Veren Inc. (VRN) Earnings Call Transcript & Summary

Good morning everybody. On behalf of the Board of Directors, it's my pleasure to welcome you to the annual general meeting of Crescent Point Energy Corp. The Board Management team thank you for you interest and for you attendance today. My name is Barbara Munroe, I am the Chair of the Board of Crescent Point. I will act as Chair of the meeting today. To begin our meeting, I would acknowledge that we are in Southern Alberta, which is the traditional territory of many nations including the Blackfoot Confederacy, Tsuu T'ina, and Nakoda nations and Métis nation Region 3. In the spirit of reconciliation, I would like to pay respect to those who have come before us in Treaty 7, in the region of Southern Alberta. Before we proceed, I would be remiss if I did not acknowledge Laura Cillis. Laura is retiring at this year's meeting after being on the Board at present point since 2014. In particular, I would like to thank Laura for her leadership as Chair of our Audit Committee. And on behalf of the Board, I would like to thank her for her service. I would also like to introduce Mindy Wight, a new independent Board member for her election at today's meeting. Along with her outstanding career as an accountant and financial professional, Mindy is currently the Chief Financial Officer and Treasurer of the Board of Nch'kay Development Organization and a big welcome to Mindy. I would also like to introduce the other directors and nominees in addition to me and Craig Bryksa, who are standing for elections to Board at today's meeting. Jim Craddock, John Dielwart, Ted Goldthorpe, Jennifer Koury, Mike Jackson, Francois Langlois, Myron Stadnyk and Mindy Wight. At this time, I would like to thank the Board for their continued support and guidance of the affairs of the company. Seated in attendance today is the executive team of Crescent Point, who will be available at the front of the room to answer any questions you have after the formal business of the meeting concludes. And we also have a few employees in attendance, all of whom are shareholders, and thank you for joining us. With respect to the logistics of the meeting, if you wish to vote or participate in the formal portion of you must be a registered shareholder of record on April 7, 2022, or a duly appointed proxy holder of Crescent Point. If you wish to speak, please start by stating your full name and confirming your status as a registered shareholder or a duly appointed proxy holder. In order to have the meeting proceed efficiently, we have asked a number of employees who are shareholders or proxy holders at 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 majority. If you wish, the scrutineer can provide you with a detailed breakdown following the meeting. We welcome those of you who are not shareholders of the meeting or of the company to our meeting, but I remind you that only registered shareholders of record on April 7, 2022, or duly appointed proxy holders of Crescent Point are entitled to vote or take not to part in the formal meeting. All right. Test. I promise I won't start from the beginning. In any event, for those of you who are not shareholders at the meeting, I remind you that only registered shareholders of record on April 7, 2022, or duly appointed proxy holders of Crescent Point are entitled to vote or take an active part in the formal part of the meeting. If you have any questions about the business Crescent Point, we will address them after the conclusion of the formal meeting and following Mr. Bryksa's presentation. I will now call the Crescent Point Annual Meeting to order. Our Senior Vice President, Mark Eade, will act as Secretary of the meeting. Jennifer Oliver of Computershare Canada, our transfer agent, is in attendance today, and I appoint her to act as scrutineer for the meeting. I asked Mr. Eade to file a copy of the notice of this meeting, which was mailed on April 12, 2022 to shareholders of record on April 7, 2022. A copy of the notice and proof of service will be filed with the records of this meeting. The scrutineer has provided me with a preliminary report on attendance and the count indicates that 179 shareholders are present in person and by proxy, representing 262,369,120 common shares and accordingly, 45.71% 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. The copy of the scrutineers' report will be filed with the records of the meeting. Copies of the meeting of the last Annual Meeting of Shareholders held on May 20, 2021 are available. I declare that the 2021 minutes have been verified and signed, and have been filed in the corporations [indiscernible]. Anyone wishing a copy of the minutes, may pick one up from the table located at the back of the meeting room. 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, 2021. The annual consolidated financial statements and auditor's report were mailed to shareholders in accordance with securities law requirements, together with notice of this meeting. Copies of the annual consolidated financial statements and the related auditor's report are available on the table located at the back of the meeting room, and I request the secretary to file a copy of the annual financial statements and auditor's report with the minutes of the meeting. Brian Lundin of PricewaterhouseCoopers LLP, the auditor of the corporation is in attendance today and available to answer 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.

Okay. My name is Shelly Witwer, and I am a shareholder and a proxy holder. I so move.

My name is [ Justin Segre Malon ], and I am a shareholder and proxy holder. I second the motion.

