amortization, impairments,
accretion of asset retirement obligation, long-term incentive costs, restructuring costs and current expected credit
losses. When presented on a per BOE basis, Total Costs is divided by production volumes. Management believes this
measure is useful to the Company and its investors as a measure of operational efficiency across periods.
($ millions, except as indicated)
Total Operating Expenses
Deduct (add back):
Market optimization operating expenses
Corporate & other operating expenses
Depreciation, depletion and amortization
Impairments
Accretion of asset retirement obligation
Long-term incentive costs
Restructuring costs
Current expected credit losses
Total Costs
Divided by:
Production Volumes (MMBOE)
Total Costs ($/BOE) (1)
(1) Calculated using whole dollars and volumes.
Debt to Adjusted Capitalization
2020
$
11,484 $
1,608
(2 )
1,834
5,580
29
31
90
1
2,313 $
199.0
11.60 $
$
$
2019
6,128
1,304
(3 )
2,015
-
37
35
138
-
2,602
206.2
12.59
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)
December 31, 2020 December 31, 2019
Long-Term Debt, including current portion
Total Shareholders’ Equity
Equity Adjustment for Impairments at December 31, 2011
Adjusted Capitalization
Debt to Adjusted Capitalization
$
$
6,885 $
3,837
7,746
18,468 $
37%
6,974
9,930
7,746
24,650
28%
76 | 2020 Annual Report
Ovintiv Inc.
Net Debt to Adjusted EBITDA
Net Debt to Adjusted EBITDA is a non-GAAP measure whereby Net Debt is defined as long-term debt, including the
current portion, less cash and cash equivalents and Adjusted EBITDA is defined as trailing 12-month net earnings
(loss) before income taxes, DD&A, impairments, accretion of asset retirement obligation, interest, unrealized
gains/losses on risk management, foreign exchange gains/losses, gains/losses on divestitures and other gains/losses.
Management believes this measure is 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. This measure is used, along with other
measures, in the calculation of certain financial performance targets for the Company’s management and employees.
($ millions, except as indicated)
December 31, 2020 December 31, 2019
Long-Term Debt, including current portion
Less:
Cash and cash equivalents
Net Debt
Net Earnings (Loss)
Add back (deduct):
Depreciation, depletion and amortization
Impairments
Accretion of asset retirement obligation
Interest
Unrealized (gains) losses on risk management
Foreign exchange (gain) loss, net
(Gain) loss on divestitures, net
Other (gains) losses, net
Income tax expense (recovery)
Adjusted EBITDA (1)
Net Debt to Adjusted EBITDA (times)
$
6,885 $
10
6,875
(6,097 )
1,834
5,580
29
371
204
17
-
(55 )
367
2,250 $
3.1
$
6,974
190
6,784
234
2,015
-
37
382
730
(119 )
(3 )
23
81
3,380
2.0
(1) Adjusted EBITDA for 2019 only includes Newfield’s results of operations for the post-acquisition period from February 14, 2019 to
December 31, 2019.
Ovintiv Inc.
2020 Annual Report | 77
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
The primary objective of the following information is to provide forward-looking quantitative and qualitative
information about Ovintiv’s potential exposure to market risks. The term “market risk” refers to the Company’s risk
of loss arising from adverse changes in oil, NGL and natural gas prices, foreign currency exchange rates and interest
rates. The following disclosures are not meant to be precise indicators of expected future losses but rather indicators
of reasonably possible losses. The forward-looking information provides indicators of how the Company views and
manages ongoing market risk exposures.
COMMODITY PRICE RISK
Commodity price risk arises from the effect fluctuations in future commodity prices, including oil, NGLs and natural
gas, may have on future revenues, expenses and cash flows. Realized pricing is primarily driven by the prevailing
worldwide price for crude oil and spot market prices applicable to the Company’s natural gas production. Pricing for
oil, NGLs and natural gas production is volatile and unpredictable as discussed in Item 1A. “Risk Factors” of this
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 25 under Item 8 of this Annual
Report on Form 10-K.
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)
Crude oil price
NGL price
Natural gas price
FOREIGN EXCHANGE RISK
$
December 31, 2020
10% Price
Increase
(130 ) $
(13 )
(74 )
10% Price
Decrease
114
13
54
Foreign exchange risk arises from changes in foreign exchange rates that may affect the fair value or future cash flows
of 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 the prior years.
Increase (Decrease) in:
Capital Investment
Transportation and Processing Expense (1)
Operating Expense (1)
Administrative Expense
Depreciation, Depletion and Amortization (1)
(1) Reflects upstream operations.
2020
$ millions
$/BOE $ millions $/BOE
2019
$
(6 )
(7 ) $
(1 )
(3 )
(4 )
$
(0.04 )
(0.01 )
(0.02 )
(0.02 )
(17 )
(18 ) $
(3 )
(4 )
(8 )
(0.09 )
(0.01 )
(0.02 )
(0.04 )
78 | 2020 Annual Report
Ovintiv Inc.
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 December 31, 2020, Ovintiv has entered into
$350 million notional U.S. dollar denominated currency swaps at an average exchange rate of US$0.7289 to C$1,
which mature monthly throughout 2021.
As at December 31, 2020, Ovintiv had $193 million in U.S. dollar long-term debt and $77 million in U.S. dollar
finance lease obligations issued from Canada that were subject to foreign exchange exposure.
The table below summarizes the sensitivity to foreign exchange rate fluctuations, with all other variables held constant.
The Company has used a 10 percent variability to assess the potential impact from Canadian to U.S. foreign currency
exchange rate changes. Fluctuations in foreign currency exchange rates could have resulted in unrealized gains (losses)
impacting pre-tax net earnings as follows:
(US$ millions)
Foreign currency exchange
INTEREST RATE RISK
December 31, 2020
10% Rate
Increase
$
(32 ) $
10% Rate
Decrease
39
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 December 31, 2020, Ovintiv had floating rate revolving credit and term loan borrowings of $950 million.
Accordingly, the sensitivity in net earnings for each one percent change in interest rates on floating rate revolving
credit and term loan borrowings was $10 million (2019 - $5 million).
Ovintiv Inc.
2020 Annual Report | 79
Item 8: Financial Statements and Supplementary Data
Management Report
Management’s Responsibility for Consolidated Financial Statements
The accompanying Consolidated Financial Statements of the Company are the responsibility of Management. The
Consolidated Financial Statements have been prepared by Management in United States dollars in accordance with
generally accepted accounting principles in the United States and include certain estimates that reflect Management’s
best judgments.
Ovintiv’s Board of Directors has approved the information contained in the Consolidated Financial Statements. The
Board of Directors fulfills its responsibility regarding the financial statements mainly through its Audit Committee,
which has a written mandate that complies with the requirements of United States and Canadian securities legislation
and the Audit Committee guidelines of the New York Stock Exchange. The Audit Committee meets at least on a
quarterly basis.
Management’s Assessment of Internal Control over Financial Reporting
Management is also responsible for establishing and maintaining adequate internal control over the Company’s
financial reporting. The internal control system was designed to provide reasonable assurance to the Company’s
Management regarding the preparation and presentation of the Consolidated Financial Statements.
Internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and
presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Management has assessed the design and effectiveness of the Company’s internal control over financial reporting as
at December 31, 2020. In making its assessment, Management has used the Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the
effectiveness of the Company’s internal control over financial reporting. Based on our evaluation, Management has
concluded that the Company’s internal control over financial reporting was effective as at that date.
PricewaterhouseCoopers LLP, an independent firm of chartered professional accountants, was appointed by a vote of
shareholders at the Company’s last annual meeting to audit and provide independent opinions on both the Consolidated
Financial Statements and the Company’s internal control over financial reporting as at December 31, 2020, as stated
in their Auditor’s Report. PricewaterhouseCoopers LLP has provided such opinions.
/s/ Douglas J. Suttles
Douglas J. Suttles
Chief Executive Officer
February 18, 2021
/s/ Corey D. Code
Corey D. Code
Executive Vice-President &
Chief Financial Officer
80 | 2020 Annual Report
Ovintiv Inc.
Auditor’s Report
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Ovintiv Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying Consolidated Balance Sheets of Ovintiv Inc. and its subsidiaries (together, the
“Company”) as of December 31, 2020 and 2019, and the related Consolidated Statements of Earnings, Comprehensive
Income, Changes in Shareholders’ Equity and Cash Flows for each of the three years in the period ended December
31, 2020, including the related notes (collectively referred to as the “Consolidated Financial Statements”). We also
have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (“COSO”).
In our opinion, the Consolidated Financial Statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the Consolidated Financial Statements, the Company changed the manner in which it
accounts for leases in 2019 due to the adoption of ASC Topic 842, Leases.
Basis for Opinions
The Company’s management is responsible for these Consolidated Financial Statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Assessment of Internal Control over Financial Reporting. Our
responsibility is to express opinions on the Company’s Consolidated Financial Statements and on the Company’s
internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect
to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission (“SEC”) and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the Consolidated Financial Statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting
was maintained in all material respects.
Our audits of the Consolidated Financial Statements included performing procedures to assess the risks of material
misstatement of the Consolidated Financial Statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the Consolidated Financial Statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the Consolidated
Financial Statements. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.
Ovintiv Inc.
2020 Annual Report | 81
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the Consolidated
Financial Statements that was communicated or required to be communicated to the audit committee and that (i) relates
to accounts or disclosures that are material to the Consolidated Financial Statements and (ii) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way
our opinion on the Consolidated Financial Statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which
it relates.
The impact of estimates of proved oil, natural gas liquids (“NGL”), and natural gas reserves on net oil and natural
gas proved properties
As described in Notes 1 and 10 to the Consolidated Financial Statements, the Company has a net oil and natural gas
proved properties balance of $6,246 million as of December 31, 2020 and depreciation, depletion, and amortization
(“DD&A”) expense of $1,834 million for the year ended December 31, 2020. The Company also recognized a ceiling
test impairment of $5,580 million for the year ended December 31, 2020. The Company uses the full cost method of
accounting for its acquisition, exploration, and development activities. Capitalized costs accumulated within each cost
centre are depleted using the unit-of-production method based on proved oil, NGL and natural gas reserves. Proved
oil, NGL and natural gas reserve estimates are key inputs to the Company’s depletion and ceiling test impairment
calculations. A ceiling test impairment is recognized in net earnings when the carrying amount of a country cost centre
exceeds the country cost centre ceiling. Management estimates its proved oil, NGL and natural gas reserves according
to the definition of proved reserves provided by the SEC. Management’s estimates of proved oil, NGL and natural gas
reserves are made using available geological and reservoir data as well as production performance data. Proved oil,
NGL and natural gas reserves are those quantities of oil and natural gas, which by analysis of geoscience and
engineering data, can be estimated with reasonable certainty to be economically producible in future periods from
known reservoirs under existing economic conditions, operating methods and government regulations. The
assumptions used by management to determine estimates of the proved oil, NGL and natural gas reserves and the
ceiling test impairment calculation include the average beginning-of-the-month prices during the 12-month period for
the year, future production estimates, future production and development costs and estimates for abandonment and
dismantlement costs associated with asset retirement obligations. The estimation of reserves is a subjective process.
In determining the estimates of the proved oil, NGL and natural gas reserves, management utilizes the services of
specialists, specifically petroleum engineers.
The principal considerations for our determination that performing procedures relating to the impact of estimates of
proved oil, NGL and natural gas reserves on net oil and natural gas proved properties is a critical audit matter are (i)
significant judgment used by management, including the use of specialists, when developing the estimates of the
proved oil, NGL and natural gas reserves and performing the ceiling test impairment calculation and (ii) a high degree
of auditor judgment, effort and subjectivity in performing procedures to evaluate the significant assumptions used in
82 | 2020 Annual Report
Ovintiv Inc.
developing those estimates including the average beginning-of-the-month prices during the 12-month period for the
year, future production estimates, future production and development costs, and estimates for abandonment and
dismantlement costs associated with asset retirement obligations.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the Consolidated Financial Statements. These procedures included testing the effectiveness of
controls relating to management’s estimates of proved oil, NGL and natural gas reserves, the calculation of the full
cost ceiling test and the calculation of DD&A expense. These procedures also included, among others, evaluating
management’s ceiling test impairment calculation and testing the unit-of-production depletion rate used to calculate
depletion expense, testing the completeness, accuracy and relevance of underlying data and evaluating the
appropriateness of the significant assumptions used by management in developing these estimates, including
assumptions related to the average beginning-of-the-month prices during the 12-month period for the year, future
production estimates, future production and development costs, and estimates for abandonment and dismantlement
costs associated with asset retirement obligations. The work of management’s specialists was used in performing
procedures to evaluate the reasonableness of the estimates of proved oil, NGL and natural gas reserves. As a basis for
using this work, the specialists’ qualifications were understood and the Company’s relationship with the specialists
was assessed. The procedures performed also included evaluation of the methods and assumptions used by the
specialists, tests of the data used by the specialists, and an evaluation of the specialists’ findings. Evaluating the
significant assumptions also involved evaluating whether the assumptions used were reasonable considering the past
performance of the Company and whether they were consistent with evidence obtained in other areas of the audit.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Calgary, Canada
February 18, 2021
We have served as the Company’s or its predecessors’ auditor since 1958.
Ovintiv Inc.
2020 Annual Report | 83
Consolidated Statement of Earnings
For the years ended December 31 (US$ millions, except per share amounts)
2020
2019
2018
Revenues
Product and service revenues
Gains (losses) on risk management, net
Sublease revenues
Total Revenues
Operating Expenses
Production, mineral and other taxes
Transportation and processing
Operating
Purchased product
Depreciation, depletion and amortization
Impairments
Accretion of asset retirement obligation
Administrative
Total Operating Expenses
Operating Income (Loss)
Other (Income) Expenses
Interest
Foreign exchange (gain) loss, net
(Gain) loss on divestitures, net
Other (gains) losses, net
Total Other (Income) Expenses
Net Earnings (Loss) Before Income Tax
Income tax expense (recovery)
Net Earnings (Loss)
Net Earnings (Loss) per Share of Common Stock
Basic
Diluted
Weighted Average Shares of Common Stock Outstanding
(millions)
Basic
Diluted
(Note 2)
(Note 3) $
(Note 25)
(Note 14)
(Note 2)
(Notes 14, 22, 23)
(Note 10)
(Note 17)
(Notes 14, 21, 22, 23)
(Notes 4, 15)
(Notes 5, 25)
(Notes 8, 15, 23)
(Note 6)
$
(Note 18)
$
(Note 18)
5,509 $
507
71
6,087
173
1,502
605
1,366
1,834
5,580
29
395
11,484
(5,397 )
371
17
-
(55 )
333
(5,730 )
367
(6,097 ) $
(23.47 ) $
(23.47 )
7,013 $
5,457
(361 )
74
415
67
6,726
5,939
254
1,558
732
1,043
2,015
-
37
489
6,128
598
382
(119 )
(3 )
23
283
315
81
147
1,083
454
1,100
1,272
-
32
157
4,245
1,694
351
168
(5 )
17
531
1,163
94
234 $
1,069
0.90 $
0.90
5.57
5.57
259.8
259.8
261.2
261.2
192.0
192.0
Consolidated Statement of Comprehensive Income
For the years ended December 31 (US$ millions)
2020
2019
2018
Net Earnings (Loss)
Other Comprehensive Income (Loss), Net of Tax
Foreign currency translation adjustment
Pension and other post-employment benefit plans
Other Comprehensive Income (Loss)
Comprehensive Income (Loss)
See accompanying Notes to Consolidated Financial Statements
$
(6,097 ) $
234
$
1,069
(Note 19)
(Notes 19, 23)
$
38
(8 )
30
(6,067 ) $
28
20
48
(53 )
9
(44 )
282
$
1,025
84 | 2020 Annual Report
Ovintiv Inc.
Consolidated Balance Sheet
As at December 31 (US$ millions)
Assets
Current Assets
Cash and cash equivalents
Accounts receivable and accrued revenues (net of allowances
of $4 million (2019: $3 million))
Risk management
Income tax receivable
2020
2019
$
(Note 7)
(Notes 24, 25)
10
$
928
37
272
1,247
Property, Plant and Equipment, at cost:
(Note 10)
Oil and natural gas properties, based on full cost accounting
Proved properties
Unproved properties
Other
Property, plant and equipment
Less: Accumulated depreciation, depletion and amortization
Property, plant and equipment, net
Other Assets
Risk Management
Deferred Income Taxes
Goodwill
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities
Current portion of operating lease liabilities
Income tax payable
Risk management
Current portion of long-term debt
Long-Term Debt
Operating Lease Liabilities
Other Liabilities and Provisions
Risk Management
Asset Retirement Obligation
Deferred Income Taxes
Commitments and Contingencies
Shareholders’ Equity
(Note 2)
(Notes 11, 14)
(Notes 24, 25)
(Note 6)
(Notes 2, 8, 12)
(Note 2)
$
(Note 13)
(Note 14)
$
(Notes 24, 25)
(Note 15)
(Note 15)
(Note 14)
(Notes 14, 16)
(Notes 24, 25)
(Note 17)
(Note 6)
(Note 27)
Share capital - authorized 775 million shares of stock
2020 issued and outstanding: 259.8 million shares (2019: 259.8 million shares)
Paid in surplus
Retained earnings (Accumulated deficit)
Accumulated other comprehensive income
(Note 18)
(Notes 18, 22)
(Note 19)
Total Shareholders’ Equity
$
See accompanying Notes to Consolidated Financial Statements
Approved by the Board of Directors
/s/ Peter A. Dea
Peter A. Dea
Director
/s/ Bruce G. Waterman
Bruce G. Waterman
Director
$
$
53,883
2,962
911
57,756
(48,306 )
9,450
1,143
4
-
2,625
14,469
1,704
68
3
130
518
2,423
6,367
938
358
125
401
20
10,632
3
8,531
(5,773 )
1,076
3,837
14,469
$
190
1,235
148
296
1,869
51,210
3,714
904
55,828
(40,637 )
15,191
1,213
2
601
2,611
21,487
2,239
78
1
114
-
2,432
6,974
977
464
68
425
217
11,557
7,061
1,402
421
1,046
9,930
21,487
Ovintiv Inc.
2020 Annual Report | 85
Consolidated Statement of Changes in Shareholders’ Equity
For the year ended December 31, 2020 (US$ millions)
Total
Share Paid in (Accumulated Comprehensive Shareholders’
Equity
Deficit)
Income
Capital Surplus
Retained Accumulated
Other
Earnings
Balance, December 31, 2019
$
7,061 $
1,402 $
421 $
1,046 $
Net Earnings (Loss)
Dividends on Shares of Common Stock ($0.375 per share) (Note 18)
(Note 22)
Equity-Settled Compensation Costs
(Note 19)
Other Comprehensive Income (Loss)
Reclassification of Share Capital due to the Reorganization (Note 18)
$
Balance, December 31, 2020
-
-
-
-
-
-
71
-
(7,058 )
7,058
(6,097 )
(97 )
-
-
-
-
-
-
30
-
9,930
(6,097 )
(97 )
71
30
-
3 $
8,531 $
(5,773 ) $
1,076 $
3,837
Accumulated
For the year ended December 31, 2019 (US$ millions)
Balance, December 31, 2018
Net Earnings (Loss)
Dividends on Common Shares ($0.375 per share)
Common Shares Purchased under Substantial Issuer Bid
Common Shares Purchased under Normal
Course Issuer Bid
Common Shares Issued
Other Comprehensive Income (Loss)
Impact of Adoption of Topic 842, Leases
Balance, December 31, 2019
For the year ended December 31, 2018 (US$ millions)
Share Paid in
Capital Surplus
$
4,656 $
1,358 $
(Note 18)
-
-
-
-
(Note 18)
(257 )
44
(Note 18)
(Notes 8, 18)
(Note 19)
(816 )
3,478
-
-
-
-
-
-
$
7,061 $
1,402 $
Total
Retained Comprehensive Shareholders’
Equity
Earnings
Income
Other
435 $
234
(102 )
-
(221 )
-
-
75
421 $
998 $
7,447
-
-
-
-
-
48
-
234
(102 )
(213 )
(1,037 )
3,478
48
75
1,046 $
9,930
Total
Share Paid in (Accumulated Comprehensive Shareholders’
Equity
Deficit)
Income
Other
Capital Surplus
Retained Accumulated
Earnings
Balance, December 31, 2017
Net Earnings (Loss)
Dividends on Common Shares ($0.30 per share)
Common Shares Purchased under Normal
Course Issuer Bid
Common Shares Issued Under
Dividend Reinvestment Plan
Other Comprehensive Income (Loss)
Balance, December 31, 2018
$
4,757 $
1,358 $
(Note 18)
(Note 18)
(Note 18)
(Note 19)
-
-
(102 )
1
-
-
-
-
-
-
(429 ) $
1,069
(57 )
(148 )
-
-
$
4,656 $
1,358 $
435 $
1,042 $
-
-
-
-
(44 )
998 $
6,728
1,069
(57 )
(250 )
1
(44 )
7,447
See accompanying Notes to Consolidated Financial Statements
86 | 2020 Annual Report
Ovintiv Inc.
Consolidated Statement of Cash Flows
For the years ended December 31 (US$ millions)
2020
2019
2018
Operating Activities
Net earnings (loss)
Depreciation, depletion and amortization
Impairments
Accretion of asset retirement obligation
Deferred income taxes
Unrealized (gain) loss on risk management
Unrealized foreign exchange (gain) loss
Foreign exchange on settlements
(Gain) loss on divestitures, net
Other
Net change in other assets and liabilities
Net change in non-cash working capital
Cash From (Used in) Operating Activities
Investing Activities
Capital expenditures
Acquisitions
Corporate acquisition, net of cash and restricted cash acquired
Proceeds from divestitures
Net change in investments and other
Cash From (Used in) Investing Activities
Financing Activities
Net issuance (repayment) of revolving long-term debt
Repayment of long-term debt
Purchase of shares of common stock
Dividends on shares of common stock
Finance lease payments and other financing arrangements
Cash From (Used in) Financing Activities
Foreign Exchange Gain (Loss) on Cash, Cash Equivalents
and Restricted Cash Held in Foreign Currency
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
Cash, Cash Equivalents and Restricted Cash, Beginning of Year
Cash, Cash Equivalents and Restricted Cash, End of Year
Cash, End of Year
Cash Equivalents, End of Year
Restricted Cash, End of Year
Cash, Cash Equivalents and Restricted Cash, End of Year
$
(Note 10)
(Note 17)
(Note 6)
(Note 25)
(Note 5)
(Note 5)
(Note 26)
(Note 2)
(Note 9)
(Note 8)
(Note 9)
(Note 15)
(Note 15)
(Note 18)
(Note 18)
(Note 14)
$
$
$
(6,097 ) $
1,834
5,580
29
381
204
11
6
-
(19 )
(173 )
139
234
$
2,015
-
37
94
730
(23 )
(96 )
(3 )
(57 )
(97 )
87
1,069
1,272
-
32
149
(519 )
233
(46 )
(5 )
(70 )
(60 )
245
1,895
2,921
2,300
(1,736 )
(19 )
-
89
(198 )
(1,864 )
252
(272 )
-
(97 )
(89 )
(206 )
(5 )
(180 )
190
$
10
9 $
1
-
10
$
(2,626 )
(1,975 )
(65 )
94
197
(156 )
(2,556 )
698
(500 )
(1,250 )
(102 )
(84 )
(1,238 )
5
(868 )
1,058
(17 )
-
493
(56 )
(1,555 )
-
-
(250 )
(56 )
(90 )
(396 )
(10 )
339
719
190
$
1,058
44
$
146
-
52
1,006
-
190
$
1,058
Supplementary Cash Flow Information
(Note 26)
See accompanying Notes to Consolidated Financial Statements
Ovintiv Inc.
2020 Annual Report | 87
1.
Summary of Significant Accounting Policies
A) NATURE OF OPERATIONS
On January 24, 2020, Encana Corporation (“Encana”) completed a corporate reorganization, which included a plan of
arrangement (the “Arrangement”) that involved, among other things, a share consolidation by Encana on the basis of
one post-consolidation share for each five pre-consolidation shares (the “Share Consolidation”), and Ovintiv Inc.
ultimately acquired all of the issued and outstanding common shares of Encana in exchange for shares of common
stock of Ovintiv Inc. on a one-for-one basis. Following completion of the Arrangement, Ovintiv Inc. migrated from
Canada and became a Delaware corporation, domiciled in the U.S. (the “U.S. Domestication”). The Arrangement and
the U.S. Domestication together are referred to as the “Reorganization”. Ovintiv Inc. and its subsidiaries (collectively,
“Ovintiv”) continue to carry on the business of the exploration for, the development of, and the production and
marketing of oil, NGLs and natural gas, which was previously conducted by Encana and its subsidiaries prior to the
completion of the Reorganization.
B) BASIS OF PRESENTATION
The Consolidated Financial Statements include the accounts of Ovintiv and are presented in conformity with U.S.
GAAP and the rules and regulations of the SEC.
In these Consolidated Financial Statements, unless otherwise indicated, all dollar amounts are expressed in
U.S. dollars. Following the U.S. Domestication on January 24, 2020, the functional currency of Ovintiv Inc. became
U.S. dollars, and accordingly, the financial results herein are consolidated and reported in U.S. dollars. All references
to US$ or to $ are to United States dollars and references to C$ are to Canadian dollars.
The Arrangement, as described above, was accounted for as a reorganization of entities under common control.
Accordingly, the resulting transactions were recognized using historical carrying amounts. On January 24, 2020,
Ovintiv became the reporting entity upon completion of the Reorganization.
In accordance with the Share Consolidation, all shares of common stock and per-share amounts disclosed herein reflect
the post-Share Consolidation shares unless otherwise specified. References to shares of common stock refer to the
shares of common stock of Ovintiv Inc. for any periods after the completion of the Arrangement, and to the common
shares of Encana Corporation for any periods before January 24, 2020.
C) PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of Ovintiv and entities in which it holds a controlling
interest. All intercompany balances and transactions are eliminated on consolidation. Undivided interests in oil and
natural gas exploration and production joint ventures and partnerships are consolidated on a proportionate basis.
Investments in non-controlled entities over which Ovintiv has the ability to exercise significant influence are
accounted for using the equity method.
D) FOREIGN CURRENCY TRANSLATION
Monetary assets and liabilities of the Company that are denominated in foreign currencies are translated at the rates
of exchange in effect at the period end date. Any gains or losses are recorded in the Consolidated Statement of
Earnings. Foreign currency revenues and expenses are translated at the rates of exchange in effect at the time of the
transaction.
