OVV 8-K/A
Ovintiv Inc. (OVV)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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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. ☐
Explanatory Note
On January 31, 2025, Ovintiv Inc. (“Ovintiv”) filed with the U.S. Securities and Exchange Commission a Current Report on Form 8-K (the “Original Form 8-K”) reporting, among other events, that Ovintiv and its wholly-owned subsidiary, Ovintiv Canada ULC (collectively, the “Company”), completed the acquisition of approximately 109,000 net acres in the Montney formation, located in Canada (the “Montney Acquisition”) from Paramount Resources Ltd. (“Paramount”).
This Current Report on Form 8-K/A amends the Original Form 8-K to disclose the statements of revenue and expenses and other information for the properties acquired in the Montney Acquisition and the pro forma financial information required by Item 9.01 of Form 8-K. No other changes to the Original Form 8-K are being made hereby.
| Item 9.01. | Financial Statements and Exhibits. |
(a) Financial statements of business to be acquired.
The audited annual statement of revenue and expenses for the year ended December 31, 2023, and the unaudited statement of revenue and expenses for the nine months ended September 30, 2024 and the related notes, are filed as Exhibit 99.1 hereto and incorporated by reference herein.
(b) Pro forma financial information.
The unaudited pro forma condensed combined financial information of the Company, which comprise the balance sheet as of September 30, 2024, the related statements of earnings for the nine months ended September 30, 2024 and year ended December 31, 2023, and the related notes to the pro forma condensed combined financial information, is filed as Exhibit 99.2 hereto and incorporated by reference herein.
(d) Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: February 4, 2025
| OVINTIV INC. | ||
| (Registrant) | ||
| By: | /s/ Corey D. Code | |
| Name: | Corey D. Code | |
| Title: | Executive Vice-President & Chief Financial Officer | |
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-270153 and 333-273488) and Form S-8 (Nos. 333-231248, 333-188758, 333-140856, 333-124218, 333-266531 and 333-85598) of Ovintiv Inc. of our report dated December 18, 2024 relating to the statement of revenues and expenses for the Karr, Wapiti and Zama Properties of Paramount Resources Ltd. which appears in this Current Report on Form 8-K/A of Ovintiv Inc.
| /s/ Ernst & Young LLP |
| Ernst & Young LLP |
| Chartered Professional Accountants |
Calgary, Alberta, Canada
February 4, 2025
Exhibit 23.2
Consent of Independent Petroleum Engineers
As independent petroleum engineers, we hereby consent to the references to our firm, in the context in which they appear, and to the references to, the oil, natural gas and NGL reserves estimates and forecasts of economics as of December 31, 2023, included in or made part of the registration statements on Form S-3 (Nos. 333-270153 and 333-273488) and Form S-8 (Nos. 333-231248, 333-188758, 333-140856, 333-124218, 333-266531 and 333-85598) of Ovintiv Inc., which appears in this Current Report on Form 8-K/A dated February 4, 2025.
| McDaniel & Associates Consultants Ltd. |
| /s/ Michael Verney |
| Michael Verney, P.Eng. |
| Executive Vice President |
Calgary, Alberta
February 4, 2025
Exhibit 99.1
Paramount Resources Ltd.
Karr, Wapiti and Zama Properties
Statements of Revenue and Expenses
For the Years Ended December 31, 2023 (Audited) and 2022 (Unaudited)
For the Nine Months Ended September 30, 2024 and 2023 (Unaudited)
REPORT OF INDEPENDENT AUDITORS
To the Directors of Paramount Resources Ltd.
Opinion
We have audited the accompanying financial information relating to the Karr, Wapiti and Zama assets owned by Paramount Resources Ltd. (the “Assets”) which comprise the statement of revenues and expenses for the year ended December 31, 2023 and the related notes (the “Statements”).
In our opinion, the accompanying Statements present fairly, in all material respects, the revenues and expenses of the Assets for the year ended December 31, 2023 in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board using the basis of presentation described in Note 1.
Basis for opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States, as promulgated by the American Institute of Certified Public Accountants (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Operating Statement section of this report. We are required to be independent of Paramount Resources Ltd. and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of matter
As described in Note 1, the accompanying Statements were prepared for the purpose of complying with the financial reporting framework specified in subsection 3.11(5) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for an operating statement and are not intended to be a complete presentation of the financial position, results of operations, or cash flows of the Assets. Our opinion is not modified with respect to this matter.
Other matter
The financial information for the year ended December 31, 2022 and the nine months ended September 30, 2024 and 2023 are unaudited.
Responsibilities of management and those charged with governance for the Statements
Management of Paramount Resources Ltd. is responsible for the preparation of the Statements in accordance with IFRS, and for such internal control as management of Paramount Resources Ltd. determines is necessary to enable the preparation of the Statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibilities for the audit of the operating statement
Our objectives are to obtain reasonable assurance about whether the Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted
| Statements of Revenue and Expenses | 1 |
in accordance with GAAS, will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the Statements.
In performing an audit in accordance with GAAS we:
| • | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| • | Identify and assess the risks of material misstatement of the Statements, whether due to fraud or error and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the Statements. |
| • | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of management’s internal control. Accordingly, no such opinion is expressed. |
| • | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management of Paramount Resources Ltd. as well as evaluating the overall presentation of the Statements. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant internal control-related matters that we identified during the audit.
Chartered Professional Accountants
Calgary, Alberta, Canada
December 18, 2024
| Statements of Revenue and Expenses | 2 |
Paramount Resources Ltd.
Karr, Wapiti and Zama Properties
Statements of Revenue and Expenses
($ Canadian Millions)
| Year ended December 31 |
Note | 2023 | 2022 | |||||||||
| (audited) | (unaudited) | |||||||||||
| Petroleum and natural gas sales |
1,445.8 | 1,639.5 | ||||||||||
| Royalties |
(217.4 | ) | (261.2 | ) | ||||||||
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| Revenue |
3 | 1,228.4 | 1,378.3 | |||||||||
| Expenses |
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| Transportation and NGLs processing |
107.4 | 93.1 | ||||||||||
| Operating expense |
301.0 | 250.6 | ||||||||||
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| 408.4 | 343.7 | |||||||||||
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| Operating income |
820.0 | 1,034.6 | ||||||||||
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See the accompanying notes to the statements of revenue and expenses
| Statements of Revenue and Expenses | 3 |
Paramount Resources Ltd.
