SEC Form 11-K filed by Ovintiv Inc. (DE)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 11-K

 

 

FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE,

SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

☒	Annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2023

OR

 

☐	Transition report pursuant to Section 15(d) of the Securities Exchange Act of 1934

For the transition period from _______________ to _______________

Commission File Number: 001-39191

 

 

 

A.	Full title of the plan and the address of the plan, if different from that of the issuer named below:

OVINTIV U.S. RETIREMENT PLAN

370 17^th Street, Suite 1700

Denver, CO 80202

U.S.A.

 

B.	Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

OVINTIV INC.

370 17^th Street, Suite 1700

Denver, CO 80202

U.S.A.

 

 

 

Ovintiv U.S. Retirement Plan

Financial Statements

and

Report of Independent Registered Public Accounting Firm

December 31, 2023 and 2022

Table of Contents

 

		Page
Report of Independent Registered Public Accounting Firm			3
Financial Statements
Statements of Net Assets Available for Benefits			4
Statement of Changes in Net Assets Available for Benefits			5
Notes to Financial Statements			6
Supplemental Schedules
Schedule H, Part IV, Line 4i – Schedule of Assets (Held at End of Year)			14

 

2

Report of Independent Registered Public Accounting Firm

To the Management Pension and Benefits Committee and Plan Participants

Ovintiv U.S. Retirement Plan

Opinion on the Financial Statements

We have audited the accompanying statement of net assets available for benefits of Ovintiv U.S. Retirement Plan (the “Plan”) as of December 31, 2023 and 2022; the related statement of changes in net assets available for benefits for the year ended December 31, 2023; and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the net assets of the Plan as of December 31, 2023 and 2022 and the changes in its net assets for the year ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis of Opinion

The Plan’s management is responsible for these financial statements. Our responsibility is to express an opinion on the Plan’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Supplemental Information

The supplemental information in the accompanying schedule of assets held (at end of year) as of December 31, 2023 has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with Department of Labor’s Rules and Regulations for Reporting under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole.

 

/s/ Plante & Moran, PLLC

We have served as the Plan’s auditor since 2010.

Broomfield, Colorado

June 27, 2024

 

3

OVINTIV U.S. RETIREMENT PLAN

 

Statements of Net Assets Available for Benefits

 

						As at December 31,
						2023				2022
Assets
Investments, at fair value			(Note 2	)
Mutual funds						$	194,322,311			$	151,533,257
Pooled separate accounts							33,412,446				27,290,112
Common collective trust funds							180,776,803				169,398,459
Ovintiv common stock							50,220,976				64,374,191
Total investments, at fair value							458,732.536				412,596,019
Common collective trust funds, at net asset value							44,283,167				36,571,934
Receivables
Participant notes receivable							2,607,697				2,727,671
Net assets available for benefits						$	505,623,400			$	451,895,624

See accompanying Notes to Financial Statements

 

4

OVINTIV U.S. RETIREMENT PLAN

 

Statement of Changes in Net Assets Available for Benefits

For the Year Ended December 31, 2023

 

Investment income
Net realized and unrealized gains on investments		$	60,925,282
Dividend income			4,729,020
Total investment income - Net			65,654,302
Interest income
Interest income from participant notes receivable			159,680
Contributions
Employer			18,779,945
Employee			13,446,536
Rollover			5,088,422
Total contributions			37,314,903
Deductions
Participant withdrawals and benefit payments			49,194,419
Administrative fees			206,690
Total deductions			49,401,109
Net increase		$	53,727,776
Net assets available for benefits
Beginning of year		$	451,895,624
End of year		$	505,623,400

See accompanying Notes to Financial Statements

 

5

OVINTIV U.S. RETIREMENT PLAN

Notes to Financial Statements

1. Description of the Retirement Plan and Significant Accounting Policies

The following description of the Ovintiv U.S. Retirement Plan (the “Plan”) provides only general information. Participants and all others should refer to the Plan document for a more complete description of the Plan’s provisions.

A) General

On January 24, 2020, Encana Corporation (“Encana”) completed a corporate reorganization (the “Reorganization”). As a result of the Reorganization, Ovintiv became the parent company of Encana and its subsidiaries, including Ovintiv Services Inc., which at the time served as the sponsor of the Plan. Ovintiv and its subsidiaries continue to carry on the business previously conducted by Encana and its subsidiaries prior to the completion of the Reorganization. On January 1, 2021, in connection with a corporate reorganization, Ovintiv Services Inc. transferred sponsorship of the Plan to Ovintiv USA Inc. (the “Company”).