Assets and liabilities of foreign operations are translated at period end exchange rates, while the related revenues and
expenses are translated using average rates during the period. Translation gains and losses relating to foreign
operations are included in accumulated other comprehensive income (“AOCI”). Recognition of Ovintiv’s accumulated
translation gains and losses into net earnings occurs upon complete or substantially complete liquidation of the
Company’s investment in the foreign operation.
88 | 2020 Annual Report
Ovintiv Inc.
E) USE OF ESTIMATES
Preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires Management to make
informed estimates and assumptions and use judgments that affect reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported
amounts of revenues and expenses during the period. Such estimates primarily relate to unsettled transactions and
events as of the date of the Consolidated Financial Statements. Accordingly, actual results may differ from estimated
amounts as future events occur.
Significant items subject to estimates and assumptions are:
• Estimates of proved reserves used for depletion and ceiling test impairment calculations
• Estimated fair value of long-term assets used for impairment calculations
• Fair value of reporting units used for the assessment of goodwill
• Estimates of future taxable earnings used to assess the realizable value of deferred tax assets
• Estimates of incremental borrowing rates and lease terms used in the measurement of right-of-use (“ROU”)
assets and lease liabilities
• Fair value of asset retirement costs and related obligations
• Fair value of derivative instruments
• Fair value attributed to assets acquired and liabilities assumed in business combinations
• Tax interpretations, regulations and legislation in the various jurisdictions in which the Company and its
subsidiaries operate
• Accruals for long-term performance-based compensation arrangements, including whether or not the
performance criteria will be met and measurement of the ultimate payout amount
• Recognized values of pension assets and obligations, as well as the pension costs charged to net earnings,
depend on certain actuarial and economic assumptions
• Accruals for legal claims, environmental risks and exposures
F) REVENUES FROM CONTRACTS WITH CUSTOMERS
Revenues from contracts with customers associated with Ovintiv’s oil, NGLs and natural gas and third party
processing and gathering are recognized when control of the good or service is transferred to the customer, and title
or risk of loss transfers to the customer. Transaction prices are determined at inception of the contract and allocated
to the performance obligations identified. Variable consideration is estimated and included in the transaction price,
unless the variable consideration is constrained.
For product sales, the performance obligations are satisfied at a point in time when the product is delivered to the
customer and control is transferred. Payment from the customer is due when the product is delivered to the custody
point. Revenues for product sales are presented on an after-royalties basis. For arrangements to gather and process
natural gas for third parties, performance obligations are satisfied over time as the service is provided to the customer.
Payment from the customer is due when the customer receives the benefit of the service and the product is delivered
to the custody point or plant tailgate. Revenues associated with services provided where Ovintiv acts as agent are
recorded on a net basis.
G) PRODUCTION, MINERAL AND OTHER TAXES
Costs paid by Ovintiv for taxes based on production or revenues from oil, NGLs and natural gas are recognized when
the product is produced. Costs paid by Ovintiv for taxes on the valuation of upstream assets and reserves are recognized
when incurred.
H) TRANSPORTATION AND PROCESSING
Costs paid by Ovintiv for the transportation and processing of oil, NGLs and natural gas are recognized when the
product is delivered and the services made available or provided.
Ovintiv Inc.
2020 Annual Report | 89
I) OPERATING
Operating costs paid by Ovintiv, net of amounts capitalized, are recognized for oil and natural gas properties in which
the Company has a working interest.
J)
EMPLOYEE BENEFIT PLANS
The Company sponsors defined contribution and defined benefit plans, providing pension and other post-employment
benefits to its employees in Canada and the U.S. As of January 1, 2003, the defined benefit pension plan was closed
to new entrants.
Pension expense for the defined contribution pension plan is recorded as the benefits are earned by the employees
covered by the plans. Ovintiv accrues for its obligations under its employee defined benefit plans, net of plan assets.
The cost of defined benefit pensions and other post-employment benefits is actuarially determined using the projected
benefit method based on length of service and reflects Management’s best estimate of salary escalation, mortality
rates, retirement ages of employees and expected future health care costs. The expected return on plan assets is based
on historical and projected rates of return for assets in the investment plan portfolio. The actual return is based on the
fair value of plan assets. The projected benefit obligation is discounted using the market interest rate on high-quality
corporate debt instruments as at the measurement date.
Defined benefit pension plan expenses include the cost of pension benefits earned during the current year, the interest
cost on pension obligations, the expected return on pension plan assets, the amortization of adjustments arising from
pension plan amendments, the amortization of net prior service costs, and the amortization of the excess of the net
actuarial gains or losses over 10 percent of the greater of the benefit obligation and the fair value of plan assets.
Amortization is on a straight-line basis over a period covering the expected average remaining service lives of
employees covered by the plans. All components of the net defined periodic benefit cost, excluding the service cost
component, are included in other (gains) losses, net.
K)
INCOME TAXES
Ovintiv follows the liability method of accounting for income taxes. Under this method, deferred income taxes are
recorded for the effect of any temporary difference between the accounting and income tax basis of an asset or liability,
using the enacted income tax rates and laws expected to apply when the assets are realized and liabilities are settled.
Current income taxes are measured at the amount expected to be recoverable from or payable to the taxing authorities
based on the income tax rates and laws enacted at the end of the reporting period. The effect of a change in the enacted
tax rates or laws is recognized in net earnings in the period of enactment. Income taxes are recognized in net earnings
except to the extent that they relate to items recognized directly in shareholders’ equity, in which case the income
taxes are recognized directly in shareholders’ equity.
Deferred income tax assets are assessed routinely for realizability. If it is more likely than not that deferred tax assets
will not be realized, a valuation allowance is recorded to reduce the deferred tax assets. Ovintiv considers available
positive and negative evidence when assessing the realizability of deferred tax assets including historic and expected
future taxable earnings, available tax planning strategies and carry forward periods. The assumptions used in
determining expected future taxable earnings are consistent with those used in the goodwill impairment assessment.
Ovintiv recognizes the financial statement effects of a tax position when it is more likely than not, based on the
technical merits, that the position will be sustained upon examination by a taxing authority. A recognized tax position
is initially and subsequently measured as the largest amount of tax benefit that is greater than 50 percent likely of
being realized upon settlement with a taxing authority. Liabilities for unrecognized tax benefits that are not expected
to be settled within the next 12 months are included in other liabilities and provisions. Interest related to unrecognized
tax benefits is recognized in interest expense.
L) EARNINGS PER SHARE AMOUNTS
Basic net earnings per share of common stock is computed by dividing the net earnings by the weighted average
number of shares of common stock outstanding during the period. Diluted net earnings per share of common stock is
calculated giving effect to the potential dilution that would occur if stock options were exercised or other contracts to
issue shares of common stock were exercised, fully vested, or converted to shares of common stock. The treasury
stock method is used to determine the dilutive effect of stock options and other dilutive instruments. The treasury
90 | 2020 Annual Report
Ovintiv Inc.
stock method assumes that proceeds received from the exercise of in-the-money stock options and other dilutive
instruments are used to repurchase shares of common stock at the average market price.
M) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and short-term investments, such as money market deposits or similar
type instruments, with a maturity of three months or less when purchased. Outstanding disbursements issued in excess
of applicable bank account balances are excluded from cash and cash equivalents and are recorded in accounts payable
and accrued liabilities.
N) PROPERTY, PLANT AND EQUIPMENT
UPSTREAM
Ovintiv uses the full cost method of accounting for its acquisition, exploration and development activities.
Accordingly, all costs directly associated with the acquisition of, the exploration for, and the development of oil,
NGLs and natural gas reserves, including costs of undeveloped leaseholds, dry holes and related equipment, are
capitalized on a country-by-country cost center basis. Capitalized costs exclude costs relating to production, general
overhead or similar activities.
Capitalized costs accumulated within each cost center are depleted using the unit-of-production method based on
proved reserves. Depletion is calculated using the capitalized costs, including estimated retirement costs, plus the
undiscounted future expenditures, based on current costs, to be incurred in developing proved reserves.
Costs associated with unproved properties are excluded from the depletion calculation until it is determined that
proved reserves are attributable or impairment has occurred. Unproved properties are assessed separately for
impairment on a quarterly basis. Costs that have been impaired are included in the costs subject to depletion within
the full cost pool.
Under the full cost method of accounting, the carrying amount of Ovintiv’s oil and natural gas properties within each
country cost center is subject to a ceiling test at the end of each quarter. A ceiling test impairment is recognized in net
earnings when the carrying amount of a country cost center exceeds the country cost center ceiling. The carrying
amount of a cost center includes capitalized costs of proved oil and natural gas properties, net of accumulated depletion
and the related deferred income taxes.
The cost center ceiling is the sum of the estimated after-tax future net cash flows from proved reserves, using the 12-
month average trailing prices and unescalated future development and production costs, discounted at 10 percent, plus
unproved property costs. The 12-month average trailing price is calculated as the average of the price on the first day
of each month within the trailing 12-month period. Any excess of the carrying amount over the calculated ceiling
amount is recognized as an impairment in net earnings.
Proceeds from the divestiture of properties are normally deducted from the full cost pool without recognition of a gain
or loss unless the deduction significantly alters the relationship between capitalized costs and proved reserves in the
cost center, in which case a gain or loss is recognized in net earnings. Generally, a gain or loss on a divestiture would
be recognized when 25 percent or more of the Company’s proved reserves quantities are sold in a particular country
cost center. For divestitures that result in the recognition of a gain or loss on the sale and constitute a business, goodwill
is allocated to the divestiture.
CORPORATE
Costs associated with office furniture, fixtures, leasehold improvements, information technology and aircraft are
carried at cost and depreciated on a straight-line basis over the estimated service lives of the assets, which range from
three to 25 years. Assets under construction are not subject to depreciation until put into use. Land is carried at cost.
Ovintiv Inc.
2020 Annual Report | 91
O) CAPITALIZATION OF COSTS
Expenditures related to renewals or betterments that improve the productive capacity or extend the life of an asset are
capitalized. Maintenance and repairs are expensed as incurred. Interest on borrowings associated with major
development projects is capitalized during the construction phase.
P) BUSINESS COMBINATIONS
Business combinations are accounted for using the acquisition method. The acquired identifiable net assets are
measured at fair value at the date of acquisition. Deferred taxes are recognized for any differences between the fair
value of net assets acquired and the related tax bases. Any excess of the purchase price over the fair value of the net
assets acquired is recognized as goodwill. Any deficiency of the purchase price below the fair value of the net assets
acquired is recorded as a gain in net earnings. Associated transaction costs are expensed when incurred.
Q) GOODWILL
Goodwill represents the excess of purchase price over fair value of net assets acquired and is assessed for impairment
at least annually at December 31. Goodwill and all other assets and liabilities are allocated to reporting units, which
are Ovintiv’s country cost centers. To assess impairment, the carrying amount of each reporting unit is determined
and compared to the fair value of each respective reporting unit. Any excess of the carrying value of the reporting
unit, including goodwill, over its fair value is recognized as an impairment and charged to net earnings. The
impairment charge measured is limited to the total amount of goodwill allocated to that reporting unit. Subsequent
measurement of goodwill is at cost less any accumulated impairments.
R)
IMPAIRMENT OF LONG-TERM ASSETS
The carrying value of long-term assets, excluding goodwill and upstream assets included in property, plant and
equipment, is assessed for impairment when indicators suggest that the carrying value of an asset or asset group may
not be recoverable. If the carrying amount exceeds the sum of the undiscounted cash flows expected to result from the
continued use and eventual disposition of the asset or asset group, an impairment is recognized for the excess of the
carrying amount over its estimated fair value.
S) ASSET RETIREMENT OBLIGATION
Asset retirement obligations are those legal obligations where the Company will be required to retire tangible long-
lived assets such as producing well sites, processing plants, and restoring land at the end of oil and gas production
operations. The asset retirement obligation is initially measured at its fair value and recorded as a liability with an
offsetting retirement cost that is capitalized as part of the related long-lived asset in the Consolidated Balance Sheet.
The estimated fair value is measured by reference to the expected future cash flows required to satisfy the obligation,
discounted at the Company’s credit-adjusted risk-free rate. Changes in the estimated obligation resulting from
revisions to estimated timing or amount of future cash flows are recognized as a change in the asset retirement
obligation and the related asset retirement cost.
Amortization of asset retirement costs are included in depreciation, depletion and amortization in the Consolidated
Statement of Earnings. Increases in the asset retirement obligations resulting from the passage of time are recorded as
accretion of asset retirement obligation in the Consolidated Statement of Earnings.
Actual expenditures incurred are charged against the accumulated asset retirement obligation.
92 | 2020 Annual Report
Ovintiv Inc.
T)
STOCK-BASED COMPENSATION
Stock-based compensation arrangements are accounted for at fair value. Fair values are determined using observable
share prices and/or pricing models such as the Black-Scholes-Merton option-pricing model. For equity-settled stock-
based compensation plans, fair values are determined at the grant date and are recognized over the vesting period as
compensation costs with a corresponding credit to shareholders’ equity. For cash-settled stock-based compensation
plans, fair values are determined at each reporting date and periodic changes are recognized as compensation costs,
with a corresponding change to liabilities. Compensation costs are recognized over the vesting period using the
accelerated attribution method for awards with a graded vesting feature. Forfeitures are estimated based on the
Company’s historical turnover rates.
U) LEASES
Leases for the right to use an asset are classified as either an operating or finance lease. Upon commencement of the
lease, a ROU asset and corresponding lease liability are recognized in the Consolidated Balance Sheet for all operating
and finance leases. Ovintiv has elected the short-term lease exemption, which does not require a ROU asset or lease
liability to be recognized in the Consolidated Balance Sheet when the lease term is 12 months or less and does not
include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
Upon commencement of the lease, ROU assets are recognized based on the initial measurement of the lease liability
and adjusted for any lease payments made before commencement date of the lease, less any lease incentives and
including any initial direct costs incurred. Lease liabilities are initially measured at the present value of future
minimum lease payments over the lease term. The discount rate used to determine the present value is the rate implicit
in the lease unless that rate cannot be determined, in which case Ovintiv’s incremental borrowing rate is used.
Rights to extend or terminate a lease are included in the lease term when there is reasonable certainty the right will be
exercised. Factors used to assess reasonable certainty of rights to extend or terminate a lease include current and
forecasted drilling plans, anticipated changes in development strategies, historical practice in extending similar
contracts and current market conditions.
Operating lease ROU assets and liabilities are subsequently measured at the present value of the lease payments not
yet paid and discounted at the initial discount rate at commencement of the lease, less any impairments to the ROU
asset. Operating lease expense and revenue from subleases are recognized in the Consolidated Statement of Earnings
on a straight-line basis over the lease term. Finance lease ROU assets are amortized on a straight-line basis over the
estimated useful life of the asset if the lessee is reasonably certain to exercise a purchase option or ownership of the
leased asset transfers at the end of the lease term, otherwise the leased assets are amortized over the lease term.
Amortization of finance lease ROU assets is included in depreciation, depletion and amortization in the Consolidated
Statement of Earnings.
Variable lease payments include changes in index rates, mobilization and demobilization costs related to oil and gas
equipment and certain costs associated with office and building leases. Variable lease payments are recognized when
incurred. Lease and non-lease components are accounted for as a single lease component for compression, coolers and
office subleases.
On January 1, 2019, the Company adopted ASC Topic 842, Leases (“Topic 842”) and related amendments, using the
modified retrospective approach recognizing a cumulative effect adjustment at the beginning of the reporting period
in which Topic 842 was applied. Results for reporting the periods beginning after January 1, 2019, are presented in
accordance with Topic 842, while prior periods have not been restated and are reported in accordance with
ASC Topic 840, Leases. The adoption of Topic 842 did not have a material impact on the Company’s Consolidated
Statements of Earnings or Cash Flows. The effect of the January 1, 2019 adoption of Topic 842 on the Company’s
Consolidated Balance Sheet can be found in Note 1 to the Company’s Consolidated Financial Statements included in
Part II, Item 8 of Ovintiv’s 2019 Annual Report on Form 10-K.
V) FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. Valuation techniques include the market, income
and cost approach. The market approach uses information generated by market transactions involving identical or
Ovintiv Inc.
2020 Annual Report | 93
comparable assets or liabilities; the income approach converts estimated future amounts to a present value; the cost
approach is based on the amount that currently would be required to replace an asset.
Inputs used in determining fair value are characterized according to a hierarchy that prioritizes those inputs based on
the degree to which they are observable. The three input levels of the fair value hierarchy are as follows:
• Level 1 - Inputs represent quoted prices in active markets for identical assets or liabilities, such as exchange-
traded commodity derivatives.
• Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets or
other market corroborated inputs.
• Level 3 - Inputs that are not observable from objective sources, such as forward prices supported by little or
no market activity or internally developed estimates of future cash flows used in a present value model.
In determining fair value, the Company utilizes the most observable inputs available. If a fair value measurement
reflects inputs at multiple levels within the hierarchy, the fair value measurement is characterized based on the lowest
level of input that is significant to the fair value measurement.
The carrying amount of cash and cash equivalents, accounts receivable and accrued revenues, and accounts payable
and accrued liabilities reported in the Consolidated Balance Sheet approximates fair value. The fair value of long-term
debt is disclosed in Note 15. Fair value information related to pension plan assets is included in Note 23. Recurring
fair value measurements are performed for risk management assets and liabilities and other derivative contracts as
discussed in Note 24.
Certain non-financial assets and liabilities are initially measured at fair value, such as asset retirement obligations and
assets and liabilities acquired in business combinations or certain non-monetary exchange transactions.
W) RISK MANAGEMENT ASSETS AND LIABILITIES
Risk management assets and liabilities are derivative financial instruments used by Ovintiv to manage economic
exposure to market risks relating to commodity prices, foreign currency exchange rates and interest rates. The use of
these derivative instruments is governed under formal policies and is subject to limits established by the Board of
Directors.
Derivative instruments that do not qualify for the normal purchases and sales exemption are measured at fair value
with changes in fair value recognized in net earnings. The fair values recorded in the Consolidated Balance Sheet
reflect netting the asset and liability positions where counterparty master netting arrangements contain provisions for
net settlement.
Realized gains or losses from financial derivatives related to oil, NGLs and natural gas commodity prices are presented
in revenues as the contracts are settled. Realized gains or losses from foreign currency exchange swaps are presented
in foreign exchange (gain) loss as the contracts are settled. Realized gains or losses recognized from other derivative
contracts are presented in revenues as the obligations are settled.
Unrealized gains and losses are recognized based on the changes in fair value of the contracts and are presented in
revenues and foreign exchange (gain) loss.
X) COMMITMENTS AND CONTINGENCIES
Liabilities for loss contingencies arising from claims, assessments, litigation, environmental and other sources are
recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. These
accruals are adjusted as additional information becomes available or circumstances change.
94 | 2020 Annual Report
Ovintiv Inc.
Y) RECENT ACCOUNTING PRONOUNCEMENTS
Changes in Accounting Policies and Practices
On January 1, 2020, Ovintiv adopted the following ASUs issued by the FASB, which have not had a material impact
on the Consolidated Financial Statements:
• ASU 2017-04, “Simplifying the Test for Goodwill Impairment”. The amendment eliminates the second step of
the goodwill impairment test which requires the Company to measure the impairment based on the excess amount
of the carrying value of the reporting unit’s goodwill over the implied fair value of its goodwill. Under this
amendment, the goodwill impairment will be measured based on the excess amount of the reporting unit’s
carrying value over its respective fair value. The amendment has been applied prospectively.
• ASU 2016-13, “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments”
under Topic 326. The standard amends the impairment model which requires utilizing a forward-looking expected
loss methodology in place of the incurred loss methodology for financial instruments, including trade receivables.
The standard requires entities to consider a broader range of information to estimate expected credit losses,
resulting in earlier recognition of credit losses. The standard has been applied using the modified retrospective
approach.
2.
Segmented Information
Ovintiv’s reportable segments are determined based on the following operations and geographic locations:
• USA Operations includes the exploration for, development of, and production of oil, NGLs and natural gas and
other related activities within the U.S. cost center.
• Canadian Operations includes the exploration for, development of, and production of oil, NGLs and natural gas
and other related activities within the Canadian cost center.
• China Operations included the production of oil and other related activities within the China cost center.
Effective July 31, 2019, the production sharing contract with China National Offshore Oil Corporation
(“CNOOC”) was terminated and the Company exited its China Operations.
• Market Optimization is primarily responsible for the sale of the Company’s proprietary production. These
results are reported in the USA and Canadian Operations. Market optimization activities include third party
purchases and sales of product to provide operational flexibility and cost mitigation for transportation
commitments, product type, delivery points and customer diversification. These activities are reflected in the
Market Optimization segment. Market Optimization sells substantially all of the Company’s upstream production
to third-party customers. Transactions between segments are based on market values and are eliminated on
consolidation.
Corporate and Other mainly includes unrealized gains or losses recorded on derivative financial instruments. Once
the instruments are settled, the realized gains and losses are recorded in the reporting segment to which the derivative
instruments relate. Corporate and Other also includes amounts related to sublease rentals.
Ovintiv Inc.
2020 Annual Report | 95
Results of Operations
Segment Information
For the years ended December 31
2020
2019
2018
2020
2019
2018
2020
2019
2018
USA Operations
Canadian Operations
China Operations (1)
Revenues
Product and service revenues
Gains (losses) on risk management, net
Sublease revenues
Total Revenues
Operating Expenses
$ 2,701 $ 4,163 $ 2,512 $ 1,349 $ 1,654 $ 1,721 $
100
(199 )
-
-
3,198 4,321 2,313 1,556 1,865 1,821
497
-
207
-
158
-
211
-
238
Production, mineral and other taxes
466
Transportation and processing
566
Operating
Depreciation, depletion and amortization 1,378 1,593
Impairments
-
Total Operating Expenses
16
131
828
124
118
305
361
860
5,580
-
-
8,054 2,863 1,420 1,371 1,383 1,323
$ (4,856 ) $ 1,458 $ 893 $ 185 $ 482 $ 498 $
15
829
100
427
-
16
859
125
383
-
158
453
485
- $
-
-
-
-
-
-
-
-
-
- $
37 $
-
-
37
-
-
16
-
-
16
21 $
-
-
-
-
-
-
-
-
-
-
-
Market Optimization
Corporate & Other
2020
2019
2018
2020
2019
2018
Consolidated
2019
2020
2018
$ 1,459 $ 1,159 $ 1,224 $
(5 )
-
1,466 1,159 1,219
7
-
-
-
- $
(204 )
71
(133 )
- $
(730 )
74
(656 )
- $ 5,509 $ 7,013 $ 5,457
415
519
67
67
586 6,087 6,726 5,939
(361 )
74
507
71
Production, mineral and other taxes
Transportation and processing
Operating
Purchased product
Depreciation, depletion and amortization
Impairments
Accretion of asset retirement obligation
Administrative
Total Operating Expenses
254
173
-
233
28
-
220
22
-
131
16
1,366 1,043 1,100
1
-
-
-
1,608 1,304 1,248
$ (142 ) $ (145 ) $
-
-
(3 )
-
39
-
37
489
562
(29 ) $ (584 ) $ (1,218 ) $ 332 (5,397 )
-
147
- 1,502 1,558 1,083
454
- 1,366 1,043 1,100
50 1,834 2,015 1,272
-
32
32
157
157
254 11,484 6,128 4,245
598 1,694
-
-
(2 )
-
29
-
29
395
451
- 5,580
29
395
-
37
489
-
-
-
-
-
-
-
-
605
732
15
Operating Income (Loss)
Revenues
Product and service revenues
Gains (losses) on risk management, net
Sublease revenues
Total Revenues
Operating Expenses
Operating Income (Loss)
Other (Income) Expenses
Interest
Foreign exchange (gain) loss, net
(Gain) loss on divestitures, net
Other (gains) losses, net
Total Other (Income) Expenses
Net Earnings (Loss) Before Income Tax
Income tax expense (recovery)
Net Earnings (Loss)
371
17
-
(55 )
333
(5,730 )
367
351
382
168
(119 )
(5 )
(3 )
17
23
283
531
315 1,163
94
81
$ (6,097 ) $ 234 $ 1,069
(1) Effective July 31, 2019, the production sharing contract with CNOOC was terminated and the Company exited its China Operations.
96 | 2020 Annual Report
Ovintiv Inc.
Intersegment Information
For the years ended December 31
Marketing Sales
2019
2020
2018
Market Optimization
Upstream Eliminations
2020
2019
2018
Total
2020
2019
2018
Revenues
$ 6,108 $ 7,489 $ 5,724 $ (4,642 ) $ (6,330 ) $ (4,505 ) $ 1,466 $ 1,159 $ 1,219
Operating Expenses
Transportation and processing
Operating
Purchased product
Depreciation, depletion and
amortization
Operating Income (Loss)
$
616
22
635
28
5,612 6,973
457
16
(402 )
-
5,279 (4,246 ) (5,930 )
(396 )
-
(326 )
-
233
28
(4,179 ) 1,366 1,043
220
22
131
16
1,100
-
(142 ) $
-
(147 ) $
1
(29 ) $
-
- $
-
2 $
-
- $
-
(142 ) $
-
(145 ) $
1
(29 )
Revenues by Geographic Region
For the years ended December 31
Revenues
Product revenues
Oil
NGLs
Natural gas
Other revenues (1)
Gains (losses) on risk management, net
Total Revenues
Revenues
Product revenues
Oil
NGLs
Natural gas
Other revenues (1)
Gains (losses) on risk management, net
Total Revenues
United States
2019
2020
2018
2020
2019
2018
Canada
$ 2,035 $ 3,329 $ 2,093 $
289
126
353
310
452
380
7 $
602
737
10 $
870
756
7
863
826
1,296
406
262
1,058
199
216
$ 4,400 $ 4,985 $ 3,782 $ 1,687 $ 1,704 $ 2,157
287
(219 )
966
(142 )
240
101
China (2)
Total
2020
2019
2018
2020
2019
2018
$
$
- $
-
-
-
-
- $
37 $
-
-
-
-
37 $
- $ 2,042 $ 3,376 $ 2,100
1,152
-
955 1,322
952
- 1,047 1,136
- 1,536 1,253
1,320
415
(361 )
-
- $ 6,087 $ 6,726 $ 5,939
507
(1)
Includes market optimization and other revenues such as purchased product sold to third parties, sublease revenues and gathering and
processing services provided to third parties.
(2) Effective July 31, 2019, the production sharing contract with CNOOC was terminated and the Company exited its China Operations.
Major Customers
In connection with the marketing and sale of Ovintiv’s own and purchased oil, NGLs and natural gas for the year
ended December 31, 2020, the Company had one customer which individually accounted for more than 10 percent of
Ovintiv’s product revenues. Sales to this customer, secured by a financial institution with an investment grade credit
rating, totaled approximately $834 million which comprised $825 million in the United States and $9 million in
Canada (2019 - one customer with sales of approximately $866 million; 2018 - one customer with sales of
approximately $752 million).
