Encana Corp., one of Canada’s oldest and largest energy companies, is moving its corporate headquarters from Calgary to the United States.
The company, which is also changing its name to Ovintiv Inc., said Thursday that having a U.S. address will expose it to increasingly larger pools of investment in U.S. index funds and passively managed accounts, as well as better align it with its U.S. peers.
On a morning conference call, CEO Doug Suttles insisted the name and “corporate domicile” changes will not affect any Canadian staff, result in any layoffs, or divert investment strategies in oil and gas formations in Alberta and B.C.
“Make no mistake, we have a long and proud history in Canada, and our assets here are world class,” he said.
“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.”
Suttles said the base change won’t alter how the company runs its day-to-day activities.
“There’ll be no movement of roles or responsibilities, no reduction in staff and actually no change to how we’re allocating capital,” he said during the conference call.
The company said it’s hoped the plan, which still requires shareholder, stock exchange and court approval, would be in place early next year.
Thursday’s announcement came after Encana announced a third-quarter profit of $149 million or 11 cents per share, up from a profit of $39 million or four cents per share a year ago.
Analysts react to Encana plans
Reaction to the news of the change of headquarters was mixed.
“This is a sad day for Canada’s energy sector,” said Deborah Yedlin, business commentator for CBC’s Calgary Eyeopener.
“I was shocked like everybody else to see this, although some will say this was telegraphed as Encana has moved to make some significant acquisitions in the U.S.”
She said Encana had already substantially changed its asset mix to include more U.S. elements, including shale plays.
“But I think this just adds to the overall uncertainty, weariness and anxiety because we are seeing companies looking elsewhere to invest their capital, and increasingly we’re not seeing that capital invested in Canada.”
Analysts said the move is not surprising given Encana’s increased focus on oil and natural gas liquids plays in the United States over the past decade, culminating in its $5.5 billion US all-shares acquisition of U.S. rival Newfield Exploration Co. announced a year ago.
“I am not surprised at all by the move,” said Jennifer Rowland, a U.S.-based analyst with Edward Jones.
“Post the Newfield deal, 60 per cent of Encana’s production is in the U.S. and two of its key growth drivers are in the U.S. … Plus CEO Suttles doesn’t live in Canada; he lives in Denver.”
Phil Skolnick, an analyst with Eight Capital Research, said the headquarters move is bound to lead to speculation about a sale of Canadian operations.
“It will beg the question of whether or not ECA will eventually sell or spin out its Canadian assets. We believe in this current market, this is not in the works,” he said in a report.
Deep Canadian roots
Encana can trace its roots to the Canadian Pacific Railway, which was granted subsurface mineral rights by the government of Sir John A. Macdonald, Canada’s first prime minister, as compensation for assuming the risk of developing the railroad. These rights were later inherited by Encana’s predecessors.
Previous iterations of the company included Pan Canadian Petroleum Ltd., formed in 1971, which merged with Alberta Energy Corp. to form EnCana in 2002. EnCana was split into natural gas-weighted Encana and oil company Cenovus Energy Corp. in 2009.
Encana was the largest gas producer in Canada for several years — Suttles said the name change is in part designed to cast off the association with natural gas, a commodity with overproduction in North America that has led to depressed prices for years.
The name change is reminiscent of TransCanada Corp.’s move to officially drop the “Canada” from its name last May, renaming itself TC Energy Corp., a name it said better speaks to the breadth of its pipeline, power generation and energy storage businesses and its operations in Canada, the U.S. and Mexico.
Encana also plans a share consolidation that will see shareholders receive one share of Ovintiv for every five common shares of Encana. It plans to continue to trade on both the Toronto and New York stock exchanges.