Fear and dismay as Encana chooses U.S. as new home
Iconic Canadian firm to change name to Ovintiv in bid to appeal to investors
CALGARY/EDMONTON Described as a “tragedy” in a downtrodden industry, one of Canada’s oldest and largest energy companies, Encana Corp., is dropping Canada from its name and moving to the United States to attract more investors.
“Make no mistake, we have a long and proud history in Canada and our assets here are world class,” Encana president and CEO Doug Suttles said on an investor call Thursday morning as he announced what many in Calgary had long feared — the company’s headquarters was moving to the U.S., with the iconic company to be renamed Ovintiv Inc.
But industry observers see it as another symbolic blow to the Canadian oilpatch that’s been hit by low commodity prices, stringent regulations, transport constraints and opposition from climate activists over the past decade.
Alberta Premier Jason Kenney said the combination of federal laws around new pipeline development and rhetoric about phasing out the energy industry had created “an inhospitable environment” for companies like Encana and exacerbated the underperformance of the Canadian energy sector.
“What we’ve seen in the last five years is companies from Kinder Morgan to now Encana have taken the hint,” Kenney said, adding the country has seen an exodus of foreign capital.
Texas-based Kinder Morgan Inc. sold its Trans Mountain pipeline and expansion project to the federal government last year for $4.5 billion after being stuck in a regulatory quagmire for years. The company sold off its remaining assets in Canada to Pembina Pipeline Corp. this year.
The move had been rumoured in Calgary for over a year because Suttles left Calgary in 2018 to live closer to his family in Denver and publicly described steering Encana toward a “headquarter-less model.”
Then in late 2018, Encana spent US$7.7 billion to buy Newfield Exploration, a move that shifted Encana from being a producer with assets split evenly between Canada and the U.S. to being 60 per cent weighted in favour of the U.S.
While the relocation didn’t surprise, it did send shock waves through the industry as analysts, investors and executives described the loss as “a tragedy” given the company’s history, with roots that trace back to the construction of the Canadian Pacific Railway, and its size. As of the end of 2018, there were 2,100 employees, according to Bloomberg data.
“Here’s a company that had Canada in their name,” St. Louis-based
Edward Jones senior analyst Jennifer Rowland said, adding that she wasn’t surprised by the move and expects the company to try to sell off “non-core assets” in Canada.
Former Alberta finance minister and energy minister Ted Morton, now an executive fellow at the University of Calgary School of Public Policy, called Encana’s relocation “a particularly bitter pill to swallow” given the company’s history, as one of its predecessor companies was Alberta Energy Co. Ltd. formed by the revered former Alberta premier Peter Lougheed to directly invest in the province’s oil and gas development.
“The initial share offering was only to Albertans, so this is how Peter Lougheed said Albertans can participate in our shared ownership of oil and gas,” Morton said, adding Encana’s exodus will fan the flames of Alberta alienation given that the feds reportedly attempted to prevent Snc-lavalin Group Inc. from relocating its headquarters from Montreal to London.
“I don’t think it’s alarmist to call it a crisis. This is a Main Street issue — people are losing their jobs, people are losing their houses,” said Morton said
Formed out of the $23-billion merger between Pancanadian Energy Corp. and Alberta Energy Co. Ltd. in 2002, Encana Corp. was the largest oil and gas producers in the country for the next seven years until the company decided to break out its unconventional oil business into oilsands-focused Cenovus Energy Inc. in 2010.
In 2014, Encana spun out Prairiesky Royalty Ltd. in an initial public offering that off-loaded its royalty lands that date back to the CP Rail development in the 1880s. Since then, it has sold off numerous non-core assets in Canada and the U.S. to pay for acquisitions.
While the company has shrunk over time, the departure of Encana is a symbolic loss for the Canadian oil and gas industry that has been fighting against an exodus of capital for the past five years, said Ken Hughes, another former Alberta energy minister and now the chair and co-founder of Alpine Insurance and Financial Inc.
Encana signalled that its planned U.S. relocation aims to attract more investment from funds that track American indexes. “As a U.S. company, we may be able to attract deeper and growing pools of investment capital in the United States,” chief financial officer Corey Code said on Thursday’s earnings call.
I don’t think it’s alarmist to call it a crisis. This is a Main Street issue — people are losing their jobs, people are losing their houses.