Ovintiv Inc.
2020 Annual Report | 97
Capital Expenditures by Segment
For the years ended December 31
2020
2019
2018
USA Operations
Canadian Operations
Market Optimization
Corporate & Other
$
$
1,353 $
380
-
3
1,736 $
2,134 $
480
2
10
2,626 $
1,332
632
-
11
1,975
Goodwill, Property, Plant and Equipment and Total Assets by Segment
As at December 31
USA Operations
Canadian Operations
Market Optimization
Corporate & Other
Goodwill
2020
1,938 $
687
-
-
2,625 $
$
$
Property, Plant and Equipment
2019
2020
2019
Total Assets
2020
1,938 $
673
-
-
2,611 $
8,103 $
1,142
2
203
9,450 $
13,757 $
1,205
2
227
15,191 $
10,646 $
2,031
233
1,559
14,469 $
Goodwill, Property, Plant and Equipment and Total Assets by Geographic Region
As at December 31
United States
Canada
Other Countries
Goodwill
2020
1,938 $
687
-
2,625 $
$
$
Property, Plant and Equipment
2019
2020
2019
Total Assets
2020
1,938 $
673
-
2,611 $
8,159 $
1,291
-
9,450 $
13,825 $
1,366
-
15,191 $
10,925 $
3,540
4
14,469 $
2019
16,613
2,122
253
2,499
21,487
2019
16,996
4,457
34
21,487
98 | 2020 Annual Report
Ovintiv Inc.
3. Revenues from Contracts with Customers
The following table summarizes Ovintiv’s revenues from contracts with customers.
Revenues
For the years ended December 31
2020
2019
2018
2020
2019
2018
2020
2019
2018
USA Operations
Canadian Operations
China Operations (1)
Revenues from Customers
Product revenues (2)
Oil
NGLs
Natural gas
Service revenues
Gathering and processing
Product and Service Revenues
Revenues from Customers
Product revenues (2)
Oil
NGLs
Natural gas
Service revenues
Gathering and processing
Product and Service Revenues
$ 2,045 $ 3,341 $ 2,099 $
290
126
354
309
454
379
7 $
606
743
10 $
878
774
7 $
870
849
- $
-
-
37 $
-
-
3
6
$ 2,711 $ 4,176 $ 2,519 $ 1,359 $ 1,667 $ 1,732 $
3
4
5
2
-
- $
-
37 $
-
-
-
-
-
Market Optimization
Corporate & Other
2020
2019
2018
2020
2019
2018
Consolidated
2019
2020
2018
$ 616 $ 249 $
7
89 $
8
877 1,109
10
813
-
-
$ 1,439 $ 1,133 $ 1,206 $
-
- $
-
-
-
- $
- $
-
-
-
- $
- $ 2,668 $ 3,637 $ 2,195
-
970 1,339 1,168
- 1,865 2,030 2,084
-
10
- $ 5,509 $ 7,013 $ 5,457
6
7
(1) Effective July 31, 2019, the production sharing contract with CNOOC was terminated and the Company exited its China Operations.
(2)
Includes revenues from production and revenues of product purchased from third parties, but excludes intercompany marketing fees transacted
between the Company’s operating segments.
The Company’s revenues from contracts with customers consists of product sales including oil, NGLs and natural gas,
as well as the provision of gathering and processing services to third parties. Ovintiv had no contract asset or liability
balances during the periods presented. For the year ended December 31, 2020, receivables and accrued revenues from
contracts with customers were $814 million (2019 - $1,095 million).
Ovintiv’s product sales are sold under short-term contracts with terms that are less than one year at either fixed or
market index prices or under long-term contracts exceeding one year at market index prices.
The Company’s gathering and processing services are provided on an interruptible basis with transaction prices that
are for fixed prices and/or variable consideration. Variable consideration received is related to recovery of plant
operating costs or escalation of the fixed price based on a consumer price index. As the service contracts are
interruptible, with service provided on an “as available” basis, there are no unsatisfied performance obligations
remaining at December 31, 2020.
As at December 31, 2020, all remaining performance obligations are priced at market index prices or are variable
volume delivery contracts. As such, the variable consideration is allocated entirely to the wholly unsatisfied
performance obligation or promise to deliver units of production, and revenue is recognized at the amount for which
the Company has the right to invoice the product delivered. As the period between when the product sales are
transferred and Ovintiv receives payments is generally 30 to 60 days, there is no financing element associated with
customer contracts. In addition, Ovintiv does not disclose unsatisfied performance obligations for customer contracts
with terms less than 12 months or for variable consideration related to unsatisfied performance obligations.
Ovintiv Inc.
2020 Annual Report | 99
4.
Interest
For the years ended December 31
Interest Expense on:
Debt
The Bow office building
Finance leases (See Note 14)
Other
2020
2019
2018
$
$
350 $
-
9
12
371 $
359 $
-
13
10
382 $
267
63
16
5
351
Upon adoption of ASC Topic 842, Leases, on January 1, 2019, The Bow office building was determined to be an
operating lease with lease costs recognized in administrative expense. Previously, payments related to The Bow were
recognized as interest expense and principal repayments. See Note 14 for further information.
5.
Foreign Exchange (Gain) Loss, Net
For the years ended December 31
2020
2019
2018
Unrealized Foreign Exchange (Gain) Loss on:
Translation of U.S. dollar financing debt issued from Canada
Translation of U.S. dollar risk management contracts issued from Canada
Translation of intercompany notes
$
Foreign Exchange on Settlements of:
U.S. dollar financing debt issued from Canada
U.S. dollar risk management contracts issued from Canada
Intercompany notes
Other Monetary Revaluations
$
51 $
(13 )
(27 )
11
1
1
5
(1 )
17 $
(207 ) $
(12 )
196
(23 )
(25 )
(3 )
(71 )
3
(119 ) $
358
24
(149 )
233
3
(10 )
(49 )
(9 )
168
Following the completion of the Reorganization, including the U.S. Domestication, on January 24, 2020 as described
in Note 1, the U.S. dollar denominated unsecured notes issued by Encana Corporation from Canada were assumed by
Ovintiv Inc., a company incorporated in Delaware with a U.S. dollar functional currency. Accordingly, these U.S.
dollar denominated unsecured notes, along with certain intercompany notes, no longer attract foreign exchange
translation gains or losses.
100 | 2020 Annual Report
Ovintiv Inc.
6.
Income Taxes
The provision for income taxes is as follows:
For the years ended December 31
2020
2019
2018
Current Tax
United States
Canada
Other Countries
Total Current Tax Expense (Recovery)
Deferred Tax
United States
Canada
Total Deferred Tax Expense (Recovery)
Income Tax Expense (Recovery)
$
$
(12 ) $
(2 )
-
(14 )
(187 )
568
381
367 $
3 $
(16 )
-
(13 )
147
(53 )
94
81 $
4
(62 )
3
(55 )
195
(46 )
149
94
During the year ended December 31, 2020, the current income tax recovery was primarily due to certain current year
losses being carried back to prior years to recover taxes paid in prior years. During the years ended December 31, 2019
and 2018, the current income tax recovery was primarily due to the resolution of certain tax items relating to prior
taxation years.
On June 28, 2019, Alberta Bill 3, the Job Creation Tax Cut (Alberta Corporate Tax Amendment) Act, was signed into
law resulting in a phased in reduction of the Alberta corporate tax rate from 12 percent to eight percent over a period
of four years. During the year ended December 31, 2019, the deferred tax expense of $94 million includes an
adjustment of $55 million resulting from the re-measurement of the Company’s deferred tax position due to the Alberta
corporate tax rate reduction. On June 29, 2020, Alberta announced the previously phased in rate reduction will be
accelerated with the Alberta rate reducing to eight percent effective July 1, 2020. This new legislation was enacted in
December 2020 and the impact resulting from this announcement is not material for the Company’s tax position.
The following table reconciles income taxes calculated at the applicable statutory rate with the actual income taxes:
For the years ended December 31
2020
2019
2018
Net Earnings (Loss) Before Income Tax
United States Federal Statutory Rate (1)
Expected Income Tax Expense (Recovery)
Effect on Taxes Resulting From:
State tax difference
Income tax related to foreign operations
Effect of legislative changes
Non-taxable capital (gains) losses
Realized capital loss resulting from U.S. Domestication
Partnership tax allocations in excess of funding
Amounts in respect of prior periods
Change in valuation allowance
Other
Effective Tax Rate
$
$
(5,730 )
$
21.0 %
(1,203 )
(147 )
(2 )
2
3
(1,238 )
-
5
2,900
47
$
367
(6.4 %)
315 $
21.0 %
66
18
(7 )
55
(11 )
-
(20 )
(23 )
(7 )
10
81 $
25.7 %
1,163
21.0 %
244
7
(43 )
-
22
-
(68 )
(54 )
8
(22 )
94
8.1 %
(1) Following the U.S. Domestication as described in Note 1, the applicable statutory rate became the U.S. federal income tax rate of 21 percent.
For comparability, the 2019 and 2018 rate reconciliations have been recalculated using the U.S. federal tax rate of 21 percent.
Deferred income tax assets are routinely assessed for realizability. During the year ended December 31, 2020, the
Company determined, after weighing both positive and negative evidence, that a valuation allowance should be
recorded to reduce the associated deferred tax assets in the United States and in Canada. As at December 31, 2020,
the Company is in a cumulative three-year loss position in both the U.S. and Canada. The cumulative three-year losses
and increased uncertainty in the timing as to when the realization of deferred tax assets will occur, is significant
negative evidence to overcome, and consequently, it is more likely than not that the deferred tax assets will not be
realizable. If it is determined that the deferred tax assets are realizable in the future, a reduction in the valuation
allowance will be recorded.
Ovintiv Inc.
2020 Annual Report | 101
As part of the U.S. Domestication, in the first quarter of 2020 Ovintiv recognized a capital loss and recorded a deferred
income tax benefit in the amount of $1.2 billion for Canadian income tax purposes due to the decline in the Company’s
share value compared to the historical tax basis of its properties that were transferred as part of the Reorganization.
Ovintiv assessed the realizability of these capital losses against capital gains and concluded that it is more likely than
not that the deferred tax asset will not be realizable. Therefore, Ovintiv has recorded a corresponding valuation
allowance against the deferred tax asset. If it is determined the capital loss can be utilized at a future date, a reduction
in the valuation allowance will be recorded.
The effective tax rate of (6.4) percent for the year ended December 31, 2020 is lower than the U.S. federal statutory
tax rate of 21 percent primarily due to valuation allowances recorded relating to current year losses arising from ceiling
test impairments and an increase in the valuation allowance of $568 million in Canada related to prior years’ deferred
tax assets. See Note 10 for further discussion related to the ceiling test impairments.
For the year ended December 31, 2019, the effective tax rate of 25.7 percent was higher than the U.S. federal statutory
tax rate of 21 percent primarily due to state taxes and the re-measurement of the Company’s deferred tax position
resulting from the Alberta corporate tax rate reduction discussed above, partially offset by partnership tax allocations
in excess of funding in Canada as well as the resolution of certain tax items relating to prior taxation years. For the
year ended December 31, 2018, the effective tax rate was 8.1 percent, which was lower than the U.S. federal statutory
tax rate of 21 percent primarily due to the impact of foreign jurisdictional tax rates relative to the U.S. statutory tax
rate applied to jurisdictional earnings, partnership tax allocations in excess of funding in Canada and the successful
resolution of certain tax items relating to prior taxation years.
The net deferred income tax asset (liability) consists of:
As at December 31
Deferred Income Tax Assets
Property, plant and equipment
Risk management
Compensation plans
Interest and other deferred deductions
Unrealized foreign exchange losses
Non-capital and net capital losses carried forward (1)
Foreign tax credits
Other
Less: valuation allowance
Deferred Income Tax Liabilities
Property, plant and equipment
Risk management
Unrealized foreign exchange gains
Other
Net Deferred Income Tax Asset (Liability)
2020
2019
107 $
48
49
27
-
2,917
165
8
(3,273 )
(24 )
-
(21 )
(23 )
(20 ) $
168
8
46
32
-
1,703
198
14
(215 )
(1,554 )
(4 )
(2 )
(10 )
384
$
$
(1) The U.S. Domestication as described in Note 1, did not impact the availability of the U.S. and Canadian losses carried forward to future years.
As at December 31, 2020, Ovintiv has recorded a valuation allowance against federal and state losses, U.S. foreign
tax credits and U.S. charitable donations in the amount of $1,310 million (2019 - $215 million) and Canadian non-
capital losses, net capital losses and other tax pools in the amount of $1,963 million (2019 - nil) as it is more likely
than not that these benefits will not be realized based on expected future taxable earnings as determined in accordance
with the Company’s accounting policies.
102 | 2020 Annual Report
Ovintiv Inc.
The net deferred income tax asset (liability) for the following jurisdictions is reflected in the Consolidated Balance
Sheet as follows:
As at December 31
Deferred Income Tax Assets
United States
Canada
Deferred Income Tax Liabilities
United States
Canada
Net Deferred Income Tax Asset (Liability)
$
$
Tax basis, loss carryforwards, charitable donations and tax credits available are as follows:
As at December 31
United States
Tax basis
Non-capital losses (Federal)
Foreign tax credits
Charitable donations
Canada
Tax pools
Net capital losses
Non-capital losses
Charitable donations
Includes non-capital losses of $853 million which have an indefinite expiration date.
(1)
$
$
2020
2019
- $
-
-
-
(20 )
(20 )
(20 ) $
2
599
601
(189 )
(28 )
(217 )
384
2020
Expiration Date
7,744
4,801
159
1
1,535
5,777
1,934
3
Indefinite
2021-2038 (1)
2021 - 2024
2021 - 2024
Indefinite
Indefinite
2027 - 2040
2022
As at December 31, 2020, approximately nil (2019 - $16 million) of Ovintiv’s unremitted earnings from its foreign
subsidiaries were considered to be permanently reinvested and, accordingly, Ovintiv has not recognized a deferred
income tax liability in respect of such earnings. If such earnings were to be remitted, Ovintiv may be subject to income
taxes and foreign withholding taxes. However, determination of any potential amount of unrecognized deferred
income tax liabilities is not practicable. The balance for the comparative period as at December 31, 2019 represents
unremitted earnings prior to the U.S. Domestication.
The following table presents changes in the balance of Ovintiv’s unrecognized tax benefits excluding interest:
For the years ended December 31
Balance, Beginning of Year
Additions for tax positions taken in the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Lapse of statute of limitations
Settlements
Foreign currency translation
Balance, End of Year
2020
2019
(222 ) $
(4 )
(1 )
-
-
-
(5 )
(232 ) $
(248 )
-
(1 )
4
34
-
(11 )
(222 )
$
$
Ovintiv Inc.
2020 Annual Report | 103
The unrecognized tax benefit is reflected in the Consolidated Balance Sheet as follows:
As at December 31
Other Liabilities and Provisions (See Note 16)
Deferred Income Tax Asset (1)
Balance, End of Year
2020
(158 ) $
(74 )
(232 ) $
2019
(159 )
(63 )
(222 )
$
$
(1) As at December 31, 2020, the unrealized tax benefit was offset against the valuation allowance recognized in Canada.
If recognized, all of Ovintiv’s unrecognized tax benefits as at December 31, 2020 would affect Ovintiv’s effective
income tax rate. The nature of the unrecognized tax benefits is highly uncertain. As at December 31, 2020, Ovintiv
does not anticipate that the amount of unrecognized tax benefits will significantly change during the next 12 months.
Ovintiv recognizes interest accrued in respect of unrecognized tax benefits in interest expense. During 2020, Ovintiv
recognized an expense of nil (2019 - nil; 2018 - recovery of $11 million) in interest expense. As at December 31, 2020,
Ovintiv had a liability of $5 million (2019 - $5 million) for interest accrued in respect of unrecognized tax benefits.
Included below is a summary of the tax years, by jurisdiction, that remain statutorily open for examination by the
taxing authorities.
Jurisdiction
United States - Federal
United States - State
Canada - Federal
Canada - Provincial
Other
Taxation Year
2017 - 2020
2016 - 2020
2013 - 2020
2013 - 2020
2020
Ovintiv and its subsidiaries file income tax returns primarily in the United States and Canada. Issues in dispute for
audited years and audits for subsequent years are ongoing and in various stages of completion.
7. Accounts Receivable and Accrued Revenues
As at December 31
2020
2019
Trade Receivables and Accrued Revenues
Oil, NGLs and natural gas
Midstream and marketing
Derivative financial instruments
Corporate and other
Total Trade Receivables and Accrued Revenues
Prepaids
Deposits and Other
Expected Credit Loss Allowance
$
$
465 $
357
23
26
871
23
38
932
(4 )
928 $
765
353
7
24
1,149
48
41
1,238
(3 )
1,235
Ovintiv’s trade receivables and accrued revenues primarily consist of production sales of oil, NGLs and natural gas,
product optimization from marketing and recoveries from joint working interest partners. The Company’s receivables
are short dated with payments generally due within 30 to 60 days, with no financing element.
Trade receivables and accrued revenues are subject to credit risk which is the risk of loss from the potential of a
counterparty failing to meet its obligation in accordance with agreed terms. Ovintiv’s credit exposure related to product
sales and derivative financial instruments are mitigated through the use of credit policies approved by the Board of
Directors which govern credit practices that limit transactions according to counterparties’ credit quality, and regular
monitoring and review of counterparties’ credit worthiness. The Company may also request collateral support,
including standby letters of credit, from customers that purchase production. Receivables due from joint working
interest partners include numerous counterparties ranging from large public companies to small private companies
within the oil and gas industry. In the event of non-payment, Ovintiv may be able to mitigate losses through requiring
104 | 2020 Annual Report
Ovintiv Inc.
prepayment of future costs and netting outstanding receivables against associated revenue payables to the interest
owner. The Company monitors ongoing credit exposure through active review of counterparty balances against
contract terms and due dates, timely dispute resolution, payment confirmation, consideration of the customers’
financial condition and general industry market conditions.
Ovintiv’s estimated credit loss allowance is estimated using historical loss information, current industry conditions
and payment practices, as well as reasonable and supportable forecasts of future economic conditions. Credit risk is
assessed based on days outstanding and utilizes both internal credit assessments and publicly available credit
information. As a result, the allowance reflects anticipated effects caused by recent market deterioration. As at
December 31, 2020, the current period expected credit loss allowance was $4 million. See Note 25 for more
information on credit risk exposures.
8. Business Combination
Newfield Exploration Company Acquisition
On February 13, 2019, the business combination with Newfield Exploration Company, a Delaware corporation
(“Newfield”) was completed pursuant to an Agreement and Plan of Merger with Newfield (the “Merger”). As a result
of the Merger, Newfield stockholders received 2.6719 Encana common shares, on a pre-Share Consolidation basis,
for each share of Newfield common stock that was issued and outstanding immediately prior to the effective date of
the Merger. The Company issued approximately 543.4 million Encana common shares, on a pre-Share Consolidation
basis, representing a value of $3.5 billion and paid approximately $5 million in cash in respect of Newfield’s cash-
settled incentive awards. Following the acquisition, Newfield’s senior notes totaling $2.45 billion were outstanding.
For the year ended December 31, 2019, transaction costs of approximately $33 million were included in other (gains)
losses, net.
Newfield’s operations focused on the exploration and development of oil and gas properties located in Anadarko and
Arkoma in Oklahoma, Bakken in North Dakota and Uinta in Utah, as well as offshore oil assets located in China. The
results of Newfield’s operations have been included in the Company’s Consolidated Financial Statements as of
February 14, 2019.
Ovintiv Inc.
2020 Annual Report | 105
Purchase Price Allocation
The transaction was accounted for under the acquisition method, which requires that the assets acquired and liabilities
assumed be recognized at their fair values as of the acquisition date, with any excess of the purchase price over the
estimated fair value of identified net assets acquired recorded as goodwill. The purchase price allocation represents
the consideration paid and the fair values of the assets acquired, and liabilities assumed as of the acquisition date.
Purchase Price Allocation
Consideration:
Fair value of Encana's common shares issued (1)
Fair value of Newfield liability awards paid in cash (2)
Total Consideration
Assets Acquired:
Cash and cash equivalents
Accounts receivable and accrued revenues
Other current assets
Proved properties
Unproved properties
Other property, plant and equipment
Restricted cash
Other assets
Goodwill (3)
Liabilities Assumed:
Accounts payable and accrued liabilities (3) (4)
Long-term debt
Operating lease liabilities
Other long-term liabilities (3)
Asset retirement obligation
Deferred income taxes (3)
Total Purchase Price
$
$
$
$
3,478
5
3,483
46
486
50
5,903
838
22
53
105
25
(795 )
(2,603 )
(76 )
(65 )
(184 )
(322 )
3,483
(1) The fair value was based on the NYSE closing price of the pre-Share Consolidation Encana common shares of $6.40 on February 13, 2019.
(2) The fair value was based on a price of $6.50 per notional unit which was determined using a volume-weighted average of the trading price of
pre-Share Consolidation Encana common shares on the NYSE on each of the five consecutive trading days ending on the trading day that
was three trading days prior to February 13, 2019.
(4)
(3) Since the completion of the business combination on February 13, 2019, additional information related to pre-acquisition liabilities and
contingencies was obtained resulting in a measurement period adjustment. Changes in the fair value estimates comprised an increase in other
liabilities of $16 million, of which approximately $11 million is presented in accounts payable and accrued liabilities and $5 million is
presented in other long-term liabilities, a decrease in deferred tax liabilities of $4 million and a corresponding increase in goodwill of
$12 million.
In conjunction with the acquisition, various legal claims and actions arising in the normal course of Newfield’s operations were assumed by
Ovintiv. On March 29, 2019, Newfield and its wholly-owned subsidiary entered into an Agreement and Mutual Release with Sapura Energy
Berhad, formerly known as SapuraKencana Petroleum Berhad, and Sapura Exploration and Production Inc., formerly known as
SapuraKencana Energy Inc. (collectively, “Sapura”), and agreed to settle arbitration claims in the amount of $22.5 million arising from
Sapura’s purchase of Newfield’s Malaysian business in February 2014. The settlement amount including legal fees was included in the
purchase price allocation as part of the current liabilities assumed at the acquisition date. Although the outcome of any remaining legal claims
and actions assumed following the acquisition of Newfield cannot be predicted with certainty, the Company does not expect these matters to
have a material adverse effect on Ovintiv’s financial position, cash flows or results of operations.
The income approach valuation technique was used for the fair value of assets acquired and liabilities assumed. The
carrying amounts of cash and cash equivalents, accounts receivable and accrued revenues, restricted cash, other current
assets, and accounts payable and accrued liabilities approximate their fair values due to their nature and/or the short-
term maturity of the instruments. The fair values of long-term debt, ROU assets and operating lease liabilities were
categorized within Level 2 of the fair value hierarchy and were determined using quoted prices and rates from an
available pricing source. The fair values of the proved and unproved properties, other property, plant and equipment,
other assets, other long-term liabilities and asset retirement obligation were categorized within Level 3 and were
determined using relevant market assumptions, including discount rates, future commodity prices and costs, timing of
development activities, projections of oil and gas reserves, and estimates for abandonment and reclamation.
Goodwill arose from the Newfield acquisition primarily from the requirement to recognize deferred taxes on the
difference between the fair value of the assets acquired and liabilities assumed and the respective carry-over tax basis.
Goodwill is not amortized and is not deductible for tax purposes.
106 | 2020 Annual Report
Ovintiv Inc.
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information combines the historical financial results of the Company
with Newfield and has been prepared as though the acquisition had occurred on January 1, 2019. The pro forma
information is not intended to reflect the actual results of operations that would have occurred if the business
combination had been completed at the date indicated. In addition, the pro forma information is not intended to be a
projection of the Company’s results of operations for any future period.
Additionally, pro forma earnings were adjusted to exclude transaction-related costs incurred of approximately
$71 million and severance payments made to employees which totaled $138 million for the year ended
December 31, 2019. The pro forma financial information does not include any cost savings or other synergies from
the Merger or any estimated costs that have been incurred to integrate the assets. Ovintiv’s consolidated results for the
year ended December 31, 2020 include the results from Newfield.
For the year ended December 31 (US$ millions, except per share amounts)
Revenues
Net Earnings (Loss)
Net Earnings (Loss) per Share
Basic & Diluted
9. Acquisitions and Divestitures
2019
7,005
376
$
$
$
1.44
For the years ended December 31
2020
2019
2018
Acquisitions
USA Operations
Canadian Operations
Total Acquisitions
Divestitures
USA Operations
Canadian Operations
Total Divestitures
Net Acquisitions & (Divestitures)
ACQUISITIONS
$
$
19 $
-
19
(78 )
(11 )
(89 )
(70 ) $
65 $
-
65
(196 )
(1 )
(197 )
(132 ) $
-
17
17
(438 )
(55 )
(493 )
(476 )
Acquisitions in 2020 in the USA Operations primarily included property purchases with oil and liquids rich potential.
Acquisitions in 2019 in the USA Operations primarily included seismic purchases, water rights and property purchases
with oil and liquids rich potential. Acquisitions in 2018 in the Canadian Operations primarily included property purchases
with oil and liquids rich potential.
DIVESTITURES
In 2020, amounts received from the sale of assets were $89 million (2019 - $197 million; 2018 - $493 million).
Amounts received from the Company’s divestiture transactions have been deducted from the respective U.S. and
Canadian full cost pools.
USA Operations
In 2020, divestitures in the USA Operations primarily included the sale of certain properties that did not complement
Ovintiv’s existing portfolio of assets.
In 2019, divestitures in the USA Operations primarily included the sale of the Arkoma natural gas assets located in
Oklahoma.
Ovintiv Inc.
2020 Annual Report | 107
In 2018, divestitures in the USA Operations primarily included the sale of the San Juan assets located in northwestern
New Mexico.
Canadian Operations
In 2020, divestitures in the Canadian Operations primarily included the sale of certain properties that did not
complement Ovintiv’s existing portfolio of assets.
In 2018, divestitures in the Canadian Operations primarily included the sale of certain Pipestone assets located in
Alberta.
10. Property, Plant and Equipment, Net
As at December 31
USA Operations
Proved properties
Unproved properties
Other
Canadian Operations
Proved properties
Unproved properties
Other
Market Optimization
Corporate & Other
2020
Accumulated
2019
Accumulated
Cost
DD&A
Net
Cost
DD&A
Net
$
37,875 $
2,785
24
40,684
(32,581 ) $
-
-
(32,581 )
16,008
177
13
16,198
(15,056 )
-
-
(15,056 )
9
865
57,756 $
(7 )
(662 )
(48,306 ) $
$
5,294
2,785
24
8,103
952
177
13
1,142
2
203
9,450
$
35,870 $
3,491
19
39,380
(25,623 ) $
-
-
(25,623 )
10,247
3,491
19
13,757
15,284
223
18
15,525
(14,320 )
-
-
(14,320 )
964
223
18
1,205
9
914
55,828 $
(7 )
(687 )
(40,637 ) $
2
227
15,191
$
USA and Canadian Operations’ property, plant and equipment include internal costs directly related to exploration,
development and construction activities of $157 million, which have been capitalized during the year ended
December 31, 2020 (2019 - $228 million).
