Ovintiv Inc

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 and capital allocation framework or to manage its capital structure as discussed below. At December 31, 2024, $38 million in cash and cash equivalents was held by Canadian subsidiaries. The cash held by Canadian subsidiaries is accessible and may be subject to additional U.S. income taxes and Canadian withholding taxes if repatriated.

The Company’s capital structure consists of total shareholders’ equity plus long-term debt, including any current portion. The Company’s objectives when managing its capital structure are to maintain financial flexibility to preserve Ovintiv’s access to capital markets and its ability to meet financial obligations and finance internally generated growth, as well as potential acquisitions. Ovintiv has a practice of maintaining capital discipline and strategically managing its capital structure by adjusting capital spending, adjusting dividends paid to shareholders, issuing new shares of common stock, purchasing shares of common stock for cancellation or return to treasury, issuing new debt and repaying or repurchasing existing debt.

(1)

Includes three uncommitted demand lines totaling $295 million, net of $204 million in related undrawn letters of credit (2023 - $289 million and $55 million, respectively).

(2)

These measures are defined in the Non-GAAP Measures section of this MD&A.

In December 2024, the Company renewed its committed revolving credit facilities, extending the maturity dates to December 2029. The Company continues to have full access to two committed revolving U.S. dollar denominated credit facilities totaling $3.5 billion, which include a $2.2 billion revolving credit facility for Ovintiv Inc. and a $1.3 billion revolving credit facility for a Canadian subsidiary (collectively, the “Credit Facilities”). The Credit Facilities provide financial flexibility and allow the Company to fund its operations or capital investment program. At December 31, 2024, there were no outstanding amounts under the revolving Credit Facilities.

Depending on the Company’s credit rating and market demand, the Company may issue from its two U.S. commercial paper (“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, 2024, the Company had no balance outstanding under its U.S. CP program. All of Ovintiv’s credit ratings are investment grade as at December 31, 2024 and were reaffirmed following the announcement of the Montney Acquisition.

As at December 31, 2024, the available Credit Facilities, uncommitted demand lines, and cash and cash equivalents provide Ovintiv with total liquidity of approximately $3.6 billion. Ovintiv also had approximately $204 million in undrawn letters of credit issued in the normal course of business as collateral security, primarily related to sales arrangements.

On December 10, 2024, to facilitate its previously announced Montney Acquisition, the Company entered into two term facilities which consist of a $1.5 billion 364-day Asset Sale Term Facility and a $1.0 billion 2-year Term Facility. As at December 31, 2024, the Company had no outstanding borrowings under the two term facilities.

On January 22, 2025, the Company closed its previously announced Uinta divestiture and received net proceeds of approximately $2.0 billion which was used to fund the majority of the Montney Acquisition as discussed above. In conjunction with the closing of the Uinta divestiture, the 364-day Asset Sale Term Facility was terminated.

On January 31, 2025, the Company closed its Montney Acquisition. Ovintiv funded the Montney Acquisition through a combination of cash proceeds received from the sale of the Uinta assets, cash on hand, as well as short-term borrowings. Following the closing of the Montney Acquisition, the 2-year Term Facility was terminated.

Additional information on the term facilities, and the Uinta divestiture and Montney Acquisition can be found in Notes 15 and 28, respectively, to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Ovintiv has a U.S. shelf registration statement under which the Company may issue from time to time, debt securities, common stock, preferred stock, warrants, units, share purchase contracts and share purchase units in the U.S. The U.S. shelf registration statement expires in March 2026.

The obligations under the Company’s existing debt securities are fully and unconditionally guaranteed on a senior unsecured basis by Ovintiv Canada ULC, an indirect wholly-owned subsidiary of the Company. Additional information on the Company’s Canadian Operations segment and the Bow office lease can be found in the Results of Operations section in this MD&A and in the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Ovintiv is currently 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, 2024, the Company’s Debt to Adjusted Capitalization was 23 percent. The definitions used in the covenant under the Credit Facilities adjust capitalization for cumulative historical ceiling test impairments recorded in conjunction with the Company’s January 1, 2012 adoption of U.S. GAAP. Additional information on financial covenants can be found in Note 15 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Sources and Uses of Cash

The following table summarizes the sources and uses of the Company’s cash and cash equivalents.

Operating Activities

Net cash from operating activities in 2024 was $3,721 million and was primarily a reflection of the impacts from average realized commodity prices, production volumes, changes in non‑cash working capital and realized gains/losses on risk management.

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 2024 was $4,042 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.

Net cash from operating activities decreased $446 million compared to 2023 primarily due to:

•

Lower realized commodity prices ($797 million), changes in non-cash working capital ($577 million), higher operating expense, excluding non-cash long-term incentive costs ($80 million) and higher interest expense ($56 million);

•

Higher production volumes ($343 million), realized gains on risk management in revenues compared to losses in 2023 ($314 million), a decrease in current income tax expense ($199 million), lower transportation and processing expense ($127 million), and lower administrative expense, excluding non-cash long-term incentive costs ($58 million).