The Plan is a defined-contribution plan established on September 1, 1999, under which employer contributions are based on a fixed formula that is not related to profits and that is designated as a pension plan by the Company. All employees of Ovintiv USA Inc. and Ovintiv who reside in the United States of America (“U.S.”) are eligible to participate in the Plan. The Plan includes immediate participant eligibility, automatic enrollment at 5% of participant compensation, the option for a participant to contribute using a percentage or flat dollar election and the option for a participant to elect to receive dividends in cash or reinvest in additional shares. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

The Management Pension and Benefits Committee provides oversight for the Plan. Principal Trust Company (“Principal”) serves as the trustee, manages Plan assets and maintains the Plan’s records. Principal offers the Plan’s participants a variety of investment options. Individual accounts are invested in the various investment options at the direction of the participant.

 

6

OVINTIV U.S. RETIREMENT PLAN

 

B) Contributions

Participants may make before-tax and after-tax contributions up to 75% of their annual compensation not to exceed limits set by the U.S. Internal Revenue Service (the “IRS”), which are adjusted annually by the U.S. Secretary of Treasury for inflation. This maximum percentage may be reduced by the Plan administrator in certain circumstances. The Plan also permits rollover contributions from other qualified retirement plans. Participant contributions to the Plan are made through regular payroll deductions, catch-up contributions, and Roth contributions, which are after-tax contributions tracked in a separate account but subject to the same limitations set forth under the Plan.

The Company will make a safe harbor matching contribution of 100% of elective deferrals up to 5% of eligible compensation each period, which is initially invested in shares of Ovintiv common stock and after that, participants may invest at their direction. In addition, the Company will make a contribution of 8% of eligible compensation each pay period, invested at the direction of the participants (except that these funds generally cannot be invested in shares of Ovintiv common stock).

C) Participants’ Accounts

Each participant’s account is credited with the participant’s contribution and an allocation of the Company’s contribution, Plan earnings or losses, forfeitures, and an allocation of Plan expenses. Allocations are based upon Plan earnings or losses and account balances, as defined. The benefit to which a participant is entitled is the vested portion of the participant’s account.

D) Vesting

Participants are vested immediately in their contributions plus actual earnings or losses thereon. Participants also have full and immediate vesting in the Company’s 5% safe harbor matching contribution portion of their accounts. Participants are generally fully vested in the Company’s 8% contribution after three years of service, and at disability, death or attainment of early retirement age under the Plan.

E) Participant Notes Receivable

Participants may borrow from their account a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. The notes are secured by the balance in the participant’s account and bear an interest rate between 4.25% to 9.50%, equal to one percent over the prime rate published in the Wall Street Journal on the first business day of the month in which the note is requested. The notes mature at various dates through 2037. The principal and interest are paid ratably through payroll deductions. Participant notes are recorded in the financial statements at amortized cost plus accrued interest. Participant notes receivable are written off when deemed uncollectible.

F) Payments of Benefits

Upon termination of service, a participant may receive the value of the vested account balance as a lump-sum distribution or, at the participant’s election, in partial payments in cash, periodic installment payments, or in an annuity form of payment. Accounts with balances less than $1,000 will be distributed in a cash lump sum. Benefits are recorded as distributions to participants when paid.

 

7

OVINTIV U.S. RETIREMENT PLAN

 

G) Participant Termination and Forfeitures

Forfeitures occur when a participant terminates employment prior to satisfying the service years required to become vested in the 8% contribution made by the Company. Forfeitures can be used to pay Plan expenses or reduce employer contributions. As of December 31, 2023, and 2022, forfeiture balances were $3,417 and $0, respectively. For the year ended December 31, 2023, $204,552 of forfeitures were used to reduce employer contributions and $120,235 of forfeitures were used to reduce administrative expenses.

H) Valuation of Investments and Income Recognition

Investments are recorded at fair value or net asset value (“NAV”) for common collective trust funds as reported to the Plan by the trustee. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 2 for discussion of fair value measurements.

