Source Energy Services Ltd. (SHLE) Earnings Call Transcript & Summary

Hello, and welcome to Annual Meeting of Stockholders of Source Energy Services. Please note that today's meeting is being recorded. During the meeting, you will have a question-and-answer session. [Operator Instructions] It is now my pleasure to turn today's meeting over to Stew Hanlon. The floor is yours.

Thank you very much, operator. Good morning. I'd like to welcome everyone to the Annual Meeting of the Shareholders of Source Energy Services Limited. My name is Stew Hanlon, and I'm the chair of the Board of Directors of Source Energy Services Limited. In accordance with Source's bylaws, I will preside as Chair of the meeting. Ms. Tracy Nielsen will act as secretary of the meeting. Today's meeting is being held virtually as a result of the impact of COVID-19 and in keeping with the related advisories and recommendations of the federal and provincial governments that are intended to ensure the health and welfare of our shareholders, employees and other stakeholders. Regardless of the format of today's meeting, we'd like to say that we sincerely look forward to the time when we have controlled the rage on COVID-19 and when we can all meet face-to-face. Registered shareholders received a control number on their proxy form, and shareholders who have validly appointed their own proxy holder to vote of this virtual meeting by following the proxy appointment process were given a control number by Computershare's Trust Company of Canada, Source's transfer agent. These control numbers will act as your log in credentials for this meeting for voting purposes. Procedure for voting will be discussed shortly. All others attending as guest are able to listen and submit written questions but are not able to vote at this meeting. In the event that technical difficulties prevent me from completing the meeting, I hereby appoint Brad Thompson, Chief Executive Officer of Source to act as Chair of the meeting in my place. Today's meeting of shareholders is being held to consider and vote only on those specific matters set forth in the management information circular previously mailed to the company's shareholders of record as of March 26, 2021. I now call the formal part of the meeting to order. In order to expedite the meeting, I have asked certain shareholders to make certain motions at the appropriate times. This is not intended to preclude shareholder discussion, but only to assist the progress of the meeting. I welcome questions or comments from shareholders at any time. I appoint Jason Yee, a representative of Computershare Trust Company of Canada, to act as scrutineer of the meeting. I received a declaration as to the distribution of the notice of meeting, together with the management information circular and proxy form to all registered shareholders of records as of the close of business on the record date of the meeting. This declaration will be filed with the minutes of the meeting. I've received the report of the scrutineer, which indicates that we have quorum for the meeting. I hereby adapt the report of the scrutineer and declare that there is a quorum of shareholders present at the meeting. Based on the scrutineer's report and a quorum being present, I declare that this meeting is duly constituted for the transaction of business. I direct that the scrutineer's report on attendance be annexed to the minutes of this meeting. We will conduct the votes on matters considered at the meeting by online ballot. As explained earlier, registered shareholders received a control number on their proxy form and shareholders who have validly appointed their own proxy holder to vote at this meeting rather than voting in advance of this meeting by proxy. By following the proxy appointment process, we're required to obtain a control number prior to the meeting from Computershare. These control numbers are required in order to vote at this meeting. If you did not receive a control number, you will not be able to vote at this meeting and are only able to attend as a guest. Voting is open and will close when indicated by me at the end of the formal part of this meeting. Participants will have been presented with voting buttons on the Lumi platform. By clicking on the voting button, participants will see that the resolutions -- will see the resolutions we will be voting on today, together with the voting options. Please cast your vote promptly, and you will -- and you should be presented with a vote received message to confirm your ballot has been set or cast. While the resolutions are brought forward, we will open up the meeting for discussion on the resolutions, which will be done by way of simulating online questions to the chair of the meeting. Participants can ask a question at any time during the meeting by selecting the messaging icon with a red circle on top of your screen, typing your questions and submitting it. Please note that all questions are moderated before going to the Chair in order to eliminate repeated questions and to ensure normal meeting protocol for appropriateness is applied. As your question may be similar in nature to that of another participant, please be aware that the question may be presented at the meeting in a more generic format. If you intend to submit a question, you're invited to do so now. Any questions that are unrelated to the motion before the meeting are out of order and will not be addressed by the Chair. We will now proceed with the first item of business and present the annual financial statements of Source for the year -- fiscal year ended December 31, 2020, and the auditor's report thereon. Shareholders do not have to take any action regarding these financial statements, and we will now move on to the next item of business. The next item of business is to fix the number of directors of Source to be elected at the meeting. I ask Derren Newell for a motion that the number of directors be elected at the meeting be fixed at 7.

I move that the number of directors to be elected at the meeting be fixed at 7.

Thank you. May I have please -- May I please have someone second the motion.

I second the motion.

As previously mentioned, voting is open and will close when indicated. The next item of business is the election of directors. The proposed nominees are Jeff Belford, Stew Hanlon, Chris Johnson, Carrie Lonardelli, Ken Seitz, Steven Sharpe and Brad Thomson. If elected, these individuals will hold office until the next annual meeting of shareholders or until their successors are duly elected or appointed. I ask Derren Newell for a motion that each of the proposed nominees be nominated for election as directors of Source.

