EnCana’s exodus from Canada did not begin on Thursday with the company’s announcement it’s relocating corporate headquarters from Calgary to Denver, Colorado.
A year ago, $7.7 billion in EnCana capital was not invested in its Canadian resource plays; instead it was directed stateside to purchase Texas-based Newfield Exploration. Then in February of this year the company cut 15 percent of its staff, across the board.
But even before these developments, as the investment climate soured for exploration and production (E&P) firms in Canada, in March of 2018 company chief executive Doug Suttles denied there were plans to uproot EnCana’s Calgary head office.
All that changed this morning as the material exit of HQ for the oldest petroleum company in Canada, and its subsequent rebranding to Ovintiv Inc. was made official, the latest in a series of major setbacks for Canada’s energy industry.
“E&Ps are very out of favour in Canada right now, all of them. They’re trading at the lowest valuations we’ve ever seen and it’s been that way for quite some time,” said Richard Masson, an industry veteran and senior fellow at University of Calgary’s School of Public Policy.
“And it’s because the whole sentiment in Canada is we can’t get things done, we can’t get things built. Even when we go through the most thorough regulatory processes imaginable.”
Masson is referring to the embattled Trans Mountain expansion project, a proposed $7.5 billion twinning of an existing bitumen pipeline from Edmonton to Burnaby, British Columbia that the federal government nationalized last year.
“Kinder Morgan was essentially going to shut it down and walk away so if we wanted it to get built, the only option was for the federal government to buy it,” Masson said.
“So that’s a very negative signal for international investors, for U.S. investors…it doesn’t directly affect EnCana, but it speaks to the fact we’ve got to get our house in order if we’re going to be competitive internationally and keep more jobs in our industry.”
As far back as 2007, EnCana was shedding Canadian assets, beginning with its holdings in the Mackenzie River basin (Northwest Territories) after the writing was on the wall for the failed Mackenzie Gas Pipeline.
EnCana’s December 2012 partnership with PetroChina resulted in the Canadian company relinquishing a 49.9 percent stake in its Duvernay Formation natural gas fields in Alberta and earlier that same year, it sold Mitsubishi a 40 percent interest in B.C. gas fields.
While at the end of that year, EnCana’s North American workforce was nearly 4,200 strong, staff cuts this past February reduced its payroll list to approximately 2,650 employees, including those at its recently acquired Newfield operation.
In the wake of today’s EnCana decision, Senator Douglas Black called it “a terrible development” and said that Prime Minister Justin Trudeau should take immediate action, “to salvage confidence in the oil and gas industry.”
“The PM must acknowledge that the natural resource industry is important to this country and that he will do what it takes to protect it,” Black told The Post Millennial.
“Just as any government would protect the high-tech industry or the aviation industry or the car industry, we must have a crystal clear signal that this industry matters to Canada.”
The Alberta senator has repeatedly expressed scathing criticism of the Trudeau government’s Bill C-69 – most notably during committee deliberations this year – an overhaul of the environmental assessment and regulatory processes passed during the previous government, as well as the tanker ban (C-48) on the northwest coast of B.C.
“These bills have created an environment where investors have concluded that we cannot invest in Canada,” said Black. “And as we’ve seen today with EnCana, a leading Canadian company, has decided that their mind and management is better served by being outside this country.”
In 2012, EnCana was the largest producer of natural gas in the country. Today it is literally moving to United States, a decision that Masson suggested would likely ripple through other E&P boardrooms in Alberta.
“For Canadian companies to go to New York and tell their story, it’s not as easy and I think what EnCana is saying is, they’ve decided that they don’t want to wait for that (investment climate) to get better,” Masson said.
“They’re going to move and become more of a U.S. company that U.S. investors are going to be interested in long-term… I hope it doesn’t lead to others doing it, but I can say there will be lots of companies thinking about this for the next few months for sure.”
Conservative MP Shannon Stubbs, the party’s natural resources critic, called the news “devastating” and blamed Trudeau for “driv(ing) Canadian energy companies…south of the border.”
“After historic levels of energy investment have already left Canada under Prime Minister Trudeau’s watch, it’s no coincidence that even the largest Canadian oil and gas companies are leaving,” Stubbs said in a statement.
The Canadian Association of Petroleum Producers declined to comment on EnCana’s decision and told TPM that the association does not speak to the business decisions of their members.
*Correction: an earlier version of this story identified Senator Douglas Black as a Conservative. Black was appointed to the Upper Chamber in 2013 by Conservative PM Stephen Harper, and changed his designation to ‘independent’ in 2016 – The Post Millennial regrets any confusion this may have caused.