For the year ended December 31, 2020, Ovintiv recognized before-tax non-cash ceiling test impairments of
$5,580 million in the USA Operations (2019 - nil; 2018 - nil). The non-cash ceiling test impairments are included with
accumulated DD&A in the table above and primarily resulted from the decline in the 12-month average trailing prices,
which reduced proved reserves.
The 12-month average trailing prices used in the ceiling test calculations reflect benchmark prices adjusted for basis
differentials to determine local reference prices, transportation costs and tariffs, heat content and quality. The
benchmark prices are disclosed in Note 28.
Finance Lease Arrangements
The Company has two lease arrangements that are accounted for as finance leases, which include an office building
and an offshore production platform. As at December 31, 2020, the total carrying value of assets under finance lease
was $32 million (2019 - $37 million), net of accumulated amortization of $692 million (2019 - $677 million). Long-
term liabilities for the finance lease arrangements are included in other liabilities and provisions in the Consolidated
Balance Sheet and are disclosed in Note 16.
108 | 2020 Annual Report
Ovintiv Inc.
11. Other Assets
As at December 31
Operating Lease ROU Assets (See Note 14)
Long-Term Investments
Long-Term Receivables
Deferred Charges
Other
12. Goodwill
As at December 31
United States
Balance, beginning of year
Additions during the year (See Note 8)
Balance, end of year
Canada
Balance, beginning of year
Foreign currency translation adjustment
Balance, end of year
Total Goodwill
2020
991 $
30
64
8
50
1,143 $
2019
1,047
28
81
6
51
1,213
2020
2019
1,938 $
-
1,938
673
14
687
2,625 $
1,913
25
1,938
640
33
673
2,611
$
$
$
$
During 2020, the Company had no additions or dispositions relating to goodwill. The change in the Canada goodwill
balance reflects movement due to foreign currency translation. During 2019, the Company recognized goodwill of
$25 million in conjunction with the Newfield acquisition in the United States as described in Note 8.
Goodwill was assessed for impairment as at December 31, 2020 and December 31, 2019. The fair values of the United
States and Canada reporting units were determined to be greater than the respective carrying values of the reporting
units. Accordingly, no goodwill impairments were recognized. The Company has not recognized any historical
cumulative goodwill impairments.
13. Accounts Payable and Accrued Liabilities
As at December 31
Trade Payables
Capital Accruals
Royalty and Production Accruals
Market Optimization Accruals
Outstanding Disbursements
Other Accruals
Interest Payable
Current Portion of Long-Term Incentive Costs (See Note 22)
Current Portion of Finance Lease Obligations (See Note 14)
Current Portion of Asset Retirement Obligation (See Note 17)
2020
306 $
166
463
196
87
215
125
25
82
39
1,704 $
2019
355
351
598
220
78
236
83
40
89
189
2,239
$
$
Payables and accruals are non-interest bearing. Interest payable represents amounts accrued related to Ovintiv’s
unsecured notes as disclosed in Note 15.
Ovintiv Inc.
2020 Annual Report | 109
14. Leases
Operating leases include drilling rigs, compressors, marine vessels, camps, office and buildings, certain land
easements and various equipment utilized in the development and production of oil, NGLs and natural gas. Finance
leases include an office building and an offshore production platform. Subleases relate to office and building leases.
The tables below summarize Ovintiv’s operating and finance lease costs and include ROU assets and lease liabilities,
amounts recognized in net earnings during the period and other lease information.
As at December 31 (US$ millions, unless otherwise specified)
2020
2019
Consolidated Balance Sheet (1):
Operating Lease ROU Assets, in Other Assets
Finance Lease ROU Assets, in Other Property Plant and Equipment
$
991 $
32
1,047
37
Operating Lease Liabilities:
Current
Long-term
Finance Lease Liabilities:
Current, in accounts payable and accrued liabilities
Long-term, in other liabilities and provisions
Weighted Average Discount Rate
Operating leases
Finance leases
Weighted Average Remaining Lease Term
Operating leases
Finance leases
68
938
82
39
78
977
89
121
5.44%
6.00%
5.41%
5.97%
15.9 years
3.0 years
16.3 years
3.2 years
(1) Total ROU assets and liabilities are recorded at the gross contractual amount. A portion of the future lease payments will be recovered from
other working interest owners based on their proportionate share when incurred.
For the years ended December 31
Lease Costs (1):
Operating Lease Costs, Excluding Short-Term Leases
2020
2019
$
152 $
181
Finance Lease Costs:
Amortization of ROU assets
Interest on lease liabilities
Total Finance Lease Costs
Short-Term Lease Costs
Variable Lease Costs
Sublease Income:
Operating lease income
Variable lease income
Other Information (2):
Cash Paid for Amounts Included in the Measurement of Lease Liabilities:
Operating cash outflows from operating leases
Investing cash outflows from operating leases
Operating cash outflows from finance leases
Financing cash outflows from finance leases
Supplemental Non-Cash Information:
New ROU operating lease assets and liabilities
5
9
14
339
11
53
18
215
269
9
89
4
13
17
340
13
56
18
217
296
13
84
10
20
(1) Lease costs include amounts capitalized into property, plant and equipment in the Consolidated Balance Sheet and lease expense recognized
in the Consolidated Statement of Earnings.
(2) Rights to extend or terminate a lease are included in the lease term when there is reasonable certainty the right will be exercised. Lease
contracts include rights to extend leases after the initial term, ranging from month-to-month to less than 10 years.
110 | 2020 Annual Report
Ovintiv Inc.
Operating lease expense is reflected in the Consolidated Statement of Earnings as follows:
For the years ended December 31
Operating Lease Expense
Transportation and processing
Operating
Administrative
Total Operating Lease Expense
2020
2019
$
$
2 $
106
114
222 $
3
107
116
226
The following table outlines the Company’s future lease payments and lease liabilities related to the Company’s
operating and finance leases as at December 31, 2020:
Operating Leases (1)
Expected Future Lease Payments
Less: Discounting
Present Value of Future Operating
Lease Payments
Sublease Income (undiscounted)
Finance Leases
Expected Future Lease Payments
Less: Discounting
Present Value of Future Finance
Lease Payments
Sublease Income (undiscounted) (2)
2021
2022
2023
2024
2025 Thereafter
Total
$
121 $
107 $
91 $
89 $
88 $
1,036 $
1,532
526
$
(44 ) $
(40 ) $
(39 ) $
(39 ) $
(39 ) $
$
(511 ) $
1,006
(712 )
$
87 $
8 $
8 $
8 $
9 $
13 $
$
(8 ) $
(8 ) $
(7 ) $
(7 ) $
(7 ) $
$
(10 ) $
133
12
121
(47 )
(1) Lease payments are presented based on the gross contractual amount. A portion of the future lease payments will be recovered from other
working interest owners based on their proportionate share when incurred.
(2) Classified as operating lease.
There are no commitments for leases with terms greater than one year that have not yet commenced at December 31,
2020.
15. Long-Term Debt
As at December 31
Note
2020
2019
U.S. Dollar Denominated Debt
Revolving credit and term loan borrowings
U.S. Unsecured Notes:
3.90% due November 15, 2021
5.75% due January 30, 2022
5.625% due July 1, 2024
5.375% due January 1, 2026
8.125% due September 15, 2030
7.20% due November 1, 2031
7.375% due November 1, 2031
6.50% due August 15, 2034
6.625% due August 15, 2037
6.50% due February 1, 2038
5.15% due November 15, 2041
Total Principal
Increase in Value of Debt Acquired
Unamortized Debt Discounts and Issuance Costs
Total Long-Term Debt
Current Portion
Long-Term Portion
A
B
F
C
D
E
$
950 $
698
518
600
1,000
688
300
350
500
750
462
488
203
6,809
111
(35 )
6,885 $
518 $
6,367
6,885 $
600
750
1,000
700
300
350
500
750
462
505
244
6,859
149
(34 )
6,974
-
6,974
6,974
$
$
$
Ovintiv Inc.
2020 Annual Report | 111
A) REVOLVING CREDIT AND TERM LOAN BORROWINGS
At December 31, 2020, Ovintiv had in place committed revolving U.S. dollar denominated bank credit facilities
totaling $4.0 billion which included $2.5 billion on a revolving bank credit facility for Ovintiv Inc. and $1.5 billion
on a revolving bank credit facility for a Canadian subsidiary. The facilities are extendible from time to time, but not
more than once per year, for a period not longer than five years plus 90 days from the date of the extension request, at
the option of the lenders and upon notice from Ovintiv. The facilities mature in July 2024, and are fully revolving up
to maturity.
At December 31, 2020, the Company had $352 million of commercial paper outstanding under its U.S. CP program
maturing at various dates with a weighted average interest rate of approximately 1.04 percent. The Company also had
$598 million drawn on its revolving credit facilities at December 31, 2020. The U.S. CP program is supported by
Ovintiv Inc.’s $2.5 billion revolving credit facility, which is unsecured and bears interest at either the lenders’ U.S.
base rate or LIBOR, plus applicable margins. The Canadian subsidiary facility bears interest at the lenders’ rates for
Canadian prime, U.S. base rate, Bankers’ Acceptances or LIBOR, plus applicable margins.
Ovintiv is subject to a financial covenant in its credit facility agreements whereby financing debt to adjusted
capitalization cannot exceed 60 percent. Financing debt primarily includes total long-term debt and finance lease
obligations. Adjusted capitalization is calculated as the sum of total financing debt, shareholders’ equity and a
$7.7 billion equity adjustment for cumulative historical ceiling test impairments recorded in conjunction with the
Company’s January 1, 2012 adoption of U.S. GAAP. As at December 31, 2020, the Company is in compliance with
all financial covenants.
Standby fees paid in 2020 relating to revolving credit and term loan agreements were approximately $8 million (2019 -
$11 million; 2018 - $15 million) and were included in interest expense on the Consolidated Statement of Earnings.
B) UNSECURED NOTES
Shelf Prospectuses
In the first quarter of 2020, Ovintiv filed a U.S. shelf registration statement and a Canadian shelf prospectus, 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. and/or Canada. At December 31, 2020, $6.0 billion was
accessible under the Canadian shelf prospectus. The ability to issue securities under the U.S. shelf registration
statement or Canadian shelf prospectus is dependent upon market conditions and security law requirements.
U.S. Unsecured Notes
Unsecured notes include medium-term notes and senior notes that are issued from time to time under trust indentures
and have equal priority with respect to the payment of both principal and interest.
During the year ended December 31, 2020, Ovintiv repurchased approximately $302 million in principal amount of
its senior notes in the open market, which included approximately $82 million in principal amount of its 3.9 percent
senior notes due in November 2021, approximately $150 million in principal amount of its 5.75 percent senior notes
due in January 2022, approximately $12 million in principal amount of its 5.375 percent senior notes due in
January 2026, approximately $17 million in principal amount of its 6.5 percent senior notes due in February 2038 and
approximately $41 million in principal amount of its 5.15 percent senior notes due in November 2041.
For the year ended December 31, 2020, the aggregate cash payment related to note repurchases was $272 million, plus
accrued interest, and a net gain of approximately $30 million was recognized in other (gains) losses, net on the
Consolidated Statement of Earnings.
C)
INCREASE IN VALUE OF DEBT ACQUIRED
Certain of the notes and debentures of the Company were acquired in business combinations and were accounted for
at their fair value at the dates of acquisition. The difference between the fair value and the principal amount of the
debt is being amortized over the remaining life of the outstanding debt acquired, which has a weighted average
remaining life of approximately five years.
112 | 2020 Annual Report
Ovintiv Inc.
D) UNAMORTIZED DEBT DISCOUNTS AND ISSUANCE COSTS
Long-term debt premiums and discounts are capitalized within long-term debt and are being amortized using the
effective interest method. During 2020, $4 million (2019 - nil) in issuance costs were capitalized related to the renewal
of the Company’s credit facilities. Issuance costs are amortized over the term of the related debt.
E) CURRENT PORTION OF LONG-TERM DEBT
As at December 31, 2020, the current portion of long-term debt was $518 million (2019 - nil).
F) MANDATORY DEBT PAYMENTS
As at December 31
2021
2022
2023
2024
2025
Thereafter
Total
Principal
Amount
Interest
Amount
$
$
518
600
-
1,950
-
3,741
6,809
$
$
374
336
319
310
245
1,883
3,467
The revolving credit facilities are fully revolving for a period of up to five years. Based on the maturity dates of the
credit facilities at December 31, 2020, the payments are included in 2024.
As at December 31, 2020, total long-term debt had a carrying value of $6,885 million and a fair value of $7,379 million
(2019 - carrying value of $6,974 million and a fair value of $7,657 million). The estimated fair value of long-term
borrowings is categorized within Level 2 of the fair value hierarchy and has been determined based on market
information of long-term debt with similar terms and maturity, or by discounting future payments of interest and
principal at interest rates expected to be available to the Company at period end.
16. Other Liabilities and Provisions
As at December 31
Finance Lease Obligations (See Note 14)
Unrecognized Tax Benefits (See Note 6)
Pensions and Other Post-Employment Benefits (See Note 23)
Long-Term Incentive Costs (See Note 22)
Other Derivative Contracts (See Notes 24, 25)
Other
2020
2019
39
158
129
9
7
16
358
$
$
121
159
119
38
7
20
464
$
$
Ovintiv Inc.
2020 Annual Report | 113
17. Asset Retirement Obligation
As at December 31
Asset Retirement Obligation, Beginning of Year
Liabilities Incurred
Liabilities Acquired (See Note 8)
Liabilities Settled and Divested
Change in Estimated Future Cash Outflows
Accretion Expense
Foreign Currency Translation
Asset Retirement Obligation, End of Year
Current Portion (See Note 13)
Long-Term Portion
18. Share Capital
AUTHORIZED
2020
614
7
-
(160 )
(49 )
29
(1 )
440
39
401
440
$
$
$
$
2019
455
15
184
(141 )
47
37
17
614
189
425
614
$
$
$
$
Subsequent to the Reorganization as described in Note 1 and as at December 31, 2020, Ovintiv is authorized to issue
750 million shares of common stock, par value $0.01 per share, and 25 million shares of preferred stock, par value
$0.01 per share. No shares of preferred stock are outstanding.
ISSUED AND OUTSTANDING
As at December 31
2020
2019
2018
Number
(millions) Amount
Number
(millions) Amount
Number
(millions) Amount
Shares of Common Stock Outstanding, Beginning of Year
Shares of Common Stock Purchased
Shares of Common Stock Issued
Shares of Common Stock Issued Under Dividend
Reinvestment Plan
Reclassification of Share Capital due to the
Reorganization (See Note 1)
Shares of Common Stock Outstanding, End of Year
259.8 $
-
-
7,061
-
-
190.5 $
(39.4 )
108.7
4,656
(1,073 )
3,478
194.6 $
(4.1 )
-
4,757
(102 )
-
-
-
-
-
-
1
-
259.8 $
(7,058 )
3
-
259.8 $
-
7,061
-
190.5 $
-
4,656
In conjunction with the Reorganization, the amount recognized in share capital in excess of Ovintiv’s established par
value of $0.01 per share was reclassified to paid in surplus. Accordingly, approximately $7,058 million was
reclassified.
On February 13, 2019, the Company completed the acquisition of all the issued and outstanding shares of common
stock of Newfield whereby Encana issued approximately 543.4 million common shares, on a pre-Share Consolidation
basis, to Newfield shareholders (approximately 108.7 million post-Share Consolidation shares), representing a pre-
Share Consolidation exchange ratio of 2.6719 Encana common shares for each share of Newfield common stock held.
See Note 8 for further information on the business combination.
SUBSTANTIAL ISSUER BID
On June 10, 2019, the Company announced its intention to purchase, for cancellation, up to $213 million of its
common shares through a substantial issuer bid (“SIB”) which commenced on July 8, 2019. On August 29, 2019, the
Company purchased the equivalent of approximately 9.5 million post-Share Consolidation shares at a converted price
of $22.50 per share, for an aggregate purchase price of approximately $213 million, of which $257 million was charged
to share capital and $44 million was credited to paid in surplus.
114 | 2020 Annual Report
Ovintiv Inc.
The purchase was made in accordance with the terms and conditions of the SIB, with consideration allocated to share
capital equivalent to the average carrying amount of the shares, with the excess of the carrying amount over the
purchase consideration credited to paid in surplus.
NORMAL COURSE ISSUER BID
On February 27, 2019, the Company announced that the TSX accepted the Company’s notice of intention to purchase,
for cancellation, the equivalent of up to approximately 29.9 million post-Share Consolidation Encana common shares,
pursuant to a NCIB over a 12-month period from March 4, 2019 to March 3, 2020.
For the year ended December 31, 2019, the Company purchased the equivalent of approximately 29.9 million post-
Share Consolidation shares under the NCIB for total consideration of approximately $1,037 million. Of the amount
paid, $816 million was charged to share capital and $221 million was charged to retained earnings.
For the year ended December 31, 2018, the Company purchased the equivalent of approximately 4.1 million post-
Share Consolidation shares under the previous NCIB which was in place from February 28, 2018 to February 27, 2019
for total consideration of approximately $250 million. Of the amount paid, $102 million was charged to share capital
and $148 million was charged to retained earnings.
All purchases were made in accordance with their respective NCIB at prevailing market prices plus brokerage fees,
with consideration allocated to share capital up to the average carrying amount of the shares, with any excess allocated
to retained earnings.
DIVIDEND REINVESTMENT PLAN
On February 28, 2019, the Company suspended its dividend reinvestment plan (“DRIP”) and in conjunction with the
Reorganization as described in Note 1, the DRIP was terminated. During the year ended December 31, 2018, Encana
issued the equivalent of approximately 13,866 post-Share Consolidation Encana common shares, totaling $0.6 million
under the DRIP.
DIVIDENDS
During the year ended December 31, 2020, the Company declared and paid dividends of $0.375 per share of common
stock, totaling $97 million (2019 - $0.375 per common share on a post-Share Consolidation basis, totaling $102
million; 2018 - $0.30 per common share on a post-Share Consolidation basis, totaling $57 million).
Ovintiv’s quarterly dividend payment was $0.09375 per share of common stock in 2020. On a post-Share
Consolidation basis, the Company’s quarterly dividend payment was $0.09375 per common share in 2019 and $0.075
per common share in 2018.
For the year ended December 31, 2018, the dividends paid included $0.6 million in Encana common shares, as
disclosed above, which were issued in lieu of cash dividends under the DRIP.
On February 17, 2021, the Board of Directors declared a dividend of $0.09375 per share of common stock payable on
March 31, 2021 to common stockholders of record as of March 15, 2021.
Ovintiv Inc.
2020 Annual Report | 115
EARNINGS PER SHARE OF COMMON STOCK
The following table presents the computation of net earnings (loss) per share of common stock:
For the years ended December 31 (US$ millions, except per share amounts)
2020
2019
2018
Net Earnings (Loss)
$
(6,097 )
$
234
$
1,069
Number of Shares of Common Stock:
Weighted average shares of common stock outstanding - Basic
Effect of dilutive securities (1) (2)
Weighted Average Shares of Common Stock Outstanding - Diluted
Net Earnings (Loss) per Share of Common Stock
Basic
Diluted (1) (2)
259.8
-
259.8
261.2
-
261.2
$
(23.47 )
(23.47 )
$
$
0.90
0.90
192.0
-
192.0
5.57
5.57
(1) During the fourth quarter of 2020, Ovintiv’s Board of Directors resolved to settle certain Performance Share Units (“PSUs”) and Restricted
Share Units (“RSUs”) with the issuance of the Company’s common stock. As a result, the stock-based compensation awards were modified
and reclassified as equity-settled awards. See Note 22 for further information.
(2) As at December 31, 2020, all of Ovintiv’s equity-settled awards were determined to be antidilutive and therefore are excluded from the
calculation of fully diluted net earnings (loss) per share of common stock. See Note 22 for further information.
STOCK-BASED COMPENSATION PLANS
Ovintiv’s PSU and RSU stock-based compensation plans allow the Company to settle the awards either in cash or in
the Company’s common stock. The PSUs and RSUs are classified as equity-settled if the Company has sufficient
common stock reserved for issuance. These awards are included in the computation of diluted net earnings (loss) per
share if dilutive.
Ovintiv’s stock options with associated Tandem Stock Appreciation Rights (“TSARs”) give the employee the right to
purchase shares of common stock of the Company or receive cash. Historically, most holders of options have elected
to exercise their TSARs in exchange for a cash payment. As a result, outstanding options are not considered potentially
dilutive securities.
An aggregate of 7.4 million shares of Ovintiv common stock is authorized and reserved for issuance. At
December 31, 2020, 7.3 million shares of Ovintiv common stock remained available for issuance under the
Company’s stock-based compensation plans. Shares issued as a result of awards granted from stock-based
compensation plans are generally funded out of the common stock authorized for issuance as approved by the
Company’s shareholders.
See Note 22 for further information on Ovintiv’s outstanding and exercisable TSARs, PSUs and RSUs.
116 | 2020 Annual Report
Ovintiv Inc.
19. Accumulated Other Comprehensive Income
For the years ended December 31
2020
2019
2018
$
$
$
Foreign Currency Translation Adjustment
Balance, Beginning of Year
Change in Foreign Currency Translation Adjustment
Balance, End of Year
Pension and Other Post-Employment Benefit Plans
Balance, Beginning of Year
Other Comprehensive Income Before Reclassifications:
Net actuarial gains and (losses) (See Note 23)
Income taxes
Net prior service costs from plan amendment (See Note 23)
Income taxes
Amounts Reclassified from Other Comprehensive Income:
Reclassification of net actuarial (gains) and losses to
net earnings (See Note 23)
Income taxes
Reclassification of net prior service costs to net earnings (See Note 23)
Income taxes
Curtailment in net defined periodic benefit cost (See Note 23)
Income taxes
Settlement in net defined periodic benefit cost (See Note 23)
Income taxes
1,004 $
38
1,042 $
976 $
28
1,004 $
1,029
(53 )
976
42 $
22 $
(10 )
2
-
-
(9 )
2
2
-
5
(1 )
2
(1 )
58
(12 )
(31 )
6
(2 )
-
1
-
-
-
-
-
13
14
(3 )
-
-
(1 )
-
(1 )
-
-
-
-
-
Balance, End of Year
Total Accumulated Other Comprehensive Income
$
$
34 $
1,076 $
42 $
1,046 $
22
998
During the year ended December 31, 2019, the Company amended the other post-employment benefits arrangements
in conjunction with the integration of the Newfield business acquired. The plan amendment resulted in an increase to
pension liabilities with a corresponding loss recognized in other comprehensive income.
20. Variable Interest Entities
Veresen Midstream Limited Partnership
Veresen Midstream Limited Partnership (“VMLP”) provides gathering, compression and processing services under
various agreements related to the Company’s development of liquids and natural gas production in the Montney play.
As at December 31, 2020, VMLP provides approximately 1,213 MMcf/d of natural gas gathering and compression
and 932 MMcf/d of natural gas processing under long-term service agreements with remaining terms ranging from 11
to 25 years and have various renewal terms providing up to a potential maximum of 10 years.
Ovintiv has determined that VMLP is a VIE and that Ovintiv holds variable interests in VMLP. Ovintiv is not the
primary beneficiary as the Company does not have the power to direct the activities that most significantly impact
VMLP’s economic performance. These key activities relate to the construction, operation, maintenance and marketing
of the assets owned by VMLP. The variable interests arise from certain terms under the various long-term service
agreements and include: i) a take or pay for volumes in certain agreements; ii) an operating fee of which a portion can
be converted into a fixed fee once VMLP assumes operatorship of certain assets; and iii) a potential payout of
minimum costs in certain agreements. The potential payout of minimum costs will be assessed in the eighth year of
the assets’ service period and is based on whether there is an overall shortfall of total system cash flows from natural
gas gathered and compressed under certain agreements. The potential payout amount can be reduced in the event
VMLP markets unutilized capacity to third party users. Ovintiv is not required to provide any financial support or
guarantees to VMLP.
As a result of Ovintiv’s involvement with VMLP, the maximum total exposure to loss related to the commitments
under the agreements is estimated to be $1,901 million as at December 31, 2020. The estimate comprises the take or
Ovintiv Inc.
2020 Annual Report | 117
pay volume commitments and the potential payout of minimum costs. The take or pay volume commitments associated
with certain gathering and processing assets are included in Note 27 under Transportation and Processing. The
potential payout requirement is highly uncertain as the amount is contingent on future production estimates, pace of
development and the amount of capacity contracted to third parties. As at December 31, 2020, accounts payable and
accrued liabilities included $0.3 million related to the take or pay commitment.
21. Restructuring Charges
In February 2019, in conjunction with the Newfield business combination as described in Note 8, the Company
announced workforce reductions to better align staffing levels and organizational structure with the Company’s
strategy. During 2019, the Company incurred total restructuring charges of $138 million, before tax, primarily related
to severance costs.
In June 2020, Ovintiv undertook a plan to reduce its workforce by approximately 25 percent as part of a company-
wide reorganization in response to the low commodity price environment resulting from the global pandemic and the
Company’s planned reductions in capital spending. During 2020, the Company incurred total restructuring charges of
$90 million, before tax, primarily related to severance costs, of which $14 million remains accrued as at
December 31, 2020. The remaining amounts accrued are expected to be paid in 2021 and total transition and severance
costs are expected to be approximately $95 million before tax.
Restructuring charges are included in administrative expense presented in the Corporate and Other segment in the
Consolidated Statement of Earnings.
For the years ended December 31
2020
2019
2018
Severance and Benefits
Outplacement, Moving and Other Expenses
Restructuring Expenses
As at December 31
Outstanding Restructuring Accrual, Beginning of Year
Current Year Restructuring Expenses Incurred
Restructuring Costs Paid
Outstanding Restructuring Accrual, End of Year (1)
$
$
$
$
88 $
2
90 $
133 $
5
138 $
-
-
-
2020
2019
2018
8 $
90
(84 )
14 $
- $
138
(130 )
8 $
-
-
-
-
(1)
Included in accounts payable and accrued liabilities in the Consolidated Balance Sheet.
118 | 2020 Annual Report
Ovintiv Inc.
