(Reuters) - Encana Corp ECA.TO will shift base from Calgary to the United States and become Ovintiv Inc next year, the oil and gas producer said on Thursday, the latest company to move away from Canada as the nation battles with pipeline capacity shortages.
Encana's peers Royal Dutch Shell RDSa.AS, ConocoPhillips COP.N and Suncor Energy SU.TO have either been selling their Canadian assets or have scaled back investments as pipeline space crunch impacts prices.
Canada’s western oil patch is already hurting from five years of low crude prices and pipeline constraints, which resulted in capital investment in the sector more than halving to C$37 billion ($28.12 billion) in 2019 from C$81 billion in 2014.
“Sadly, I cannot say I am surprised, as Encana has been shifting its efforts to the U.S. for years, in large part due to harmful policies in Canada,” Sonya Savage, Alberta’s energy minister said in a statement.
Encana, once among Canada’s largest oil companies, has been shifting its exposure from Canada to the United States and earlier this year bought Texas-based Newfield Exploration Co for $5.5 billion. U.S. operations accounted for 60.5% of Encana’s total revenue in this quarter, while Canada contributed 24.8 %.
Chief Executive Officer Doug Suttles, who relocated from Encana’s Calgary headquarters to its Denver office last year, said the move will help the company to tap in to the deeper capital markets in the United States but added it was not a political decision.
Suttles also gave assurances that Encana will continue investing in its Montney and Duvernay assets.
But CEOs of other oil and gas companies lamented the decision.
"I think this is a tragedy for Canada," Cenovus Energy CVE.TO CEO Alex Pourbaix told a post-earnings analyst conference.
TRAGEDY FOR CANADA
Encana was formed by a 2002 merger between PanCanadian Energy Corp and Alberta Energy Company Ltd, which was created in the 1970s by the government of Alberta as a vehicle for sharing the province’s energy wealth.
Founding CEO Gwyn Morgan last year blamed Prime Minister Justin Trudeau’s policies for Encana’s gradual shift away from Canada to the United States.
PanCanadian inherited 25 million acres (over 10 million hectares) of land given to Canadian Pacific Railway in the 1880s as partial payment for building the transcontinental railroad. Those assets included Alberta’s first natural gas discovery.
The company has drawn criticism for strategic missteps. Encana in 2009 spun off its oil sands assets to create Cenovus, leaving it heavily exposed to natural gas just as prices for the fuel plummeted.
Encana’s decision comes as Canada’s energy industry is bracing for even more challenging times following last week’s federal elections. Trudeau’s Liberal Party was reduced to a minority in the House of Commons, leaving it in need of support from left-leaning parties that are opposed to new oil pipelines.
The prime minister’s office did not immediately respond to a request for comment.
Encana said the rebranded company will continue to be dually traded on the Toronto and New York stock exchanges under the ticker symbol ‘OVV’ and Suttles told investors that the changes will not lead to any staff reduction or movement in Canada.
Separately, the company said operating profit for the third quarter rose to 15 cents per share.
While the quarter had nothing negative, Encana shares fell as much as 8% on concerns that some Canadian funds may be unable to invest in shares, according to analysts at Eight Capital.
Total production rose 4% on a proforma basis to 605,100 barrels of oil equivalent per day in the quarter, on higher output from Anadarko and Permian basins.
The company now expects higher annual production and lower costs than its earlier estimates, and kept its capital investment forecast unchanged at the mid-point of $2.8 billion.
Reporting by Shariq Khan in Bengaluru, Rod Nickel and Kelsey Johnson; Editing by Bernard Orr and Marguerita Choy
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