The net realized and unrealized gain or loss on investments (net appreciation or depreciation in fair value of investments) is reflected in the accompanying statement of changes in net assets available for benefits and is determined as the difference between fair value at the beginning of the year (or date purchased if during the year) and selling price (if sold during the year) or year-end fair value. Purchase and sales of investments are recorded on a trade-date basis. Interest income is recognized on the accrual basis. Dividends are recognized on the ex-dividend date.

I) Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires the Plan administrator to make informed estimates and assumptions and use judgements that affect certain reported amounts and disclosures. Accordingly, actual results could differ from estimated amounts.

J) Risk and Uncertainties

The Plan provides for various investments that, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risks. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the value of investments will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits.

Additionally, some investments held by Principal are invested in the securities of foreign companies, which involve certain risks and considerations not typically associated with investing in U.S. companies. These risks include devaluation of currencies, less reliable information about issuers, different securities transaction clearance and settlement practices, and possible adverse political and economic developments. Moreover, securities of many foreign companies and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies.

 

8

OVINTIV U.S. RETIREMENT PLAN

 

2. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques include the market, income and cost approach. The market approach uses information generated by market transactions involving identical or comparable assets or liabilities; the income approach converts estimated future amounts to a present value; the cost approach is based on the amount that currently would be required to replace an asset.

Inputs used in determining fair value are characterized according to a hierarchy that prioritizes those inputs based on the degree to which they are observable. The three input levels of the fair value hierarchy are as follows:

 

In determining fair value, the Plan utilizes the most observable inputs available. If a fair value measurement reflects inputs at multiple levels within the hierarchy, fair value measurement is characterized based on the lowest level of input that is significant to the fair value measurement.

The following is a description of the valuation methodologies used for the investments measured at fair value. There have been no changes in the methodologies used at December 31, 2023 and 2022.

Mutual funds:

Mutual funds are valued at the daily closing price as reported by the fund. All of the mutual funds are funds with quoted daily prices that are directly observable in the marketplace by market participants.

 

9

OVINTIV U.S. RETIREMENT PLAN

 

Common collective trust funds:

The Principal Stable Value Fund, held in a common collective trust fund, invests in conventional and synthetic guaranteed investment contracts (“GICs”) issued by life insurance companies, banks and other financial institutions with excess cash invested in cash equivalents. These investments are valued at their NAV per share as of the close of business on the valuation date as a practical expedient for the estimated fair value. The NAV is quoted on a private market that is not active; however, the unit price is based on the value of the underlying investment assets owned by the fund, minus its liabilities, and then divided by the number of shares outstanding. The NAV for the Stable Value Fund is based on the contract value of fully benefit-responsive contracts, conventional and synthetic GICs, which represents invested principal plus accrued interest thereon. The Stable Value Fund seeks to provide preservation of capital and relatively stable returns regardless of the volatility of the financial markets.

The Nuveen Lifecycle Index Funds, held in a common collective trust fund, invests in equity, fixed income, and direct real estate. These funds are characterized at fair value hierarchy level 2 as they are readily determinable based on the underlying mutual funds. The Nuveen Lifecycle Index Funds seek high total return over time through a combination of capital appreciation and income.

The Great Gray Funds other than the EuroPacific Trust Class I1 Fund, held in a common collective trust fund, invests in equity securities of mid and small cap U.S. companies. Equity securities include common and preferred stocks, as well as convertible securities. These investments are valued at their NAV per unit as of the close of trading on the New York Stock Exchange each day. The NAV is based on the total value of the Great Gray Fund’s assets, minus its liabilities, and then divided by the number of units outstanding. The Great Gray Funds seek to provide long-term capital appreciation.

The Great Gray Funds also include the Great Gray EuroPacific Growth Trust Class I1 Funds. These funds seek long-term capital growth by investing in a fund that is consistent with the international equity investment style. To achieve this objective, the Great Gray EuroPacific Growth Trust Class I1 Fund is invested in the Capital Group EuroPacific Growth Trust, a collective investment trust maintained by the Capital Bank and Trust Company. The NAV per unit for the Great Gray EuroPacific Growth Trust Class I1 Funds are valued as of the close of trading on the New York Stock Exchange. The NAV is based on the total fair value of the assets, minus its liabilities, and then divided by the total number of units outstanding. Investment income earned is reinvested in the Great Gray EuroPacific Growth Trust Class I1 Fund and included in the determination of unit values.

The Great Gray Funds, including the EuroPacific Trust Class I1 Fund, are valued at the NAV of the units held by the Plan. NAV would not be used if it is determined to be probable that the fund will sell the investment for an amount different from the reported NAV.