Karr, Wapiti and Zama Properties
Statements of Revenue and Expenses
(Unaudited)
($ Canadian Millions)
| Nine months ended September 30 |
Note | 2024 | 2023 | |||||||||
| Petroleum and natural gas sales |
922.2 | 1,078.5 | ||||||||||
| Royalties |
(147.6 | ) | (160.7 | ) | ||||||||
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| Revenue |
3 | 774.6 | 917.8 | |||||||||
| Expenses |
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| Transportation and NGLs processing |
69.3 | 81.5 | ||||||||||
| Operating expense |
248.1 | 216.0 | ||||||||||
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| 317.4 | 297.5 | |||||||||||
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| Operating income |
457.2 | 620.3 | ||||||||||
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See the accompanying notes to the statements of revenue and expenses
| Statements of Revenue and Expenses | 4 |
Notes to the Statements of Revenue and Expenses
(Tabular amounts stated in $ Canadian Millions)
1. Basis of Presentation
The accompanying statements of revenue and expenses (the “Statements”) reflect the working interest petroleum and natural gas sales, royalties, transportation and NGLs processing expense and operating expense of Paramount Resources Ltd. (the “Company”) relating to its Karr, Wapiti and Zama properties (the “Assets”). The Statements have been prepared in all material respects using accounting policies permitted by International Financial Reporting Standards applicable to publicly accountable enterprises, as issued by the International Accounting Standards Board. The Statements are prepared in accordance with the financial reporting framework specified in subsection 3.11(5) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards for an operating statement.
The Statements do not include any provision for depletion and depreciation, accretion of asset retirement obligations, capital costs, impairment of properties, general and administrative costs or income taxes, as these amounts are based on the consolidated operations of the Company of which the Assets form only a part.
2. Summary of Material Accounting Policies
Functional and Presentation Currency
The functional and presentation currency of the Statements is Canadian dollars.
Revenue Recognition
Revenue from petroleum and natural gas (“P&NG”) sales is recognized when control of the P&NG volumes is transferred to the purchaser, which generally occurs when the purchaser obtains the legal right to possession of such volumes, the purchaser assumes the risks and rewards of ownership and payment from the purchaser is reasonably assured.
Royalties
Royalties are recorded when petroleum and natural gas volumes are produced and sold. Royalties are calculated in accordance with applicable regulations and/or the terms of individual royalty agreements.
Transportation and NGLs Processing
Costs associated with the transportation of petroleum and natural gas volumes and the fractionation of natural gas liquids are recognized when the petroleum and natural gas volumes are sold.
| Statements of Revenue and Expenses | 5 |
Notes to the Statements of Revenue and Expenses
(Tabular amounts stated in $ Canadian Millions)
Operating Expense
Operating expense include amounts incurred to lift petroleum and natural gas volumes to the surface, gathering, processing of natural gas and liquids to meet sales pipeline specifications, treating and field storage. More specifically operating expense includes processing fees, workovers, workforce, electricity, repairs and maintenance, water handling and trucking, property taxes and lease costs, overhead and other direct operating expenses.
Jointly Controlled Assets and Operations
The Company conducts its exploration and development activities related to the Assets independently, as well as for certain properties, jointly with others through jointly controlled assets and operations. All of the Company’s interests in these joint arrangements are classified as joint operations. The Company has recognized its proportionate share of the revenues and expenses of such joint operations in the Statements.
Management Judgements, Assumptions & Accounting Estimates
Management estimates and assumptions in regards to certain revenues and expenses have been used. Such estimates relate to unsettled transactions and events. Estimates by their nature are subject to measurement uncertainty. Accordingly, actual results may differ from estimated amounts as future confirming events occur.
3. Revenue By Product
| Year ended December 31 |
2023 | 2022 | ||||||
| (audited) | (unaudited) | |||||||
| Natural gas |
234.3 | 402.2 | ||||||
| Condensate and oil |
1,151.0 | 1,166.7 | ||||||
| Other natural gas liquids |
60.1 | 70.5 | ||||||
| Royalty income and other revenue |
0.4 | 0.1 | ||||||
| Royalties |
(217.4 | ) | (261.2 | ) | ||||
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| 1,228.4 | 1,378.3 | |||||||
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| Nine months ended September 30 |
2024 | 2023 | ||||||
| (unaudited) | (unaudited) | |||||||
| Natural gas |
107.3 | 178.1 | ||||||
| Condensate and oil |
770.2 | 856.1 | ||||||
| Other natural gas liquids |
44.6 | 44.0 | ||||||
| Royalty income and other revenue |
0.1 | 0.3 | ||||||
| Royalties |
(147.6 | ) | (160.7 | ) | ||||
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| 774.6 | 917.8 | |||||||
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4. Subsequent Events
In November 2024, Paramount entered into an agreement to sell the Assets. The sale is expected to close in the first quarter of 2025, subject to the receipt of regulatory approval and the satisfaction of other customary closing conditions.
| Statements of Revenue and Expenses | 6 |
Exhibit 99.2
UNAUDITED PRO FORMA FINANCIAL INFORMATION OF OVINTIV INC.
On November 13, 2024, Ovintiv Inc. (“Ovintiv”) and Paramount Resources Ltd., entered into a definitive Agreement of Purchase and Sale (the “Purchase Agreement”) whereby Ovintiv would purchase undivided interests in oil and gas properties, rights and related assets in the Montney formation (“Montney Assets”) located in northwest Alberta for approximately $2.307 billion (C$3.325 billion), subject to closing adjustments under the Purchase Agreement. The acquisition closed on January 31, 2025 and added approximately 900 net 10,000 foot well locations to Ovintiv’s Montney inventory and approximately 109,000 net acres in the core of the Montney formation, which is strategically located in close proximity to Ovintiv’s current Montney operations.
The acquisition of the Montney Assets will be accounted for as an asset acquisition under accounting principles generally accepted in the United States of America, as substantially all of the fair value of the assets acquired are concentrated in a single asset group.
The allocation of the purchase cost is based upon management’s estimates of, and assumptions related to, the relative fair value of assets to be acquired and related liabilities assumed. The pro forma adjustments are preliminary, have been made solely for the purpose of providing pro forma financial information, and are subject to revision based on a final determination of the purchase cost allocation at the reporting date of March 31, 2025.
The unaudited pro forma condensed combined financial information is derived from the historical consolidated financial statements of Ovintiv and adjusted to reflect the combination of Ovintiv and the Montney Assets. The Montney Assets historical amounts have been derived from the Statement of Revenue and Expenses of the Montney Assets filed herewith as an exhibit to this Current Report on Form 8-K/A. The unaudited pro forma condensed combined balance sheet as of September 30, 2024 gives effect to the Montney Assets as if the acquisition had been completed on September 30, 2024. The unaudited pro forma condensed combined statement of earnings for the year ended December 31, 2023 and for the nine months ended September 30, 2024 gives effect to the Montney Acquisition as if the acquisition had been completed on January 1, 2023.