22. Compensation Plans
Ovintiv has a number of compensation arrangements under which the Company awards various types of long-term
incentive grants to eligible employees and Directors. They may include TSARs, Stock Appreciation Rights (“SARs”),
PSUs, Deferred Share Units (“DSUs”) and RSUs.
Ovintiv accounts for PSUs and RSUs as equity-settled stock-based payment transactions provided there is sufficient
common stock held in reserve for issuance. TSARs, SARs and DSUs are accounted for as cash-settled stock-based
payment transactions. The Company accrues compensation costs over the vesting period based on the fair value of the
rights determined using the Black-Scholes-Merton or other appropriate fair value models.
During the fourth quarter of 2020, Ovintiv’s Board of Directors resolved to settle certain PSU awards and RSU awards
with the issuance of the Company’s common stock. Historically, the Company settled PSU and RSU awards in cash.
As a result, the respective awards were modified and reclassified as equity-settled share-based payment transactions
at the modification date. The modified awards accrue compensation expense using the modification date fair value of
the awards over the remaining vesting period. Common stock used to settle the PSU and RSU awards will be issued
from Ovintiv’s common stock authorized and held in reserve for issuance under the Company’s stock-based
compensation plans. The modification impacted all employees and there was no incremental compensation cost
recognized at the modification date.
The Company has recognized the following share-based compensation costs:
For the years ended December 31
2020
2019
2018
Total Compensation Costs of Transactions Classified as Cash-Settled
Total Compensation Costs of Transactions Classified as Equity-Settled
Less: Total Share-Based Compensation Costs Capitalized
Total Share-Based Compensation Expense (Recovery)
Recognized on the Consolidated Statement of Earnings in:
Operating
Administrative
$
$
$
$
42 $
3
(12 )
33 $
10 $
23
33 $
59 $
-
(20 )
39 $
16 $
23
39 $
(65 )
-
19
(46 )
(13 )
(33 )
(46 )
As at December 31, 2020, the liability for cash-settled share-based payment transactions totaled $34 million
(2019 - $78 million), of which $25 million (2019 - $40 million) is recognized in accounts payable and accrued
liabilities and $9 million (2019 - $38 million) is recognized in other liabilities and provisions in the Consolidated
Balance Sheet. Additionally, paid in surplus includes $71 million (2019 - nil) related to equity-settled share-based
compensation plans.
The following sections outline certain information related to Ovintiv’s compensation plans as at December 31, 2020.
A) TANDEM STOCK APPRECIATION RIGHTS
All options to purchase shares of common stock issued to eligible Canadian-based employees under Ovintiv’s Stock
Option Plan have associated TSARs attached. In lieu of exercising the option, the associated TSARs give the option
holder the right to purchase shares of common stock of the Company or receive a cash payment equal to the excess of
the market price of Ovintiv’s shares of common stock at the time of exercise over the original grant price. TSARs
granted vest and are exercisable at 30 percent of the number granted after one year, an additional 30 percent of the
number granted after two years, are fully exercisable after three years and expire seven years after the date granted.
TSARs are classified as a liability and remeasured at the end of each reporting period.
Ovintiv Inc.
2020 Annual Report | 119
The following tables summarize information related to the TSARs:
As at December 31
(thousands of units)
Outstanding, Beginning of Year
Granted
Exercised - SARs (1)
Exercised - Options (1)
Forfeited
Expired
Outstanding, End of Year (2)
Vested and Exercisable, End of Year (3)
Expected to Vest (4)
2020
Weighted
Average
Exercise
Price (C$)
Weighted
Average
Remaining
Contractual
Life (Years)
Outstanding
TSARs
2019
Weighted
Average
Exercise
Price (C$)
Weighted
Average
Remaining
Contractual
Life (Years)
Outstanding
TSARs
1,606
-
-
-
-
(20 )
1,586
1,348
238
48.65
-
-
-
-
78.47
48.28
47.71
51.52
3.7
2.8
2.4
5.0
2,073
249
(8 )
-
(21 )
(687 )
1,606
1,179
427
67.23
44.83
27.80
-
76.32
102.73
48.65
45.89
56.28
3.7
3.0
5.7
(1) The intrinsic value of option awards exercised and cash-settled during 2020 was nil (2019 - nil; 2018 - $3 million).
(2) The intrinsic value of option awards outstanding during 2020 was $6 million (2019 - $6 million).
(3) The intrinsic value of option awards vested and exercisable during 2020 was $6 million (2019 - $6 million).
(4) The intrinsic value of option awards expected to vest during 2020 was nil (2019 - nil).
The following weighted average assumptions were used to determine the fair value of TSARs outstanding:
As at December 31
Risk Free Interest Rate
Dividend Yield
Expected Volatility Rate (1)
Expected Term
Market Share Price
Weighted Average Grant Date Fair Value
(1) Volatility was estimated using historical rates.
C$ Share Units
2020
2019
2018
0.20%
2.75%
103.64%
1.8 yrs
C$18.29
C$48.28
1.69%
1.64%
43.61%
2.4 yrs
C$30.40
C$48.65
1.85%
0.99%
48.68%
1.8 yrs
C$39.40
C$67.23
As at December 31, 2020, there was approximately $0.1 million of unrecognized compensation costs
(2019 - $0.3 million) related to unvested TSARs. The costs are expected to be recognized over a weighted average
period of 1.1 years.
B)
STOCK APPRECIATION RIGHTS
U.S. dollar denominated SARs are granted to eligible U.S.-based employees, which entitle the employee to receive a
cash payment equal to the excess of the market price of Ovintiv’s shares of common stock at the time of exercise over
the original grant price of the right. SARs granted vest and are exercisable at 30 percent of the number granted after
one year, an additional 30 percent of the number granted after two years, are fully exercisable after three years and
expire seven years after the date granted. SARs are classified as a liability and remeasured at the end of each reporting
period.
120 | 2020 Annual Report
Ovintiv Inc.
The following tables summarize information related to the U.S. dollar denominated SARs:
As at December 31
(thousands of units)
Outstanding, Beginning of Year
Granted
Exercised (1)
Forfeited
Expired
Outstanding, End of Year (2)
Vested and Exercisable, End of Year (3)
Expected to Vest (4)
2020
Weighted
Average
Exercise
Price (US$)
Weighted
Average
Remaining
Contractual
Life (Years)
Outstanding
SARs
2019
Weighted
Average
Exercise
Price (US$)
Weighted
Average
Remaining
Contractual
Life (Years)
Outstanding
SARs
789
-
-
(86 )
(43 )
660
423
237
39.84
-
-
38.89
69.35
38.03
39.22
35.89
4.4
3.7
2.9
5.2
820
344
(5 )
(18 )
(352 )
789
378
411
67.08
34.29
20.30
91.59
95.67
39.84
41.92
37.92
4.4
2.7
6.0
(1) The intrinsic value of option awards exercised and cash-settled during 2020 was nil (2019 - nil; 2018 - $3 million).
(2) The intrinsic value of option awards outstanding during 2020 was $3 million (2019 - $3 million).
(3) The intrinsic value of option awards vested and exercisable during 2020 was $3 million (2019 - $3 million).
(4) The intrinsic value of option awards expected to vest during 2020 was nil (2019 - nil).
The following weighted average assumptions were used to determine the fair value of SARs outstanding:
As at December 31
Risk Free Interest Rate
Dividend Yield
Expected Volatility Rate (1)
Expected Term
Market Share Price
Weighted Average Grant Date Fair Value
(1) Volatility was estimated using historical rates.
US$ Share Units
2020
2019
2018
0.20%
2.61%
104.53%
2.3 yrs
US$14.36
US$38.03
1.69%
1.60%
44.98%
2.8 yrs
US$23.45
US$39.84
1.85%
1.04%
51.28%
1.4 yrs
US$28.90
US$67.08
As at December 31, 2020, there was approximately $0.2 million of unrecognized compensation costs
(2019 - $0.7 million) related to unvested U.S. dollar denominated SARs. The costs are expected to be recognized over
a weighted average period of 1.2 years.
C) PERFORMANCE SHARE UNITS
PSUs are granted to eligible employees, which entitle the employee to receive, upon vesting, one share of Ovintiv
common stock for each PSU held or a cash equivalent, at the discretion of the Company. PSUs vest three years from
the date granted, provided the employee remains actively employed with Ovintiv on the vesting date. Based on the
performance assessment, up to a maximum of two times the original PSU grant may be eligible to vest in respect of
the year being measured.
The ultimate value of the PSUs will depend upon Ovintiv’s performance relative to predetermined strategic milestones
as well as the performance of a specified peer group over a three-year period.
Ovintiv Inc.
2020 Annual Report | 121
The following tables summarize information related to the PSUs:
As at December 31
U.S. Dollar Denominated Outstanding PSUs
Unvested and Outstanding, Beginning of Year
Granted (2)
Vested and Released (3)
Units, in Lieu of Dividends
Forfeited
Unvested and Outstanding, End of Year
As at December 31
Canadian Dollar Denominated Outstanding PSUs
Unvested and Outstanding, Beginning of Year
Granted (2)
Vested and Released (3)
Units, in Lieu of Dividends
Forfeited
Unvested and Outstanding, End of Year
2020 (1)
2019
Units
(thousands)
Weighted Average
Grant Date
Fair Value (US$)
Units
(thousands)
Weighted Average
Grant Date
Fair Value (US$)
773
1,317
(155 )
125
(174 )
1,886
42.66
13.66
58.75
21.80
20.05
21.80
652
767
(643 )
11
(14 )
773
35.38
30.19
20.43
42.94
42.20
42.66
2020 (1)
2019
Units
(thousands)
Weighted Average
Grant Date
Fair Value (C$)
Units
(thousands)
Weighted Average
Grant Date
Fair Value (C$)
810
796
(291 )
84
(91 )
1,308
62.62
21.08
77.08
34.62
32.40
34.43
1,190
787
(1,150 )
12
(29 )
810
46.97
35.61
27.90
62.92
64.41
62.62
(1) During the fourth quarter of 2020, Ovintiv’s Board of Directors resolved to settle the PSUs with the issuance of the Company’s common
stock. As a result, the awards were modified and reclassified as equity-settled awards. The weighted average modification date fair value of
the awards was US$14.85 per share and C$18.83 per share for the U.S. dollar denominated and Canadian dollar denominated PSUs,
respectively.
(2) The weighted average grant date fair value of awards granted to employees during 2018 was US$54.82 per share and C$68.80 per share for
U.S. dollar denominated and Canadian dollar denominated awards, respectively.
(3) During the year ended December 31, 2020, performance shares that vested and were cash-settled resulted in payments of $6 million
(2019 - $64 million; 2018 - $26 million).
As at December 31, 2020, there was approximately $27 million of unrecognized compensation costs
(2019 - $19 million) related to unvested PSUs. The costs are expected to be recognized over a weighted average period
of 1.6 years.
D) DEFERRED SHARE UNITS
The Company has in place a program whereby Directors and certain key employees are issued DSUs, which vest
immediately, are equivalent in value to a share of Ovintiv common stock and are settled in cash. DSUs are classified
as a liability and remeasured at the end of each reporting period based on the change in fair value of the Company’s
common stock.
Under the DSU Plan, employees have the option to convert either 25 or 50 percent of their annual High Performance
Results (“HPR”) award into DSUs. The number of DSUs converted is based on the value of the award divided by the
closing value of Ovintiv’s share price at the end of the performance period of the HPR award.
For both Directors and employees, DSUs can only be redeemed following departure from Ovintiv in accordance with
the terms of the respective DSU Plan and must be redeemed prior to December 15th of the year following the departure
from Ovintiv.
122 | 2020 Annual Report
Ovintiv Inc.
The following table summarizes information related to the DSUs:
(thousands of units)
As at December 31
Vested and Outstanding, Beginning of Year
Granted
Converted from HPR awards
Units, in Lieu of Dividends
Redeemed
Vested and Outstanding, End of Year
E) RESTRICTED SHARE UNITS
Canadian Dollar Denominated
Outstanding DSUs
2020
2019
217
51
-
15
(72 )
211
191
13
11
3
(1 )
217
RSUs are granted to eligible employees and Directors. An RSU is a conditional grant to receive a share of Ovintiv
common stock or a cash equivalent at the Company’s discretion upon vesting of the RSUs and in accordance with the
terms and conditions of the RSU Plans and grant agreements.
RSUs issued to employees before February 2020 vest three years from the date granted, provided the employee
remains actively employed with Ovintiv on the vesting date. Beginning with the RSUs issued in February 2020, all
RSU awards issued to employees will vest over their three-year service period. RSUs issued to Directors fully vest on
the grant date and have no required term of service. The RSUs issued to Directors are settled three years from the date
granted or following the Director’s departure from Ovintiv, whichever is earlier.
The following table summarizes information related to the RSUs:
As at December 31
U.S. Dollar Denominated Outstanding RSUs
Unvested and Outstanding, Beginning of Year
Granted (2)
Units, in Lieu of Dividends
Vested and Released (3)
Forfeited
Unvested and Outstanding, End of Year
As at December 31
Canadian Dollar Denominated Outstanding RSUs
Unvested and Outstanding, Beginning of Year
Granted (2)
Units, in Lieu of Dividends
Vested and Released (3)
Forfeited
Unvested and Outstanding, End of Year
2020 (1)
2019
Units
(thousands)
Weighted Average
Grant Date
Fair Value (US$)
Units
(thousands)
Weighted Average
Grant Date
Fair Value (US$)
2,270
4,165
384
(449 )
(884 )
5,486
43.44
12.72
21.48
54.68
21.11
21.26
2,118
1,456
33
(1,165 )
(172 )
2,270
36.53
35.10
43.88
20.38
43.97
43.44
2020 (1)
2019
Units
(thousands)
Weighted Average
Grant Date
Fair Value (C$)
Units
(thousands)
Weighted Average
Grant Date
Fair Value (C$)
1,669
2,029
206
(433 )
(559 )
2,912
61.35
17.06
32.01
76.82
32.00
31.76
2,175
768
25
(1,203 )
(96 )
1,669
47.84
47.47
61.45
27.82
64.07
61.35
(1) During the fourth quarter of 2020, Ovintiv’s Board of Directors resolved to settle the RSUs with the issuance of the Company’s common
stock. As a result, the awards were modified and reclassified as equity-settled awards. The weighted average modification date fair value of
the awards was US$14.85 per share and C$18.83 per share for the U.S. dollar denominated and Canadian dollar denominated RSUs,
respectively.
(2) The weighted average grant date fair value of awards granted to employees during 2018 was US$54.98 per share and C$68.90 per share for
U.S. dollar denominated and Canadian dollar denominated awards, respectively.
(3) During the year ended December 31, 2020, restricted shares that vested and were cash-settled resulted in payments of $10 million
(2019 - $85 million; 2018 - $52 million).
As at December 31, 2020, there was approximately $43 million of unrecognized compensation costs
(2019 - $39 million) related to unvested RSUs. The costs are expected to be recognized over a weighted average period
of 1.0 years.
Ovintiv Inc.
2020 Annual Report | 123
23. Pension and Other Post-Employment Benefits
Ovintiv sponsors defined benefit and defined contribution plans, providing pension and other post-employment
benefits (“OPEB”) to its employees in the U.S. and Canada. As of January 1, 2003, the defined benefit pension plan
was closed to new entrants. The average remaining service period of active employees participating in the defined
benefit pension plan is six years and the average remaining life expectancy of inactive employees is 13 years. The
average remaining service period of the active employees participating in the OPEB plan is eight years.
The Company is required to file an actuarial valuation of its pension plans with the provincial regulator at least every
three years, or more frequently if directed by the regulator. The most recent filing was dated December 31, 2019 and
the next required filing is expected to be as at December 31, 2022.
The following tables set forth changes in the benefit obligations and fair value of plan assets for the Company’s defined
benefit pension and other post-employment benefit plans for the years ended December 31, 2020 and 2019, as well as
the funded status of the plans and amounts recognized in the Consolidated Financial Statements as at
December 31, 2020 and 2019.
As at December 31
Change in Benefit Obligations
Projected Benefit Obligation, Beginning of Year
Service Cost
Interest Cost
Actuarial (Gains) Losses
Exchange Differences
Employee Contributions
Benefits Paid
Plan Acquisition
Plan Amendment
Settlement
Curtailment
Projected Benefit Obligation, End of Year
Change in Plan Assets
Fair Value of Plan Assets, Beginning of Year
Actual Return on Plan Assets
Exchange Differences
Employee Contributions
Employer Contributions
Benefits Paid
Transfers to Defined Contribution Plan
Settlement
Fair Value of Plan Assets, End of Year
Funded Status of Plan Assets, End of Year
Total Recognized Amounts in the
Consolidated Balance Sheet Consist of:
Other Assets
Current Liabilities
Non-Current Liabilities
Total
Total Recognized Amounts in Accumulated
Other Comprehensive Income Consist of:
Net Actuarial (Gains) Losses
Net Prior Service Costs
Total Recognized in Accumulated Other Comprehensive
Income, Before Tax
Defined Benefits
2020
2019
OPEB
2020
2019
209 $
1
6
16
4
-
(17 )
-
-
(8 )
-
211 $
200 $
17
3
-
-
(17 )
(2 )
(8 )
193 $
196 $
1
7
10
9
-
(14 )
-
-
-
-
209 $
182 $
23
9
-
-
(14 )
-
-
200 $
87 $
4
2
4
1
1
(9 )
-
-
-
(1 )
89 $
- $
-
-
1
8
(9 )
-
-
- $
73
10
4
(52 )
1
1
(9 )
24
31
-
4
87
-
-
-
1
8
(9 )
-
-
-
(18 ) $
(9 ) $
(89 ) $
(87 )
11 $
-
(29 )
(18 ) $
12 $
-
(21 )
(9 ) $
- $
(10 )
(79 )
(89 ) $
26 $
(7 )
21 $
(5 )
(83 ) $
19
19 $
16 $
(64 ) $
-
(9 )
(78 )
(87 )
(97 )
26
(71 )
$
$
$
$
$
$
$
$
$
124 | 2020 Annual Report
Ovintiv Inc.
The accumulated defined benefit obligation for all defined benefit plans was $299 million as at December 31, 2020
(2019 - $295 million).
The following table sets forth the defined benefit plans with accumulated benefit obligation and projected benefit
obligation in excess of the fair value of the plan assets:
As at December 31
Projected Benefit Obligation
Accumulated Benefit Obligation
Fair Value of Plan Assets (1)
(1) The Company does not aggregate benefit plans.
Defined Benefits
OPEB
2020
2019
2020
2019
$
$
(69 )
(69 )
40
(72 ) $
(72 )
51
$
(89 )
(89 )
-
(87 )
(87 )
-
Following are the weighted average assumptions used by the Company in determining the defined benefit pension and
other post-employment benefit obligations:
As at December 31
Discount Rate
Rates of Increase in Compensation Levels
Defined Benefits
2020
2019
OPEB
2020
2.25%
3.11%
3.00%
3.09%
2.09%
6.28%
2019
2.95%
6.27%
The following sets forth total benefit plans expense recognized by the Company:
For the years ended December 31
Net Defined Periodic Benefit Cost
Defined Contribution Plan Expense
Total Benefit Plans Expense
Pension Benefits
2019
2020
2018
2020
2019
2018
OPEB
$
$
3 $
28
31 $
2 $
29
31 $
1 $
24
25 $
2 $
-
2 $
16 $
-
16 $
7
-
7
Of the total benefit plans expense, $27 million (2019 - $31 million; 2018 - $23 million) was included in operating
expense and $6 million (2019 - $9 million; 2018 - $9 million) was included in administrative expense. Excluding
service costs, no net defined periodic benefit costs (2019 - $7 million; 2018 - nil) were recorded in other (gains) losses,
net.
The net defined periodic benefit cost is as follows:
For the years ended December 31
Service Cost
Interest Cost
Expected Return on Plan Assets
Amounts Reclassified from Accumulated
Other Comprehensive Income:
Amortization of net actuarial (gains) and losses
Amortization of net prior service costs
Curtailment from net prior service costs
Settlement from net prior service costs
Curtailment
Total Net Defined Periodic Benefit Cost (1)
Defined Benefits
2019
2020
2018
2020
2019
2018
OPEB
$
$
1 $
6
(7 )
1
-
-
2
-
3 $
1 $
7
(7 )
1
-
-
-
-
2 $
1 $
7
(8 )
1
-
-
-
-
1 $
4 $
2
-
(10 )
2
5
-
(1 )
2 $
10 $
4
-
(3 )
1
-
-
4
16 $
7
3
-
(2 )
(1 )
-
-
-
7
(1) The components of total net defined periodic benefit cost, excluding the service cost component, are included in other (gains) losses, net.
Losses related to changes in the projected benefit obligations were due to a decline in the discount rate used to measure
the obligations.
Ovintiv Inc.
2020 Annual Report | 125
The amounts recognized in other comprehensive income are as follows:
For the years ended December 31
Defined Benefits
2019
2020
2018
2020
2019
2018
OPEB
Net Actuarial (Gains) Losses
Net Prior Service Costs from Plan Amendment
Amortization of Net Actuarial Gains and (Losses)
Amortization of Net Prior Service Costs
Curtailment of Net Prior Service Costs
Settlement from Net Prior Service Costs
Total Amounts Recognized in Other Comprehensive
(Income) Loss, Before Tax
Total Amounts Recognized in Other Comprehensive
(Income) Loss, After Tax
$
$
$
6 $
-
(1 )
-
-
(2 )
(6 ) $
-
(1 )
-
-
-
3 $
(7 ) $
3 $
(5 ) $
$
1
-
(1 )
-
-
-
-
$
-
$
4 $
-
10
(2 )
(5 )
-
(52 ) $
31
3
(1 )
-
-
(15 )
-
2
1
-
-
7 $
(19 ) $
(12 )
5 $
(15 ) $
(9 )
Following are the weighted average assumptions used by the Company in determining the net periodic pension and
other post-retirement benefit costs:
For the years ended December 31
Discount Rate
Long-Term Rate of Return on Plan Assets
Rates of Increase in Compensation Levels
Defined Benefits
2019
2020
2018
2020
2019
2018
OPEB
3.00 %
3.75 %
3.12 %
3.50 %
4.00 %
3.12 %
3.25 %
4.25 %
3.49 %
2.90 %
-
5.92 %
4.16 %
-
6.53 %
3.46 %
-
6.36 %
The Company’s assumed health care cost trend rates are as follows:
For the years ended December 31
Health Care Cost Trend Rate for Next Year
Rate to Which the Cost Trend Rate is Assumed to Decline (Ultimate Trend Rate)
Year that the Rate Reaches the Ultimate Trend Rate
2020
2019
2018
6.42 %
5.00 %
2026
6.61 %
5.00 %
2026
6.99 %
5.00 %
2026
The Company does not expect to contribute to its defined benefit pension plans in 2021. The Company’s OPEB plans
are funded on an as required basis.
The following provides an estimate of benefit payments for the next 10 years. These estimates reflect benefit increases
due to continuing employee service.
2021
2022
2023
2024
2025
2026 - 2030
Defined Benefit
Pension Payments
Other Benefit
Payments
$
13 $
13
13
13
13
57
10
9
8
8
7
26
126 | 2020 Annual Report
Ovintiv Inc.
The Company’s registered and other defined benefit pension plan assets are presented by investment asset category
and input level within the fair value hierarchy as follows:
As at December 31
Investments:
Cash and Cash Equivalents
Fixed Income - Canadian Bond Funds
Equity - International
Fair Value of Plan Assets, End of Year
As at December 31
Investments:
Cash and Cash Equivalents
Fixed Income - Canadian Bond Funds
Equity - International
Fair Value of Plan Assets, End of Year
Level 1
Level 2
Level 3
Total
2020
25 $
-
-
25 $
1 $
107
60
168 $
2019
- $
-
-
- $
26
107
60
193
Level 1
Level 2
Level 3
Total
26 $
-
-
26 $
- $
105
69
174 $
- $
-
-
- $
26
105
69
200
$
$
$
$
Fixed Income investments consist of Canadian bonds issued by investment grade companies. Equity investments
consist of international securities, including securities held in the U.S. The fair values of these securities are based on
dealer quotes, quoted market prices and net asset values.
Registered pension plan assets were invested by the Company in the following as at December 31, 2020: 69 percent
Bonds (2019 - 68 percent), and 31 percent U.S. and Foreign Equity (2019 - 32 percent). The expected long-term rate
of return is 3.00 percent. The expected rate of return on pension plan assets is based on historical and projected rates
of return for each asset class in the plan investment portfolio. The actual return on plan assets was $17 million
(2019 - $23 million). The asset allocation structure is subject to diversification requirements and constraints, which
reduce risk by limiting exposure to individual equity investment, credit rating categories and foreign currency
exposure.
Ovintiv Inc.
2020 Annual Report | 127
24. Fair Value Measurements
The fair values of cash and cash equivalents, accounts receivable and accrued revenues, and accounts payable and
accrued liabilities approximate their carrying amounts due to the short-term maturity of those instruments. The fair
values of restricted cash and marketable securities included in other assets approximate their carrying amounts due to
the nature of the instruments held. Fair value information related to pension plan assets is included in Note 23.
Recurring fair value measurements are performed for risk management assets and liabilities and other derivative
contracts, as discussed further in Note 25. These items are carried at fair value in the Consolidated Balance Sheet and
are classified within the three levels of the fair value hierarchy in the following tables.
Fair value changes and settlements for amounts related to risk management assets and liabilities are recognized in
revenues and foreign exchange gains and losses according to their purpose.
As at December 31, 2020
Risk Management Assets
Commodity Derivatives:
Current assets
Long-term assets
Foreign Currency Derivatives:
Current assets
Risk Management Liabilities
Commodity Derivatives:
Current liabilities
Long-term liabilities
Other Derivative Contracts
Level 1
Quoted
Prices in
Active
Markets
Level 2
Other
Observable
Level 3
Significant
Unobservable
Total Fair
Inputs
Inputs
Value Netting (1)
Carrying
Amount
$
- $
-
70 $
7
- $
-
70 $
7
(59 ) $
(3 )
-
26
-
26
-
11
4
26
$
1 $
-
114 $
128
74 $
-
189 $
128
(59 ) $
(3 )
130
125
Current in accounts payable and accrued liabilities
Long-term in other liabilities and provisions
$
- $
-
1 $
7
- $
-
1 $
7
- $
-
1
7
As at December 31, 2019
Risk Management Assets
Commodity Derivatives:
Current assets
Long-term assets
Foreign Currency Derivatives:
Current assets
Risk Management Liabilities
Commodity Derivatives:
Current liabilities
Long-term liabilities
Other Derivative Contracts
Level 1
Quoted
Prices in
Active
Markets
Level 2
Other
Observable
Inputs
Level 3
Significant
Unobservable
Inputs
Total Fair
Value Netting (1)
Carrying
Amount
$
- $
-
202 $
6
- $
-
202 $
6
(67 ) $
(4 )
135
2
-
13
-
13
-
13
$
1 $
-
139 $
61
41 $
11
181 $
72
(67 ) $
(4 )
114
68
Current in accounts payable and accrued liabilities
Long-term in other liabilities and provisions
$
- $
-
2 $
7
- $
-
2 $
7
- $
-
2
7
(1) Netting to offset derivative assets and liabilities where the legal right and intention to offset exists, or where counterparty master netting
arrangements contain provisions for net settlement.