There are no significant redemption restrictions or unfunded commitments on these investments.

Pooled separate accounts:

Investments in a pooled separate account (“PSA”) are valued on a per unit market value as determined by the Principal, which reflects the fair value of the underlying investments comprising the separate pooled funds. The majority of the underlying net assets have observable Level 1 quoted pricing inputs which are used to determine the unit value of the PSA which is not publicly quoted but available to investors through accessing their online balances. These PSAs are classified as Level 1.

 

10

OVINTIV U.S. RETIREMENT PLAN

 

Investments in this category can be transferred once every 30 days at the current NAV per share based on the fair value of the underlying assets. Participants are not allowed to transfer back into this category until the holding period elapses. New contributions are allowed during this time period.

There are no significant redemption restrictions or unfunded commitments on these investments.

Ovintiv common stock:

Investments in shares of Ovintiv common stock are valued at the closing price of such shares of Ovintiv common stock reported on the active market on which the securities are traded.

Fair Value

 

As at December 31, 2023
Description		Level 1				Level 2				Level 3				Total
Mutual funds		$	194,322,311			$	—			$	—			$	194,322,311
Pooled separate accounts			33,412,446				—				—				33,412,446
Common collective trust funds			—				180,776,803				—				180,776,803
Ovintiv common stock			50,220,976				—				—				50,220,976
		$	277,955,733			$	180,776,803			$	—			$	458,732,536
Common collective trust funds (net asset value*)															44,283,167
Total														$	503,015,703
As at December 31, 2022
Description		Level 1				Level 2				Level 3				Total
Mutual funds		$	151,533,257			$	—			$	—			$	151,533,257
Pooled separate accounts			27,290,112				—				—				27,290,112
Common collective trust funds			—				169,398,459				—				169,398,459
Ovintiv common stock			64,374,191				—				—				64,374,191
		$	243,197,560			$	169,398,459			$	—			$	412,596,019
Common collective trust funds (net asset value*)															36,571,934
Total														$	449,167,953

 

*

In accordance with Subtopic 820-10, certain investments that were measured at net asset value per share have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statement of net assets available for benefits.

 

11

OVINTIV U.S. RETIREMENT PLAN

 

3. Income Taxes

The Plan obtained a favorable opinion letter, dated April 27, 2023, from the IRS as to the qualified status of the Plan. The Plan has not been amended since that date therefore, the Plan administrator believes that the Plan continues to be operated and administered in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provisions for income tax have been included in the Plan financial statements. The plan administrator believes it is no longer subject to tax examinations for years prior to 2015.

4. Administration of the Plan

The Company provides, at no cost to the Plan, certain administrative, accounting, and legal services to the Plan and pays the cost of certain outside services for the Plan.

5. Plan Termination

Although it has not expressed any intent to do so, the Company has the right under the Plan to terminate the Plan subject to the provisions of ERISA. If the Plan is terminated for any reason, all participants become 100% vested and the Plan administrator is to distribute each participant’s interest to the participant or their beneficiary.

6. Party-in-Interest Transactions

Certain Plan investments are managed by Principal or its affiliates. Principal is the Trustee as defined by the Plan and these transactions qualify as party-in-interest transactions. Fees paid by the Plan for the investment management services were included as a reduction of the return earned on each fund.

The Plan allows participants to invest in Ovintiv common stock. As the Company is the sponsoring entity of the Plan, the common shares qualify as party-in-interest transactions. For the year ended December 31, 2023, transactions involving the Company’s stock included sales of approximately $15,097,658 and purchases of approximately $8,930,145.

The Company pays certain expenses on behalf of the plan. These transactions qualify as party-in-interest transactions. 

7. Concentration of Investments

As of December 31, 2023, the Plan held $80,367,879 in the Fidelity 500 Index Fund, which was approximately 16% of total investments. As of December 31, 2022, the Plan held $57,389,727 in the Fidelity 500 Index Fund, which was approximately 13% of total investments. The net assets available for benefits would be sensitive to any changes in the value of Fidelity 500 Index Fund. The Fidelity 500 Index Fund seeks to provide investment results that correspond to the total return performance of common stocks included in the S&P 500 index and would be subject to stock market risk, which is the chance that stock prices overall will decline.