The unaudited pro forma condensed combined financial information includes pro forma adjustments related to the proceeds and sale of Ovintiv’s Uinta oil and gas properties (“Uinta Assets”), which closed on January 22, 2025. The proceeds received from the sale of the Uinta Assets of approximately $2.0 billion, before closing adjustments, were used to fund the acquisition of the Montney Assets. The Uinta Assets were purchased by FourPoint Resources, LLC under a separate purchase agreement that was signed on November 13, 2024. The remaining consideration for the Montney assets was financed using short-term borrowings. The Uinta disposition and related proceeds as well as the financing from short-term borrowings are collectively referred to as “financing transactions”. As a result, the revenues and direct operating expenses related to the Uinta operations were excluded as a pro forma adjustment.
The unaudited pro forma condensed combined financial information reflects the following pro forma adjustments related to the acquired Montney Assets, based on available information and certain assumptions that Ovintiv believes are reasonable:
| • | cash consideration of approximately $2.0 billion from the disposition proceeds from the Company’s Uinta Assets with the remaining amount being financed using short-term borrowings; |
| • | the acquisition of Montney Assets consisting primarily of oil and gas properties; |
| • | capitalization of transaction-related costs; |
| • | exclusion of revenues and direct operating expenses related to the Company’s Uinta operations; and |
| • | the recognition of estimated tax impacts of the pro forma adjustments. |
As required under S-X Rule 11-01, the unaudited pro forma condensed combined financial information for the year ended December 31, 2023 also reflects historical results and pro forma adjustments related to the acquisition of Permian oil and gas properties (“Permian Assets”) acquired from EnCap Investments L.P. (“EnCap”) during the period from January 1, 2023 to June 11, 2023. The acquisition of the Permian Assets was completed on June 12, 2023 and was accounted for as a business combination resulting from the purchase of all outstanding equity interests of six Delaware limited liability companies including Black Swan Permian, LLC and Black Swan Operating, LLC (together, “Black Swan Combined”), PetroLegacy Energy II, LLC, PearlSnap Midstream, LLC, Piedra Energy III, LLC and Piedra Energy IV, LLC and associated subsidiaries (collectively, the “Permian LLCs”) from NMB Seller Representative, LLC, representing the respective sellers including, Black Swan Oil & Gas, LLC, PetroLegacy II Holdings, LLC, Piedra Energy III Holdings, LLC and Piedra Energy IV Holdings, LLC, which were portfolio companies of funds managed by EnCap. The pro forma financial information related to the Permian acquisition was filed on Form 8-K on November 20, 2023.
Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed combined financial information. In Ovintiv’s opinion, all adjustments that are necessary to present fairly the pro forma information have been made. The unaudited pro forma condensed combined financial information should be read in conjunction with the audited consolidated financial statements and accompanying notes contained in Ovintiv’s Annual Report and on Form 10-K for the year ended December 31, 2023, the unaudited consolidated financial statements and accompanying notes contained in Ovintiv’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 and the audited and unaudited Statements of Revenue and Expenses, as applicable, of the associated Montney Assets contained in Exhibit 99.1 of this Current Report on Form 8-K/A.
In addition, unaudited pro forma condensed combined financial information should be read in conjunction with the respective Permian LLCs’ unaudited historical consolidated financial statements for the periods ended January 1, 2023 to March 31, 2023 and statements of revenues and direct operating expenses, and unaudited historical consolidated financial information for the periods ended April 1, 2023 to June 11, 2023, as applicable.
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.
The unaudited pro forma condensed combined financial information is provided for illustrative purposes only and is not intended to represent what Ovintiv’s financial position or results of operations would have been had the Montney Assets actually been consummated on the assumed dates, nor is it indicative of Ovintiv’s future financial position or results of operations. The unaudited pro forma condensed combined financial information does not reflect future events that may occur after the acquisition, including, but not limited to, the anticipated realization of ongoing savings from potential operating efficiencies, asset dispositions, cost savings or economies of scale that Ovintiv may achieve with respect to the combined operations. As a result, future results may vary significantly from the pro forma results reflected herein.
| Unaudited Pro Forma Condensed Combined Balance Sheet | ||||||||||||||||||||||||
| As of September 30, 2024 | ||||||||||||||||||||||||
| Historical | Pro Forma | |||||||||||||||||||||||
| ($ millions) | Ovintiv | Montney Assets (Note 2) |
Uinta Disposition (Note 2) |
Transaction Adjustments (Note 2) |
Pro Forma Combined |
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| Assets |
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| Current Assets |
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| Cash and cash equivalents |
9 | (2,307 | ) | 2,000 | 307 | a | 9 | |||||||||||||||||
| Accounts receivable and accrued revenues |
1,290 | — | (8 | ) | — | c | 1,282 | |||||||||||||||||
| Risk management |
144 | — | — | — | 144 | |||||||||||||||||||
| Income tax receivable |
64 | — | — | — | 64 | |||||||||||||||||||
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| Total Current Assets |
1,507 | (2,307 | ) | 1,992 | 307 | 1,499 | ||||||||||||||||||
| Property, Plant and Equipment, at cost: |
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| Oil and natural gas properties, based on full cost accounting |
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| Proved properties |
66,246 | 2,293 | (1,936 | ) | 38 | b, c | 66,641 | |||||||||||||||||
| Unproved properties |
921 | 162 | (46 | ) | — | b, c | 1,037 | |||||||||||||||||
| Other |
913 | — | (21 | ) | — | c | 892 | |||||||||||||||||
