Veren Inc. (VRN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. On behalf of the Board of Directors, it is my pleasure to welcome you to the Annual General Meeting of Shareholders of Present Point Energy Corp. The Board and management, thank you for your interest and attendance today. We have, again, made the decision to hold the meeting virtually in light of the ongoing COVID-19 pandemic. We do expect that we will be able to hold our 2022 annual meeting in person, returning to our usual process. My name is Barbara Munroe, and as Chair of the Board of Directors of Crescent Present, I will act as Chair of the meeting this morning. I would now like to introduce the other directors and nominees in addition to myself and Craig Bryksa, standing for election to the Board and who are attending today's meeting remotely. Laura Cillis, James Craddock; John Dielwart; Ted Goldthorpe, Mike Jackson; Jennifer Koury, François Langlois; and Myron Stadnyk. At this time, I would like to thank the Board for their continued support and guidance of the affairs of the company. With respect to the logistics of the meeting, if you wish to vote or participate in the formal part of the meeting, you must be a registered shareholder of record on April 8, 2021, or a duly appointed proxy holder of Crescent Point. If you wish to vote or ask a question, please do so using the instant messaging service of the virtual interface. In attendance today are Craig Bryksa and Ken Lamont, who will be available after the formal portion of the meeting is completed. And after Mr. Bryksa has completed his presentation, to answer any questions you have already submitted or that you submit during the meeting using the virtual interface. Relevant questions, if any, regarding procedural matters or directly related to the motions before the meeting will be addressed during the meeting. All other questions will be addressed during the question period after the formal portion of the meeting. For the purposes of the meeting today, voting on all matters will be conducted by electronic ballot. Registered shareholders and duly appointed proxy holders will be asked to vote on each item of business. And after all items of business have been brought before the meeting, I will report the results of each vote. In order to have the meeting proceed efficiently, we have asked a number of employees who are shareholders or proxy holders of Crescent Point to move and second the motions to be put before the meeting. Note that because of the number of proxies held by management, all resolutions on today's agenda will be approved by the required majorities. If you wish, a scrutineer can provide you with a detailed breakdown after the meeting. I will now call the Crescent Point Annual General Meeting to order. Our Senior Vice President, General Counsel and Corporate Secretary, Mark Eade, is in attendance and will act as secretary of the meeting. Steve Bandola of Computershare Canada, our transfer agent, is in attendance today, and I appoint him to act as Scrutineer for the meeting. I ask Mr. Eade to file a copy of the notice of this meeting, which was mailed on April 13, 2021, to shareholders of record on April 8, 2021. A copy of the notice and proof of service will be filed with the records of this meeting. The scrutineers have provided me with a preliminary report on attendance, and the count indicates that 4 shareholders are present by webcast or by proxy and 176 proxies were deposited representing 228,011,478 common shares. Accordingly, 42.9% of the common shares outstanding are currently represented at this meeting. I therefore declare that a quorum is present and that this meeting is properly constituted for the transaction of business. A copy of the scrutineers' report will be filed with the records of the meeting. Copies of the minutes of the last Annual Meeting of Shareholders held on May 14, 2020, have been verified and signed and have been filed in the corporation's minutes book. The first item of business is the receipt of the annual consolidated financial statements of the corporation and the auditor's report for the year ended December 31, 2020. The annual consolidated financial statements and auditor's report were mailed to shareholders in accordance with securities law requirements, together with the notice of this meeting. I request the secretary file a copy of the annual financial statements and auditor's report with the minutes of the meeting. John Williamson of PricewaterhouseCoopers LLP, the auditor of the corporation, is in attendance today and available to answer written questions after the termination of the formal business of this meeting. The next item of business is the appointment of auditors. I would request a motion that PricewaterhouseCoopers LLP be appointed auditors of the corporation to hold office until the close of the next Annual Meeting of Shareholders at such remuneration as shall be fixed by the Board of Directors.

My name is David Gowland, and I am a shareholder and proxy holder. I so move.

My name is Peter Allegretto, and I'm a shareholder and proxy holder. I second the motion.

