Cavvy Energy Ltd. (CVVY) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of Pieridae Energy Limited. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you will be deemed to consent to the recording, and transfer and use of the same. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant to Computershare and the corporation that you first obtained all required consents for the disclosure, recording, transfer and use of such personal information from all appropriate persons before your disclosure. [Operator Instructions]. It is now my pleasure to turn today's meeting over to Myron A. Tétreault, Chairman of the Board of Directors. Myron, the floor is yours.

Thank you very much. Good morning, ladies and gentlemen, and welcome to this virtual annual and special meeting of Shareholders of Pieridae Energy Limited. My name is Myron A. Tétreault, and I'm the Chairman of the Board of Directors of the corporation, and I will act as Chairman for this meeting. To continue to mitigate the risks to health and safety of our shareholders, stakeholders, employees and the community, the meeting again is being held in a virtual format. With restrictions lifting in Calgary and the return to the workplace underway, perhaps this may be the last time that this is a virtual-only meeting. Before we proceed with the formal business of the annual and special meeting, I would like to take a moment to introduce the other directors and senior officers of the corporation who are participating in this meeting. They include Alfred Sorensen, the Chief Executive Officer and Director and Nominee; Charles Boulanger, a Director and Nominee; Andrew Judson, a Director and Nominee; Kiren Singh, Director and Nominee; Kjell Pedersen, Director; Charle Gamba, Director; Darcy Reding, President and Chief Operating Officer; Adam Gray, Chief Financial Officer; Tom Dawson, Senior Vice President, Business Development; and Yvonne Mcleod, Vice President, Health, Safety, Environment and Regulatory Drilling and Completions. As indicated in the management information circular, myself, Kjell Pedersen and Charle Gamba will not be standing for reelection this year. So I would like to introduce to you the 4 new nominees to the Board. They are Richard Couillard, a nominee; Patricia McLeod Q.C., nominee; Gail Harding Q.C., Nominee; and Doug Dreisinger, a nominee. It has been my pleasure to serve as Director of Pieridae and its predecessor Pétrolia since 2009 and Chairman since 2013. I believe the corporation is well positioned to take advantage of a strong market, and I'm pleased with the quality and breadth of experience of our new director nominees. I'd also like to take this opportunity to thank Kjell Pedersen and Charle Gamba, who have served as directors with distinction. I would now like to invite Alfred Sorensen to present some opening remarks.

Thank you, Mr. Chairman. Good morning, ladies and gentlemen. On behalf of the management of Pieridae Energy Limited, I would like to welcome you to the 2022 Annual and Special Meeting of Shareholders. Once the formal part of the meeting is over, I will make a brief presentation that highlights the future operations of Pieridae. With that, I will turn it back to our Board Chairman.

Thank you, Mr. Sorensen. At this time, I would like to introduce Dallas McConnell, Vice President, Corporate Finance, who has kindly agreed to act as the moderator for this meeting.

Thank you, Mr. Chairman. I would like to take this opportunity to introduce the participants in the meeting to the basic functionality of the virtual platform, which is hosting the meeting. You should see the home page for the meeting on your screen. To vote, you click on the voting tab. We encourage shareholders to ask questions, but ask that those questions unrelated to the matters to be voted on be held until after the formal portion of the meeting. [Operator Instructions]. If you wish to vote or ask a question during the formal business of the meeting, you must be a registered shareholder of record as of April 12, 2022, or a duly appointed proxy holder. Guests, including beneficial shareholders who have not duly appointed themselves as proxy holders, are able to listen to the formal business of the meeting. However, they will not be able to vote or submit questions on items of business. As with any new technology, unexpected glitches may occur, but our service providers for this virtual platform at Computershare are very experienced at running virtual meetings and will be on hand to assist.