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| Property, plant and equipment |
68,080 | 2,455 | (2,003 | ) | 38 | 68,570 | ||||||||||||||||||
| Less: Accumulated depreciation, depletion and amortization |
(53,263 | ) | — | — | — | (53,263 | ) | |||||||||||||||||
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| Property, plant and equipment, net |
14,817 | 2,455 | (2,003 | ) | 38 | 15,307 | ||||||||||||||||||
| Other Assets |
943 | 396 | (9 | ) | — | d, c | 1,330 | |||||||||||||||||
| Risk Management |
6 | — | — | — | 6 | |||||||||||||||||||
| Deferred Income Taxes |
— | — | — | — | — | |||||||||||||||||||
| Goodwill |
2,586 | — | — | — | 2,586 | |||||||||||||||||||
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| Total Assets |
19,859 | 544 | (20 | ) | 345 | 20,728 | ||||||||||||||||||
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| Liabilities and Shareholders’ Equity |
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| Current Liabilities |
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| Accounts payable and accrued liabilities |
1,777 | 7 | — | — | b | 1,784 | ||||||||||||||||||
| Current portion of operating lease liabilities |
86 | — | — | — | 86 | |||||||||||||||||||
| Income tax payable |
4 | — | — | — | 4 | |||||||||||||||||||
| Risk management |
1 | — | — | — | 1 | |||||||||||||||||||
| Current portion of long-term debt |
1,024 | — | — | 367 | f | 1,391 | ||||||||||||||||||
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| Total Current Liabilities |
2,892 | 7 | — | 367 | 3,266 | |||||||||||||||||||
| Long-Term Debt |
4,853 | — | — | — | 4,853 | |||||||||||||||||||
| Operating Lease Liabilities |
798 | 396 | — | — | d | 1,194 | ||||||||||||||||||
| Other Liabilities and Provisions |
156 | — | — | — | 156 | |||||||||||||||||||
| Risk Management |
3 | — | — | — | 3 | |||||||||||||||||||
| Asset Retirement Obligation |
263 | 141 | (20 | ) | — | b, g | 384 | |||||||||||||||||
| Deferred Income Taxes |
239 | — | — | — | 239 | |||||||||||||||||||
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| Total Liabilities |
9,204 | 544 | (20 | ) | 367 | 10,095 | ||||||||||||||||||
| Shareholders’ Equity |
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| Share capital |
3 | — | — | — | 3 | |||||||||||||||||||
| Paid in surplus |
8,025 | — | — | — | 8,025 | |||||||||||||||||||
| Retained earnings (Accumulated deficit) |
1,644 | — | — | (22 | ) | e | 1,622 | |||||||||||||||||
| Accumulated other comprehensive income |
983 | — | — | — | 983 | |||||||||||||||||||
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| Total Shareholders’ Equity |
10,655 | — | — | (22 | ) | 10,633 | ||||||||||||||||||
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| Total Liabilities and Shareholders’ Equity |
19,859 | 544 | (20 | ) | 345 | 20,728 | ||||||||||||||||||
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| Unaudited Pro Forma Condensed Combined Statement of Earnings | ||||||||||||||||||||||||
| For the Nine Months Ended September 30, 2024 | ||||||||||||||||||||||||
| Historical | Pro Forma | |||||||||||||||||||||||
| ($ millions, except per share amounts) | Ovintiv | Montney Assets (Note 3) |
Uinta Disposition (Note 3) |
Adjustments (Note 3) |
Pro Forma Combined |
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| Revenues |
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| Product and service revenues |
6,758 | 678 | (466 | ) | (109 | ) | a | 6,861 | ||||||||||||||||
| Royalties |
— | (109 | ) | — | 109 | a | — | |||||||||||||||||
| Gains (losses) on risk management, net |
151 | — | — | — | 151 | |||||||||||||||||||
| Sublease revenues |
55 | — | — | — | 55 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total Revenues |
6,964 | 569 | (466 | ) | — | 7,067 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Operating Expenses |
||||||||||||||||||||||||
| Production, mineral and other taxes |
258 | — | (29 | ) | — | 229 | ||||||||||||||||||
| Transportation and processing |
1,240 | 51 | (48 | ) | — | 1,243 | ||||||||||||||||||
| Operating |
715 | 182 | (76 | ) | — | 821 | ||||||||||||||||||
| Purchased product |
1,165 | — | — | — | 1,165 | |||||||||||||||||||
| Depreciation, depletion and amortization |
1,745 | — | — | (14 | ) | b | 1,731 | |||||||||||||||||
| Accretion of asset retirement obligation |
14 | — | — | 6 | c | 20 | ||||||||||||||||||
| Administrative |
250 | — | — | — | 250 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total Operating Expenses |
5,387 | 233 | (153 | ) | (8 | ) | 5,459 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Operating Income (Loss) |
1,577 | 336 | (313 | ) | 8 | 1,608 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Other (Income) Expenses |
||||||||||||||||||||||||
| Interest |
306 | — | — | 14 | e | 320 | ||||||||||||||||||
| Foreign exchange (gain) loss, net |
(21 | ) | — | — | — | (21 | ) | |||||||||||||||||
| Other (gains) losses, net |
(160 | ) | — | — | — | (160 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total Other (Income) Expenses |
125 | — | — | 14 | 139 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net Earnings (Loss) Before Income Tax |
1,452 | 336 | (313 | ) | (6 | ) | 1,469 | |||||||||||||||||
| Income tax expense (recovery) |
267 | 79 | (74 | ) | (1 | ) | f | 271 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net Earnings (Loss) |
1,185 | 257 | (239 | ) | (5 | ) | 1,198 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net Earnings Per Share of Common Stock |
||||||||||||||||||||||||
| Basic |
4.45 | 4.50 | ||||||||||||||||||||||
| Diluted |
4.41 | 4.46 | ||||||||||||||||||||||
| Weighted Average Shares of Common Stock Outstanding (millions) |
||||||||||||||||||||||||
| Basic |
266.0 | 266.0 | ||||||||||||||||||||||
| Diluted |
268.7 | 268.7 | ||||||||||||||||||||||
| Unaudited Pro Forma Condensed Combined Statement of Earnings |
| For the Year Ended December 31, 2023
|
| Historical | Montney Pro Forma | Permian Pro Forma | ||||||||||||||||||||||||||||||||||||||
| ($ millions, except per share amounts) | Ovintiv | Montney Assets (Note 3) |
Uinta Disposition (Note 3) |
Transaction Adjustments (Note 3) |
Subtotal Pro Forma Combined |
Combined Permian for the Period From January 1 to June 11, 2023 (Note 4) |
Pro Forma Adjustments (Note 4) |
Pro Forma Combined |
||||||||||||||||||||||||||||||||
| Revenues |
||||||||||||||||||||||||||||||||||||||||
| Product and service revenues |
10,661 | 1,071 | (521 | ) | (161 | ) | a | 11,050 | 144 | 445 | a | 11,639 | ||||||||||||||||||||||||||||
