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Doug Suttles, chief executive of Ovintiv, formerly known as Encana, addresses the company's annual meeting in Calgary on April 30, 2019.Jeff McIntosh/The Canadian Press

Energy company Ovintiv Inc.‘s decision to attract U.S. index funds by moving the head office at Canada’s oldest oil and gas play to Denver seems to be paying off.

Ovintiv, formerly known as Encana Corp. and based in Calgary, drew heated criticism last October when American-born chief executive Doug Suttles announced plans to move to the U.S. A primary reason, he said, was to join U.S. stock benchmarks and increase the number of shares held by passive investors. A number of Canadian fund managers and analysts challenged Ovintiv’s math.

As Mr. Suttles predicted, Ovintiv is now being invited into U.S. equity indexes, which has helped boost the stock price since the pandemic and oil price war-linked decline in equity markets in March.

Spokeswoman Cindy Hassler said prior to the domicile move Encana had about 7-per-cent passive ownership in its shareholder base, largely from the S&P/TSX Composite and 60 indexes, and the MSCI Global Canada.

Now, MSCI has moved Ovintiv into its U.S. index, and FTSE Russell has added Ovintiv to the the small-cap Russell 2000. Between the two, Ms. Hassler said, Ovintiv’s passive ownership is about 11 per cent.

Two more potential moves could push that number to 20 per cent, she said.

While S&P Dow Jones Indices LLC included Ovintiv in its Total Market Index in late June, it hasn’t yet placed the stock in either its MidCap 400 or SmallCap 600 indexes. That could come once another stock loses its membership by being acquired, or tumbling in value.

And the Center for Research in Securities Prices LLC, or CRSP, may have added Ovintiv last month. CRSP tells its clients about changes first, tells the companies later, and eventually informs the public. Fund giant Vanguard, with over US$1-trillion in index funds, links to CRSP indexes.

“The company’s initiative to re-domicile to the United States and thrust to attract large pools of passive capital appear to have borne fruit,” said analyst Greg Pardy at RBC Dominion Securities Inc.

For now, Ovintiv is finding a home in indexes for smaller-capitalization companies than what was first expected. When Encana announced the potential move on Oct. 31 of last year, its market capitalization was more than US$5-billion. That was too small for the marquee S&P 500, but put it squarely in the S&P MidCap 400 territory, where the minimum capitalization is US$2.4-billion.

Similarly, the company seemed headed for the Russell 1000 index of the U.S.‘s biggest stocks. The shares took a dreadful spill during the COVID-19 crisis, however, and at March lows, the entire company was worth less than US$600-million. The company’s market capitalization averaged about US$2.5-billion in the month of June. The fall means its placement by S&P is uncertain, and it ended up in the Russell 2000, which are the stocks FTSE Russell ranks 1,001 through 3,000 in value.

According to Morningstar Direct research for the Globe and Mail, just under US$64-billion of investor money is tied to the Russell 2000. Nearly US$79-billion is tied to the S&P MidCap 400, with almost US$51-billion tied to the S&P SmallCap 600.

The big prize is the S&P 500, with nearly $1.65-trillion tied to it. Ovintiv shares would need to roughly quadruple before it became a candidate for that major index.

Ovintiv’s share price is up fourfold since late March after the company cut capital spending by 60 per cent and let go a quarter of its employees to deal with the impact of the novel coronavirus and falling oil prices.

As Encana, the company was once Canada’s largest oil and gas company, with significant holdings across North America. In recent years, the company’s share-price performance lagged that of most rivals, which some institutional investors attributed to poorly timed acquisitions.

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