CLIMATE STRATEGY & RISK MANAGMENT

Policy and Legal Risk

Policies governing climate-related issues are continuing to evolve in both the U.S. and Canada. As disclosed on page 41 of the Company’s 2023 Annual Report on Form 10-K, this includes actions that seek to address concerns over climate change, such as the enactment of climate-related regulations, policies and initiatives that seek to promote adaptation to climate change or lessen activities that contribute to the adverse effects of climate change.

Internationally, this has resulted in existing and pending international agreements to reduce GHG emissions globally, while in the U.S. and Canada, this has resulted in both national, regional and local legislation and regulatory programs.

Ovintiv actively participates in public policy development with federal, provincial, state and local levels in the U.S. and Canada to support effective policies governing responsible energy development in North America. We account for an escalation of our Canadian carbon tax costs in our planning and budgeting processes. We also run scenarios to determine how a U.S. implementation would impact our cost structures.

Market Risk

Shifts in supply and demand for certain commodities, including oil and natural gas (and associated products) due to concerns over climate change could affect markets. As identified on page 42 of the Company’s 2023 Annual Report on Form 10-K, lower demand for oil and natural gas or increased demand for lower-emission products and services could result in lower prices and lower revenues.

We use scenario planning to better predict the risks associated with future commodity prices. We utilize a range of prices that represent varying levels of supply and demand for our products. As a leading operator with more than a decade of high-quality drilling locations and a deep commitment to capital discipline, we are positioned to deliver competitive returns to our shareholders through our focus on execution, disciplined capital allocation, responsible operations, and leading capital efficiency.

Reputational Risk

Our 2023 Annual Report on Form 10-K (page 42) disclosed that public attention to issues concerning climate change, and the role of human activity in it, continues to increase, with the oil and natural gas industry receiving heightened scrutiny regarding GHG emissions. These changing perceptions could lower demand for our oil and natural gas production, resulting in lower prices and lower revenues as consumers avoid carbon-intensive industries and could also pressure banks and investment managers to shift investments and reduce lending.

We monitor policy developments and engage with industry working groups and governments to provide input and advocate for policies supportive of emissions reductions initiatives. We participate in regular outreach programs with our investors and lenders and work to address their questions.

Technology Risk

The development and deployment of alternative energy sources and emerging technologies in renewable energy, battery storage and energy efficiency could lower demand for oil and natural gas and as stated in our 2023 Annual Report on Form 10-K (page 42), could potentially result in decreased revenues within the oil and natural gas industry and accelerate alternative energy technology.

We are continuously pursuing opportunities to collaborate on new emissions reduction technology and have established an Emissions Performance Group within the Chief Engineering Organization. This group works across disciplines within the Company to identify and evaluate operational emissions reduction opportunities, among other environmental improvements. We are also committed to understanding potential business opportunities that complement our vision and capitalize on our expertise.

Physical and Climate Risk

Adverse weather conditions such as severe heat or cold, flooding, tornados and other natural disasters could affect our operations. As identified on page 42 of our 2023 Annual Report on Form 10-K, if any such effects were to occur, they could adversely affect or delay demand for the oil or natural gas produced or cause us to incur significant costs in preparing for or responding to the effects of climatic events themselves.

The identification, analysis and mitigation strategy of climate-related risk is incorporated into our risk practices. We also have operational practices in place, including an emergency management incident response process that helps to manage risk associated with severe weather events. We continue to identify and pilot new technology, equipment and processes to manage through events. An example of this includes the development of an environmental hazard monitoring dashboard to track a variety of weather and geological events with potential to impact our operations.

Flexibility

Our development portfolio is highly focused on short-cycle opportunities, enabling us to maintain operational flexibility at both the asset and portfolio level. This allows for rapid conversion of capital into cash flow and a high degree of agility in managing risk and responding to opportunities.

Capital Discipline

In an evolving commodities market, we have continued our track record of demonstrating capital discipline while driving efficiency and lowering costs in every part of our business. We will continue to be a leading North American operator by strategically managing our supply chain and utilizing technology and innovation to responsibly develop our assets.

Proven Experience

We have experience operating under carbon tax jurisdictions in Canada. Our corporate culture and structure promote knowledge sharing, and we expect to apply carbon tax learnings to our U.S. assets in the event of carbon tax regulation.

Innovation

Our culture of innovation encourages us to utilize technology and operational efficiencies, particularly to drive free cash flow and emissions reductions. Ovintiv closely follows technological advancements and will continue to deploy equipment proven to be effective in reducing emissions.