 

12

OVINTIV U.S. RETIREMENT PLAN

 

SUPPLEMENTAL SCHEDULES

 

13

OVINTIV U.S. RETIREMENT PLAN

 

Schedule H, Part IV, Line 4i - Schedule of Assets (Held at End of Year)

As of December 31, 2023

 

(a)   (b) Identity of Issuer, Borrower, Lessor or Similar Party		(c) Description of Investment, Including Maturity Date, Rate of Interest, Collateral, Par, or Maturity Value		(e) Current Value
Fidelity 500 Index		Mutual Fund		$	80,367,879
Vanguard Windsor II Fund - Admiral		Mutual Fund			23,738,530
Fidelity Small Cap Index Fund		Mutual Fund			20,995,069
Fidelity International Index Fund		Mutual Fund			17,558,009
Fidelity US Bond Index Fund		Mutual Fund			15,912,701
Fidelity Mid Cap Index Fund		Mutual Fund			15,759,657
PIMCO Total Return Fund Class A		Mutual Fund			6,065,225
Fidelity Emerging Markets Index Fund		Mutual Fund			5,675,330
T. Rowe Price Int U.S. Small-Cap Growth Equity Instl		Mutual Fund			4,836,241
Columbia Strategic Income Advisor Fund		Mutual Fund			1,900,677
PIMCO Global Bond (Unhedged) I Fund		Mutual Fund			1,512,993
Total mutual funds				$	194,322,311
*   Principal Large Cap Growth I Separate Account		Pooled Separate Accounts		$	28,758,486
*   Principal Real Estate Securities Separate Account		Pooled Separate Accounts			4,653,960
Pooled separate accounts				$	33,412,446
Nuveen TIAA-CREF Lifecycle Index 2050		Common Collective Trust Fund		$	43,302,759
Nuveen TIAA-CREF Lifecycle Index 2040		Common Collective Trust Fund			32,071,803
Nuveen TIAA-CREF Lifecycle Index 2045		Common Collective Trust Fund			29,425,384
*   Principal Stable Value Z Fund		Common Collective Trust Fund			24,156,305
Nuveen TIAA-CREF Lifecycle Index 2030		Common Collective Trust Fund			19,725,690
Nuveen TIAA-CREF Lifecycle Index 2035		Common Collective Trust Fund			15,775,740
Nuveen TIAA-CREF Lifecycle Index 2055		Common Collective Trust Fund			14,891,932
Great Gray EuroPacific Growth Trust Class I1		Common Collective Trust Fund			11,522,259
Nuveen TIAA-CREF Lifecycle Index 2025		Common Collective Trust Fund			9,299,245
Nuveen TIAA-CREF Lifecycle Index 2020		Common Collective Trust Fund			6,261,738
Nuveen TIAA-CREF Lifecycle Index 2060		Common Collective Trust Fund			5,392,451
Great Gray Mid Cap Growth I1 Fund		Common Collective Trust Fund			5,230,920
Great Gray Small Cap Value II I1 Fund		Common Collective Trust Fund			1,922,157
Great Gray Mid Cap Value I1 Fund		Common Collective Trust Fund			1,451,526
Nuveen TIAA-CREF Lifecycle Index 2010		Common Collective Trust Fund			1,446,638
Nuveen TIAA-CREF Lifecycle Index 2065		Common Collective Trust Fund			1,390,115
Nuveen TIAA-CREF Lifecycle Index 2015		Common Collective Trust Fund			1,290,709
Nuveen TIAA-CREF Lifecycle Index		Common Collective Trust Fund			502,599
Total common collective trust funds				$	225,059,970
*   Ovintiv common stock		Common Stock		$	50,220,976
Total common stock				$	50,220,976
*   Participant notes receivable		4.25% - 9.50% with maturities through 2037, collateralized by participant vested balances		$	2,607,697
Total loans receivable				$	2,607,697
				$	505,623,400

 

*	Party-in-interest

 

14

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Management Pension & Benefits Committee, as administrator of the Ovintiv U.S. Retirement Plan, has duly caused this annual report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

				OVINTIV U.S. RETIREMENT PLAN
Date: June 27, 2024				By:		/s/ Elizabeth Whillock
				Name:		Elizabeth Whillock
				Title:		Management Pension & Benefits Committee Member

Form 11-K Exhibit Index

 

Exhibit No.
23.1		Consent of Plante & Moran, PLLC