128 | 2020 Annual Report
Ovintiv Inc.
The Company’s Level 1 and Level 2 risk management assets and liabilities consist of commodity fixed price contracts,
NYMEX fixed price swaptions, NYMEX three-way options, NYMEX call options, foreign currency swaps and basis
swaps with terms to 2025. Level 2 also includes financial guarantee contracts as discussed in Note 25. The fair values
of these contracts are estimated using inputs which are either directly or indirectly observable from active markets,
such as exchange and other published prices, broker quotes and observable trading activity throughout the term of the
instruments.
Level 3 Fair Value Measurements
As at December 31, 2020, the Company’s Level 3 risk management assets and liabilities consist of WTI three-way
options and WTI costless collars with terms to 2021. The WTI three-way options are a combination of a sold call,
bought put and a sold put. The WTI costless collars are a combination of a sold call and a bought put. These contracts
allow the Company to participate in the upside of commodity prices to the ceiling of the call option and provide the
Company with complete (collars) or partial (three-way) downside price protection through the put options. The fair
values of these contracts are based on the income approach and are modelled using observable and unobservable inputs
such as implied volatility. The unobservable inputs are obtained from third parties whenever possible and reviewed
by the Company for reasonableness.
A summary of changes in Level 3 fair value measurements for risk management positions is presented below:
Balance, Beginning of Year
Total Gains (Losses)
Purchases, Sales, Issuances and Settlements:
Purchases, sales and issuances
Settlements
Transfers Out of Level 3
Balance, End of Year
Change in Unrealized Gains (Losses) During the
Year Included in Net Earnings (Loss)
Risk Management
2020
2019
(52 ) $
131
-
(153 )
-
(74 ) $
139
(123 )
-
(68 )
-
(52 )
(22 ) $
(191 )
$
$
$
Quantitative information about unobservable inputs used in Level 3 fair value measurements is presented below as at
December 31, 2020:
Valuation Technique
Unobservable Input
Range
Weighted
Average (1)
Risk Management - WTI Options
Option Model
Implied Volatility
34% - 73%
41%
(1) Unobservable inputs were weighted by the relative fair value of the instruments.
A 10 percent increase or decrease in implied volatility for the WTI options would cause an approximate corresponding
$6 million (2019 - $8 million) increase or decrease to net risk management assets and liabilities.
Ovintiv Inc.
2020 Annual Report | 129
25. Financial Instruments and Risk Management
A) FINANCIAL INSTRUMENTS
Ovintiv’s financial assets and liabilities are recognized in cash and cash equivalents, accounts receivable and accrued
revenues, other assets, accounts payable and accrued liabilities, risk management assets and liabilities, long-term debt,
and other liabilities and provisions.
B) RISK MANAGEMENT ACTIVITIES
Ovintiv uses derivative financial instruments to manage its exposure to cash flow variability from commodity prices
and fluctuating foreign currency exchange rates. The Company does not apply hedge accounting to any of its
derivative financial instruments. As a result, gains and losses from changes in the fair value are recognized in net
earnings.
COMMODITY PRICE RISK
Commodity price risk arises from the effect that fluctuations in future commodity prices may have on future cash
flows. To partially mitigate exposure to commodity price risk, the Company has entered into various derivative
financial instruments. The use of these derivative instruments is governed under formal policies and is subject to limits
established by the Board of Directors.
Crude Oil and NGLs - To partially mitigate crude oil and NGL commodity price risk, the Company uses WTI-based
contracts such as fixed price contracts, options and costless collars. Ovintiv has also entered into basis swaps to
manage against widening price differentials between various production areas and benchmark price points.
Natural Gas - To partially mitigate natural gas commodity price risk, the Company uses NYMEX-based contracts
such as fixed price contracts, fixed price swaptions and options. Ovintiv has also entered into basis swaps to manage
against widening price differentials between various production areas and benchmark price points.
FOREIGN EXCHANGE RISK
Foreign exchange risk arises from changes in foreign currency exchange rates that may affect the fair value or future
cash flows of the Company’s financial assets or liabilities. To partially mitigate the effect of foreign exchange
fluctuations on future commodity revenues and expenses, the Company may enter into foreign currency derivative
contracts. As at December 31, 2020, Ovintiv has entered into $350 million notional U.S. dollar denominated currency
swaps at an average exchange rate of US$0.7289 to C$1, which mature monthly throughout 2021.
130 | 2020 Annual Report
Ovintiv Inc.
RISK MANAGEMENT POSITIONS AS AT DECEMBER 31, 2020
Crude Oil and NGL Contracts
Fixed Price Contracts
WTI Fixed Price
Propane Fixed Price
Butane Fixed Price
WTI Three-Way Options
Sold call / bought put / sold put
WTI Costless Collars
Sold call / bought put
Basis Contracts (1)
Crude Oil and NGLs Fair Value Position
Natural Gas Contracts
Fixed Price Contracts
NYMEX Fixed Price
NYMEX Fixed Price Swaptions (2)
NYMEX Three-Way Options
Sold call / bought put / sold put
NYMEX Call Options
Sold call price
Basis Contracts (3)
Other Financial Positions
Natural Gas Fair Value Position
Other Derivative Contracts
Fair Value Position
Foreign Currency Contracts
Fair Value Position (4)
Total Fair Value Position
Notional Volumes
Term
Average Price
Fair Value
24.9 Mbbls/d
8.0 Mbbls/d
5.0 Mbbls/d
2021
2021
2021
US$/bbl
43.61
24.69
24.83
$
(42 )
(4 )
(8 )
57.4 Mbbls/d
2021
50.26 / 39.95 / 31.20
(48 )
15.0 Mbbls/d
83 MMcf/d
165 MMcf/d
2021
2021
2021
2022
45.84 / 35.00
US$/Mcf
2.51
2.51
917 MMcf/d
2021
3.41 / 2.88 / 2.50
330 MMcf/d
2022
2.38
2021
2022
2023 - 2025
2021
$
(26 )
(1 )
(129 )
(6 )
(18 )
49
(51 )
(36 )
(23 )
(29 )
3
(111 )
(8 )
26
(222 )
(1) Ovintiv has entered into crude and NGL differential swaps associated with Canadian condensate and WTI.
(2) NYMEX Fixed Price Swaptions give the counterparty the option to extend certain 2021 Fixed Price swaps to 2022.
(3) Ovintiv has entered into natural gas basis swaps associated with AECO, Dawn, Malin, Waha, Houston Ship Channel and NYMEX.
(4) Ovintiv has entered into U.S. dollar denominated fixed-for-floating average currency swaps to protect against fluctuations between the
Canadian and U.S. dollars.
Ovintiv Inc.
2020 Annual Report | 131
EARNINGS IMPACT OF REALIZED AND UNREALIZED GAINS (LOSSES) ON RISK MANAGEMENT POSITIONS
For the years ended December 31
2020
2019
2018
Realized Gains (Losses) on Risk Management
Commodity and Other Derivatives:
Revenues (1)
Foreign Currency Derivatives:
Foreign exchange
Unrealized Gains (Losses) on Risk Management
Commodity and Other Derivatives:
Revenues (2)
Foreign Currency Derivatives:
Foreign exchange
Total Realized and Unrealized Gains (Losses) on Risk Management, net
Commodity and Other Derivatives:
Revenues (1) (2)
Foreign Currency Derivatives:
Foreign exchange
$
711 $
369 $
(104 )
$
(1 )
710 $
3
372 $
10
(94 )
$
(204 ) $
(730 ) $
$
13
(191 ) $
34
(696 ) $
$
507 $
(361 ) $
$
12
519 $
37
(324 ) $
519
(51 )
468
415
(41 )
374
(1)
(2)
Includes a realized gain of $2 million for the year ended December 31, 2020 (2019 - gain of $6 million; 2018 - gain of $7 million) related to
other derivative contracts.
Includes an unrealized loss of $1 million for the year ended December 31, 2020 (2019 - loss of $1 million; 2018 - loss of $2 million) related
to other derivative contracts.
RECONCILIATION OF UNREALIZED RISK MANAGEMENT POSITIONS FROM JANUARY 1 TO DECEMBER 31
Fair Value of Contracts, Beginning of Year
Change in Fair Value of Contracts in Place at Beginning of Year
and Contracts Entered into During the Year
Settlement of Other Derivative Contracts
Amortization of Option Premiums During the Year
Fair Value of Contracts Realized During the Year
Fair Value of Contracts Outstanding
2020
Fair Value
$
(41 )
519 $
2
8
(710 )
(222 ) $
$
Total
Unrealized
Gain (Loss)
2019
Total
Unrealized
Gain (Loss)
2018
Total
Unrealized
Gain (Loss)
519 $
(324 ) $
374
(710 )
(191 ) $
(372 )
(696 ) $
94
468
Risk management assets and liabilities arise from the use of derivative financial instruments and are measured at fair
value. See Note 24 for a discussion of fair value measurements.
132 | 2020 Annual Report
Ovintiv Inc.
UNREALIZED RISK MANAGEMENT POSITIONS
As at December 31
Risk Management Assets
Current
Long-term
Risk Management Liabilities
Current
Long-term
$
Other Derivative Contracts
Current in accounts payable and accrued liabilities
Long-term in other liabilities and provisions
Net Risk Management Assets (Liabilities) and Other Derivative Contracts
$
C) CREDIT RISK
2020
2019
37 $
4
41
130
125
255
1
7
(222 ) $
148
2
150
114
68
182
2
7
(41 )
Credit risk arises from the potential that the Company may incur a loss if a counterparty to a financial instrument fails
to meet its obligation in accordance with agreed terms. While exchange-traded contracts are subject to nominal credit
risk due to the financial safeguards established by the NYSE and the TSX, over-the-counter traded contracts expose
Ovintiv to counterparty credit risk. Counterparties to the Company’s derivative financial instruments consist primarily
of major financial institutions and companies within the energy industry. This credit risk exposure is mitigated through
the use of credit policies approved by the Board of Directors governing the Company’s credit portfolio including
credit practices that limit transactions according to counterparties’ credit quality. Mitigation strategies may include
master netting arrangements, requesting collateral, purchasing credit insurance, and/or transacting credit derivatives.
The Company executes commodity derivative financial instruments under master agreements that have netting
provisions that provide for offsetting payables against receivables. Ovintiv actively evaluates the creditworthiness of
its counterparties, assigns appropriate credit limits and monitors credit exposures against those assigned limits. As at
December 31, 2020, Ovintiv’s maximum exposure of loss due to credit risk from derivative financial instrument assets
on a gross and net fair value basis was $103 million and $41 million, respectively, as disclosed in Note 24. The
Company had no significant credit derivatives in place and held no collateral at December 31, 2020.
As at December 31, 2020, cash equivalents include high-grade, short-term securities, placed primarily with financial
institutions and companies with strong investment grade ratings. Any foreign currency agreements entered into are
with major financial institutions that have investment grade credit ratings.
A substantial portion of the Company’s accounts receivable are with customers and working interest owners in the oil
and gas industry and are subject to normal industry credit risks. As at December 31, 2020, approximately 89 percent
(2019 - 95 percent) of Ovintiv’s accounts receivable and financial derivative credit exposures were with investment
grade counterparties.
During 2015 and 2017, the Company entered into agreements resulting from divestitures, which may require Ovintiv
to fulfill certain payment obligations on the take or pay volume commitments assumed by the purchasers. The
circumstances that would require Ovintiv to perform under the agreements include events where a purchaser fails to
make payment to the guaranteed party and/or a purchaser is subject to an insolvency event. The agreements have
remaining terms of up to four years with a fair value recognized of $8 million as at December 31, 2020 (2019 -
$9 million). The maximum potential amount of undiscounted future payments is $82 million as at December 31, 2020,
and is considered unlikely.
Ovintiv Inc.
2020 Annual Report | 133
26. Supplementary Information
Supplemental disclosures to the Consolidated Statement of Cash Flows are presented below:
A) NET CHANGE IN NON-CASH WORKING CAPITAL
For the years ended December 31
2020
2019
2018
Operating Activities
Accounts receivable and accrued revenues
Accounts payable and accrued liabilities
Current portion of operating lease liabilities
Income tax receivable and payable
B) NON-CASH ACTIVITIES
For the years ended December 31
Non-Cash Investing Activities
Asset retirement obligation incurred (See Note 17)
Asset retirement obligation change in estimated future cash outflows (See Note 17)
Property, plant and equipment accruals
Capitalized long-term incentives
Property additions/dispositions (swaps)
New ROU operating lease assets and liabilities (See Note 14)
Non-Cash Financing Activities
$
$
$
146 $
(26 )
(11 )
30
139 $
109 $
(44 )
49
(27 )
87 $
(150 )
141
-
254
245
2020
2019
2018
7 $
(49 )
(175 )
(16 )
229
(10 )
15 $
47
(78 )
(27 )
159
(20 )
17
(20 )
(16 )
(47 )
210
-
-
1
Common shares issued in conjunction with the Newfield business
combination (See Note 8)
Shares of common stock issued under dividend reinvestment plan (See Note 18)
$
- $
-
(3,478 ) $
-
On September 1, 2020, Ovintiv closed an agreement with PetroChina Canada Ltd. (“PCC”) to terminate its joint
venture with PCC and transfer the ownership and operation of certain Duvernay shale assets in west-central Alberta.
In connection with the closing, Ovintiv and PCC agreed to partition the Duvernay acreage and associated
infrastructure. For the year ended December 31, 2020, property additions/dispositions (swaps) includes a $203 million
non-cash swap related to the Duvernay partition.
C)
SUPPLEMENTARY CASH FLOW INFORMATION
For the years ended December 31
2020
2019
Interest Paid
Income Taxes (Recovered), net of Amounts Paid
$
$
385 $
(52 ) $
415 $
(22 ) $
27. Commitments and Contingencies
COMMITMENTS
The following table outlines the Company’s commitments as at December 31, 2020:
(undiscounted)
2021
2022
Expected Future Payments
2023
2024
2025 Thereafter
Transportation and Processing
Drilling and Field Services
Building Leases
Total
$
$
729 $
36
13
778 $
747 $
-
10
757 $
709 $
-
6
715 $
507 $
-
6
513 $
444 $
-
5
449 $
2,179 $
-
2
2,181 $
2018
367
(246 )
Total
5,315
36
42
5,393
134 | 2020 Annual Report
Ovintiv Inc.
Operating leases with terms greater than one year are not included in the commitments table above. The table above
includes short-term leases with contract terms less than 12 months, such as drilling rigs and field office leases, as well
as non-lease operating cost components associated with building leases. See Note 14 for additional disclosures on
leases.
Included within transportation and processing in the table above are certain commitments associated with midstream
service agreements with VMLP as described in Note 20. Divestiture transactions can reduce certain commitments
disclosed above.
CONTINGENCIES
Ovintiv is involved in various legal claims and actions arising in the normal course of the Company’s operations.
Although the outcome of these claims cannot be predicted with certainty, the Company does not expect these matters
to have a material adverse effect on Ovintiv’s financial position, cash flows or results of operations. Management’s
assessment of these matters may change in the future as certain of these matters are in early stages or are subject to a
number of uncertainties. For material matters that the Company believes an unfavorable outcome is reasonably
possible, the Company discloses the nature and a range of potential exposures. If an unfavorable outcome were to
occur, there exists the possibility of a material impact on the Company’s consolidated net earnings or loss for the
period in which the effect becomes reasonably estimable. The Company accrues for such items when a liability is both
probable and the amount can be reasonably estimated. Such accruals are based on the Company’s information known
about the matters, estimates of the outcomes of such matters and experience in handling similar matters.
28. Supplementary Oil and Gas Information (unaudited)
The unaudited supplementary information on oil and natural gas exploration and production activities for 2020, 2019
and 2018 has been presented in accordance with the FASB’s ASC Topic 932, “Extractive Activities - Oil and Gas”
and the SEC’s final rule, “Modernization of Oil and Gas Reporting”. Disclosures by geographic area include the
United States and Canada.
Proved Oil and Natural Gas Reserves
The following reserves disclosures reflect estimates of proved reserves, proved developed reserves, and proved
undeveloped reserves, net of third-party royalty interests of oil, NGLs and natural gas owned at each year end and
changes in proved reserves during each of the last three years.
The Company’s estimates of proved reserves are made using available geological and reservoir data as well as
production performance data. These estimates are reviewed annually by internal reservoir engineers and revised, either
upward or downward, as warranted by additional data. The results of infill drilling are treated as positive revisions
due to increases to expected recovery. Other revisions are due to changes in, among other things, development plans,
reservoir performance, commodity prices, economic conditions, and government restrictions. Estimates of proved
reserves are inherently imprecise and are continually subject to revision based on production history, results of
additional exploration and development, price changes and other factors.
The following reference prices were utilized in the determination of reserves and future net revenue:
Reserves Pricing (1)
2020
2019
2018
Oil & NGLs
Natural Gas
WTI
($/bbl)
Edmonton
Condensate
(C$/bbl)
Henry Hub
($/MMBtu)
AECO
(C$/MMBtu)
39.62
55.93
65.56
49.77
68.80
79.59
1.98
2.58
3.10
2.13
1.76
1.49
(1) All prices were held constant in all future years when estimating net revenues and reserves.
Ovintiv Inc.
2020 Annual Report | 135
PROVED RESERVES (1)
(12-MONTH AVERAGE TRAILING PRICES)
Oil
(MMbbls)
NGLs
(MMbbls)
Natural Gas
(Bcf)
Total
(MMBOE)
United
States Canada Total
United
States Canada Total
United
States Canada Total
2018
Beginning of year
Revisions and improved recovery (2)
Extensions and discoveries
Purchase of reserves in place
Sale of reserves in place
Production
End of year
Developed
Undeveloped
Total
2019
Beginning of year
End of year
Developed
Undeveloped
Total
2020
Beginning of year
Revisions and improved recovery (2)
Extensions and discoveries
Purchase of reserves in place
Sale of reserves in place
Production
192.3
19.5
162.4
21.3
(11.4 )
(32.7 )
351.5
150.6
200.9
351.5
351.5
(56.4 )
230.2
262.0
(5.1 )
(59.8 )
722.4
291.0
431.4
722.4
722.4
Revisions and improved recovery (2) (221.5 )
144.3
Extensions and discoveries
9.9
Purchase of reserves in place
(9.3 )
Sale of reserves in place
(55.2 )
Production
590.5
279.1
311.4
590.5
End of year
Developed
Undeveloped
Total
0.2 192.5
67.5 115.0 182.5
19.7
0.2
(17.4 )
14.2
(3.2 )
- 162.4
78.9 127.4
48.6
21.3
-
7.7
7.7
(11.4 )
-
(5.1 )
(5.1 )
(28.5 )
(10.6 )
(32.8 )
(0.1 )
0.2 351.8 122.3 158.5 280.8
60.8 120.2
59.4
0.2 150.9
97.8 160.6
62.8
- 200.9
0.2 351.8 122.3 158.5 280.8
-
-
(18.0 )
-
-
(368 )
384 2,135 2,519
794.9
249
37
285
64.1
885 1,118
233
476.2
39
39
35.5
(40 )
(40 )
(23.1 )
(131.9 )
(423 )
(55 )
598 2,901 3,499 1,215.7
604.7
295 1,707 2,002
302 1,195 1,497
611.0
598 2,901 3,499 1,215.7
598 2,901 3,499 1,215.7
0.2 351.8 122.3 158.5 280.8
(158.7 )
(31 )
(20.2 )
3.1
0.8
(17.1 )
(55.6 )
605.3
521
62.4 158.4
96.0
0.4 230.6
796.6
- 217.2 1,904
- 262.0 217.2
(64.1 )
(351 )
-
(0.5 )
(0.5 )
-
(0.2 )
(206.2 )
(200 )
(21.6 )
(50.2 )
(28.6 )
1.3 723.7 409.4 179.1 588.5 2,441 2,818 5,259 2,188.8
1.2 292.2 211.3
68.4 279.8 1,375 1,439 2,815 1,041.1
0.1 431.5 198.1 110.7 308.8 1,066 1,378 2,444 1,147.7
1.3 723.7 409.4 179.1 588.5 2,441 2,818 5,259 2,188.8
(484 )
(515 )
777 1,298
- 1,904
(351 )
-
(576 )
(376 )
(5.1 )
(60.0 )
(29.1 )
78.1
8.4
(7.9 )
(29.8 )
1.3 723.7 409.4 179.1 588.5 2,441 2,818 5,259 2,188.8
(364.9 )
(33.1 )
(0.5 ) (222.0 )
(62.2 )
377.5
27.7 105.8
0.1 144.4
54.3
20.0
11.6
10.9
1.0
(64.1 )
(21.4 )
(13.4 )
(9.3 )
-
(0.2 )
(199.0 )
(50.3 )
(20.5 )
(55.4 )
1.7 592.3 429.1 151.4 580.5 2,268 2,650 4,918 1,992.5
76.9 319.3 1,327 1,740 3,067 1,111.3
1.7 280.9 242.3
881.1
74.5 261.2
- 311.4 186.7
1.7 592.3 429.1 151.4 580.5 2,268 2,650 4,918 1,992.5
(161 )
372
94
(106 )
(366 )
(484 )
764
140
(201 )
(560 )
(323 )
392
47
(95 )
(194 )
910 1,851
941
(1) Numbers may not add due to rounding.
(2) Changes in reserve estimates resulting from application of improved recovery techniques are included in revisions of previous estimates.
Definitions:
a.
“Proved” oil and gas reserves are those quantities of oil and gas which, by analysis of geoscience and engineering data, can be estimated with
reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic
conditions, operating methods and government regulations.
“Developed” oil and gas reserves are reserves of any category that are expected to be recovered through existing wells with existing equipment
and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well.
“Undeveloped” oil and gas reserves are reserves of any category that are expected to be recovered from new wells on undrilled acreage, or
from existing wells where a relatively major expenditure is required for recompletion.
b.
c.
136 | 2020 Annual Report
Ovintiv Inc.
Total Proved reserves decreased 196.3 MMBOE including production of 199.0 MMBOE in 2020 due to the following:
• Revisions and improved recovery of oil, NGLs and natural gas were negative primarily due to changes in the
approved development plan of 382.2 MMBOE and lower 12-month average trailing prices of
167.1 MMBOE, partially offset by positive revisions from well performance and development strategy
changes of 182.0 MMBOE and from infill drilling locations of 2.4 MMBOE.
• Extensions and discoveries of oil, NGLs and natural gas increased proved reserves by 377.5 MMBOE due to
successful drilling and technical delineation, as well as new proved undeveloped locations resulting from
development plan changes in the Permian, Montney, Anadarko and Uinta assets.
• Purchases of 54.3 MMBOE were primarily in the Permian asset and a result of the partition of certain
Duvernay shale assets between Ovintiv and PCC.
• Sale of reserves in place decreased proved developed reserves by 64.1 MMBOE primarily due to divestitures
in the Anadarko and Permian assets, and the partition of certain Duvernay shale assets between Ovintiv and
PCC.
Total Proved reserves increased 973.1 MMBOE including production of 206.2 MMBOE in 2019 due to the following:
• Revisions and improved recovery of oil, NGLs and natural gas were negative primarily due to changes in the
approved development plan of 97.5 MMBOE and lower 12-month average trailing oil and NGL prices of
118.4 MMBOE, partially offset by positive performance revisions of 57.3 MMBOE resulting from well
performance and development strategy.
• Extensions and discoveries of oil, NGLs and natural gas increased proved reserves by 605.3 MMBOE due to
the extension of proved acreage primarily from successful drilling and delineation in the Permian, Anadarko,
Montney, Eagle Ford, Bakken and Duvernay assets.
• Purchases of 796.6 MMBOE were primarily in the acquisition of Newfield Exploration.
• Sale of reserves in place decreased proved developed reserves by 64.1 MMBOE primarily due to the
divestiture of the Arkoma asset located in Oklahoma.
Total Proved reserves increased 420.8 MMBOE including production of 131.9 MMBOE in 2018 due to the following:
• Revisions and improved recovery of oil, NGLs and natural gas were 64.1 MMBOE primarily due to positive
forecast changes of 133.7 MMBOE and higher 12-month average trailing oil and NGL prices of 9.4 MMBOE,
partially offset by proved reserves removed due to changes in the approved development plan of
79.0 MMBOE.
• Extensions and discoveries of oil, NGLs and natural gas increased proved reserves by 476.2 MMBOE due to
the extension of proved acreage primarily from successful drilling and delineation in the Permian, Montney,
Eagle Ford and Duvernay assets.
• Purchases of 35.5 MMBOE were primarily in the Permian asset.
• Sale of reserves in place decreased proved developed reserves by 23.1 MMBOE primarily due to the
divestiture of the San Juan assets located in northwestern New Mexico.
Ovintiv Inc.
2020 Annual Report | 137
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO PROVED OIL AND
GAS RESERVES
In calculating the standardized measure of discounted future net cash flows, constant price and cost assumptions were
applied to Ovintiv’s annual future production from proved reserves to determine cash inflows. Estimates of future net
cash flows from proved reserves are computed based on the average beginning-of-the-month prices during the 12-
month period for the year. Future production and development costs include estimates for abandonment and
dismantlement costs associated with asset retirement obligations and assume the continuation of existing economic,
operating and regulatory conditions. Future income taxes are calculated by applying statutory income tax rates to
future pre-tax cash flows after provision for the tax cost of the oil and natural gas properties based upon existing laws
and regulations. The effect of tax credits is also considered in determining the income tax expense. The discount was
computed by application of a 10 percent discount factor to the future net cash flows.
Ovintiv cautions that the discounted future net cash flows relating to proved oil and gas reserves are an indication of
neither the fair market value of Ovintiv’s oil and gas properties, nor the future net cash flows expected to be generated
from such properties. The discounted future net cash flows do not include the fair market value of exploratory
properties and probable or possible oil and gas reserves, nor is consideration given to the effect of anticipated future
changes in oil and natural gas prices, development, asset retirement and production costs, and possible changes to tax
and royalty regulations. The prescribed discount rate of 10 percent may not appropriately reflect future interest rates.
