v3.26.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements

19.

Fair Value Measurements

The fair values of cash and cash equivalents, accounts receivable and accrued revenues, and accounts payable and accrued liabilities approximate their carrying amounts due to the short-term maturity of those instruments. The fair values of investment in marketable securities, and restricted cash and other marketable securities included in other assets approximate their carrying amounts due to the nature of the instruments held.

Recurring fair value measurements are performed for risk management assets and liabilities, as discussed further in Note 20. These items are carried at fair value in the Condensed Consolidated Balance Sheet and are classified within the three levels of the fair value hierarchy in the following tables.

Fair value changes and settlements for amounts related to risk management assets and liabilities are recognized in revenues and foreign exchange gains and losses according to their purpose.

 

As at March 31, 2026

 

Level 1
Quoted
Prices in
Active
Markets

 

 

Level 2
Other
Observable
Inputs

 

Level 3
Significant
Unobservable
Inputs

 

 

Total Fair
Value

 

 

Netting (1)

 

 

Carrying
Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Management Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

$

-

 

 

$

263

 

 

$

-

 

 

$

263

 

 

$

(37

)

 

$

226

 

Long-term assets

 

 

-

 

 

 

153

 

 

 

27

 

 

 

180

 

 

 

-

 

 

 

180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Management Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

5

 

 

$

273

 

 

$

-

 

 

$

278

 

 

$

(37

)

 

$

241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at December 31, 2025

 

Level 1
Quoted
Prices in
Active
Markets

 

 

Level 2
Other
Observable
Inputs

 

Level 3
Significant
Unobservable
Inputs

 

 

Total Fair
Value

 

 

Netting (1)

 

 

Carrying
Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Management Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

$

-

 

 

$

87

 

 

$

-

 

 

$

87

 

 

$

(1

)

 

$

86

 

Long-term assets

 

 

-

 

 

 

3

 

 

 

1

 

 

 

4

 

 

 

-

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Management Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity Derivatives:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

$

-

 

 

$

3

 

 

$

-

 

 

$

3

 

 

$

(1

)

 

$

2

 

Long-term liabilities

 

 

-

 

 

 

13

 

 

 

-

 

 

 

13

 

 

 

-

 

 

 

13

 

 

(1)
Netting to offset derivative assets and liabilities where the legal right and intention to offset exists, or where counterparty master netting arrangements contain provisions for net settlement.

 

The Company’s Level 1 and Level 2 risk management assets and liabilities include contracts with terms to 2033, consisting of commodity fixed price contracts, three-way options, costless collars, basis swaps and physical forward contracts receiving a percentage of the Japan Korea Marker (“JKM”) index price. The Company uses discounted cash flow and option-pricing models for fair valuing commodity derivatives. The fair value models use inputs such as contracted notional volumes, market future prices, maturities, credit adjusted risk free rates, and market-based implied volatility factors. The fair values of these contracts are estimated using inputs which are either directly or indirectly observable from active markets, such as exchange and other published prices, broker quotes and observable trading activity throughout the term of the instruments.

The three-way options are a combination of a sold call, a bought put and a sold put. The costless collars are a combination of a sold call and a bought put. These contracts allow the Company to participate in the upside of commodity prices to the ceiling of the call option and provide the Company with complete (collars) or partial (three-way) downside price protection through the put options.

Level 3 Fair Value Measurements

During 2025, Ovintiv entered into a ten-year physical forward contract, with terms to 2037, to deliver 100 MMcf/d of natural gas volumes with a delivery point in Alberta and will receive the Chicago city-gates (“Chicago”) index price, less deducts. Delivery of natural gas volumes is expected to commence November 1, 2027. This contract is a derivative and is required to be measured at fair value each reporting period with changes in the fair value recorded in net earnings. The fair value of this contract is based on the discounted cash flow model using observable and unobservable inputs such as forward prices less deducts. The data used to develop the unobservable inputs are obtained from third parties whenever possible and reviewed by the Company for reasonableness.

A summary of changes in Level 3 fair value measurements for risk management positions is presented below:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2026

 

 

2025

 

 

 

 

 

 

 

 

Balance, Beginning of Year

 

$

1

 

 

$

-

 

Total Gains (Losses)

 

 

26

 

 

 

-

 

Purchases, Sales, Issuances and Settlements:

 

 

 

 

 

 

Purchases, sales and issuances

 

 

-

 

 

 

-

 

Settlements

 

 

-

 

 

 

-

 

Transfers Out of Level 3

 

 

-

 

 

 

-

 

Balance, End of Period

 

$

27

 

 

$

-

 

Change in Unrealized Gains (Losses) During the

 

 

 

 

 

 

   Period Included in Net Earnings (Loss)

 

$

26

 

 

$

-

 

 

Quantitative information about unobservable inputs used in Level 3 fair value measurements is presented below as at March 31, 2026:

 

 

 

Valuation Technique

 

Unobservable Input

 

Range

 

Weighted Average

 

 

 

 

 

 

 

 

 

 

 

Risk Management - Physical Forward Contract

 

Discounted Cash Flow Model

 

Forward Prices (1)

 

$0.69/Mcf - $3.28/Mcf

 

$1.26/Mcf

 
(1)
Forward prices refers to the differential between Chicago and AECO forward prices.

 

A 10 percent increase or decrease in forward price differentials between Chicago and AECO for the physical forward contract would cause an approximate corresponding $27 million ($24 million as at December 31, 2025) increase or decrease to net risk management assets and liabilities.