SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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¨ | Definitive Proxy Statement |
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ý | Soliciting Material Under Rule 14a-12 |
Ovintiv Inc.
(Name of Registrant as Specified in Its Charter)
Kimmeridge Energy Management Company, LLC
Kimmeridge Active Engagement, LLC
Benjamin Dell
Alexander Inkster
Noam Lockshin
Henry Makansi
Neil McMahon
Randy Smith
Mark Viviano
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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On January 14, 2021, Kimmeridge Energy Management Company, LLC (“Kimmeridge”) issued a press release (the “Press Release”) announcing its publication of a presentation highlighting the underperformance—including in the areas of capital allocation, governance and environmental stewardship— of Ovintiv Inc. (the “Company”) and proposing a detailed framework aimed at addressing these issues and restoring confidence in the Company (the “Presentation”). A copy of the Press Release is filed herewith as Exhibit 1. The Press Release contains a link to the Presentation which is filed herewith as Exhibit 2.
In addition, on January 14, 2021, Kimmeridge launched a website related to the concerns outlined in its Press Release and Presentation (the “Website”), and copies of the materials posted to the Website are filed herewith as Exhibit 3. Information regarding the Participants (as defined in Exhibit 4) in any future solicitation of proxies regarding the Company is filed herewith as Exhibit 4.
Exhibit 1
Kimmeridge Publishes Presentation:
"Ovintiv: A Track Record of Value Destruction"
Ovintiv dramatically underperforms peers and the energy sector
Total Shareholder Return of (84.8%) since the current CEO joined in 2013; net debt increased 53% and $12.7B in impairment charges were recorded; CEO awarded over $75M in compensation over the same period
CEO and Ovintiv Board own less than 0.2% of shares outstanding[i]
Kimmeridge proposes framework for restoring confidence in Ovintiv by addressing deficiencies in capital allocation, governance and environmental stewardship
NEW YORK, Jan. 14, 2021 – Kimmeridge Energy Management Company, LLC ("Kimmeridge"), a private investment firm focused on upstream energy, with an investment philosophy underpinned by fundamental research, today published an investor presentation titled, "Ovintiv: A Track Record of Value Destruction."
In its presentation, Kimmeridge, a top ten shareholder of Ovintiv Inc. ("Ovintiv" or the "Company") (NYSE: OVV), highlights the Company's failures of capital allocation, governance and environmental stewardship. Kimmeridge also provides a framework for restoring confidence in Ovintiv, applying the core principles previously outlined in its white papers. Kimmeridge has argued that the E&P sector needs to embrace a new business model focused on:
· | Returning capital to shareholders; |
· | Lowering reinvestment rates; |
· | Reducing absolute debt; |
· | Aligning management compensation with the interests of shareholders; and |
· | Establishing credible environmental targets aligned with the Paris Agreement. |
Mark Viviano, Managing Partner and Head of Public Equities at Kimmeridge, said: "As a long-standing investor in the E&P sector, I have witnessed the continued deterioration of investor sentiment towards Ovintiv. Given the quality of its asset base, this company should not have been one of the worst performing E&Ps over the past seven years. However, Ovintiv is emblematic of everything that is wrong with the U.S. shale industry, and the reasons for underperformance are clear; unchecked decision-making, overseen by a board with insignificant equity ownership and inadequate expertise, is a prescription for failure.
Despite Kimmeridge's best efforts to engage in a constructive dialogue with the Board of Directors of the Company, we repeatedly encountered an unreceptive Board that mistakenly believes it has already positioned Ovintiv as a leading E&P company – but the facts suggest otherwise. We believe shareholders deserve better and will be supportive of change."
As further detailed in the presentation, Kimmeridge has identified three main failures at Ovintiv:
1. | Failure of Capital Allocation |
Ovintiv management appears addicted to taking on debt, demonstrated by a history of acquiring companies at the wrong time for the wrong price. We believe their mistakes are compounded by allocating capital to the wrong areas.
2. | Failure of Governance |
Ovintiv management has not been held accountable. We believe the Company's compensation structure displays a troubling lack of alignment between pay and performance, compounded by the lowest insider ownership amongst U.S. peers.[ii]
3. | Failure of Environmental Stewardship |
With one of the highest CO2e intensities in their U.S. peer group, and no targets related to flaring or total emissions intensity, Ovintiv is an environmental laggard, not a leader.
Mr. Viviano continued, "The combination of poor capital allocation, misaligned incentives and an inferior environmental strategy leaves the Company unprepared for the growing risks associated with the energy transition. More concerning is the degree of complacency around the need for meaningful reform. The magnitude of shareholder value destruction demands a sense of urgency we have yet to witness from the Board and management team. Kimmeridge is prepared to help drive the change that the company desperately needs by nominating directors to the Ovintiv Board at the upcoming annual meeting."
A copy of Kimmeridge's presentation and additional information regarding can be found at www.FixOvintiv.com.