Thank you, Mr. McConnell. We will now proceed with the formal part of the meeting. The meeting of shareholders of the corporation will now come to order. And with your approval, I will ask Thomas Valentine, Corporate Secretary, to act as Secretary of the meeting. I'll also ask Christopher Parsons and Reymer Espinas of Computershare Trust Company of Canada, be appointed act as scrutineers for the meeting to report on the shareholders participating by electronic means, the number of shares represented in person or by proxy at the meeting and to compute votes on any poll taken at the meeting or any adjournment thereof and to report thereon to the Chairman. The notice calling this Annual and Special Meeting of Shareholders was sent on April 29, 2022, to all shareholders of record as of April 12, 2022, which is designated as the record date and to intermediaries as required by securities legislation. A declaration as to such distribution is available for inspection by any shareholder. The Secretary will append the declaration as a schedule to the minutes of the meeting. The notice calling this meeting was also sent to the directors and to Ernst & Young LLP as auditors of the corporation in accordance with the Canada Business Corporations Act. I have been advised by the scrutineer that we have achieved quorum, I direct that the scrutineers' report be kept with the minutes of the meeting. As such, I declare this meeting properly constituted for the transaction of business. Notice having been served in accordance with the bylaws of the corporation and a quorum being present, I now declare that the Annual and Special Meeting of the shareholders of the corporation has been duly called and is properly constituted for the transaction of business. Should a shareholder wish to address the Chair, please type in your question or comment in the message section on your computer screen. If there is any discussion or question, the monitor will read the statement or question allowed. The form of proxy delivered to registered shareholders in connection with today's meeting provided registered shareholders with the option of appointing Alfred Sorensen or alternatively, Darcy Reding as such shareholders proxy. As a result, they will be voting on their own behalf and on behalf of all registered shareholders who appointed either of them as their proxy. The purpose of this meeting is to allow shareholders to receive the audited consolidated financial statements of the corporation for the year ended December 31, 2021, together with the report of the auditor thereon; to fix the number of directors of the corporation to be elected as 8; to elect the directors of the corporation for the ensuing year; to appoint Ernst & Young LLP as the auditors of the corporation for the ensuing year; and authorize the Board of Directors of the corporation to fix the remuneration of the auditors; to consider and, if deemed advisable, to pass an ordinary resolution approving the stock option plan as described in Schedule A attached to the management information circular; to accept the corporation's approach to executive compensation; and to transact any other business which may be properly brought before the meeting. All is more particularly outlined in the management information circular of the corporation dated April 12, 2022, which was forwarded to all of the shareholders of the corporation with the notice calling this meeting. I'm advised by the scrutineer that the total number of votes represented at the meeting by proxy that are required to be voted against any of these regulations is less than 40% of the votes attached to the common shares entitled to vote and represented at the meeting. The last annual general and special meeting of the shareholders of the corporation was held on May 26, 2021. The secretary has tabled the minutes from that meeting, and they are available for inspection by any shareholder at the registered office of the corporation. Unless any shareholder wishes the minutes to be read, I do not propose to read them at this meeting. As the first matter of formal business, I place before the shareholders at this meeting, the audited consolidated financial statements of the corporation for the year ended December 31, 2021. Copies of such financial statements and auditor's report have been sent to all registered shareholders. As is customary, we do not intend to conduct a vote on these financial statements. I declare that the audited financial statements of the corporation for the year ended December 31, 2021, together with the report of the auditors thereon have been received. As previously indicated, Mr. Sorensen will make a brief presentation on the corporation following the formal portion of the meeting. We will conduct the votes on the matter before us by a poll. On a poll, every registered shareholder of the corporation, as at the record date, is entitled to vote on the matter and has 1 vote in respect of each common share that is entitled to be voted on the matter and it's held by that shareholder. It is now in order to proceed with the election of directors of the corporation. I will entertain a motion to fix the number of directors to be elected at this meeting at 8 and invite any such motion to be seconded.

Mr. Chairman, my name is Adam Gray, and I am a proxy holder and I so move.

Mr. Chairman, my name is Tom Dawson. I am a proxy holder, and I second the motion.

Is there any discussion?

There is no discussion at this time, Mr. Chairman.

As there is no discussion, I now call for a vote on the motion before the meeting. Would all voting shareholders please enter their votes on the virtual platform? [Voting]

I'm informed that a majority of the votes submitted were in favor of the motion, and I therefore declare the motion carried. I now declare the meeting open for the election of Directors. The articles of the corporation allow for a minimum of 3 and a maximum of 11 directors. As well, the corporation has also adopted Bylaw #3, which establishes the nomination procedures. Bylaw #3 requires, among other things, that any notice of nomination if given by or at the direction of the Board must be included in the notice of meeting. And if given by any qualified shareholder in the case of an annual and special meeting, must be delivered to the Corporate Secretary of the corporation, no later than the end of the 10th day following April 12, 2022. I'm informed by the Corporate Secretary that no such notice has been delivered by any qualified shareholders. The corporation has given notice of the nomination for election to the Board of Directors of 8 individuals whose names and Biographic information are included in the management information circular. I will now entertain a motion placing the names of those nominees before the meeting for election as directors of the corporation and invite any such motion to be seconded.

Mr. Chairman, my name is Adam Gray, and I'm a proxy holder. I nominate each of Alfred Sorensen, Charles Boulanger, Andrew Judson, Kiren Singh, Richard Couillard, Patricia McLeod, Gail Harding and Doug Dreisinger for election as Director of Pieridae Energy Limited to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed.

