Encana Sheds Canadian Roots To Become US Company With A New Name
The large independent says while it is proud of its origins and history, it must make a move to attract new investment and be seen more as an oil producer than a gas producer.
Encana Corporation will no longer be a Canadian oil and gas company. It also will no longer be known as Encana.
The firm’s new home will be somewhere in the US and its new name will be Ovintiv Inc.
The move represents an attempt to boost shareholder value and attract new investment, according to company executives who announced the news during their third quarter earnings call.
The changes are not yet official, as they will require shareholder approval in a vote that is slated for early next year along with approval by the Canadian court system.
The company’s new headquarters will be in Denver. Chief Executive Doug Suttles relocated last year from Calgary to Denver where Encana has maintained a large presence for several years.
“Make no mistake, we have a long and proud history in Canada, and our assets here are world class,” said Suttles.
“Our returns in Canada continue to be every bit as strong as the rest of our portfolio. We will continue to make profitable investments in the Montney and the Duvernay, and manage these assets out of the Calgary office. We do not expect any impact on our Canadian workforce, either in the office or the field.”
Encana’s new name and logo represent “continuous innovation” and “the human connection” made possible by affordable energy production. Source: Encana Corp.
Suttles emphasized that the move is being strictly driven by the larger pools of investment that exist in the US compared with Canada. In particular, the company highlighted the growing popularity of US index funds, which enable passive investment of large, publicly traded firms. Most US index funds and similar financial vehicles require companies within these funds to be domiciled in the US.
Encana said public data indicate that its US-based peers enjoy around 20% more index and passive ownership than it does. “We believe this change will level the playing field with our principal competitors, most of which are US-based companies,” the company said in a statement.
Since last year’s acquisition of Newfield Exploration, a shale producer based in the Houston area, close to 60% of Encana’s production has come from within the US. On the earnings call, the company reported that in 2019 around 80% of its capital investments have also been in the US.
The rebranding effort is being described as an attempt to change how investors view the company. Encana has risen to become one of the largest North American independents, boasting close to 250,000 B/D of oil and condensates. Suttles pointed out that some still consider the company a natural gas producer when in fact it has transitioned in recent years from only 15% liquids production to 55%.
Pending approval, the move will also include a provision to consolidate shares to bring per-share metrics in line with US oil and gas stocks. Encana shareholders will receive one share of the newly named entity for every five shares of Encana stock. Ovintiv will be listed on the Toronto Stock Exchange in addition to its pending listing on the New York Stock Exchange next year.
*Story has been updated to reflect Encana’s announcement to relocate its headquarters.