Thank you, David and Peter. We will now open the online call. Please note that if you have voted your shares by proxy, your vote has already been recorded, and it is not necessary that you vote now unless you wish to change your vote. Those who wish to vote are asked to use the appropriate voting buttons. If you wish to change your prior vote or to vote for the first time, if you have not already submitted a proxy already. [Voting]

I remind you that we will report the voting results on all matters of business at the end of the formal portion of the meeting. The election of the directors is the next item of business. In connection with the election, it is necessary to first fix the number of directors to be elected. The articles of Crescent Point currently provide that Crescent Point shall have not less than 1 and not more than 11 directors. It is proposed that 10 directors be elected at this meeting to serve until the next annual meeting or until their successors are duly elected or appointed. We are satisfied that this number of directors is currently appropriate to provide a significant range of depth and experience and to meet all corporate governance requirements. I would ask for a motion to fix the number of directors to be elected at this meeting at 10.

I move that the number of directors of Crescent Point to be elected at this meeting be fixed at 10.

I second the motion.

Thank you, Peter and David. If you wish to change your vote or vote if you have not submitted a proxy already, please use the appropriate voting buttons to do so now. [Voting]

I would now like to open the meeting for nominations of directors to serve for the following year. May I have a nomination for the 10 nominees being Barbara Munroe, Craig Bryksa, Laura Cillis, James Craddock, John Dielwart, Ted Goldthorpe, Mike Jackson, Jennifer Koury, Francois Langlois and Myron Stadnyk.

I nominate Barbara Munroe, Craig Bryksa, Laura Cillis, James Craddock, John Dielwart, Ted Goldthorpe, Mike Jackson, Jennifer Koury, Francois Langlois, Myron Stadnyk to be elected as directors of the corporation to hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

Thank you, David. In 2013, Crescent Point's shareholders approved the adoption of an advanced notice bylaw. This allows the corporation and its shareholders to evaluate the proposed nominees' qualifications and suitability as directors, helping shareholders cast an informed vote for the election of directors. As no other nominations have been received in accordance with the advanced notice bylaw, there can be no further nominations. Accordingly, I declare nominations for the Board closed. The voting for directors of the corporation is pursuant to the policies of Crescent Point by individual director and not by way of slate vote. In addition, the Board has adopted a majority voting policy that meets the requirements of the TSX and requires any director nominee who receives a greater number of votes withheld and votes for the nominee's election to submit the nominee's resignation for consideration promptly after the AGM. However, since the number of nominees does not exceed the number of directors to be elected by the shareholders, and each nominee has already received a majority of the votes represented by proxy at the meeting, each of the nominees will be elected as directors. On this basis, I request a motion that each of the nominees be elected as directors of the corporation to hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed.

I so move.

I second the motion.

Thank you, Peter and David. Please note that if you have voted your shares by proxy, your vote has already been recorded, and it is not necessary that you vote now unless you wish to change your vote. If you wish to change your prior vote or vote if you have not submitted a proxy already, please use the appropriate voting buttons to vote for or withhold from voting for each nominee. [Voting]

The final item of business is the advisory vote on executive compensation. The Board believes that it is appropriate to hold a nonbinding say-on-pay vote with the intention that this advisory vote will form an integral part of the Board's shareholder engagement process around executive compensation. A detailed discussion of our executive compensation program is provided in the executive compensation section of the circular. I would now ask for a motion 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 information circular mailed to shareholders in advance of the meeting.

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 information circular.

I second the motion.

Again, if you wish to change your prior vote or vote if you have not submitted a proxy already, please use the appropriate voting buttons. [Voting]

We are about to close the polls. If you haven't finished indicating your vote on any selections, please do so now. [Voting]

The polls on all items of business brought before the meeting are now closed. I declare that all resolutions put to the meeting have been carried and that Craig Bryksa, Laura Cillis, James Craddock, John Dielwart, Ted Goldthorpe, Mike Jackson, Jennifer Koury, Francois Langlois, Myron Stadnyk and I have each been elected directors of Crescent Point to hold office until the next Annual Meeting of Shareholders or until our successors are elected or appointed. I declare that the advisory vote with respect to say on pay has been carried with approximately 93% voting in favor of the resolution. Scrutineers' report will be filed with the records of this meeting. As all business properly brought before the meeting has been dealt with, this concludes the business of the meeting, and I declare the meeting is now closed. Mr. Bryksa will now give a presentation on the company. Following Mr. Bryksa's presentation, we will respond to questions submitted by registered shareholders or valid proxy holders to management before or during the meeting.