Mr. Chairman, my name is Yvonne McLeod. I am a proxy holder, and I second the motion.

Thank you. As timely notice has not been received of the nomination of any other individual for election as a director of the corporation and as the number of individuals nominated pursuant to this motion is equal to the number of vacancies on the Board of Directors, I now declare the nominations closed. I'll now read the names and call for a vote with respect to each proposed director and ask that all voting shareholders enter their votes on the virtual platform by clicking on the vote tab with respect to each director for election as a Director of the corporation to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed, unless their office is earlier vacated pursuant to the articles of the corporation or the Canada Business Corporations Act. Alfred Sorensen, Charles Boulanger, Andrew Judson, Kiren Singh, Richard Couillard, Patricia McLeod Q.C., Gail Harding Q.C. and Doug Dreisinger. The moderator has cast the ballot for each individual nominated and the ballots have been counted. [Voting]

I'm informed that a majority of the votes submitted were in favor of each motion, and I therefore declare the motion carried. I declared that Alfred Sorensen, Charles Boulanger, Andrew Judson, Kiren Singh, Richard Couillard, Patricia McLeod, Gail Harding and Doug Dreisinger are each duly elected as a Director of the corporation to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed. I'd like to congratulate the Board of Directors, and thank them for their service and offer a warm welcome to the new directors. The next item of business is the appointment of the auditors of the corporation. The corporation proposes the appointment of Ernst & Young LLP as its auditors to hold offices until the next Annual Meeting of Shareholders at such remuneration as may be fixed by the corporation's Board of Directors. May I have a motion please and a seconder of the motion?

Mr. Chairman, my name is Adam Gray, and I'm a proxy holder. I move that Ernst & Young LLP be appointed as auditors of Pieridae Energy Limited to hold office until the next Annual Meeting of Shareholders at such remuneration as may be fixed by the Board of Directors of Pieridae Energy Limited.

Mr. Chairman, my name is Tom Dawson. I am a proxy holder, and I second that motion.

Thank you. Is there any discussion?

Mr. Chairman, there is no discussion at this time.

As there is no discussion, I now call for a vote on the motion before the meeting. Would all shareholders please enter their votes by clicking on the vote tab on the virtual platform? [Voting]

I'm informed that a majority of the votes submitted were in favor of the motion, and therefore, I declare the motion carried. Next item of business is consideration and possible approval of the stock option plan as described in schedule attached to the management information circular. May I have a motion, please and a seconder of that motion?

SP-8 Mr. Chairman, my name is Yvonne McLeod. I am a proxy holder, and I move as an ordinary resolution that, a, the amendments to the provisions governing nonemployee director participation limits, which were approved by the Board on May 19, 2021, the text of which is reproduced in Schedule A to the Management Information Circular dated April 12, 2022, be accepted and adopted; b, the amendments to the provisions governing amendments requiring shareholder approval, which were approved by the Board on May 19, 2021, the text of which is reproduced in Schedule A to the Management Information Circular dated April 12, 2022, be accepted and adopted; and c, any Director or Officer of Pieridae Energy Limited is hereby authorized to execute and deliver whether under corporate seal or otherwise, any agreements, instruments, notices, consents, acknowledgments, certificates and other documents, including any documents required under applicable laws or regulatory policies and to perform and do all other such acts and things as any such director or officer in his or her discretion may consider to be necessary or advisable from time to time in order to give effect to this resolution.

Mr. Chairman, my name is Adam Gray, I'm a proxy holder, and I second the motion.

Thank you. Is there any discussion?

There is no discussion at this time, Mr. Chairman.

As there is no discussion, I now call for a vote on the motion before the meeting. So would all shareholders please enter their votes by clicking on the vote tab on the virtual platform? [Voting]

I'm informed that a majority of the votes submitted were in favor of the motion, and I therefore declare the motion carried. The next item of business is the nonbinding advisory vote on executive compensation, also known as say on pay. May I have a motion, please and a seconder of that motion?

Mr. Chairman, my name is Yvonne McLeod. I am a proxy holder, and I move that on an advisory basis and not to diminish the role and responsibilities of the Board of Directors that the shareholders accept the approach to executive compensation disclosed in the Management Information Circular.

Mr. Chairman, my name is Adam Gray, I'm a proxy holder, and I second the motion.

Thank you. Is there any discussion?

Mr. Chairman, there is no discussion at this time.

As there is no discussion, I now call for a vote on the motion before meeting. Would all voting shareholders please enter their votes by clicking on the vote tab on the virtual platform? [Voting]

I'm informed that a majority of the votes submitted were in favor of the motion, and I therefore declare the motion carried. The polls are now closed. And I'll ask if there's any other business to be brought before this meeting? Hearing no other business that has to be brought before this meeting, I now declare the formal part of this meeting to be terminated. Thank you for attending. I'll now ask Alfred Sorensen to make a presentation about the business of the corporation.