| Oil & condensate |
- | - | - | - | - | 429 | (429 | ) | a | - | ||||||||||||||||||||||||||||||
| Natural gas |
- | - | - | - | - | 7 | (7 | ) | a | - | ||||||||||||||||||||||||||||||
| Natural gas liquids |
- | - | - | - | - | 7 | (7 | ) | a | - | ||||||||||||||||||||||||||||||
| Royalties |
- | (161 | ) | - | 161 | a | - | - | - | - | ||||||||||||||||||||||||||||||
| Gains (losses) on risk management, net |
151 | - | - | - | 151 | 1 | 12 | a | 164 | |||||||||||||||||||||||||||||||
| Sublease revenues |
71 | - | - | - | 71 | - | - | 71 | ||||||||||||||||||||||||||||||||
| Produced water handling-related parties |
- | - | - | - | - | 10 | (10 | ) | a, b | - | ||||||||||||||||||||||||||||||
| Water solutions-related parties |
- | - | - | - | - | 5 | (5 | ) | a, b | - | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Revenues |
10,883 | 910 | (521 | ) | - | 11,272 | 603 | (1 | ) | 11,874 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Operating Expenses |
||||||||||||||||||||||||||||||||||||||||
| Production, mineral and other taxes |
342 | - | (30 | ) | - | 312 | 27 | - | 339 | |||||||||||||||||||||||||||||||
| Transportation and processing |
1,766 | 80 | (92 | ) | - | 1,754 | - | - | 1,754 | |||||||||||||||||||||||||||||||
| Operating |
859 | 223 | (76 | ) | - | 1,006 | 86 | (7 | ) | b | 1,085 | |||||||||||||||||||||||||||||
| Purchased product |
2,815 | - | - | - | 2,815 | - | - | 2,815 | ||||||||||||||||||||||||||||||||
| Depreciation, depletion and amortization |
1,825 | - | - | 97 | b | 1,922 | 185 | 13 | d | 2,120 | ||||||||||||||||||||||||||||||
| Accretion of asset retirement obligation |
19 | - | - | 16 | c | 35 | - | - | 35 | |||||||||||||||||||||||||||||||
| Administrative |
393 | - | - | 3 | d | 396 | 6 | (77 | ) | f | 325 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Operating Expenses |
8,019 | 303 | (198 | ) | 116 | 8,240 | 304 | (71 | ) | 8,473 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Operating Income (Loss) |
2,864 | 607 | (323 | ) | (116 | ) | 3,032 | 299 | 70 | 3,401 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Other (Income) Expenses |
||||||||||||||||||||||||||||||||||||||||
| (Gain) Loss on derivative contracts, net |
- | - | - | - | - | (12 | ) | 12 | a | - | ||||||||||||||||||||||||||||||
| Interest |
355 | - | - | 36 | d, e | 391 | 14 | 64 | e | 469 | ||||||||||||||||||||||||||||||
| Foreign exchange (gain) loss, net |
19 | - | - | - | 19 | - | - | 19 | ||||||||||||||||||||||||||||||||
| Other (gains) losses, net |
(20 | ) | - | - | - | (20 | ) | - | - | (20 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total Other (Income) Expenses |
354 | - | - | 36 | 390 | 2 | 76 | 468 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Net Earnings (Loss) Before Income Tax |
2,510 | 607 | (323 | ) | (152 | ) | 2,642 | 297 | (6 | ) | 2,933 | |||||||||||||||||||||||||||||
| Income tax expense (recovery) |
425 | 144 | (74 | ) | (35 | ) | f | 460 | 5 | 60 | g | 525 | ||||||||||||||||||||||||||||
| Net Earnings (Loss) |
2,085 | 463 | (249 | ) | (117 | ) | 2,182 | 292 | (66 | ) | 2,408 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Net Earnings Per Share of Common Stock |
||||||||||||||||||||||||||||||||||||||||
| Basic |
8.02 | h | 8.77 | |||||||||||||||||||||||||||||||||||||
| Diluted |
7.90 | h | 8.65 | |||||||||||||||||||||||||||||||||||||
| Weighted Average Shares of Common Stock Outstanding (millions) |
||||||||||||||||||||||||||||||||||||||||
| Basic |
259.9 | h | 274.5 | |||||||||||||||||||||||||||||||||||||
| Diluted |
263.9 | h | 278.5 | |||||||||||||||||||||||||||||||||||||
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 1 — Basis of Presentation
The unaudited pro forma condensed combined financial information has been derived from the historical consolidated financial statements of Ovintiv and the historical financial information of the Montney Assets in accordance with Article 11 of the Securities and Exchange Commission’s (“SEC”) Regulation S-X. Certain of the Montney Assets historical amounts have been reclassified to conform to Ovintiv’s financial statement presentation. The unaudited pro forma condensed combined balance sheet as of September 30, 2024 gives effect to the acquisition of the Montney Assets and the related financing transactions as if they had occurred on September 30, 2024. The unaudited pro forma condensed combined statements of earnings for the year ended December 31, 2023 and for the nine months ended September 30, 2024 give effect to the acquired Montney Assets and the related financing transactions as if they had occurred on January 1, 2023.
The unaudited pro forma condensed combined financial information reflects pro forma adjustments that are described in the accompanying notes and are based on available information and certain assumptions that Ovintiv believes are reasonable. However, actual results may differ from those reflected in these statements. In Ovintiv’s opinion, all adjustments that are necessary to present fairly the pro forma information have been made. The following unaudited pro forma condensed combined statements do not purport to represent what the financial position or results of operations would have been if the acquisition of the Montney Assets and the related financing transactions had actually occurred on the dates indicated above, nor are they indicative of Ovintiv’s future financial position or results of operations.
Note 2 — Unaudited Pro Forma Condensed Combined Balance Sheet
The acquired Montney Assets will be accounted for as an asset acquisition as substantially all of the fair value of the assets acquired are concentrated in a single asset group. The total cost of assets acquired and liabilities assumed is based upon Ovintiv management’s estimates of and assumptions which includes utilizing a discounted cash flow model in determining the relative fair value of the oil and gas properties. Significant inputs into the calculation include future commodity prices, estimated volumes of oil and gas reserves, expectations for timing and amount of future development and operating costs, future abandonment costs and a risk adjusted discount rate. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final cost allocation that will be reported for the period ended March 31, 2025, and the resulting effect on financial position and results of operations may differ significantly from the pro forma amounts.
