Ovintiv Inc.

Results of Operations

Selected Financial Information

(1)

Service revenues comprise third-party gathering and processing fees, and other revenues.

(2)

Total Operating Expenses include non-cash items such as DD&A, impairments, accretion of asset retirement obligations and long-term incentive costs. The three months ended March 31, 2026, includes non-cash ceiling test impairments of $1,485 million (2025 ‑ $730 million).

Revenues

Ovintiv’s revenues are substantially derived from sales of oil, NGLs and natural gas production. Increases or decreases in Ovintiv’s revenue, profitability and future production are highly dependent on the commodity prices the Company receives. Prices are market driven and fluctuate due to factors beyond the Company’s control, such as supply and demand, seasonality and geopolitical and economic factors. The Company’s realized prices generally reflect WTI, NYMEX, Edmonton Condensate and AECO benchmark prices, as well as other downstream benchmarks, including Houston and Dawn. The Company proactively mitigates price risk and optimizes margins by entering into firm transportation contracts to diversify market access to different sales points. Realized prices, excluding the impact of risk management activities, may differ from the benchmarks for many reasons, including quality, location, or production being sold at different market hubs.

Benchmark prices relevant to the Company are shown in the table below.

Benchmark Prices

Production Volumes and Realized Prices

(1)

Average daily.

(2)

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

(3)

Includes production impacts of acquisitions and divestitures.

Upstream Product Revenues, Excluding Realized Gains (Losses) on Risk Management

Oil Revenues

Oil revenues were lower by $49 million compared to the first quarter of 2025 primarily due to:

•

Lower average oil production volumes of 8.7 Mbbls/d decreased revenues by $55 million. Lower production volumes were primarily due to the sale of the Uinta assets during the first quarter of 2025 (5.9 Mbbls/d) and fewer wells put on production in Permian in 2026 compared to 2025 (4.5 Mbbls/d), partially offset by successful drilling in Anadarko (2.1 Mbbls/d).

NGL Revenues

NGL revenues were higher by $172 million compared to the first quarter of 2025 primarily due to:

•

Higher average plant condensate production volumes of 28.3 Mbbls/d increased revenues by $173 million. Higher production volumes were primarily due to the NuVista Acquisition during the quarter (17.4 Mbbls/d) and the Montney assets acquired in the first quarter of 2025 (7.3 Mbbls/d);

•

Higher average other NGLs production volumes of 10.9 Mbbls/d increased revenues by $25 million. Higher production volumes were primarily due to the NuVista Acquisition during the quarter (6.0 Mbbls/d) and increased associated other NGLs production in Permian (4.5 Mbbls/d);

•

An increase of $3.47 per bbl, or five percent, in the average realized plant condensate prices which increased revenues by $23 million. The increase primarily reflected higher regional pricing relative to benchmark prices in the Canadian Operations and a lower U.S./Canadian dollar foreign exchange rate; and

•

A decrease of $5.09 per bbl, or 22 percent, in the average realized other NGLs price decreased revenues by $49 million. The decrease primarily reflected lower other NGLs benchmark prices and lower regional pricing.

Natural Gas Revenues

Natural gas revenues were higher by $129 million compared to the first quarter of 2025 primarily due to:

•

Higher average natural gas production volumes of 360 MMcf/d increased revenues by $94 million. Higher production volumes were primarily due to the NuVista Acquisition during the quarter (271 MMcf/d) and the Montney assets acquired in the first quarter of 2025 (69 MMcf/d); and

•

An increase of $0.16 per Mcf, or five percent, in the average realized natural gas prices which increased revenues by $35 million. The increase reflected the higher AECO benchmark price which was up 23 percent, partially offset by lower realized price increases from exposure to other downstream benchmark prices relating to the Company’s diversified markets in the Canadian Operations.

Sales of Purchased Product

Revenues from the sale of purchased product relate to activities that provide operational flexibility and cost mitigation for transportation commitments, product type, delivery points and customer diversification within the USA and Canadian Operations segments.

