A Track Record ofValue Destruction
“The magnitude of shareholder value destruction at Ovintiv demands a sense of urgency we have yet to witness from the Board and management team. Kimmeridge is prepared to help drive the change the company desperately needs by nominating directors to the Ovintiv Board at the upcoming annual meeting.”
– Mark Viviano, Managing Partner and Head of Public Equities at Kimmeridge
The Case For Change
Ovintiv is struggling to remain relevant within a dynamically changing energy landscape. Despite controlling attractive assets in low-cost basins, such as the Permian and Montney, Ovintiv has dramatically underperformed peers and the energy sector, with a TSR of (84.8%) since the appointment of Doug Suttles as CEO in 2013.1
The collective failures of capital allocation, governance and environmental stewardship have led to a crisis of confidence with investors and rendered the company unprepared for the growing risks associated with the energy transition.
As a significant shareholder, Kimmeridge is focused on helping to address the deficiencies and restoring confidence. The deterioration in investor sentiment has led to a distressed valuation relative to peers, which Kimmeridge believes presents a compelling re-rating opportunity if change can be effectuated.
Ovintiv’s three main failures
Addicted to debt
Acquisitions at the wrong time for the wrong price
Allocated capital to the wrong areas
Lack of accountability
No alignment between pay and performance
Lowest insider ownership in the peer group
Inadequate target setting
Mistaken ESG leadership
1Source: FactSet, Bloomberg, Public Company Financial Reports and Proxy Statements. Total Shareholder Return (TSR) of (84.8)% from 6/10/13 (the last trading day before Douglas Suttles joined Ovintiv) to 11/16/20 (the last trading day before media reports that Kimmeridge was actively seeking changes).
Total Shareholder Return since June 2013 (underperforming U.S. Peers by 2,400bp)
increase in net debt since June 2013
impairment charges since June 2013
CEO compensation awarded since 2013
beneficial ownership of CEO and board (lowest CEO ownership amongst U.S. peers)3
CDP Climate Change Score (2019)4
2Source: Bloomberg, FactSet, Public Company Financial Reports and Proxy Statements. Total Shareholder Return (TSR) of (84.8)% from 6/10/13 to 11/16/20. U.S. Peer Group data shown here and elsewhere on this site represents average TSR of a subset of the constituents of the U.S. Performance Peers contained in OVV’s 2020 proxy statement that traded consistently from 6/10/13 to 11/16/20: APA, CHK, CLR, COG, CXO, DVN, EOG, HES, MRO, MUR, PXD, RRC and XEC. Capital expenditures, net debt, shares outstanding (adjusted for reverse split), production and impairments from Q2’13 to Q3’20. CEO compensation since 2013 from 2020 proxy statement.
3Beneficial Ownership from Bloomberg as of 12/31/20 for OVV and U.S. Peer Group.
4Climate Disclosure Project (CDP) Climate change score for 2019 as of 12/31/20 (2020 score not yet available).
A private investment firm focused on unconventional oil and gas assets in the U.S.