The preliminary allocation of the total cost of the Montney Acquisition to the assets acquired and liabilities assumed:
| ($ millions) |
||||
| Cash Consideration |
||||
| Cash paid at closing |
2,307 | |||
| Transaction costs |
20 | |||
|
|
|
|||
| Total cash paid |
2,327 | |||
| Liabilities Assumed |
||||
| Operating lease liability |
396 | |||
| Asset retirement obligations |
148 | |||
|
|
|
|||
| Total Cost of Montney Acquisition |
2,871 | |||
| Allocation of Total Cost |
||||
| Proved and unproved property |
2,475 | |||
| Operating lease asset |
396 | |||
|
|
|
|||
| Total Assets Acquired |
2,871 | |||
|
|
|
|||
The following adjustments have been made to the accompanying unaudited pro forma condensed combined balance sheet as of September 30, 2024:
| (a) | Reflects the proceeds and sale of Ovintiv’s Uinta Assets which closed on January 22, 2025. Proceeds from the sale of the Uinta Assets were $2.0 billion, before closing adjustments, and was used to fund to the majority of the Montney Asset acquisition, with the remaining amount financed using short-term borrowings. |
| (b) | The estimated cost of the assets acquired and liabilities assumed resulted in the following purchase cost allocation: |
| • | $2.5 billion of acquired oil and gas properties; and |
| • | $148 million increase in asset retirement obligations, including $7 million current portion of the asset retirement obligation. |
| (c) | Reflects the disposition of the Company’s Uinta Assets. Proceeds from 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 reserve quantities are sold in the respective country cost center. The divestiture of the Company’s Uinta Assets did not exceed 25 percent of the U.S. cost center, therefore the proceeds were deducted from the U.S. cost center full cost pool. |
| (d) | Reflects a long-term midstream agreement for processing natural gas located in the Karr area of the acquired properties, which has been classified as an operating lease. |
| (e) | Reflects the impact of estimated bridge financing, financial advisor, legal and accounting fees that are not capitalized as part of the transaction. Accordingly, the pro forma statements of the unaudited balance sheet and earnings reflect the effects of these nonrecurring charges, which are not included in the historical statements of operations of Ovintiv for the historical periods presented. |
| (f) | Reflects short-term borrowings to finance the remaining portion of the Montney Assets and associated transaction costs. |
| (g) | Reflects the asset retirement obligations assumed by the purchaser of the Company’s Uinta Assets. |
Note 3. Adjustments to the Unaudited Pro Forma Condensed Combined Statements of Earnings For the Montney Acquisition
The following adjustments have been made to the accompanying unaudited pro forma condensed combined statements of earnings for the nine months ended September 30, 2024 and the year ended December 31, 2023:
| (a) | Reflects reclassification of the Montney Assets’ royalty amounts presented to conform to Ovintiv’s presentation which includes royalties net in product and service revenues. |
| (b) | Reflects the depreciation, depletion and amortization expense calculated using Ovintiv’s depletion rate calculated under the full cost method of accounting for oil and gas properties based on the preliminary allocation of cost for the Montney Assets and also reflects adjustments related to the divestiture of the Uinta Assets. |
| (c) | Reflects the accretion from the asset retirement obligations assumed and divested. |
| (d) | Reflects the impact of estimated bridge financing commitment fees and other direct transaction costs that are not capitalized as part of the transaction. Any such charge could affect the future results of the post acquisition Company in the period in which such charges are incurred; however, these costs are not expected to be incurred in any period beyond twelve months from the closing date of the transaction. Accordingly, the pro forma statements of the unaudited balance sheet and earnings reflect an estimated accrual for the effects of these nonrecurring charges, which are not included in the historical statements of operations of Ovintiv for the historical periods presented. |
| (e) | Reflects interest expense calculated using a weighted average effective interest rate of 4.92 percent resulting from the short-term borrowings. |
| (f) | Reflects the approximate income tax effects of the pro forma adjustments presented. The tax rate applied to the pro forma adjustments was the statutory federal and apportioned statutory state tax rate, net of the federal benefit of state taxes, applied to pre-tax earnings. |
Note 4. Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Earnings For the Permian Acquisition
Adjustments for the Permian acquisition have been made to the accompanying unaudited pro forma condensed combined statements of earnings for period from January 1, 2023 to June 11, 2023. The acquisition of the Permian companies closed on June 12, 2023 and the associated results of operations are incorporated in Ovintiv’s consolidated statement of earnings from June 12 to December 31, 2023. The following adjustments have been made to the accompanying unaudited pro forma condensed combined statements of earnings for the year ended December 31, 2023:
| (a) | Reflects reclassification of the Permian LLCs amounts presented to conform to Ovintiv’s presentation: |
| • | Revenues from Oil & condensate, Natural gas, Natural gas liquids and sales from Produced water and Water solutions to Product and service revenues; and |
| • | (Gain) Loss on derivative contracts, net reclassified to Gains (losses) on risk management, net. |
| (b) | Reflects the elimination of historical related party transactions between the Permian LLCs acquired that would be treated as intercompany transactions on a consolidated basis. |
| (c) | Reflects the harmonization of accounting policies, whereby proceeds from divestiture of properties are deducted from the full cost pool without recognition of a gain or loss. |
| (d) | Reflects the harmonization of accounting policies, whereby Depreciation, depletion and amortization expense is calculated using Ovintiv’s depletion rate calculated under the full cost method of accounting for oil and gas properties based on the preliminary purchase price allocation. |
| (e) | Reflects interest expense, net of capitalized amounts, calculated using an weighted average effective interest rate of 6.06% related to the $2.3 billion in senior unsecured notes that were issued on May 31, 2023 and the remaining $825 million from incremental borrowings under the Company’s credit facility and short-term borrowings to fund the Permian Acquisition. The unaudited pro forma condensed combined statement of earnings for the period from January 1 to June 11, 2023 does not reflect a pro forma adjustment related to the proceeds and sale of Ovintiv’s Bakken Assets, which closed on June 12, 2023. Proceeds from the sale of the Bakken Asset were $717 million, after closing adjustments, and were used to fund the Permian Acquisition. |
| (f) | Reflects the impact of advisor, legal and accounting fees that are not capitalized as part of the transaction. The pro forma statements of earnings reflect the effects of these nonrecurring charges as if they were incurred January 1, 2022 in the pro forma filed on Form 8-K November 20, 2023. |
| (g) | Reflects the approximate income tax effects of the pro forma adjustments presented. The tax rate applied to the pro forma adjustments was the statutory federal and apportioned statutory state tax rate, net of the federal benefit of state taxes, applied to pre-tax income. |
| (h) | Reflects Ovintiv’s common stock issued to the Permian LLCs. |
SUPPLEMENTAL PRO FORMA OIL, NATURAL GAS LIQUIDS AND NATURAL GAS RESERVES INFORMATION
AS OF DECEMBER 31, 2023
The following tables present the estimated pro forma combined net proved developed and undeveloped, oil, natural gas liquids and natural gas reserves as of December 31, 2023, along with a summary of changes in quantities of net remaining proved reserves during the year ended December 31, 2023. The pro forma reserve information set forth below gives effect to the Montney Acquisition as if the transaction had occurred on January 1, 2023. The tables below also include the sale of the Uinta Assets which closed on January 22, 2025.