Sales of purchased product revenues decreased $54 million compared to the first quarter of 2025 primarily due to:

•

Lower sales of third-party purchased liquids volumes in the USA Operations ($87 million);

•

Higher realized third-party natural gas and liquids pricing ($25 million and $6 million, respectively).

Gains (Losses) on Risk Management, Net

As a means of managing commodity price volatility, Ovintiv enters into commodity derivative financial instruments on a portion of its expected oil, NGLs and natural gas production volumes. Additional information on the Company’s commodity price positions as at March 31, 2026, can be found in Note 20 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The following tables provide the effects of the Company’s risk management activities on revenues.

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 and Canadian Operations’ revenues as the contracts are cash settled. Unrealized gains or losses on fair value changes of unsettled contracts are included in the Corporate and Other segment.

Additional information on fair value changes can be found in Note 19 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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 11 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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.

Production, mineral and other taxes decreased $8 million compared to the first quarter of 2025 primarily due to:

•

The sale of the Uinta assets during the first quarter of 2025 ($5 million).

Transportation and Processing

Transportation and processing expense includes transportation costs incurred to move product from production points to sales points including gathering, compression, pipeline tariffs, trucking and storage costs. Ovintiv also incurs costs related to processing provided by third parties or through ownership interests in processing facilities.

(1)

Includes other third-party transportation and processing fees with no associated volumes in the Canadian Operations of approximately $11 million (2025 ‑ $7 million).

Transportation and processing expense increased $73 million compared to the first quarter of 2025 primarily due to:

•

Higher production volumes due to the NuVista Acquisition during the quarter ($68 million), higher midstream transportation costs in Montney ($18 million) and a lower U.S./Canadian dollar exchange rate ($13 million);

•

A settlement related to a downstream transportation contract in the Canadian Operations ($19 million) and lower downstream transportation costs in Montney due to a third-party adjustment ($6 million).

Operating

Operating expense includes costs paid by the Company, net of amounts capitalized, on oil and natural gas properties in which Ovintiv has a working interest. These costs primarily include labor, service contract fees, chemicals, fuel, water hauling, electricity and workovers.

Operating expense increased $22 million compared to the first quarter of 2025 primarily due to:

•

Increased workover activity in Montney and Permian ($12 million), higher activity due to the NuVista Acquisition during the quarter ($8 million) and higher water disposal costs in Permian ($4 million);

•

The sale of the Uinta assets in the first quarter of 2025 ($7 million) and lower electricity costs in Permian ($4 million).

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 within the USA and Canadian Operations segments.

Purchased product expense decreased $58 million compared to the first quarter of 2025 primarily due to:

•

Lower third-party purchased liquids volumes in the USA Operations ($87 million);

•

Higher third-party natural gas and liquids purchase prices ($21 million and $6 million, respectively).

Depreciation, Depletion & Amortization

Proved properties within each country cost center are depleted using the unit-of-production method based on proved reserves as discussed in Note 1 to the Consolidated Financial Statements included in Item 8 of the 2025 Annual Report on Form 10-K. Depletion rates are impacted by impairments, acquisitions, divestitures and foreign exchange rates, as well as fluctuations in 12-month average trailing prices which affect proved reserves volumes. Corporate assets are carried at cost and depreciated on a straight-line basis over the estimated service lives of the assets.

Additional information can be found under Upstream Assets and Reserve Estimates in the Critical Accounting Estimates section of the MD&A included in Item 7 of the 2025 Annual Report on Form 10-K.

DD&A increased $16 million compared to the first quarter of 2025 primarily due to:

•

Higher production volumes in the Canadian Operations primarily due to the NuVista Acquisition during the quarter ($59 million) and a lower U.S./Canadian dollar foreign exchange rate ($8 million);

•

Lower depletion rates in the USA Operations and the Canadian Operations ($37 million and $11 million, respectively).

The upstream depletion rate in the USA Operations decreased $1.29 per BOE primarily due to a lower depletable base resulting from the sale of the Uinta assets in the first quarter of 2025. The upstream depletion rate in the Canadian Operations decreased $0.02 per BOE primarily due to a lower depletable base resulting from the ceiling test impairments recognized in the first and third quarters of 2025, partially offset by the NuVista Acquisition during the quarter.