Good morning. Thank you, everybody. Thanks for joining us today. Ideally, this is the last time that we do this virtually. And next year, we can all be in person and spend some time together running through the meeting. So again, thanks for taking the time and joining us today. I'm going to run you through a short presentation, and then we'll open it up for questions. And again, if we don't get to any of your questions or if you have some that you don't type in, please reach out to us post the meeting as well. So I'll talk to you about a few things here that I'm going to run you through this morning. First, I'm going to talk to you about COVID-19 and the response in the macro environment that we had, our execution in 2020 and then how that set us up for 2021 and beyond. So let's talk about COVID-19 and the macro environment. 2020, what a challenging year. I mean, it's a year like no other where we went through a global commodity price collapse, coupled with a pandemic. Obviously, a lot of challenges through that environment, but I'm extremely proud of how we took very decisive actions, how we stabilized the company very quickly and how we really set the company up for success, not only for 2021, but into the future years. We heightened our safety protocols to deal with COVID, and we protected all the safety of our staff and our stakeholders. And in fact, we had our best year as far as our safety measures that the company has had in its 19 years of existence last year. So very proud of that. We cut our capital program by 40%. We cut our executive and Board compensation levels. And we set ambitious emissions intensity reduction target that I'm happy to tell you we've made such good progress on that we actually increased that this year. So with all that going on in the background, we still continued with our commitments to our community donations programs. And the one that I'm most proud of in there is a renewed commitment to STARS Air Ambulance of $1.5 million over the next 5 years. So let's talk a little bit now just about the commodity price environment. So look at this graph. Last year at this time, we were sitting in front of you and oil was $2.44 a barrel. What a difference a year makes. I mean, right now, we're talking $60 to $65 a barrel, and there's a lot of things to be positive about just in the economies and globally when you look at it. Vaccines are rolling out. Global economies are starting to open. OPEC has done a marvelous job, a great job of really managing the delicate supply-demand balance here just coming out of the back end of this pandemic. And energy companies are staying disciplined. They're focusing on returns and they're focusing on free cash flow generation, and they're not focusing on production volume growth. So all of those things when you combine them paint a very optimistic picture for the commodity as you move into '21 and into 2022. And then even if you look at some of the -- not only the bank strips, but a number of the supply-demand forecasts out there, you really see demand outpacing supply here in the back part of 2021 and then when you look at '22. So a number of things for us to all be positive for. So now I'm going to talk to you a little bit about execution in 2020. So before I do that, I just want to remind you about the pillars of our strategy. These are things that we brought forward in 2018 when the new management team came out. They were fundamental to us then, and they continue to be fundamental to us now. These are the pillars that really drive all the decisions within the organization, and we tie everything back into them: one, balance sheet strength; and two, sustainability. The other thing I'd say is, keep in mind, every decision around these is underpinned with a strong ESG focus. So when you look at the balance sheet strength, what do we do in 2020? Well, in a brutal commodity price environment, we paid down $615 million of debt. And at the same time, one thing I'm really proud of is we brought forward a very disciplined returns-based capital allocation framework. That's a very transparent view on how the management team and the Board of Crescent Point think of allocating capital. And when you look at sustainability, we managed to moderate our decline rate by 5%, which is significant. And we're continuing to focus in on that so look for continued improvement in that in years to come. So now let's talk about our strategic focus and into 2021 and beyond. So the management team and the Board here at Crescent Point have worked very hard here over the last 24 months on really not only setting but executing on the long-term strategic plan. And you've seen us already move out a number of assets that don't fit within the portfolio we're trying to build. And you've seen us here recently move in an asset that really fits the portfolio that we're trying to build in the Kaybob Duvernay asset. So do know that when we are looking at assets on whether they are in or out of the portfolio, it's centered around our key asset criteria of returns, free cash flow generation, scalability and market access. In the long term, we envision a portfolio of assets that has a combination of both short cycle and long cycle and really sets the company up to weather the commodity price cycles to be resilient through that and at the same time, to continue to drive returns through all those commodity price cycles. So again, like I mentioned before, as far