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

CAPITAL
ALLOCATION

Addicted to debt
Acquisitions at the wrong time for the wrong price
Allocated capital to the wrong areas

GOVERNANCE

Lack of accountability 
No alignment between pay and performance 
Lowest insider ownership in the peer group

ENVIRONMENTAL STEWARDSHIP

Elevated emissions 
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). 

Key Facts2

85%

Total Shareholder Return since June 2013 (underperforming U.S. Peers by 2,400bp)

53%

increase in net debt since June 2013

$12.7B

impairment charges since June 2013

>$75M

CEO compensation awarded since 2013

0.2%

beneficial ownership of CEO and board (lowest CEO ownership amongst U.S. peers)3

“D”

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).

Resources

PRESS RELEASE

Kimmeridge Nominates Three Highly Qualified, Independent Directors to Ovintiv Board
January 26, 2021

PRESENTATION

Ovintiv: A Track Record of Value Destruction
January 2021

BOARD NOMINEES

Kimmeridge Presents Nominees for the Board of Ovintiv
January 2021

About Kimmeridge

A private investment firm focused on unconventional oil and gas assets in the U.S.

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