About Kimmeridge
Founded in 2012, Kimmeridge is a private investment firm focused on unconventional oil and gas assets in the U.S. Kimmeridge is differentiated in its direct investment approach, deep technical knowledge, active portfolio management and proprietary research and data gathering. In addition to its New York headquarters, Kimmeridge maintains a fully-staffed, in-house operating and geology team in Denver, with experience across all major upstream functions and disciplines. For additional information on Kimmeridge and its proprietary research, please visit www.kimmeridge.com.
Media:
Kekst CNC
212.521.4800
Kekst-Kimmeridge@kekstcnc.com
Investors:
Bruce H. Goldfarb / Patrick J. McHugh
212.297.0722 / 212.297.0721
bhgoldfarb@okapipartners.com / pmchugh@okapipartners.com
Legend
Kimmeridge Active Engagement, LLC and Kimmeridge Energy Management Company, LLC and certain of their principals and affiliates (collectively, "Kimmeridge") and potential nominees (collectively and together with Kimmeridge, the "Participants") intend to file with the SEC a definitive proxy statement and accompanying form of proxy to be used in connection with the solicitation of proxies from the stockholders of Ovintiv. All Ovintiv stockholders are advised to read the definitive proxy statement and other documents related to the solicitation of proxies by the Participants when they become available, as they will contain important information, including additional information related to the Participants. The definitive proxy statement and an accompanying proxy card will be furnished to Ovintiv stockholders and will be, along with other relevant documents, available at no charge on the SEC website at http://www.sec.gov/.
Information about the Participants and a description of their direct or indirect interests by security holdings is contained in the Schedule 14A filed by the Participants with the SEC on January 14, 2021. This document will be available free of charge from the source indicated above.
[i] Source: Bloomberg, FactSet, 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 OVV) to 11/16/20 (the last trading day before media reports that Kimmeridge was actively seeking changes).Net debt and impairments from Q2’13 to Q3’20. CEO compensation since 2013 from 2020 proxy statement. Beneficial Ownership from Bloomberg as of 12/31/20 for U.S. Peers (APA, CHK, CLR, COG, CXO, DVN, EOG, HES, MRO, MUR, PXD, RRC and XEC)
[ii] U.S. Peers (APA, CHK, CLR, COG, CXO, DVN, EOG, HES, MRO, MUR, PXD, RRC and XEC)
Exhibit 2
Exhibit 3
Exhibit 4
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
Kimmeridge (as defined below), together with the other Participants (as defined below), intends to file a definitive proxy statement and accompanying proxy card with the Securities and Exchange Commission (the “SEC”) to be used to solicit proxies for votes (a “Proxy Solicitation”) in connection with the solicitation of proxies from the stockholders of Ovintiv Inc. (the “Company”) at the Company’s 2021 annual meeting of stockholders.
THE PARTICIPANTS STRONGLY ADVISE ALL STOCKHOLDERS OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC’S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS’ PROXY SOLICITOR, OKAPI PARTNERS LLC BY PHONE AT +1 (888) 785-6688 (TOLL-FREE) OR +1 (212) 297-0720 OR BY EMAIL TO INFO@OKAPIPARTNERS.COM.
The Participants in any future Proxy Solicitation are anticipated to be: Kimmeridge Active Engagement, LLC (“KAE”), Kimmeridge Energy Management Company, LLC (“KEM”), Benjamin Dell (Mr. “Dell”), Alexander Inkster (Mr. “Inkster”), Noam Lockshin (Mr. “Lockshin”), Henry Makansi (Mr. “Makansi”), Neil McMahon (Mr. “McMahon”), Randy Smith (Mr. “Smith”) and Mark Viviano (Mr. “Viviano”, and together with Mr. Dell, Mr. Inkster, Mr. Lockshin, Mr. Makansi, Mr. McMahon, Mr. Smith, KAE and KEM, “Kimmeridge”) and any potential nominees (collectively and together with Kimmeridge, the “Participants”).
As of the date hereof, the Participants may be deemed to beneficially own (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934), in the aggregate, 6,234,626 shares of common stock, par value $0.01 per share of the Company (the “Common Stock”). Of the 6,234,626 shares of Common Stock beneficially owned in the aggregate by the Participants, such shares of Common Stock may be deemed to be beneficially owned as follows: (a) 6,234,626 shares of Common Stock may be deemed to be beneficially owned by KAE, (b) 6,234,626 shares of Common Stock may be deemed to be beneficially owned by KEM by virtue of it being the investment adviser to parent companies of KAE and (c) 6,234,626 shares of Common Stock may be deemed to be beneficially owned by Mr. Dell, Mr. Inkster, Mr. Lockshin, Mr. Makansi, Mr. McMahon, Mr. Smith and Mr. Viviano by virtue of their collective control of KEM or Kimmeridge Engagement Management, L.P., the investment manager to the private investment fund which is the parent company of KAE.
Each Participant disclaims beneficial ownership of the Common Stock reported above except to the extent of his or its actual pecuniary interest therein.