Encana Corp. is set to become U.S.-based Ovintiv Inc. as the company continues the strategic transformation it undertook more than five years ago.

By establishing a corporate domicile in the U.S., CEO Doug Suttles said Encana, currently based in Calgary, Alberta, will be better positioned to compete in the broader markets and realize shareholder value.

“A domicile in the United States will expose our company to increasingly larger pools of investment in U.S. index funds and passively managed accounts, as well as better align us with our U.S. peers,” he said.

UPDATE:

Encana CEO: Third Quarter Was ‘Anything But Boring’

Encana is a North American oil and gas producer with roots dating back to the late 1800s, according to the company website. Starting in 2013, the company began retooling its portfolio with a weighting toward liquids. This included billions of dollars worth of noncore asset sales plus the multibillion-dollar acquisition of Newfield Exploration Co., which closed earlier this year.

As a result of its transformation, Encana’s multi-basin portfolio currently consists of core growth assets in the Anadarko Basin, Permian Basin and Montney plays.

“Is ‘Ovintiv’ Latin for ‘takeout candidate?’” said Bob Brackett, Bernstein senior research analyst, in a research note.

Brackett augured that another interpretation of this redomiciling is that it removes the potential poison pill of the Canada federal law “Investment Canada Act” that has derailed several mergers of Canadian based companies since being passed in 1985.

In order to achieve the promised increased access to capital Encana claims will result from the U.S. domicile, the company’s multiple would have to expand in order for the stock to rerate, according to Brackett.

“We argue that E&P multiples are set by the quality of the assets and organization and ECA’s share price already reflects the market’s view and so a rerating of the stock on the redomiciling is not obvious to us,” he wrote in the note. “For example, outside of ECA-specific events (such as its acquisition of NFX), ECA shares trade in line with the XOP despite not being a member.”

In his statement, Suttles assured that the change in corporate domicile would not change Encana’s day-to-day activities. 

“However, our actions show that we will leave no stone unturned to capture the value we deeply believe exists within our equity,” he said.

The move, which requires shareholder, stock exchange and court approval, is expected to occur in early 2020. As part of this process, the new company will rebrand under the name Ovintiv.

In coordination with the change in corporate domicile, a consolidation and share exchange will be completed for effectively one share of common stock of Ovintiv for every five common shares of Encana.

Following completion of the corporate redomicile and the adoption of its new name, the new company will begin trading on both the New York and Toronto stock exchanges under the ticker symbol “OVV.”

Onshore