The following historical estimates of the net proved oil and natural gas reserves of Ovintiv’s oil and gas properties as of December 31, 2023 are based on evaluations prepared by Ovintiv’s internal qualified reserves evaluators. In 2023, Netherland, Sewell & Associates, Inc. audited 26 percent of Ovintiv’s estimated U.S. proved reserve volumes and McDaniel & Associates Consultants Ltd. audited 53 percent of the Company’s estimated Canadian proved reserve volumes. The estimates of the net proved oil and natural gas reserves of the Montney Assets are as of December 31, 2023 and were prepared by McDaniel & Associates Consultants Ltd. All reserves information presented herein was prepared in accordance with applicable SEC regulations.
There are numerous uncertainties inherent in estimating quantities and values of proved reserves and in projecting future rates of production and the amount and timing of development expenditures, including many factors beyond the property owner’s control. The following reserve data represents estimates only and should not be construed as being precise. The assumptions used in preparing these estimates may not be realized, causing the quantities of oil and gas that are ultimately recovered, the timing of the recovery of oil and gas reserves, the production and operating costs incurred and the amount and timing of future development expenditures to vary from the estimates presented herein. Actual production, revenues and expenditures with respect to reserves will vary from estimates and the variances may be material.
These estimates were calculated using the 12-month average of the first day of the month reference prices as adjusted for location and quality differentials. Any significant price changes will have a material effect on the quantity and present value of the reserves. These estimates depend on a number of variable factors and assumptions, including historical production from the area compared with production from other comparable producing areas, the assumed effects of regulations by governmental agencies, assumptions concerning future oil and gas prices, and assumptions concerning future operating costs, transportation costs, severance and excise taxes, development costs and workover and remedial costs.
The following estimated pro forma combined net proved developed and undeveloped oil, natural gas liquids and natural gas reserves is not necessarily indicative of the results that might have occurred had the Montney Asset acquisition been completed on January 1, 2023 and is not intended to be a projection of future results. As a result, future results may vary significantly from the pro forma results reflected herein.
| Oil (MMbbls)(1) | ||||||||||||||||||||||||||||
| Historical Ovintiv Canada |
Montney Asset Acquisition |
Pro Forma Combined Canada |
Historical Ovintiv U.S. |
Uinta Asset Disposition |
Pro Forma Combined U.S. |
Pro Forma Combined |
||||||||||||||||||||||
| Balance—December 31, 2022 |
0.1 | — | 0.1 | 535.2 | (82.2 | ) | 453.0 | 453.1 | ||||||||||||||||||||
| Revisions and improved recovery |
— | — | — | (134.0 | ) | 14.7 | (119.3 | ) | (119.3 | ) | ||||||||||||||||||
| Extensions and discoveries |
— | — | — | 64.7 | (30.4 | ) | 34.3 | 34.3 | ||||||||||||||||||||
| Purchase of reserves in place |
— | — | — | 160.0 | (7.8 | ) | 152.2 | 152.2 | ||||||||||||||||||||
| Sale of reserves in place |
— | — | — | (49.1 | ) | — | (49.1 | ) | (49.1 | ) | ||||||||||||||||||
| Production |
— | — | — | (58.0 | ) | 7.0 | (51.0 | ) | (51.0 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance—December 31, 2023 |
0.1 | — | 0.1 | 518.8 | (98.7 | ) | 420.1 | 420.2 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Proved developed reserves as of |
||||||||||||||||||||||||||||
| December 31, 2022 |
0.1 | — | 0.1 | 257.2 | (26.1 | ) | 231.1 | 231.2 | ||||||||||||||||||||
| December 31, 2023 |
0.1 | — | 0.1 | 277.6 | (35.6 | ) | 242.0 | 242.1 | ||||||||||||||||||||
| Proved undeveloped reserves as of |
||||||||||||||||||||||||||||
| December 31, 2022 |
— | — | — | 278.0 | (56.1 | ) | 221.9 | 221.9 | ||||||||||||||||||||
| December 31, 2023 |
— | — | — | 241.2 | (63.1 | ) | 178.1 | 178.1 | ||||||||||||||||||||
| (1) | Numbers may not add due to rounding. |
| Natural Gas Liquids (MMbbls) (1) | ||||||||||||||||||||||||||||
| Historical Ovintiv Canada |
Montney Asset Acquisition |
Pro Forma Combined Canada |
Historical Ovintiv U.S. |
Uinta Asset Disposition |
Pro Forma Combined U.S. |
Pro Forma Combined |
||||||||||||||||||||||
| Balance—December 31, 2022 |
149.0 | 97.6 | 246.6 | 457.8 | (8.3 | ) | 449.5 | 696.1 | ||||||||||||||||||||
| Revisions and improved recovery |
(6.2 | ) | 5.3 | (0.9 | ) | (89.1 | ) | 1.8 | (87.3 | ) | (88.2 | ) | ||||||||||||||||
| Extensions and discoveries |
20.4 | 7.2 | 27.6 | 23.3 | (2.7 | ) | 20.6 | 48.2 | ||||||||||||||||||||
| Purchase of reserves in place |
1.1 | — | 1.1 | 46.6 | (0.8 | ) | 45.8 | 46.9 | ||||||||||||||||||||
| Sale of reserves in place |
— | — | — | (28.9 | ) | 0 | (28.9 | ) | (28.9 | ) | ||||||||||||||||||
| Production |
(17.4 | ) | (10.6 | ) | (28.0 | ) | (31.2 | ) | 0.5 | (30.7 | ) | (58.7 | ) | |||||||||||||||
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| Balance—December 31, 2023 |
146.9 | 99.5 | 246.4 | 378.4 | (9.4 | ) | 369.0 | 615.4 | ||||||||||||||||||||
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| Proved developed reserves as of |
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| December 31, 2022 |
71.2 | 33.8 | 105.0 | 288.3 | (2.8 | ) | 285.5 | 390.5 | ||||||||||||||||||||
| December 31, 2023 |
78.0 | 39.0 | 117.0 | 275.7 | (3.7 | ) | 272.0 | 389.0 | ||||||||||||||||||||
| Proved undeveloped reserves as of |