as sustainability and balance sheet, everything that we do revolves around back to those. And any asset we move in or out will check either one or both of those boxes like the Kaybob Duvernay asset. This is an asset that we just closed on this deal where we feel it really checked both of the boxes. When you look at it from a balance sheet side, it's certainly deleveraging here in the near term and accelerates the deleveraging profile of the company moving forward just by the free cash flow profile of this asset. And at the same time, as far as sustainability, it comes in with over a 10-year drilling inventory at a very manageable decline rate. So just as a reminder on this, how we're going to keep or run this asset. We're going to keep it relatively flat at 30,000 BOE per day. It's going to take about $180 million per year to do that. And at a $60 price environment, like we're living to date, it generates $400 million of cash flow. So that's over $200 million of free cash flow. So you can certainly see how this asset starts to fit into the portfolio we're trying to build and that free cash flow profile that we're trying to drive within this organization. And I'll speak to that here on the next slide. So now this is the free cash flow profile of us over the next couple of years. If you look at 2021, under our current guidance scenario that we've laid out in the market at a $60 price environment, we're generating $600 million of excess free cash flow. When you look at it under a sustaining budget for next year and assumed sustaining budget in 2022 of approximately $850, we're going to generate $525 million of excess free cash, again, at that same $60 price environment. That's $1.1 billion of excess free cash flow in the next 2 years. And then if you look at a $70 price deck, which hopefully we make it there at some point, it's $1.5 billion of excess free cash in the next 2 years. So certainly provides a lot of optionality and flexibility for the organization as we move it forward. On our leverage profile, under those same scenarios, when you look at us at $60, we're going to end next year at just over 1x debt to cash flow. And when you look at it on a $70 price environment, we're going to end -- we would end next year at a 0.6x debt to cash flow. So certainly, that deleveraging profile and that free cash flow profile that we've been trying to drive within this organization has started to really live up to its potential. Let's talk about our capital allocation framework. This is something I was really excited to get at last year. It's a very simple slide, but there's a lot of details in this slide. And again, it's a very transparent view on how management and Board of Crescent Point think of allocating capital. Everything starts at the asset level and based on returns and feeds into a maintenance capital budget where we target a 70% reinvestment rate. Now ideally, we can drive that even lower. But at a 70% reinvestment rate, that inherently means that you have 30% remaining for free cash flow. That next step down for us is something that you've heard from me a million times, build on that balance sheet and get closer to our debt targets. And then the next step with that is let's bring back that base level dividend. So we have been very transparent with the market around our overall debt targets. We don't necessarily need to be there, but we certainly need to have sight lines to those in place before we bring that core dividend back. And when we do bring that dividend back, it will certainly be sustainable, and that's something that we can grow over time. When you take the next step down, those additional items all compete on returns or long-term strategic plans for the organization. And again, I'd highlight that everything we do here is underpinned by that strong ESG focus. So this just highlights -- this is a slide that highlights a lot of our ESG focus that we've had over the last year. And there's one thing in particular that I really like to highlight for you this year, and I spoke to it a little bit at the start. Last year, we set a very ambitious emissions intensity reduction target of 20 -- sorry, of 30% by 2025. We've made such good progress on that in the backdrop of the brutal environment that we're living through in 2020, and we've actually increased that this year to 50% by 2025. Something I'm extremely proud of and I know the Board is extremely proud of as well. So look for us to continue to drive that forward. And I would also say that's one of the highest targets out there when you look at our peer group. And again, the one highlight I would have for you is look for our third annual sustainability report to come out over the summer months here, and we'll have a lot more clarity and transparency on all our initiatives as far as ES&G within that sustainability report. So now I'll leave it and open it up to questions with our purpose statement of bringing energy to our world the right way. Know that this statement drives our corporate strategy and our long-term strategy for the organization, and it's really the reason that this company is around. And now with that, I'll open it up for questions. Okay. It looks like we don't have any questions. So I thank everybody for taking the time and joining us today at our AGM. And again, next year, ideally, we're doing this in person, and we can have a chat after the meeting face-to-face. So thanks again for taking the time.