Encana move shocks Alberta oil patch

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Encana Corp. [ECA-TSX, NYSE], has delivered another blow to the Alberta oil patch by announcing its intention to establish a corporate domicile in the United States. The Calgary-based company is also planning to change its name to Ovintiv Inc.

“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,” said Encana CEO Doug Suttles in a press release on October 31, 2019.

But the announcement has been greeted with shock and dismay in Alberta, where the energy sector is still struggling to recover from the oil price drop five years ago. In Calgary, the vacant office space has remained at around 20%. “This is a loss for Calgary and Alberta,” said Calgary Mayor Naheed Nenshi.

Encana is a leading North American energy producer with a focus on developing its multi-basin portfolio of oil, natural gas liquids and natural gas producing plays. However, the company said it believes its share price valuation continues to be disconnected from its U.S. peers.

“This is due, in part, to the inability to access certain pools of capital in the United States that are limited in investing in securities of non-U.S. companies,” Encana said.

On Friday, Encana shares were up 3% or 15.5 cents to $5.31 on volume of 11.4 million. The shares are currently trading in a 52-week range of $5.02 and $11.88.

The proposed change of name to Ovintiv Inc. has also raised some eyebrows. The company has said the new name stands for its “commitment to deliver unmatched value through continuous innovation.”

Ovintiv said it will be uniquely positioned to be a leader in the E&P industry, which is at the cusp of transformation today. The company is generating significant free cash flow, returning cash to its shareholders and generating industry-competitive liquids growth from its multi-basin portfolio of assets.

It is this unique combination that the company believes will ultimately be differentiated by the market, Encana said.

In coordination with the change of corporate domicile, a consolidation and share exchange will be completed for effectively one common share of Ovintiv for every five common shares of Encana. A special meeting will be held in early 2020 to approve the name change, the share consolidation and the U.S. domicile.

Approval by two-thirds of the votes cast will be required to approve the changes, as well as stock exchange and Canadian court approvals.

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

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