Compensation Plans

6 Months Ended

Jun. 30, 2022

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Compensation Plans

15. Compensation Plans

Ovintiv has a number of compensation arrangements under which the Company awards various types of long-term incentive grants to eligible employees and Directors. They may include TSARs, Stock Appreciation Rights (“SARs”), PSUs, Deferred Share Units (“DSUs”) and RSUs.

Ovintiv accounts for PSUs and RSUs as equity-settled stock-based payment transactions provided there is sufficient common stock held in reserve for issuance. TSARs, SARs and DSUs are accounted for as cash-settled stock-based payment transactions. The Company accrues compensation costs over the vesting period based on the fair value of the rights determined using the Black-Scholes-Merton or other appropriate fair value models.

During the second quarter of 2022, Ovintiv’s shareholders approved an increase to the number of shares of common stock held in reserve for issuance under the Company’s stock-based compensation plans. Accordingly, certain awards were modified and reclassified as equity-settled share-based payment transactions at the modification date. The modification date fair value of the awards was US$56.72 per share and C$72.17 per share for the U.S. dollar denominated and Canadian dollar denominated awards, respectively. The modification impacted all employees and there was no incremental compensation cost recognized at the modification date.

The following weighted average assumptions were used to determine the fair value of TSAR and SAR units outstanding:  

	As at June 30, 2022		As at June 30, 2021
	US$ SAR Share Units	C$ TSAR Share Units	US$ SAR Share Units	C$ TSAR Share Units
Risk Free Interest Rate	3.12%	3.12%	0.44%	0.44%
Dividend Yield	2.26%	2.23%	1.19%	1.20%
Expected Volatility Rate (1)	107.62%	106.01%	105.96%	104.94%
Expected Term	1.7 yrs	1.7 yrs	1.7 yrs	1.7 yrs
Market Share Price	US$44.19	C$56.94	US$31.47	C$39.07
Weighted Average Grant Date Fair Value	US$39.92	C$56.97	US$36.98	C$50.16

(1) Volatility was estimated using historical rates.

The Company has recognized the following share-based compensation costs:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
Total Compensation Costs of Transactions Classified as Cash-Settled	$	1		$	42		$	90		$	82
Total Compensation Costs of Transactions Classified as Equity-Settled		21			7			31			18
Less: Total Share-Based Compensation Costs Capitalized		(7	)		(9	)		(16	)		(16	)
Total Share-Based Compensation Expense (Recovery)	$	15		$	40		$	105		$	84
Recognized in the Condensed Consolidated Statement of Earnings in:
Operating	$	8		$	9		$	19		$	18
Administrative		7			31			86			66
	$	15		$	40		$	105		$	84

As at June 30, 2022, the liability for cash-settled share-based payment transactions totaled $105 million ($114 million as at December 31, 2021), of which $98 million ($78 million as at December 31, 2021) is recognized in accounts payable and accrued liabilities and $7 million ($36 million as at December 31, 2021) is recognized in other liabilities and provisions in the Condensed Consolidated Balance Sheet.

The following units were granted primarily in conjunction with the Company’s annual grant of long-term incentive awards. The PSUs and RSUs were granted at the volume-weighted average trading price of shares of Ovintiv common stock for the five days prior to the grant date.

Six Months Ended June 30, 2022 (thousands of units)
RSUs	1,408
PSUs	480
DSUs	6