Encana picks Denver for new HQ
CALGARY/TORONTO Encana Corp., which is moving from Canada to the U.S., will locate its new headquarters in Denver, where chief executive Doug Suttles lives.
The company, to be renamed Ovintiv, will be incorporated in Delaware and trade on the New York Stock Exchange and the Toronto Stock Exchange under the symbol “OVV,” according to a filing on Thursday.
The move to Denver was widely anticipated because Suttles, a Texan, relocated his residence there in March 2018, though the company also has a major office in Houston.
Suttles said in November of last year that he envisioned the company moving toward a “headquarterless” model, with work being performed close to its operations.
Encana follows BP Plc in choosing Denver as its new base of operations. The London-based supermajor moved its U.S. onshore oil and gas unit’s headquarters to the Rocky Mountain city from Houston last year.
Encana’s U.S. move announced last week was a morale blow for the Canadian energy industry, which has been suffering from pipeline bottlenecks that have choked off prospects for growth.
The company said the move will give it access to larger pools of investment, including U.S. index funds and passively managed accounts.
The move may also be a blow for H&R Real Estate Investment Trust. The odds of the Toronto-based REIT selling a stake in its wholly owned iconic Calgary tower have dropped after Encana announced its plans to move, according to BMO Capital Markets.
The Bow tower, located in downtown Calgary, houses the oil and gas driller as its largest tenant.
Uncertainty surrounding Encana’s commitment to Calgary with its plans to move its headquarters stateside means “it is less likely that H&R will be able to sell a partial interest in The Bow at a value that management would find agreeable,” BMO analyst Jenny Ma said in a recent report.
Encana represents 11.9 per cent of H&R’s rental income and its lease obligations expire in 2038, according to the REIT’s presentation as of June 30. Cenovus Energy, which was spun out of Encana, has a sublet of 27 floors.
Pipeline giant TC Energy Corp., also located in downtown Calgary, generates 1.9 per cent of H&R’s rental income.
H&R’s chief executive Thomas Hofstedter said during its second-quarter earnings call in August (and before Encana’s announcement Thursday) that it was still considering the possibility of a partial sale of The Bow, and hopes to get clarity “before the year is out if we can actually execute on our plan.”
H&R’s management “confirmed that Encana must maintain its lease obligations through to the end of the term,” BMO’s Ma said, and re-domiciling is more of “symbolic blow to Calgary” and the city’s office market.
The office vacancy rate in Calgary was 24.3 per cent as of Sept. 30, as both the downtown (26.6 per cent vacancy rate) and suburban areas (20.6 per cent) are hurting, BMO added.
Bloomberg