I move that each of the proposed nominees be elected as directors of Source to hold the office until the next annual meeting of the shareholders or until they resign or their successors are duly elected or appointed.

May I please have someone second the nominations?

I second the nominations.

As previously mentioned, voting is open and will close when indicated. The next item of business is the appointment of auditors of Source for the current year. I ask Derren Newell for the motion to reappoint Pricewaterhousecoopers LLP as auditors of Source.

I move that Pricewaterhousecoopers LLP be reappointed as auditor of Source and that the remuneration as such be fixed by the Board of Directors.

Thank you. May I please have someone second the motion?

I'll second the motion.

As previously mentioned, voting is open and will close when indicated. The next item of business is approval of Source's 2021 long-term incentive plan. The 2021 long-term incentive plan is a renewal of the 2018 long-term incentive plan and allows restricted share units or RSUs, and preferred share units or PSUs to be settled either in cash or in common shares issued from treasury or purchased on the secondary market. The 2021 long-term incentive plan contains amendments to align certain definitions with TSX requirements, which are deemed to be of a housekeeping nature, and therefore, do not require shareholder approval. The 2021 long-term incentive plan has been described in detail in the information circular provided to shareholders in connection with this meeting, and a copy of the plan is attached as Appendix B to that information circular. Under the policies of the TSX, the ability to settle RSUs and PSUs with treasury issued shares triggers a TSX requirement that the plan must be approved by the shareholders to be effective. The maximum number of common shares reserved for issuance under the 2021 long-term incentive plan and all other security based compensation arrangements of Source may not exceed 10% of the then issued and outstanding common shares calculated on a non-diluted basis. The Board of Directors approved the 2021 long-term incentive plan on March 18, 2021, subject to shareholder approval. The full text of the ordinary resolution being put forward by -- for approval by shareholders at this meeting has been set out -- has been set forth on Page 29 of the information circular. I ask Derren Newell for a motion to approve the 2021 long-term incentive plan.

I move that the ordinary resolution as set forth at Page 29 of the information circular of Source Energy Services Limited dated March 18, 2021, be approved.

Thank you. May I have -- please have someone second that motion.

I second the motion.

As previously mentioned, voting is open and will close when indicated. The next item of business is approval of Source's 2021 stock option plan. The 2021 stock option plan is a renewal of the 2017 stock option plan, which laps and cease to be effective as of April 13, 2020, and allows for grants of options to be settled in common shares issued from treasury. The 2021 stock option plan contains amendments to align certain definitions with the TSX requirements, which are deemed to be of a housekeeping nature, and therefore, do not require shareholder approval. Under the policies of the TSX, the ability to settle options with treasury issued shares triggers a TSX requirement that the plan must be approved by shareholders to be effective. The maximum number of common shares reserved for issuance under the 2021 stock option plan and all other security based compensation arrangements at Source may not exceed 10% of the then issued and outstanding common shares calculated on a non-diluted basis. The Board of Directors approved the 2021 stock option plan on March 18, 2021, subject to shareholders' approval. The 2021 stock option plan has been described in detail in the information circular provided to shareholders in connection with this meeting, and a copy of that plan is attached as Appendix C to that information circular. The full text of the ordinary resolution being put forward for approval by shareholders at this meeting has been set forth on Page 32 of the information circular. I ask Derren Newell for a motion to approve the 2021 stock option plan.

I move that the ordinary resolution has set forth at Page 32 of the information circular of Source Energy Services Limited date March 18, 2021, be approved.

Thank you. May I please have somebody second that motion?

I second the motion.

As previously mentioned, voting is open and will close when indicated. [Voting]

Thank you. I hereby declare the polls closed. The resolutions are now open for discussion. I will pause for a moment to allow the moderator to ask any questions that have been submitted. Otherwise, we will move to conclude this meeting.

No questions have been submitted at this time.

Thank you. Ladies and gentlemen, this concludes the business of the meeting. I therefore declare the polls closed. Thank you for casting your votes. We will give the scrutineer a further moment to complete their tabulation of the votes cast, and we will report back momentarily. Please stand by. I'm pleased to report that we have now received the voting results, and I confirm that the resolution to fix the number of directors at 7 has been approved and that these persons nominated are duly elected as directors of Source to hold office until the next annual meeting of the shareholders or until they resign or their successors are duly elected or appointed. I confirm that Pricewaterhousecoopers LLP has been reappointed as auditor of source, and that the Board is authorized to fix the auditor's remuneration. I confirm that the 2021 long-term incentive planning resolution has been approved. I confirm that the 2021 stock option plan for resolution has been approved. If there is no further business, I would like to call for a motion to terminate this meeting.

I move that the meeting be terminated.

Please have someone second that motion?

I second the motion.

Thank you all for attending today. I declare that the meeting is terminated. If any shareholder or proxy holder is interested in the exact number of votes cast in respect of the matters decided at this meeting, he or she may obtain particulars of the meeting from the Secretary. The report of voting results will be filed on SEDAR after the meeting. Thank you all. Good morning.

This concludes the meeting. You may now disconnect.