Investing Activities

The Company’s primary investing activities are capital expenditures, acquisitions and proceeds from divestitures, which are summarized in Notes 2 and 8 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10‑K.

2024 and 2023

Net cash used in investing activities in 2024 was $2,457 million primarily due to capital expenditures and acquisitions in the USA Operations. Capital expenditures decreased $441 million compared to 2023 primarily due to decreased completions activity in Montney, Anadarko and Permian, drilling efficiencies in Uinta, and the sale of the Bakken assets in the second quarter of 2023, partially offset by increased capital inventory.

Acquisitions in 2024 were $205 million, which primarily included property purchases with oil and liquids-rich potential in the USA Operations (2023 - $277 million).

Corporate acquisitions in 2024 included the final cash settlements of $12 million related to the Permian Acquisition in the second quarter of 2023. Corporate acquisitions in 2023 were $3,225 million, which related to the Permian Acquisition. Additional information regarding the Permian Acquisition can be found in Note 9 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Proceeds from divestitures in 2024 were $7 million, which included certain properties that did not complement Ovintiv’s existing portfolio of assets. Proceeds from divestitures also included total net settlement proceeds of approximately $156 million related to the previous dispositions of certain legacy assets. Divestitures in 2023 were $772 million, which primarily included the sale of the Bakken assets in North Dakota and certain properties that did not complement Ovintiv’s existing portfolio of assets.

Financing Activities

Net cash from and/or used in financing activities has been impacted by Ovintiv’s strategic objective to return value to shareholders by repaying existing debt, purchasing shares of common stock and paying dividends.

Net cash used in financing activities in 2024 was $1,231 million compared to net cash from financing activities of $1,359 million in 2023. The change was primarily due to the net issuance of long-term debt in 2023 of $2,278 million, increased net repayment of revolving debt ($175 million) and increased purchases of shares of common stock in 2024 compared to 2023 ($171 million).

The Company’s long-term debt, including the current portion of $600 million, totaled $5,453 million at December 31, 2024. The Company has $600 million of fixed rate long-term debt due in May 2025 and expects to have a total long-term debt balance of less than $5.0 billion by the end of 2025. The Company’s long-term debt at December 31, 2023 totaled $5,737 million, including the current portion of $284 million.

In support of the Company’s commitment to enhancing shareholder value, Ovintiv utilizes its capital allocation framework to provide competitive returns to shareholders while strengthening its balance sheet. In conjunction with the announced transactions as discussed in the Significant Developments and Subsequent Events section of this MD&A, the Company has temporarily paused its share buyback program, starting in October 2024, and expects to resume the buybacks in the second quarter of 2025. Dividends declared and paid by the Company are expected to remain unchanged.

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.

Dividends

The Company pays quarterly dividends to common shareholders at the discretion of the Board of Directors.

On February 26, 2025, the Board of Directors declared a dividend of $0.30 per share of common stock payable on March 31, 2025 to common shareholders of record as of March 14, 2025.

Dividends increased $9 million compared to 2023 as a result of Ovintiv increasing its annualized dividend to $1.20 per share of common stock in the second quarter of 2023. The dividend increase reflects the Company’s commitment to returning capital to shareholders.

Normal Course Issuer Bid

On September 26, 2024, the Company announced it had received regulatory approval for the renewal of its NCIB program, which enables the Company to purchase, for cancellation or return to treasury, up to approximately 25.9 million shares of common stock over a 12-month period from October 3, 2024 to October 2, 2025. The number of shares authorized for purchase represents 10 percent of Ovintiv’s public float as at September 20, 2024. The Company expects to execute the renewed NCIB program in conjunction with its capital allocation framework in the second quarter of 2025.

During 2024, the Company purchased for cancellation, approximately 12.7 million shares of common stock for total consideration of approximately $597 million.

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.

Material Cash Requirements

Ovintiv’s material cash requirements include various contractual obligations arising from long-term debt, operating leases, risk management liabilities and asset retirement obligations which are recognized in the Company’s Consolidated Balance Sheet. The Company expects to fund long-term material cash requirements primarily with cash from operating activities.

Interest payments include scheduled cash payments on finance leases, long-term debt, and other obligations. Additional information can be found in Notes 14 and 15 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Operating leases include drilling rigs, compressors, office and buildings, certain land easements and various equipment utilized in the development and production of oil, NGLs and natural gas, as well as The Bow building. As at December 31, 2024, the Company subleased approximately 50 percent of The Bow office space under the lease agreement. 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.

Risk management liabilities represent Ovintiv’s net liability positions 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.

Contractual commitments relating to transportation and processing commitments, and drilling and field services can be found in Note 27 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10‑K.

Further to the commitments discussed above, Ovintiv also has various obligations that become payable if certain future events occur relating to take or pay arrangements and payout of minimum costs as described in Notes 20 and 27 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

In addition, the Company has obligations to fund the disposal of long-lived assets upon their abandonment as well as its obligations to fund its defined benefit pension and other post-employment benefit plans as described in Notes 17 and 23, respectively, to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10‑K.

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.

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.