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| December 31, 2022 |
77.8 | 63.8 | 141.6 | 169.5 | (5.4 | ) | 164.1 | 305.7 | ||||||||||||||||||||
| December 31, 2023 |
68.9 | 60.5 | 129.4 | 102.7 | (5.7 | ) | 97.0 | 226.4 | ||||||||||||||||||||
| Natural Gas (Bcf) (1) | ||||||||||||||||||||||||||||
| Historical Ovintiv Canada |
Montney Asset Acquisition |
Pro Forma Combined Canada |
Historical Ovintiv U.S. |
Uinta Asset Disposition |
Pro Forma Combined U.S. |
Pro Forma Combined |
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| Balance—December 31, 2022 |
4,090 | 687 | 4,777 | 2,698 | (110 | ) | 2,588 | 7,365 | ||||||||||||||||||||
| Revisions and improved recovery |
(21 | ) | 119 | 98 | (460 | ) | 17 | (443 | ) | (345 | ) | |||||||||||||||||
| Extensions and discoveries |
916 | 52 | 968 | 146 | (38 | ) | 108 | 1,076 | ||||||||||||||||||||
| Purchase of reserves in place |
17 | — | 17 | 201 | (10 | ) | 191 | 208 | ||||||||||||||||||||
| Sale of reserves in place |
— | — | — | (137 | ) | — | (137 | ) | (137 | ) | ||||||||||||||||||
| Production |
(411 | ) | (73 | ) | (484 | ) | (189 | ) | 8 | (181 | ) | (665 | ) | |||||||||||||||
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| Balance—December 31, 2023 |
4,591 | 786 | 5,377 | 2,259 | (133 | ) | 2,126 | 7,503 | ||||||||||||||||||||
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| Proved developed reserves as of |
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| December 31, 2022 |
2,276 | 262 | 2,538 | 1,755 | (38 | ) | 1,717 | 4,255 | ||||||||||||||||||||
| December 31, 2023 |
2,590 | 342 | 2,932 | 1,695 | (52 | ) | 1,643 | 4,575 | ||||||||||||||||||||
| Proved undeveloped reserves as of |
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| December 31, 2022 |
1,814 | 425 | 2,239 | 943 | (73 | ) | 870 | 3,109 | ||||||||||||||||||||
| December 31, 2023 |
2,000 | 444 | 2,444 | 564 | (81 | ) | 483 | 2,927 | ||||||||||||||||||||
| (1) | Numbers may not add due to rounding. |
The pro forma standardized measure of discounted future net cash flows relating to proved oil, natural gas liquids and natural gas reserves as of December 31, 2023 is as follows:
| ($ millions) | Historical Ovintiv Canada |
Montney Asset Acquisition |
Pro Forma Combined Canada |
Historical Ovintiv U.S. |
Uinta Asset Disposition |
Pro Forma Combined U.S. |
Pro Forma Combined |
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| Future cash inflows |
$ | 19,697 | $ | 7,910 | $ | 27,607 | $ | 47,946 | $ | (6,616 | ) | $ | 41,330 | $ | 68,937 | |||||||||||||
| Less future: |
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| Production costs |
8,147 | 3,044 | 11,191 | 14,405 | (2,219 | ) | 12,186 | 23,377 | ||||||||||||||||||||
| Development costs |
2,264 | 1,640 | 3,904 | 8,849 | (1,754 | ) | 7,095 | 10,999 | ||||||||||||||||||||
| Income taxes |
2,016 | 757 | 2,773 | 2,735 | (32 | ) | 2,703 | 5,476 | ||||||||||||||||||||
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| Future net cash flows |
7,270 | 2,469 | 9,739 | 21,957 | (2,611 | ) | 19,346 | 29,085 | ||||||||||||||||||||
| Less 10% annual discount for estimated timing of cash flows |
2,963 | 926 | 3,889 | 10,182 | (1,414 | ) | 8,768 | 12,657 | ||||||||||||||||||||
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| Discounted future net cash flows |
$ | 4,307 | $ | 1,543 | $ | 5,850 | $ | 11,775 | $ | (1,197 | ) | $ | 10,578 | $ | 16,428 | |||||||||||||
The changes in the pro forma standardized measure of discounted future net cash flows relating to proved oil, natural gas liquids and natural gas reserves for the year ended December 31, 2023 are as follows:
| ($ millions) | Historical Ovintiv Canada |
Montney Asset Acquisition |
Pro Forma Combined Canada |
Historical Ovintiv U.S. |
Uinta Asset Disposition |
Pro Forma Combined U.S. |
Pro Forma Combined |
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| Balance, beginning of year—January 1, 2023 |
$ | 8,531 | $ | 2,887 | $ | 11,418 | $ | 18,968 | $ | (1,748 | ) | $ | 17,220 | $ | 28,638 | |||||||||||||
| Changes resulting from: |
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| Sales of oil and gas produced during the year |
(1,056 | ) | (608 | ) | (1,664 | ) | (3,953 | ) | 323 | (3,630 | ) | (5,294 | ) | |||||||||||||||
| Discoveries and extensions, net of related costs |
1,059 | 164 | 1,223 | 1,141 | (371 | ) | 770 | 1,993 | ||||||||||||||||||||
| Purchases of proved reserves in place |
24 | — | 24 | 2,440 | (97 | ) | 2,343 | 2,367 | ||||||||||||||||||||
| Sales and transfers of proved reserves in place |
— | — | — | (1,765 | ) | — | (1,765 | ) | (1,765 | ) | ||||||||||||||||||
| Net change in prices and production costs |
(6,878 | ) | (1,427 | ) | (8,305 | ) | (5,746 | ) | 620 | (5,126 | ) | (13,431 | ) | |||||||||||||||
| Revisions to quantity estimates |
(143 | ) | (88 | ) | (231 | ) | (5,250 | ) | 346 | (4,904 | ) | (5,135 | ) | |||||||||||||||
| Accretion of discount |
1,094 | 379 | 1,473 | 2,290 | (176 | ) | 2,114 | 3,587 | ||||||||||||||||||||
| Development costs incurred during the year |
575 | 282 | 857 | 2,184 | (420 | ) | 1,764 | 2,621 | ||||||||||||||||||||
| Changes in estimated future development costs |
(120 | ) | (302 | ) | (422 | ) | (1,384 | ) | 323 | (1,061 | ) | (1,483 | ) | |||||||||||||||
| Other |
— | — | — | 1 | 2 | 3 | 3 | |||||||||||||||||||||
| Net change in income taxes |
1,221 | 256 | 1,477 | 2,849 | 1 | 2,850 | 4,327 | |||||||||||||||||||||
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| Balance, end of year—December 31, 2023 |
$ | 4,307 | $ | 1,543 | $ | 5,850 | $ | 11,775 | $ | (1,197 | ) | $ | 10,578 | $ | 16,428 | |||||||||||||
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