Future Cash Inflows
Less Future:
Production costs
Development costs
Income taxes
Future Net Cash Flows
Less 10% annual discount for estimated
timing of cash flows
Discounted Future Net Cash Flows
Future Cash Inflows
Less Future:
Production costs
Development costs
Income taxes
Future Net Cash Flows
Less 10% annual discount for estimated
timing of cash flows
Discounted Future Net Cash Flows
United States
2019
2020
2018
2020
2019
2018
Canada
$
26,093 $
46,076 $
26,305 $
7,156 $
10,404 $
12,463
8,864
6,187
74
10,968
13,064
10,795
2,262
19,955
6,399
4,751
1,673
13,482
4,202
1,859
-
1,095
4,791
3,024
-
2,589
5,231
2,641
586
4,005
5,895
5,073 $
9,914
10,041 $
6,532
6,950 $
$
246
849 $
1,014
1,575 $
1,351
2,654
Total
2020
2019
2018
$
33,249 $
56,480 $
38,768
13,066
8,046
74
12,063
17,855
13,819
2,262
22,544
11,630
7,392
2,259
17,487
6,141
5,922 $
10,928
11,616 $
7,883
9,604
$
138 | 2020 Annual Report
Ovintiv Inc.
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO
PROVED OIL AND GAS RESERVES
Balance, Beginning of Year
Changes Resulting From:
Sales of oil and gas produced during the year
Discoveries and extensions, net of related costs
Purchases of proved reserves in place
Sales and transfers of proved reserves in place
Net change in prices and production costs
Revisions to quantity estimates
Accretion of discount
Development costs incurred during the year
Changes in estimated future development costs
Other
Net change in income taxes
Balance, End of Year
$
Balance, Beginning of Year
Changes Resulting From:
Sales of oil and gas produced during the year
Discoveries and extensions, net of related costs
Purchases of proved reserves in place
Sales and transfers of proved reserves in place
Net change in prices and production costs
Revisions to quantity estimates
Accretion of discount
Development costs incurred during the year
Changes in estimated future development costs
Other
Net change in income taxes
United States
2019
2020
2018
2020
2019
2018
Canada
$
10,041 $
6,950 $
2,731 $
1,575 $
2,654 $
1,582
(1,605 )
1,080
98
(255 )
(7,119 )
(2,346 )
1,064
1,341
2,183
-
591
5,073 $
(2,893 )
2,893
5,581
(931 )
(2,629 )
(850 )
749
2,115
(885 )
-
(59 )
10,041 $
(1,952 )
3,300
468
(202 )
1,841
526
273
1,315
(824 )
16
(542 )
6,950 $
(405 )
140
44
(97 )
(1,563 )
(188 )
158
535
652
(2 )
-
849 $
(654 )
544
-
-
(1,219 )
(550 )
297
545
(364 )
1
321
1,575 $
(759 )
1,130
-
-
307
121
164
665
(303 )
15
(268 )
2,654
Total
2020
2019
2018
$
11,616 $
9,604 $
4,313
(2,010 )
1,220
142
(352 )
(8,682 )
(2,534 )
1,222
1,876
2,835
(2 )
591
5,922 $
(3,547 )
3,437
5,581
(931 )
(3,848 )
(1,400 )
1,046
2,660
(1,249 )
1
262
11,616 $
(2,711 )
4,430
468
(202 )
2,148
647
437
1,980
(1,127 )
31
(810 )
9,604
Balance, End of Year
$
Ovintiv Inc.
2020 Annual Report | 139
RESULTS OF OPERATIONS
The following table sets forth revenue and direct cost information relating to the Company’s oil and gas exploration
and production activities.
Oil, NGL and Natural Gas Revenues (1)
Less:
Production, mineral and other taxes
Transportation and processing
Operating
Depreciation, depletion and amortization
Impairments
Accretion of asset retirement obligation
Operating Income (Loss)
Income Taxes
Results of Operations
Oil, NGL and Natural Gas Revenues (1)
Less:
Production, mineral and other taxes
Transportation and processing
Operating
Depreciation, depletion and amortization
Impairments
Accretion of asset retirement obligation
Operating Income (Loss)
Income Taxes
Results of Operations
United States
2019
2020
2018
2020
2019
2018
Canada
$
2,701 $
4,163 $
2,512 $
1,349 $
1,654 $
1,721
158
453
485
1,378
5,580
13
(5,366 )
(1,309 )
(4,057 ) $
238
466
566
1,593
-
15
1,285
313
972 $
131
124
305
860
-
9
1,083
234
849 $
15
829
100
427
-
16
(38 )
(9 )
(29 ) $
16
859
125
383
-
21
250
60
190 $
16
828
118
361
-
23
375
101
274
$
China (2)
Total
2020
2019
2018
2020
2019
2018
$
- $
37 $
- $
4,050 $
5,854 $
4,233
-
-
-
-
-
-
-
-
- $
-
-
16
-
-
1
20
4
16 $
-
-
-
-
-
-
-
-
- $
173
1,282
585
1,805
5,580
29
(5,404 )
(1,318 )
(4,086 ) $
254
1,325
707
1,976
-
37
1,555
377
1,178 $
147
952
423
1,221
-
32
1,458
335
1,123
$
(1) Excludes gains (losses) on risk management.
(2) Effective July 31, 2019, the production sharing contract with CNOOC was terminated and the Company exited its China Operations.
CAPITALIZED COSTS
Capitalized costs include the cost of properties, equipment and facilities for oil and natural gas producing activities.
Capitalized costs for proved properties include costs for oil and natural gas leaseholds where proved reserves have
been identified, development wells and related equipment and facilities, including development wells in progress.
Capitalized costs for unproved properties include costs for acquiring oil and natural gas leaseholds where no proved
reserves have been identified.
Proved Oil and Gas Properties
Unproved Oil and Gas Properties
Total Capital Cost
Accumulated DD&A
Net Capitalized Costs
Proved Oil and Gas Properties
Unproved Oil and Gas Properties
Total Capital Cost
Accumulated DD&A
Net Capitalized Costs
United States
2019
2020
2018
2020
2019
2018
Canada
$
$
37,875 $
2,785
40,660
32,581
8,079 $
35,870 $
3,491
39,361
25,623
13,738 $
27,189 $
3,493
30,682
24,099
6,583 $
16,008 $
177
16,185
15,056
1,129 $
15,284 $
223
15,507
14,320
1,187 $
13,996
237
14,233
13,261
972
Other
Total
2020
2019
2018
2020
2019
2018
$
$
- $
-
-
-
- $
56 $
-
56
56
- $
56 $
-
56
56
- $
53,883 $
2,962
56,845
47,637
9,208 $
51,210 $
3,714
54,924
39,999
14,925 $
41,241
3,730
44,971
37,416
7,555
140 | 2020 Annual Report
Ovintiv Inc.
COSTS INCURRED
Costs incurred includes both capitalized costs and costs charged to expense when incurred. Costs incurred also includes
internal costs directly related to acquisition, exploration, and development activities, new asset retirement costs
established in the current year as well as increases or decreases to the asset retirement obligations resulting from changes
to cost estimates during the year.
Acquisition Costs (1)
Unproved
Proved
Total Acquisition Costs
Exploration Costs
Development Costs
Total Costs Incurred
Acquisition Costs (1)
Unproved
Proved
Total Acquisition Costs
Exploration Costs
Development Costs
Total Costs Incurred
United States
2019
2020
2018
2020
2019
2018
Canada
$
$
16 $
3
19
12
1,352
1,383 $
843 $
5,963
6,806
5
2,129
8,940 $
- $
-
-
2
1,330
1,332 $
- $
-
-
-
353
353 $
- $
-
-
-
480
480 $
17
-
17
1
631
649
Total
2020
2019
2018
$
$
16 $
3
19
12
1,705
1,736 $
843 $
5,963
6,806
5
2,609
9,420 $
17
-
17
3
1,961
1,981
(1) Acquisition costs for the year ended December 31, 2019 were restated to include the non-cash acquisition of the proved and unproved
properties of Newfield Exploration Company in conjunction with the business combination described in Note 8.
COSTS NOT SUBJECT TO DEPLETION OR AMORTIZATION
Upstream costs in respect of significant unproved properties are excluded from the country cost center’s depletable base as
follows:
As at December 31
United States
Canada
2020
2,785 $
177
2,962 $
$
$
The following is a summary of the costs related to Ovintiv’s unproved properties as at December 31, 2020:
Acquisition Costs
Exploration Costs
2020
2019
2018
Prior to
2018
$
$
22 $
7
29 $
810 $
3
813 $
17 $
18
35 $
1,965 $
120
2,085 $
2019
3,491
223
3,714
Total
2,814
148
2,962
Acquisition costs primarily include costs incurred to acquire or lease properties. Exploration costs primarily include
costs related to geological and geophysical studies and unevaluated costs associated with drilling and equipping
exploratory wells. Ultimate recoverability of these costs and the timing of inclusion within the applicable country cost
center’s depletable base is dependent upon either the finding of proved oil, NGL and natural gas reserves, expiration
of leases or recognition of impairments.
Ovintiv Inc.
2020 Annual Report | 141
Included in the $3.0 billion of oil and natural gas properties not subject to depletion or amortization are acquired
leasehold and mineral costs of approximately $2.8 billion related to the acquisition of Permian, Anadarko, Bakken
and Uinta. These acquisition costs are associated with acquired acreage for which proved reserves have yet to be
assigned from future development. The Company continually assesses the development timeline of the acquired
acreage. The timing and amount of the transfer of property acquisition costs into the depletable base are based on
several factors and may be subject to changes over time from drilling plans, drilling results, availability of capital,
project economics and other assessments of the property. The inclusion of these acquisition costs in the depletable
base is expected to occur within four to eight years. The remaining costs excluded from depletion are related to
properties which are not individually significant.
29. Supplemental Quarterly Financial Information (unaudited)
The following summarizes quarterly financial data for the fiscal years of 2020 and 2019:
(US$ millions, except per share amounts)
Revenues
Impairments
Operating Income (Loss)
Net Earnings (Loss) Before Income Tax
Income Tax Expense (Recovery)
Net Earnings (Loss)
Net Earnings (Loss) per Share of Common Stock - Basic
Net Earnings (Loss) per Share of Common Stock - Diluted
(US$ millions, except per share amounts)
Revenues
Impairments
Operating Income (Loss)
Net Earnings (Loss) Before Income Tax
Income Tax Expense (Recovery)
Net Earnings (Loss)
Net Earnings (Loss) per Common Share - Basic & Diluted
Q4
1,528 $
717
(591 )
(642 ) $
(28 )
(614 ) $
2020
Q3
1,190 $
1,336
(1,506 )
(1,560 ) $
(39 )
(1,521 ) $
Q2
726 $
3,250
(4,059 )
(4,089 ) $
294
(4,383 ) $
(2.36 ) $
(2.36 )
(5.85 ) $
(5.85 )
(16.87 ) $
(16.87 )
Q1
2,643
277
759
561
140
421
1.62
1.62
Q4
1,565 $
-
(28 )
(68 ) $
(62 )
(6 ) $
2019
Q3
1,871 $
-
315
192 $
43
149 $
Q2
Q1
2,055 $
-
538
497 $
161
336 $
1,235
-
(227 )
(306 )
(61 )
(245 )
(0.02 ) $
0.56 $
1.22 $
(1.00 )
$
$
$
$
$
$
$
$
142 | 2020 Annual Report
Ovintiv Inc.
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
The financial statements for the fiscal years ended December 31, 2020, 2019, and 2018, included in this Annual Report
on Form 10-K, have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm,
as stated in their audit report appearing herein. There have been no changes in or disagreements with the accountants
during the periods presented.
Item 9A: Controls and Procedures
EVALUATION AND DISCLOSURE CONTROLS AND PROCEDURES
The Company’s Chief Executive Officer and Chief Financial Officer performed an evaluation 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 are effective as of
December 31, 2020.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
See “Management’s Assessment of Internal Control Over Financial Reporting” under Item 8 of this Annual Report
on Form 10-K.
ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM
See “Report of Independent Registered Public Accounting Firm” under Item 8 of this Annual Report on Form 10-K.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in the Company’s internal control over financial reporting during the fourth quarter of
2020 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over
financial reporting. See “Management’s Assessment of Internal Control Over Financial Reporting” under Item 8 of
this Annual Report on Form 10-K.
Item 9B. Other Information
None.
Ovintiv Inc.
2020 Annual Report | 143
PART III
Item 10. Directors, Executive Officers and Corporate Governance
DIRECTORS AND EXECUTIVE OFFICERS
Information regarding the Board of Directors is set forth in the Proxy Statement relating to the Company’s 2021 annual
meeting of stockholders, which is incorporated herein by reference.
Information regarding the Company’s executive officers is set forth in the section entitled “Executive Officers of the
Registrant” under Items 1 and 2 of this Annual Report on Form 10-K.
CODE OF ETHICS
Ovintiv has adopted a code of ethics entitled the “Business Code of Conduct” (the “Code of Ethics”), that applies to
its principal executive officer, principal financial officer, principal accounting officer or controller, and persons
performing similar functions. The Code of Ethics is available for viewing on Ovintiv’s website at www.ovintiv.com,
and is available in print to any stockholder who requests it. Requests for copies of the Code of Ethics should be made
by contacting Ovintiv’s Corporate Secretary by mail at Suite 1700, 370 17th Street, Denver, Colorado, 80202, U.S.A.
or by telephone at (303) 623-2300. Ovintiv intends to disclose and summarize any amendment to, or waiver from, any
provision of the Code of Ethics that is required to be so disclosed and summarized, on its website at www.ovintiv.com.
Item 11. Executive Compensation
The information required by this Item 11 is set forth in the Proxy Statement relating to the Company’s 2021 annual
meeting of stockholders, which is incorporated herein by reference.
The executive compensation and related information incorporated by reference herein shall not be deemed “soliciting
material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing
under the Securities Act or Exchange Act, except to the extent that the Company specifically incorporates it by
reference into such filing.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item 12 is set forth in the Proxy Statement relating to the Company’s 2021 annual
meeting of stockholders, which is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item 13 is set forth in the Proxy Statement relating to the Company’s 2021 annual
meeting of stockholders, which is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
The information required by this Item 14 is set forth in the Proxy Statement relating to the Company’s 2021 annual
meeting of stockholders, which is incorporated herein by reference.
144 | 2020 Annual Report
Ovintiv Inc.
PART IV
Item 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this Annual Report on Form 10-K or incorporated by reference:
1. Consolidated Financial Statements
Reference is made to the Consolidated Financial Statements and notes thereto appearing in Item 8 of this Annual
Report on Form 10-K.
2. Consolidated Financial Statement Schedules
All financial statement schedules are omitted as they are inapplicable, or the required information has been included
in the Consolidated Financial Statements or notes thereto.
3. Exhibits
Exhibits are listed in the exhibit index below. The exhibits include management contracts, compensatory plans and
arrangements required to be filed as exhibits to the Annual Report on Form 10-K by Item 601(b)(10)(iii) of Regulation
S-K.
Exhibit No Description
2.1
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
Arrangement and Reorganization Agreement dated October 31, 2019 between Encana Corporation and 1847432
Alberta ULC (incorporated by reference to Exhibit 2.1 to Encana’s Current Report on Form 8-K filed on November
5, 2019, SEC File No. 001-15226).
Ovintiv Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Ovintiv’s Current Report on Form
8-K filed on January 24, 2020, SEC File No. 333-234526).
Ovintiv Bylaws (incorporated by reference to Exhibit 3.2 to Ovintiv’s Current Report on Form 8-K filed on January
24, 2020, SEC File No. 333-234526).
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Ovintiv’s Current Report on Form
8-K filed on January 24, 2020, SEC File No. 333-234526).
3.90% Notes due 2021 (incorporated by reference to Exhibit 4.4 to Encana’s Annual Report on Form 10-K filed on
February 27, 2017, SEC File No. 001-15226).
8.125% Notes due 2030 (incorporated by reference to Exhibit 4.5 to Encana’s Annual Report on Form 10-K filed
on February 27, 2017, SEC File No. 001-15226).
7.2% Notes due 2031 (incorporated by reference to Exhibit 4.6 to Encana’s Annual Report on Form 10-K filed on
February 27, 2017, SEC File No. 001-15226).
7.375% Notes due 2031 (incorporated by reference to Exhibit 4.7 to Encana’s Annual Report on Form 10-K filed
on February 27, 2017, SEC File No. 001-15226).
6.50% Notes due 2034 (incorporated by reference to Exhibit 4.8 to Encana’s Annual Report on Form 10-K filed on
February 27, 2017, SEC File No. 001-15226).
6.625% Notes due 2037 (incorporated by reference to Exhibit 4.9 to Encana’s Annual Report on Form 10-K filed
on February 27, 2017, SEC File No. 001-15226).
6.50% Notes due 2038 (incorporated by reference to Exhibit 4.10 to Encana’s Annual Report on Form 10-K filed
on February 27, 2017, SEC File No. 001-15226).
5.15% Notes due 2041 (incorporated by reference to Exhibit 4.11 to Encana’s Annual Report on Form 10-K filed
on February 27, 2017, SEC File No. 001-15226).
Indenture dated as of August 13, 2007 between Encana Corporation and The Bank of New York (incorporated by
reference to Exhibit 4.12 to Encana’s Annual Report on Form 10-K filed on February 27, 2017, SEC File No. 001-
15226).
Indenture dated as of November 14, 2011 between Encana Corporation and The Bank of New York Mellon
(incorporated by reference to Exhibit 7.1 to Encana’s Registration Statement on Form F-10 filed on May 7, 2012,
SEC File No. 333-181196).
Indenture dated as of September 15, 2000 between Encana Corporation (as successor by amalgamation to Alberta
Energy Company Ltd.) and The Bank of New York (incorporated by reference to Exhibit 4.14 to Encana’s Annual
Report on Form 10-K filed on February 27, 2017, SEC File No. 001-15226).
First Supplemental Indenture dated as of January 1, 2003 to the Indenture dated as of September 15, 2000 between
Encana Corporation and The Bank of New York (incorporated by reference to Exhibit 4.15 to Encana’s Annual
Report on Form 10-K filed on February 27, 2017, SEC File No. 001-15226).
Ovintiv Inc.
2020 Annual Report | 145
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
4.29
Second Supplemental Indenture dated as of November 20, 2012 to the Indenture dated as of September 15, 2000
between Encana Corporation and The Bank of New York (incorporated by reference to Exhibit 4.16 to Encana’s
Annual Report on Form 10-K filed on February 27, 2017, SEC File No. 001-15226).
Indenture dated as of November 5, 2001 between Encana Corporation (as successor by amalgamation to
PanCanadian Petroleum Limited) and The Bank of Nova Scotia Trust Company of New York (incorporated by
reference to Exhibit 4.17 to Encana’s Annual Report on Form 10-K filed on February 27, 2017, SEC File No. 001-
15226).
First Supplemental Indenture dated as of January 1, 2002 to the Indenture dated as of November 5, 2001 between
Encana Corporation (as successor by amalgamation to PanCanadian Petroleum Limited) and The Bank of Nova
Scotia Trust Company of New York (incorporated by reference to Exhibit 4.18 to Encana’s Annual Report on Form
10-K filed on February 27, 2017, SEC File No. 001-15226).
Second Supplemental Indenture dated as of January 1, 2003 to the Indenture dated as of November 5, 2001 between
Encana Corporation and The Bank of Nova Scotia Trust Company of New York (incorporated by reference to
Exhibit 4.19 to Encana’s Annual Report on Form 10-K filed on February 27, 2017, SEC File No. 001-15226).
Third Supplemental Indenture dated as of November 20, 2012 to the Indenture dated as of November 5, 2001
between Encana Corporation and The Bank of Nova Scotia Trust Company of New York (incorporated by reference
to Exhibit 4.20 to Encana’s Annual Report on Form 10-K filed on February 27, 2017, SEC File No. 001-15226).
Fourth Supplemental Indenture dated as of July 24, 2013 to the Indenture dated as of November 5, 2001 between
Encana Corporation and The Bank of Nova Scotia Trust Company of New York (incorporated by reference to
Exhibit 4.21 to Encana’s Annual Report on Form 10-K filed on February 27, 2017, SEC File No. 001-15226).
Indenture dated as of October 2, 2003 between Encana Corporation and The Bank of New York (incorporated by
reference to Exhibit 4.22 to Encana’s Annual Report on Form 10-K filed on February 27, 2017, SEC File No. 001-
15226).
Senior Indenture, dated as of February 28, 2001 between Newfield Exploration Company, as Issuer, and First Union
National Bank, as Trustee (the “Senior Indenture”) (incorporated by reference to Exhibit 4.1 to Newfield’s Current
Report on Form 8-K filed on February 28, 2001, SEC File No. 001-12534).
Second Supplemental Indenture, dated as of September 30, 2011, to Senior Indenture between Newfield
Exploration Company and U.S. Bank National Association (as successor to Wachovia Bank, National Association
(formerly First Union National Bank)), as Trustee (incorporated by reference to Exhibit 4.2 to Newfield’s Current
Report on Form 8-K filed on September 30, 2011, SEC File No. 001-12534).
Third Supplemental Indenture, dated as of June 26, 2012, to Senior Indenture between Newfield Exploration
Company and U.S. Bank National Association (as successor to Wachovia Bank, National Association (formerly
First Union National Bank)), as Trustee (incorporated by reference to Exhibit 4.2 to Newfield’s Current Report on
Form 8-K filed on June 26, 2012, SEC File No. 001-12534).
Fourth Supplemental Indenture, dated as of March 10, 2015, to Senior Indenture between Newfield Exploration
Company and U.S. Bank National Association (as successor to Wachovia Bank, National Association (formerly
First Union National Bank)), as Trustee (incorporated by reference to Exhibit 4.2 to Newfield’s Current Report on
Form 8-K filed on March 12, 2015, SEC File No. 001-12534).
Fifth Supplemental Indenture, dated as of March 1, 2019, among Encana Corporation, as Guarantor, Newfield
Exploration Company, as Issuer, and U.S. Bank National Association (as successor to Wachovia Bank, National
Association (formerly First Union National Bank)), as Trustee, to the Senior Indenture (incorporated by reference
to Exhibit 4.5 to Encana’s Current Report on Form 8-K filed on March 1, 2019, SEC File No. 001-15226).
Third Supplemental Indenture, dated as of March 1, 2019, among Newfield Exploration Company, as Guarantor,
Encana Corporation, as Issuer, and The Bank of New York Mellon to the Indenture, dated as of September 15,
2000, between Encana Corporation (as successor by amalgamation to Alberta Energy Company Ltd.) and The Bank
of New York Mellon (formerly known as The Bank of New York), as Trustee (incorporated by reference to Exhibit
4.6 to Encana’s Current Report on Form 8-K filed on March 1, 2019, SEC File No. 001-15226).
First Supplemental Indenture, dated as of March 1, 2019, among Newfield Exploration Company, as Guarantor,
Encana Corporation, as Issuer, and The Bank of New York Mellon to the Indenture, dated as of October 2, 2003,
between Encana Corporation and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit
4.7 to Encana’s Current Report on Form 8-K filed on March 1, 2019, SEC File No. 001-15226).
Fifth Supplemental Indenture, dated as of March 1, 2019, among Newfield Exploration Company, as Guarantor,
Encana Corporation, as Issuer, and The Bank of New York Mellon to the Indenture, dated as of November 5, 2001,
between Encana Corporation (as successor by amalgamation to PanCanadian Petroleum Limited) and The Bank of
New York Mellon, as successor Trustee to The Bank of Nova Scotia Trust Company of New York (incorporated
by reference to Exhibit 4.8 to Encana’s Current Report on Form 8-K filed on March 1, 2019, SEC File No. 001-
15226).
First Supplemental Indenture, dated as of March 1, 2019, among Newfield Exploration Company, as Guarantor,
Encana Corporation, as Issuer, and The Bank of New York Mellon to the Indenture, dated as of August 13, 2007,
between Encana Corporation and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit
4.9 to Encana’s Current Report on Form 8-K filed on March 1, 2019, SEC File No. 001-15226).
146 | 2020 Annual Report
Ovintiv Inc.
4.30
4.31
4.32
4.33
4.34
4.35
4.36
4.37
4.38
4.39
4.40
4.41
4.42
First Supplemental Indenture, dated as of March 1, 2019, among Newfield Exploration Company, as Guarantor,
Encana Corporation, as Issuer, and The Bank of New York Mellon to the Indenture, dated as of November 14,
2011, between Encana Corporation and The Bank of New York Mellon, as Trustee (incorporated by reference to
Exhibit 4.10 to Encana’s Current Report on Form 8-K filed on March 1, 2019, SEC File No. 001-15226).
Fourth Supplemental Indenture, dated as of January 24, 2020, among Ovintiv Inc., as successor issuer, Encana
Corporation, Newfield Exploration Company, as Guarantor, and The Bank of New York Mellon to the Indenture,
dated as of September 15, 2000, between Encana Corporation (as successor by amalgamation to Alberta Energy
Company Ltd.) and The Bank of New York Mellon (formerly known as The Bank of New York), as Trustee
(incorporated by reference to Exhibit 4.1 to Ovintiv’s Current Report on Form 8-K filed on January 28, 2020, SEC
File No. 001-39191).
Second Supplemental Indenture, dated as of January 24, 2020, among Ovintiv Inc., as successor issuer, Encana
Corporation, Newfield Exploration Company, as Guarantor, and The Bank of New York Mellon to the Indenture,
dated as of October 2, 2003, between Encana Corporation and The Bank of New York Mellon, as Trustee
(incorporated by reference to Exhibit 4.2 to Ovintiv’s Current Report on Form 8-K filed on January 28, 2020, SEC
File No. 001-39191).
Sixth Supplemental Indenture, dated as of January 24, 2020, among Ovintiv Inc., as successor issuer, Encana
Corporation, Newfield Exploration Company, as Guarantor, and The Bank of New York Mellon to the Indenture,
dated as of November 5, 2001, between Encana Corporation (as successor by amalgamation to PanCanadian
Petroleum Limited) and The Bank of New York Mellon, as successor Trustee to The Bank of Nova Scotia Trust
Company of New York (incorporated by reference to Exhibit 4.3 to Ovintiv’s Current Report on Form 8-K filed on
January 28, 2020, SEC File No. 001-39191).
Second Supplemental Indenture, dated as of January 24, 2020, among Ovintiv Inc., as successor issuer, Encana
Corporation, Newfield Exploration Company, as Guarantor, and The Bank of New York Mellon to the Indenture,
dated as of August 13, 2007, between Encana Corporation and The Bank of New York Mellon, as Trustee
(incorporated by reference to Exhibit 4.4 to Ovintiv’s Current Report on Form 8-K filed on January 28, 2020, SEC
File No. 001-39191).
