Ovintiv Inc. (de) · NYSE:OVV
Ovintiv Inc. (de) — Proxy Contest (January 2021)
37 slides from Ovintiv Inc. (de)'s proxy contest presentation, Jan 14, 2021
Slide 1: A Track Record of Value Destruction
Fi><Ovintiv 4 Kimmeridge A TRACK RECORD OF VALUE DESTRUCTION JANUARY 2021
Slide 2: What's Wrong at Ovintiv?
WHAT'S WRONG AT OVINTIV? Attractive Assets Unattractive Returns With attractive assets and material Ovintiv (“OVV") has attractive Total Shareholder Return is underperformance, we ask: positions in low-cost shale (84.8%) since Doug Suttles What's wrong at Ovintiv? basins like the Permian and became
Slide 3: Three Primary Failures
WHAT'S WRONG AT OVINTIV? Three Primary Failures Corporate Environmental Capital Allocation Governance Vv Stewardship Elevated emissions: > Large, expensive deals: No accountability: Lack of Acquired Athlon Energy and alignment between executive Among the highest total Newfield Exploration: wrong pay
Slide 4: Compelling Re-Rating Opportunity
COMPELLING RE-RATING OPPORTUNITY Crisis of Confidence These failures have created a crisis of confidence amongst investors Deteriorating investor sentiment has resulted in valuation multiples well below that of peers This presents a compelling re-rating opportunity if we are successful in restoring
Slide 5: Failure of Capital Allocation: Addicted to Debt
FAILURE OF CAPITAL ALLOCATION Addicted to Debt Since 2014, each time net debt fell below $2.9 bn, Ovintiv made a large and, in our view, value-destructive acquisition OVV's net debt has risen by 53% over the CEO's tenure to $7.1 bn The debt overhang has weighed on investor sentiment Athlon Newfield
Slide 6: Failure of Capital Allocation: Wrong Time, Wrong Price
FAILURE OF CAPITAL ALLOCATION Wrong Time, Wrong Price Acquiring Athlon and Newfield destroyed tremendous value, on both an absolute and relative basis Average value of the two deals: $7.4 bn Average change in OVV's market cap over the following 12 months: NEGATIVE $7.4 bn Athlon Acquisition: 12 Mont
Slide 7: Failure of Capital Allocation: Wrong Basin
FAILURE OF CAPITAL ALLOCATION Wrong Basin OWV justified a 35% premium for Newfield by calling the STACK in the Anadarko Basin a “world-class, oil-rich” play Within months, the rest of the industry abandoned the Anadarko Basin Anadarko Basin Industry Rig Count % Change in Industry Rig Count from 10/3
Slide 8: Failure of Capital Allocation: Wrong Basin
FAILURE OF CAPITAL ALLOCATION Wrong Basin The success of the Newfield acquisition hinged on the STACK being a highly-competitive, low-cost resource play Industry experts have concluded the STACK is not an economically competitive play m Ovintiv Management (Nov ‘18) “The STACK/SCOOP clearly competes
Slide 9: Failure of Capital Allocation: Throwing Good Money After Bad
FAILURE OF CAPITAL ALLOCATION Throwing Good Money After Bad Despite inferior economics, OVV has continued to allocate meaningful capital to the Anadarko Basin This has been at the expense of OVV's Permian Basin operations, which have generated industry-leading results Management appears more focused
Slide 10: Failure of Governance: Minimal Insider Ownership
FAILURE OF GOVERNANCE Minimal Insider Ownership OVWV's history of value destructive capital allocation may result from insiders’ lack of skin in the game OVV's CEO has the lowest ownership among U.S. peers. The board owns less than 0.2% of shares outstanding The CEO's beneficial ownership is only wo
Slide 11: Failure of Governance: No Alignment or Accountability
FAILURE OF GOVERNANCE No Alignment or Accountability Despite the share price underperformance, CEO pay increased from $6.7 mm in 2014 to $12.6 mm in 2019 ISS’ analysis shows top quartile pay (horizontal) for bottom quartile performance (vertical) ISS: Pay vs Performance (2017 - 2019) RELATIVE DEGREE