Ceiling Test Impairment

Under full cost accounting, the carrying amount of Ovintiv’s oil and natural gas properties within each country cost center 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 the first quarter of 2026, the Company recognized before-tax non-cash ceiling test impairments of $1,485 million, comprising $1,111 million in the USA Operations and $374 million in the Canadian Operations. The non-cash ceiling test impairments primarily resulted from declines in the 12-month average trailing prices which reduced proved reserves in the USA Operations, and the 12-month average trailing prices used in the ceiling test at March 31, 2026, which were lower than the market prices used for the NuVista Acquisition on February 3, 2026, in the Canadian Operations.

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.

(1)

All prices were held constant in all future years when estimating net revenues and reserves.

Further declines in the 12‑month average trailing commodity prices could reduce proved reserves values and result in the recognition of future ceiling test impairments. Future ceiling test impairments can also result from changes to reserves estimates, future development costs, capitalized costs and unproved property costs. Proceeds received from oil and natural gas divestitures are typically deducted from the Company’s capitalized costs and can reduce the risk of ceiling test impairments.

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 Part I, Item 1 of this Quarterly Report on Form 10‑Q.

Administrative

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

(1)

Includes costs related to The Bow office lease of $29 million (2025 - $28 million), half of which is recovered from sublease revenues.

Administrative expense increased $19 million compared to the first quarter of 2025 primarily due to:

•

Transaction costs incurred related to the NuVista Acquisition during the quarter ($22 million);

•

Restructuring costs incurred in 2025 ($10 million).

In 2024, Ovintiv undertook a plan, which extended into 2025, to reduce its workforce by approximately 10 percent as part of a corporate reorganization. Additional information on restructuring charges and long-term incentive costs can be found in Notes 17 and 18 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Other (Income) Expenses

Interest

Interest expense primarily includes interest on Ovintiv’s short-term and long-term debt. Additional information on changes in interest and long-term debt can be found in Notes 5 and 12, respectively, to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Interest expense increased $7 million compared to the first quarter of 2025 primarily due to:

•

Higher interest expense on short-term borrowings and the Term Credit Agreement ($16 million);

•

Lower interest expense resulting from the repayment of the Company’s $459 million senior notes during the quarter and its $600 million senior notes in the second quarter of 2025 ($15 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 6 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Additional information on foreign exchange rates and the effects of foreign exchange rate changes can be found in Part I, Item 3 of this Quarterly Report on Form 10-Q.

Net foreign exchange gain of $2 million compared to a loss of $10 million during the first quarter of 2025 primarily due to:

•

Realized foreign exchange losses on the settlement of U.S. dollar risk management contracts issued from Canada in 2025 ($98 million) and unrealized foreign exchange losses on the translation of intercompany notes in 2025 ($42 million);

•

Lower unrealized foreign exchange gains on the translation of U.S. dollar risk management contracts issued from Canada ($86 million) and lower realized foreign exchange gains on the settlement of intercompany notes ($41 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 and adjustments related to other assets.

In the first quarter of 2026, the Company recognized a gain of approximately $25 million resulting from the fair value remeasurement of the previously acquired 18.5 million NuVista common shares in conjunction with the closing of the NuVista Acquisition.

Income Tax

During the first quarter of 2026, the current income tax expense of $13 million was lower than 2025 primarily due to recently enacted Canadian legislation that accelerates capital cost recovery and favorable changes in the calculation of Corporate Alternative Minimum Tax in the U.S.

During the first quarter of 2026, the deferred income tax recovery of $210 million was higher than 2025, primarily due to the impact of the non-cash ceiling test impairment recognized in the U.S. in 2026, partially offset by Canadian deferred tax expense.

The determination of income and other tax liabilities of the Company and its subsidiaries requires interpretation of complex domestic and foreign tax laws and regulations, that are subject to change. The Company’s interpretation of tax laws may differ from the interpretation of the tax authorities. As a result, there are tax matters under review for which the timing of resolution is uncertain. The Company believes that the provision for income taxes is adequate.

Additional information on income taxes can be found in Note 7 to the Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.