Second Supplemental Indenture, dated as of January 24, 2020, among Ovintiv Inc., as successor issuer, Encana
Corporation, Newfield Exploration Company, as Guarantor, and The Bank of New York Mellon to the Indenture,
dated as of November 14, 2011, between Encana Corporation and The Bank of New York Mellon, as Trustee
(incorporated by reference to Exhibit 4.5 to Ovintiv’s Current Report on Form 8-K filed on January 28, 2020, SEC
File No. 001-39191).
Sixth Supplemental Indenture, dated as of January 27, 2020, among Ovintiv Inc., as Guarantor, Newfield
Exploration Company, as Issuer, Ovintiv Canada ULC, as Guarantor, and U.S. Bank National Association (as
successor to Wachovia Bank, National Association (formerly First Union National Bank)), as Trustee, to the Senior
Indenture (incorporated by reference to Exhibit 4.1 to Ovintiv’s Current Report on Form 8-K filed on January 28,
2020, SEC File No. 001-39191).
Fifth Supplemental Indenture, dated as of January 27, 2020, among Ovintiv Canada ULC, as Guarantor, Ovintiv
Inc., as Issuer, Newfield Exploration Company, as Guarantor, and The Bank of New York Mellon to the Indenture,
dated as of September 15, 2000, between Ovintiv Inc. (as successor issuer) and The Bank of New York Mellon
(formerly known as The Bank of New York), as Trustee (incorporated by reference to Exhibit 4.2 to Ovintiv’s
Current Report on Form 8-K filed on January 28, 2020, SEC File No. 001-39191).
Third Supplemental Indenture, dated as of January 27, 2020, among Ovintiv Canada ULC, as Guarantor, Ovintiv
Inc., as Issuer, Newfield Exploration Company, as Guarantor, and The Bank of New York Mellon to the Indenture,
dated as of October 2, 2003, between Ovintiv Inc. (as successor issuer) and The Bank of New York Mellon, as
Trustee (incorporated by reference to Exhibit 4.3 to Ovintiv’s Current Report on Form 8-K filed on January 28,
2020, SEC File No. 001-39191).
Seventh Supplemental Indenture, dated as of January 27, 2020, among Ovintiv Canada ULC, as Guarantor, Ovintiv
Inc., as Issuer, Newfield Exploration Company, as Guarantor, and The Bank of New York Mellon to the Indenture,
dated as of November 5, 2001, between Ovintiv Inc. (as successor issuer) and The Bank of New York Mellon, as
successor Trustee to The Bank of Nova Scotia Trust Company of New York (incorporated by reference to Exhibit
4.4 to Ovintiv’s Current Report on Form 8-K filed on January 28, 2020, SEC File No. 001-39191).
Third Supplemental Indenture, dated as of January 27, 2020, among Ovintiv Canada ULC, as Guarantor, Ovintiv
Inc., as Issuer, Newfield Exploration Company, as Guarantor, and The Bank of New York Mellon to the Indenture,
dated as of August 13, 2007, between Ovintiv Inc. (as successor issuer) and The Bank of New York Mellon, as
Trustee (incorporated by reference to Exhibit 4.5 to Ovintiv’s Current Report on Form 8-K filed on January 28,
2020, SEC File No. 001-39191).
Third Supplemental Indenture, dated as of January 27, 2020, among Ovintiv Canada ULC, as Guarantor, Ovintiv
Inc., as Issuer, Newfield Exploration Company, as Guarantor, and The Bank of New York Mellon to the Indenture,
dated as of November 14, 2011, between Ovintiv Inc. (as successor issuer) and The Bank of New York Mellon, as
Trustee (incorporated by reference to Exhibit 4.6 to Ovintiv’s Current Report on Form 8-K filed on January 28,
2020, SEC File No. 001-39191).
Description of Capital Stock (incorporated by reference to Exhibit 99.1 to Ovintiv’s Current Report on Form 8-K
filed on January 24, 2020, SEC File No. 001-39191).
Ovintiv Inc.
2020 Annual Report | 147
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*
Credit Agreement, dated as of January 27, 2020, between Ovintiv Inc., as Borrower, JPMorgan Chase Bank, N.A.,
RBC Capital Markets, Canadian Imperial Bank of Commerce, Citibank, N.A., TD Securities, as Joint Lead
Arrangers and Joint Bookrunners, BMO Capital Markets and The Bank of Nova Scotia, as Joint Lead Arrangers,
Bank of Montreal and The Bank of Nova Scotia, as Documentation Agents, JPMorgan Chase Bank, N.A., as
Administrative Agent, and the initial lenders and initial issuing banks named therein (the “U.S. Credit Agreement”)
(incorporated by reference to Exhibit 4.1 to Ovintiv’s Current Report on Form 8-K filed on January 29, 2020, SEC
File No. 001-39191).
Guarantee of the U.S. Credit Agreement, made as of January 27, 2020, by Newfield Exploration Company
(incorporated by reference to Exhibit 4.2 to Ovintiv’s Current Report on Form 8-K filed on January 29, 2020, SEC
File No. 001-39191).
Guarantee of the U.S. Credit Agreement, made as of January 27, 2020, by Ovintiv Canada ULC (incorporated by
reference to Exhibit 4.3 to Ovintiv’s Current Report on Form 8-K filed on January 29, 2020, SEC File No. 001-
39191).
Credit Agreement, dated as of January 27, 2020, among Ovintiv Canada ULC, as Borrower, Ovintiv Inc., as
Guarantor, the financial institutions party thereto, as lenders, and Royal Bank of Canada, as administrative agent
(incorporated by reference to Exhibit 4.4 to Ovintiv’s Current Report on Form 8-K filed on January 29, 2020, SEC
File No. 001-39191).
Guarantee, dated as of March 1, 2019, by Newfield Exploration Company, guaranteeing Encana Corporation’s
obligations under Encana Corporation’s Restated Credit Agreement, dated as of July 16, 2015, among Encana
Corporation, as borrower, the financial and other institutions named therein, as lenders, and Royal Bank of Canada,
as agent, as amended by the First Amending Agreement dated as of March 28, 2018 (incorporated by reference to
Exhibit 4.11 to Encana’s Current Report on Form 8-K filed on March 1, 2019, SEC File No. 001-15226).
Form of Commercial Paper Dealer Agreement between Ovintiv Inc., as Issuer, and the Dealer party thereto
(incorporated by reference to Exhibit 10.1 to Ovintiv’s Current Report on Form 8-K filed on January 29, 2020, SEC
File No. 001-39191).
Form of Commercial Paper Dealer Agreement among Ovintiv Canada ULC, as Issuer, Ovintiv Inc., as Guarantor,
and the Dealer party thereto (incorporated by reference to Exhibit 10.2 to Ovintiv’s Current Report on Form 8-K
filed on January 29, 2020, SEC File No. 001-39191).
Encana Corporation Employee Stock Option Plan reflective with amendments made as of April 27, 2005, as of
April 25, 2007, as of April 22, 2008, as of October 22, 2008, as of November 30, 2009, as of July 20, 2010, as of
February 24, 2015 and as of February 22, 2016 (incorporated by reference to Exhibit 10.6 to Encana’s Annual
Report on Form 10-K filed on February 27, 2017, SEC File No. 001-15226).
Form of Executive Stock Option Grant Agreement for stock options granted under the Encana Corporation
Employee Stock Option Plan (incorporated by reference to Exhibit 10.7 to Encana’s Annual Report on Form 10-K
filed on February 26, 2018, SEC File No. 001-15226).
Encana Corporation Employee Stock Appreciation Rights Plan, adopted with effect from February 12, 2008, as
amended December 9, 2008, November 30, 2009, April 20, 2010, July 20, 2010, February 24, 2015, February 22,
2016 and February 14, 2018 (incorporated by reference to Exhibit 10.8 to Encana’s Annual Report on Form 10-K
filed on February 26, 2018, SEC File No. 001-15226).
Form of Executive Stock Appreciation Rights Grant Agreement for stock appreciation rights granted under the
Encana Corporation Employee Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10.9 to
Encana’s Annual Report on Form 10-K filed on February 27, 2017, SEC File No. 001-15226).
Performance Share Unit Plan for Employees of Encana Corporation amended and restated with effect from January
1, 2010, and reflective with amendments made as of July 20, 2010, February 24, 2015, February 22, 2016 and
February 14, 2018 (incorporated by reference to Exhibit 10.10 to Encana’s Annual Report on Form 10-K filed on
February 26, 2018, SEC File No. 001-15226).
Form of Canadian Executive PSU Grant Agreement for performance share units granted under the Performance
Share Unit Plan for Employees of Encana Corporation (incorporated by reference to Exhibit 10.11 to Encana’s
Annual Report on Form 10-K filed on February 26, 2018, SEC File No. 001-15226).
Form of U.S. Executive PSU Grant Agreement for performance share units granted under the Performance Share
Unit Plan for Employees of Encana Corporation (incorporated by reference to Exhibit 10.12 to Encana’s Annual
Report on Form 10-K filed on February 26, 2018, SEC File No. 001-15226).
Restricted Share Unit Plan for Employees of Encana Corporation established with effect from February 8, 2011,
and reflective with amendments made as of February 24, 2015, February 22, 2016 and February 14, 2018
(incorporated by reference to Exhibit 10.13 to Encana’s Annual Report on Form 10-K filed on February 26, 2018,
SEC File No. 001-15226).
Form of Canadian Executive RSU Grant Agreement for restricted share units granted under the Restricted Share
Unit Plan for Employees of Encana Corporation (incorporated by reference to Exhibit 10.14 to Encana’s Annual
Report on Form 10-K filed on February 27, 2017, SEC File No. 001-15226).
Form of U.S. Executive RSU Grant Agreement for restricted share units granted under the Restricted Share Unit
Plan for Employees of Encana Corporation (incorporated by reference to Exhibit 10.15 to Encana’s Annual Report
on Form 10-K filed on February 27, 2017, SEC File No. 001-15226).
148 | 2020 Annual Report
Ovintiv Inc.
10.18*
10.19*
10.20*
10.21*
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
10.28*
10.29*
10.30*
10.31*
10.32*
10.33*
10.34*
10.35*
10.36*
10.37*
10.38*
Deferred Share Unit Plan for Employees of Encana Corporation adopted with effect from December 18, 2002 and
reflective of amendments made as of October 23, 2007, October 22, 2008, and July 20, 2010 (incorporated by
reference to Exhibit 10.16 to Encana’s Annual Report on Form 10-K filed on February 27, 2017, SEC File No. 001-
15226).
Deferred Share Unit Plan for Directors of Encana Corporation adopted with effect from December 18, 2002 and
reflective with amendments made as of April 26, 2005, October 22, 2008, December 8, 2009, July 20, 2010,
February 13, 2013, December 1, 2014 and February 14, 2018 (incorporated by reference to Exhibit 10.17 to
Encana’s Annual Report on Form 10-K filed on February 26, 2018, SEC File No. 001-15226).
Restricted Share Unit Plan for Directors of Encana Corporation effective February 14, 2018 (incorporated by
reference to Exhibit 10.38 to Encana’s Annual Report on Form 10-K filed on February 26, 2018, SEC File No. 001-
15226).
Form of Director RSU Grant Agreement for restricted share units granted under the Restricted Share Unit Plan for
Directors of Encana Corporation (incorporated by reference to Exhibit 10.39 to Encana’s Annual Report on Form
10-K filed on February 26, 2018, SEC File No. 001-15226).
Omnibus Incentive Plan of Encana Corporation adopted with effect from February 13, 2019 (incorporated by
reference to Exhibit 10.44 to Encana’s Annual Report on Form 10-K filed on February 28, 2019, SEC File No. 001-
15226).
Form of Stock Option Grant Agreement for stock options granted under the Omnibus Incentive Plan of Encana
Corporation (incorporated by reference to Exhibit 10.45 to Encana’s Annual Report on Form 10-K filed on February
28, 2019, SEC File No. 001-15226).
Form of RSU Grant Agreement for restricted share units granted to employees under the Omnibus Incentive Plan
of Encana Corporation (incorporated by reference to Exhibit 10.46 to Encana’s Annual Report on Form 10-K filed
on February 28, 2019, SEC File No. 001-15226).
Form of Director RSU Grant Agreement for restricted share units granted to directors under the Omnibus Incentive
Plan of Encana Corporation (incorporated by reference to Exhibit 10.47 to Encana’s Annual Report on Form 10-K
filed on February 28, 2019, SEC File No. 001-15226).
Form of PSU Grant Agreement for performance share units granted under the Omnibus Incentive Plan of Encana
Corporation (incorporated by reference to Exhibit 10.48 to Encana’s Annual Report on Form 10-K filed on February
28, 2019, SEC File No. 001-15226).
Form of Stock Appreciation Rights Grant Agreement for stock appreciation rights granted under the Omnibus
Incentive Plan of Encana Corporation (incorporated by reference to Exhibit 10.49 to Encana’s Annual Report on
Form 10-K filed on February 28, 2019, SEC File No. 001-15226).
Encana (USA) Deferred Compensation Plan (“U.S. Deferred Compensation Plan”) amended and restated effective
April 1, 2018 (incorporated by reference to Exhibit 10.2 to Encana’s Quarterly Report on Form 10-Q filed on
August 2, 2018, SEC File No. 001-15226).
Change in Control Agreement between Ovintiv Inc. and Douglas J. Suttles effective January 24, 2020 (incorporated
by reference to Exhibit 10.46 to Ovintiv’s Annual Report on Form 10-K filed on February 21, 2020, SEC File No.
001-39191).
Change in Control Agreement between Ovintiv Inc. and Joanne L. Cox effective January 24, 2020 (incorporated
by reference to Exhibit 10.47 to Ovintiv’s Annual Report on Form 10-K filed on February 21, 2020, SEC File No.
001-39191).
Change in Control Agreement between Ovintiv Inc. and Corey D. Code effective January 24, 2020 (incorporated
by reference to Exhibit 10.48 to Ovintiv’s Annual Report on Form 10-K filed on February 21, 2020, SEC File No.
001-39191).
Change in Control Agreement between Ovintiv Inc. and Gregory D. Givens effective January 24, 2020
(incorporated by reference to Exhibit 10.49 to Ovintiv’s Annual Report on Form 10-K filed on February 21, 2020,
SEC File No. 001-39191).
Change in Control Agreement between Ovintiv Inc. and Brendan M. McCracken effective January 24, 2020
(incorporated by reference to Exhibit 10.52 to Ovintiv’s Annual Report on Form 10-K filed on February 21, 2020,
SEC File No. 001-39191).
Change in Control Agreement between Ovintiv Inc. and Renee E. Zemljak effective January 24, 2020 (incorporated
by reference to Exhibit 10.54 to Ovintiv’s Annual Report on Form 10-K filed on February 21, 2020, SEC File No.
001-39191).
Form of Director and Officer Indemnification Agreement effective as of January 24, 2020 between Ovintiv Inc.
and each of its directors and officers (incorporated by reference to Exhibit 10.1 to Ovintiv’s Current Report on
Form 8-K filed on January 24, 2020, SEC File No. 001-39191).
Amending Agreement to Omnibus Incentive Plan of Encana Corporation (incorporated by reference to Exhibit 99.9
to Ovintiv’s Post-Effective Amendment No. 1 filed on January 27, 2020, SEC File No. 333-231248).
Amending Agreement to Encana Corporation Employee Stock Option Plan (incorporated by reference to Exhibit
99.10 to Ovintiv’s Post-Effective Amendment No. 1 filed on January 27, 2020, SEC File No. 333-231248).
Amending Agreement to Encana Corporation Employee Stock Appreciation Rights Plan (incorporated by reference
to Exhibit 99.11 to Ovintiv’s Post-Effective Amendment No. 1 filed on January 27, 2020, SEC File No. 333-
231248).
Ovintiv Inc.
2020 Annual Report | 149
10.39*
10.40*
10.41*
10.42*
10.43*
10.44*
10.45*
10.46*
10.47*
10.48*
10.49*
10.50*
10.51*
10.52*
10.53*
10.54*
14.1
21.1
23.1
23.2
23.3
24.1
31.1
31.2
32.1
32.2
99.1
99.2
101.INS
101.SCH
101.CAL
101.LAB
101.DEF
101.PRE
104
Amending Agreement to Performance Share Unit Plan for Employees of Encana Corporation (incorporated by
reference to Exhibit 99.12 to Ovintiv’s Post-Effective Amendment No. 1 filed on January 27, 2020, SEC File No.
333-231248).
Amending Agreement to Restricted Share Unit Plan for Employees of Encana Corporation (incorporated by
reference to Exhibit 99.13 to Ovintiv’s Post-Effective Amendment No. 1 filed on January 27, 2020, SEC File No.
333-231248).
Amending Agreement to Deferred Share Unit Plan for Employees of Encana Corporation (incorporated by
reference to Exhibit 99.14 to Ovintiv’s Post-Effective Amendment No. 1 filed on January 27, 2020, SEC File No.
333-231248).
Amending Agreement to Restricted Share Unit Plan for Directors of Encana Corporation (incorporated by reference
to Exhibit 99.15 to Ovintiv’s Post-Effective Amendment No. 1 filed on January 27, 2020, SEC File No. 333-
231248).
Amending Agreement to Deferred Share Unit Plan for Directors of Encana Corporation (incorporated by reference
to Exhibit 99.16 to Ovintiv’s Post-Effective Amendment No. 1 filed on January 27, 2020, SEC File No. 333-
231248).
First Amendment to U.S. Deferred Compensation Plan amended and restated effective April 1, 2018, dated effective
January 24, 2020 (incorporated by reference to Exhibit 10.1 to Ovintiv’s Quarterly Report on Form 10-Q filed on
May 8, 2020, SEC File No. 001-39191).
Ovintiv U.S. Retirement Plan amended and restated effective January 27, 2020 (incorporated by reference to
Exhibit 10.2 to Ovintiv’s Quarterly Report on Form 10-Q filed on May 8, 2020, SEC File No. 001-39191).
Offer of employment dated June 10, 2013 (incorporated by reference to Exhibit 10.3 to Ovintiv’s Quarterly Report
on Form 10-Q filed on May 8, 2020, SEC File No. 001-39191).
Change in Control Agreement between Ovintiv Inc. and Rachel M. Moore effective June 30, 2020 (incorporated
by reference to Exhibit 10.1 to Ovintiv’s Quarterly Report on Form 10-Q filed on July 31, 2020, SEC File No. 001-
39191).
Letter agreement between Ovintiv Inc. and David G. Hill (incorporated by reference to Exhibit 10.2 to Ovintiv’s
Quarterly Report on Form 10-Q filed on July 31, 2020, SEC File No. 001-39191).
Ovintiv Canadian Pension Plan amended and restated effective January 24, 2020.
Ovintiv Canadian Supplemental Pension Plan amended and restated effective January 24, 2020.
Ovintiv Canadian Investment Plan amended and restated effective January 24, 2020.
First Amendment to Ovintiv U.S. Retirement Plan amended and restated effective January 27, 2020, dated effective
January 1, 2021.
Second Amendment to U.S. Deferred Compensation Plan amended and restated effective April 1, 2018, dated
effective January 1, 2021.
Second Amending Agreement to Deferred Share Unit Plan for Employees of Ovintiv Inc.
Business Code of Conduct effective March 1, 2020.
Significant Subsidiaries
Consent of PricewaterhouseCoopers LLP.
Consent of McDaniel & Associates Consultants Ltd.
Consent of Netherland, Sewell & Associates, Inc.
Power of Attorney (included on the signature page of this report).
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of
1934.
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of
1934.
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.
Report of McDaniel & Associates Consultants Ltd.
Report of Netherland, Sewell & Associates, Inc.
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its
XBRL tags are embedded within the Inline XBRL document.
Inline XBRL Taxonomy Schema Document.
Inline XBRL Calculation Linkbase Document.
Inline XBRL Label Linkbase Document.
Inline XBRL Definition Linkbase Document.
Inline XBRL Presentation Linkbase Document.
The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, has been
formatted in Inline XBRL.
* Management contract or compensatory arrangement.
150 | 2020 Annual Report
Ovintiv Inc.
Item 16. Form 10-K Summary
None.
Ovintiv Inc.
2020 Annual Report | 151
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
SIGNATURES
Dated: February 18, 2021
OVINTIV INC.
By: /s/ Corey D. Code
Name: Corey D. Code
Title: Executive Vice-President & Chief
Financial Officer
152 | 2020 Annual Report
Ovintiv Inc.
SIGNATURES WITH RESPECT TO OVINTIV INC.
POWERS OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Douglas J. Suttles and Corey D. Code, and each of
them, any of whom may act without the joinder of the other, the true and lawful attorney-in-fact and agent of the undersigned, with
full power of substitution and resubstitution, for and in the name, place and stead of the undersigned, in any and all capacities, to
sign any and all amendments, including any post-effective amendments, and supplements to this Annual Report on Form 10-K,
and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission, and hereby
grants to such attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken
together shall constitute one instrument.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been
signed by the following persons in the capacities and on the dates indicated.
Signature
Capacity
Date
/s/ Peter A. Dea
Peter A. Dea
Chairman of the Board
of Directors
/s/ Douglas J. Suttles
Douglas J. Suttles
Chief Executive Officer and Director
(Principal Executive Officer)
February 18, 2021
February 18, 2021
February 18, 2021
/s/ Corey D. Code
Corey D. Code
/s/ Fred J. Fowler
Fred J. Fowler
/s/ Meg A. Gentle
Meg A. Gentle
/s/ Howard J. Mayson
Howard J. Mayson
/s/ Lee A. McIntire
Lee A. McIntire
Executive Vice-President
& Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
Corporate Director
February 18, 2021
Corporate Director
February 18, 2021
Corporate Director
February 18, 2021
Corporate Director
February 18, 2021
/s/ Margaret A. McKenzie
Margaret A. McKenzie
Corporate Director
February 18, 2021
/s/ Steven W. Nance
Steven W. Nance
/s/ Suzanne P. Nimocks
Suzanne P. Nimocks
/s/ Thomas G. Ricks
Thomas G. Ricks
/s/ Brian G. Shaw
Brian G. Shaw
/s/ Bruce G. Waterman
Bruce G. Waterman
Corporate Director
February 18, 2021
Corporate Director
February 18, 2021
Corporate Director
February 18, 2021
Corporate Director
February 18, 2021
Corporate Director
February 18, 2021
Ovintiv Inc.
2020 Annual Report | 153
Executive Leadership Team
and Board of Directors
Executive
Leadership Team
Doug Suttles
Chief Executive Officer
Brendan McCracken
President
Joanne Cox
Executive Vice President,
General Counsel &
Corporate Secretary
Corey Code
Executive Vice President
& Chief Financial Officer
Greg Givens
Executive Vice President
& Chief Operating Officer
Rachel Moore
Executive Vice President,
Corporate Services
Renee Zemljak
Executive Vice President,
Midstream, Marketing &
Fundamentals
Board of
Directors
Peter Dea
Chairman
Denver, Colorado
Fred Fowler
Houston, Texas
Meg Gentle
Houston, Texas
Howard Mayson
Breckenridge, Colorado
Lee McIntire
Denver, Colorado
Margaret McKenzie
Calgary, Alberta
Steven Nance
Houston, Texas
Suzanne Nimocks
Houston, Texas
Thomas Ricks
Austin, Texas
Brian Shaw
Toronto, Ontario
Doug Suttles
Denver, Colorado
Bruce Waterman
Calgary, Alberta
Ovintiv Inc.
2020 Annual Report | 155
Corporate and
Investor Information
Auditor
PricewaterhouseCoopers LLP
Chartered Professional Accountants
Calgary, Alberta
Independent Qualified Reserves Auditors
Netherland, Sewell & Associates, Inc.
Dallas, Texas
McDaniel & Associates Consultants Ltd.
Calgary, Alberta
Annual Report on Form 10-K
Ovintiv’s Annual Report on Form 10-K is filed with
the securities regulators in the United States
and Canada.
Ovintiv Website
www.ovintiv.com
The Ovintiv website contains a variety of corporate
and investor information, including, among other
information, the following:
• Current stock prices
• Annual and Interim reports
• Proxy Statement
• News releases
•
Investor presentations
• Dividend information
• Shareholder support information
• Sustainability information
Additional information, including copies of the
Ovintiv Year-End 2020 Annual Report, may be
obtained from Ovintiv Inc.
Investor Contact
888.525.0304
investor.relations@ovintiv.com
Media Contact
281.210.5253
media.relations@ovintiv.com
156 | 2020 Annual Report
Ovintiv Inc.
Abbreviations
bbls
barrels
bbls/d
barrels per day
BOE
barrels of oil equivalent
BOE/d
barrels of oil equivalent per day
Bcf
billion cubic feet
Bcf/d
billion cubic feet per day
Mbbls
thousand barrels
Mbbls/d
thousand barrels per day
MBOE
thousand barrels of oil equivalent
MBOE/d
thousand barrels of oil equivalent per day
MMbbls
million barrels
MMbbls/d million barrels per day
Mcf
thousand cubic feet
Mcf/d
thousand cubic feet per day
MM
million
MMBOE
million barrels of oil equivalent
MMBOE/d million barrels of oil equivalent per day
MMBtu
million British thermal units
MMcf
million cubic feet
MMcf/d
million cubic feet per day
NGLs
natural gas liquids
/d
per day
Ovintiv is one of the largest independent
producers of crude oil, condensate
and natural gas in North America. The
Company is committed to preserving
its financial strength, maximizing
profitability through disciplined capital
investments and operational efficiencies
and returning capital to shareholders.
A talented team, in combination with a
culture of innovation and efficiency, fuels
our economic performance, increases
shareholder value and strengthens our
commitment to sustainability in the
communities where we live and work.
Stock Information
Corporate Headquarters
Ovintiv Inc.
370 17th Street
Suite 1700
Denver, Colorado 80202
www.ovintiv.com
Investor Contact
888.525.0304
investor.relations@ovintiv.com
Media Contact
281.210.5253
media.relations@ovintiv.com
Our common stock is traded on the New York Stock
Exchange and the Toronto Stock Exchange under
the symbol “OVV.”
Transfer Agents and Registrar
For information regarding change of address or
other matters concerning your shares, please
contact our transfer agents at:
American Stock Transfer
& Trust Company, LLC
6201 15th Avenue
Brooklyn, New York, 11219
1.877.361.7965
help@astfinancial.com
AST Trust Company (Canada)
P.O. Box 721
Agincourt, Ontario M1S 0A1
1.866.580.7145 (toll free in North America)
1.416.682.3863 (outside North America)
www.astfinancial.com/ca-en
O
v
n
t
i
i
v
I
n
c
.
|
A
n
n
u
a
l
R
e
p
o
r
t
2
0
2
0
i
o
v
n
t
i
.
v
c
o
m
2020
Annual Report
233_AR_210301_v15.indd 1
233_AR_210301_v15.indd 1
3/2/21 9:00 AM
3/2/21 9:00 AM