Thank you, Myron. Good morning, everyone, and thank you for taking the time to attend our meeting today. I will focus today's presentation on the next year, as we previously spoke to our financial results 2 weeks ago on our investor call. Our 2022 corporate goals were detailed in our annual information form filed on SEDAR earlier this year. We remain on track to meet those goals for year 2022. And with the continuing strong pricing environment, we will exceed our economic goals. Of priority to us this year is meeting our ESG goals for 2022. We will begin that with our first Board meeting to be held directly after the conclusion of our meeting today. Our commitment to gender equality begins today with management's proposal to the new Board that Ms. Patricia McLeod be elected -- nominated and elected as the new Chair of our company. With the election of Ms. McLeod, Pieridae will become one of the few oil and gas companies to have a female Chair of our Board. And that will represent a change in our Board composition that 38% of our Board would be female. We are proud to be leaders in this part of the ESG struggle, and we continue to be proud of our fact that we find this important part of where we're going from here. Part of our ESG moving forward is to put resources into the entire ESG scenario. We have hired 2 new individuals over the last week or so to ensure that by the third quarter of this year, we will have our second sustainability report issued, and we will also be able to begin to pre-feed on our carbon sequestration project in the third quarter. We also believe it's important that we begin drilling in 2022. As the largest foothills producer, it is our responsibility to prove the economic value of the foothills and the only way for us to do so is to commence drilling in 2022. Finally, renegotiating our capital structure remains our paramount concern for this year. We believe with the current pricing environment and the ability to continue to improve our ESG commitments that we will be able to reduce our cost of capital and redeploy that capital in a matter that we will be able to increase our value to all our shareholders. Of concern for all shareholders has been our relationship with Shell. Earlier this year, we indicated to shareholders through our press release that we would not be continuing with the license transfer process until the very end of 2022, more likely in 2023. We remain the beneficial owners of the assets and that requires that we take a relook at our relationship with Shell. In renegotiating our relationship with Shell, we are looking to improve on the economic value of the original sales and purchase agreement that was signed back in 2019. One of the primary areas of concern will be our sulfur contract that we currently have in place. And we hope to be able to take the economic advantage of the fact that we have a significantly different sulfur market in 2022 than we did back in 2019. Our drilling program, as I mentioned, is an important part of our '22 goals. We look forward to beginning that process. We are already well into obtaining the necessary license permits from the province of Alberta. We have engaged our drilling company, and we hope to begin drilling in the third quarter of this year. If we are able to close an earlier financing with our renegotiated debt structure, we will try and move our project drilling up and perhaps as early as the second quarter. As drilling remains an important part of our LNG story, it becomes an important part of our overall go-forward structure. Speaking quickly about our LNG story, is obviously was a year ago with great disappointment that we had to postpone our Goldboro project for indefinitely. The last 8 months, we have looked at a variety of different opportunities to try and revise our LNG project. And with the change in circumstances around the world with the unfortunate invasion of Ukraine by Russia, it has opened up new opportunities for us to develop our LNG project on the East Coast. There remains significant hurdles to overcome, but we believe with the participation of the government of Canada and with the solution with the First Nations that we will be able to come to some type of solution by the end of this summer. Quickly just reiterating where we were with our guidance that we talked about 2 weeks ago when we released our first quarter results. We believe we are positioned for a very successful 2022. We had a very difficult year ago, but we have emerged a much better company. With the guidance of Darcy Reding as our new President of our Production Company and Pieridae as a whole, we believe that we will have capabilities to increase the value to our shareholders in this very exciting environment. Our original guidance is on the higher side, but -- our guidance today remains on the higher side of our original guidance issued in March, and we believe that by the end of this year, we will obtain significant improvements over our prior year's operations. I'd now like to take a couple of minutes to thank our departing Board members, Myron, Charle and Kjell, I've enjoyed working with you for the last several years. And I also would like to thank Third Eye who has been a constant supporter of our company as we went through last year. Although last year was not easy for our Board members, our employees or the management of our company with their guidance and support, we have merged and are prepared to meet new challenges. Myron, on behalf of the Board and myself, I wish you all the best. And I thank you for your support throughout the year.

Thank you, Alfred. We will now take questions submitted via our virtual platform. Okay. Seeing no questions, I would like to thank everyone for their participation in this meeting. Thank you very much for participating in our virtual AGM this morning and for your interest in Pieridae. Stay safe and healthy, everyone, and have a good day.

This concludes the meeting. You may now disconnect.