An investment firm plans to start a proxy fight at Ovintiv Inc., saying the oil and gas producer should shift spending and improve governance to increase the company’s stock price.
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Kimmeridge Energy Management Co. will put forward three candidates on Tuesday, including founder Ben Dell, to Ovintiv’s board of directors, Kimmeridge officials said. He owns a 2.5% stake valued at approximately $ 100 million in Ovintiv, which has a market value of $ 4.4 billion.
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Ovintiv, based in Denver, produces oil and natural gas. Formerly known as Encana Corp., it has significant assets in the Permian and Anadarko basins and in the Montney region of Canada. Small and medium-sized producers have been affected by the sharp decline in crude oil prices in recent years and have come under pressure from investors to provide more consistent cash flow.
A spokeswoman for Ovintiv said the company is focused on creating sustainable value for investors. “We have generated significant free cash flow for each of the past three years and we are entering this year with strong momentum,” she said.
Kimmeridge managing partner Mark Viviano said in an interview that Ovintiv has underperformed his peers, which he blamed on a board he said has limited experience in shale.
Ovintiv’s shares have fallen by around 9% over the past year.
Kimmeridge this month called on Ovintiv to take action, including selling non-core assets, better aligning executive pay with performance, and strengthening environmental commitments.
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Mr Viviano said the company is appointing directors after meeting resistance from the company since talks began in the fall. Assuming both sides don’t call for a truce before Ovintiv’s annual meeting this spring, this could be one of the first major fights of the year for a shareholder vote.
Ovintiv this month announced plans to reduce debt by at least $ 1 billion from the second half of 2020 through the end of 2021. It appointed a new member of the board in November, the former CEO of Tellurian Inc., Meg Gentle, and is expected to release its fourth quarter results and forecast for 2021 on February 17.
Other nominees for Kimmeridge’s board are Erin Blanton, senior researcher at the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs, and Katherine Minyard, chief investment officer and partner at Cambiar Investors.
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Kimmeridge, which was founded in 2012 and has approximately $ 2 billion under management, focuses on unconventional oil and gas assets. He previously agitated at companies such as Resolute Energy Corp. and led an unsuccessful proxy fight for three seats on the board of directors of PDC Energy Inc. in 2019.