Slide 12: Lack of Alignment Between CEO Compensation and Performance
FAILURE OF GOVERNANCE Lack of Alignment Between CEO Compensation and Performance Three-year TSR of (59%) is far below peers’, while CEO pay increased to $12.6 mm for 2019 The compensation structure has no correlation to shareholder value creation The board awarded over 100% of target for annual bonu
Slide 13: Failure of Environmental Stewardship: Lagging Not Leading
FAILURE OF ENVIRONMENTAL STEWARDSHIP Lagging Not Leading In investor materials, management refers to Ovintiv as the “New E&P” with “top tier ESG performance” However, OVV appears to be the only one who believes that Credible third-party evaluators rate OVV's environmental stewardship as poor ISS Env
Slide 14: Elevated Emissions
FAILURE OF ENVIRONMENTAL STEWARDSHIP Elevated Emissions OW has one of the highest greenhouse gas emission intensities within its U.S. Peer Group It has not adopted targets for total emissions intensity or gas flaring, unlike peers such as Pioneer OW’s unwillingness to listen to shareholders is clear
Slide 15: Kimmeridge Plan
KIMMERIDGE PLAN How to <Ovintiv CAPITAL » Reintroduce 5-year plan with long-term visibility into return of capital ALLOCATION » Monetize non-core assets to accelerate debt reduction » Reallocate capital from the STACK and widen spacing assumptions » Redirect capital to the Permian with detailed disc
Slide 16: About Us
ABOUT US y Kimmeridge Founded in 2012, Kimmeridge is a private investment firm focused on U.S. unconventional oil and gas assets > Kimmeridge is differentiated in its direct investment approach with in-house technical expertise and experience in geological evaluation, land acquisition and engineerin
Slide 17: Disclaimer
DISCLAIMER This presentation, the materials contained herein, and the views expressed herein (this “Presentation”) are for discussion and general informational purposes only. This Presentation does not incorporate the specific investment objective, financial situation, suitability, or the particular
Slide 18: Legend
LEGEND Kimmeridge 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 t
Slide 19: Fix Ovintiv website: A Track Record of Value Destruction
FixOvintiv. HOME PRESS RELEASES PRESENTATIONS. INTHE NEWS — KIMMERIDGE ~ ATRACK RECORD OF VALUE 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
Slide 20: The Case for Change
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
Slide 21: “85% 53% ‘12.7B **75M 0.2% Cie}!
— ®@®®O®e® ® “85% 53% ‘12.7B **75M 0.2% Cie}! RETURN SINCE 2UNE 201 UNE 2015 20 ano Roan pore) 2015 lowest ceo 240080) pees) ‘Source: Blomberg, FactSet, Public Company Franca Reports anc Proxy Statements Total Shareholder Return (SR) of (84) from 6/10/15 to 14/36/20 US Past Group dats shovn her nd e
Slide 22: Resources
RESOURCES PRESS RELEASE PRESENTATION Kimmeridge Publishes Presentation: “Ovintiv: A Track Record Ovintiv: A Track Record of Value Destruction of Value Destruction” January 2024 January 14,2021 in
Slide 23: About Kimmeridge
ABOUT KIMMERIDGE A private investment frm focused on unconventional ol and gas assets in the US. WHITE PAPERS > ABOUT KIMMERIDGE » STAY INFORMED = suaMir > FixOvintiv GENERAL INQUIRIES SHAREHOLDER INQUIRIES MEDIA eee ruc coat asst ene 2021 Kiar Al Rights Reseed Potentiation ee ere Sats Lnmeride@latt
Slide 24: Resources: Press Releases
Fix’Ovintiv HOME PRESSRELEASES PRESENTATIONS INTHENEWS KIMMERIDGE ¥ RESOURCES PRESS RELEASES KIMMERIDGE PUBLISHES PRESENTATION: “OVINTIV: A TRACK RECORD OF VALUE DESTRUCTION” January 14, 2021 Ovintiv dramatically underperforms peers and the energy sector STAY INFORMED cae Fiz ( ) VAlg \ GENERAL INQU
Slide 25: Resources: Presentations
Fix’Ovintiv HOME PRESSRELEASES PRESENTATIONS INTHENEWS KIMMERIDGE ¥ RESOURCES PRESENTATIONS A TRACK RECORD OF VALUE DESTRUCTION January 2021 STAY INFORMED SUBMIT » Fi> ( IVINTIV GENERAL INQUIRIES SHAREHOLDER INQUIRIES MEDIA General Inquiries: Bruce H. Goldfarb Kekst CNC 2021 Kimmeridge. All Rights R
Slide 26: Ovintiv In the News
HOME PRESSRELEASES PRESENTATIONS INTHENEWS KIMMERIDGE ¥ OVINTIV IN THE NEWS BLOOMBERG - SHALE DRILLER OVINTIV ADDS NEW DIRECTOR AFTER INVESTOR CRITICISM By Gerson Freitas Jr. and Scott Deveau November 19, 2020 Ovintiv adds new board director following Kimmeridge criticism. BLOOMBERG - OVINTIV CRITIC
Slide 27: Shale Driller Ovintiv Adds New Director After Investor Criticism
[By Manage Subscription Corporate Governance Shale Driller Ovintiv Adds New Director After Investor Criticism Gerson Freitas Jr. and Scott Deveau ov. 19, 2020, 10:56 AM @ Fred Fowler will not seek re-election as director in 2021 @ Tellurian CEO Meg Gentle named as new member of the board Bloomberg L
Slide 28: Ovintiv’s market value has declined by over the past year to $3.2 billion, The
Ovintiv’s market value has declined by 38 over the past year to $3.2 billion, The shares were little changed at $12.24 at 10:39 a.m, in New York after earlier rising as much as 3.39. To contact the reporters on this story Gerson Freitas Jr. in New York at gfreitasjr@bloombergnet; Scott Deveau in New
Slide 29: View Full Desktop Site
View Full Desktop Site BLAW °® 24/7 Help Desk (888) 560-2529 Terms of service , Privacy , Copyright , Accessibility f National Affairs, Inc.
Slide 30: Ovintiv Criticized by Activist Over 'Excessive' Pay
Deals Ovintiv Criticized by Activist Over ‘Excessive’ Pay By Scott Deveau November 17, 2020, 9:00 AM EST Corrected November 17, 2020, 5:22 PM EST > Kimmeridge also builds new positions in PDC Energy, Cimarex > Suggests measures aimed at restoring shareholder confidence Activist investor Kimmeridge E
Slide 31: NEW YEAR'S SALE
NEW YEAR'S SALE Here’s toa new outlook. } News for abright new year, at 99¢ a month Bloomberg.com Ovintiv said in an emailed statement it valued constructive suggestions from all shareholders. “We disagree with Kimmeridge’s characterizations of our corporate governance and compensation programs. Our
Slide 32: Kimmeridge, which owns a 19% stake in Ovintiv, has raised its concerns to the
Kimmeridge, which owns a 19% stake in Ovintiv, has raised its concerns to the company, and will keep all options on the table if the company fails to address them, induding starting a proxy fight to replace board members ifneeded, Viviano said. On The Backfoot Energy stocks including Ovintiv underpe
Slide 33: Paid Post
Paid Post 3D Printing Fighter Plane Parts GE The firm has conveyed its message to Cimarex but has yet to do so at PDC Energy, where it waged an unsuccessful proxy fight last year. “We’re building positions in these companies because we believe the underlying asset quality and cash flow generation ha
Slide 34: About Kimmeridge
24 . . F Ss Ovi ntiv HOME PRESSRELEASES PRESENTATIONS INTHENEWS KIMMERIDGE ¥ ABOUT KIMMERIDGE FOUNDED IN 2012 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 with in-house
Slide 35: Research: White Papers
PR’ ELEASES PRESENTATIONS INTHE NEWS KIMMERIDGE ¥ RESEARCH WHITE PAPERS BRINGING ALIGNMENT AND ACCOUNTABILITY TO THE E&P SECTOR November 17, 2020 Our latest white paper addresses the lack of alignment between executives and shareholders and offers solutions to remedy this deeply rooted issue. CHARTI
Slide 36: Kimmeridge Media Coverage
RELEASES PRESENTATIONS INTHENEWS KIMMERIDGE ~ KIMMERIDGE MEDIA COVERAGE ENERGY 360 PODCAST - REFORMING U.S. SHALE COMPANIES Mark Vi 12, Head of Public Equities a Kimmeridga discusses the fim approach to reforming the shale sector BLOOMBERG TV MARKETS - BIDEN WIN WOULD BE POSITIVE FOR OIL PRICE, ACTI
Slide 37: Certain Information Concerning the Participants
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 p