Thank you, Shelly and Kristen. As Chair, I require a ballot vote on the motion. Mr. Eade, would you please explain the process?

Thank you, Barb. The scrutineers provided ballots to registered shareholders and proxy holders upon registration for today's meeting. And many of these ballots have already been executed and deposited back with the scrutineers retabulation. If you voted by proxy already, your vote has been recorded, and it is not necessary for you to fill out a ballot. If you would still like to receive a ballot, please raise your hand and a representative of Computershare will provide you with one. And please note that the preprinted -- it doesn't look like anyone's actually put their hands up. But please note that the pre-printed ballots provide you with the option to vote for or against the resolution appointing PricewaterhouseCoopers as auditors of the corporation. If you wish to vote, please vote by placing an X beside the appropriate voting option. Please sign the ballot and please put your name on it. If you put your hand up if you're holding about, they will pick it up for you. You are not required to fill out the bottom section and the scrutineer will complete that section, indicating your shareholdings. Thank you.

We will continue now with the business of the meeting while the scrutineer prepares any report on that vote that might be necessary. The election of 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 provides Crescent Point shouldn't have 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 appointed. We are satisfied that this number of directors is currently appropriate to provide a significant range and depth of expertise 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.

All in favor. Contrary, if any. I declare the motion carried. I would now like to open the meeting for nomination of directors to serve for the following year. May I have a nomination for the 10 nominees being Barbara Munroe, Craig Bryksa, James Craddock, John Dielwart, Ted Goldthorpe, Mike Jackson, Myron Stadnyk and Mindy Wight.

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

Thank you, Shelly. In 2013, Crescent Point 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, help 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. And accordingly, I declare nominations for the Board closed. I again require a ballot vote on the motion. Mr. Eade, would you please explain the process?

Thank you, Barb. Again, the scrutineers have provided ballots to registered shareholders and proxy holders upon registration at today's meeting, and many of those ballots have already been executed and deposited back with the scrutineers. If you voted by proxy already, your vote has been counted and recorded. It's not necessary for you to vote again. If you would still like to receive a ballot, please put your hand up and someone from Computershare will provide it to you. Thank you. And please note that the 10 names are preprinted on the ballot. If you wish to vote for these candidates, please sign the ballot and return it to the scrutineer. No other nominees may be added to the ballot, and you may vote for a maximum of 10 nominees. Vote by placing an X beside the name of each of the nominees you wish to elect, sign the ballot, and please print your name on it. You're not required again to fill out the bottom of the ballot. Thank you.

Thank you, Mark. We will continue now with the business of the meeting while the scrutineer prepares any report on the vote. The next 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 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 of responsibilities of the Board of Directors that the shareholders accept the approach to executive compensation disclosed in the information circular.

I second the motion.

Thank you, Shelly and Kristen. All in favor? Contrary, if any? I declare that motion carried. The report on the ballots for the election of directors and for the appointment of the auditor has now been received. And in accordance with that report, I declare that Craig Bryksa, James Craddock, John Dielwart, Ted Goldthorpe, Mike Jackson, Jennifer Koury, Francois Langlois, Myron Stadnyk, Mindy Wight and I have each been elected directors of Crescent Point to hold office until the next Annual Meeting of Shareholders or until their successors are elected or appointed. I declare that the vote with respect to PricewaterhouseCoopers as auditor of the corporation has been carried with approximately 94.31% voting in favor of the resolution. And scrutineers' report will be filed with the records of the meeting. As all business properly brought before the meeting has been dealt with, this concludes the business of the meeting and I declare this meeting closed. I wish you again thank you for your attendance today, and Mr. Bryksa will now give a presentation on the company. And following that, management and members of the Board who are in attendance today will be available at the front of the room to answer any questions that you have.

Can you guys hear me? Sounds like you can. Good morning, everybody. Thanks for coming today. I'd like to welcome everybody. It's a pleasure to see everyone here today after holding our shareholder meeting virtually for the past couple of years. It's important to us at Crescent Point to do an in person, to meet and engage with our shareholders, getting a bit of feedback from this one. Meet and engage with our shareholders. So again, thank you all for attending today. At Crescent Point, we care deeply about the safety of our employees, contractors and our stakeholders. And as such, we share a safety moment at the start of every company-wide meeting. We encourage everyone to take an active role in their safety and that of their coworkers and our commitment to safety is clear throughout our operations and has led to 2021 being our safest year on record. I'd like to thank our field staff, our management team for their relentless focus on safe operations. So thank you, everyone. For today's meeting, I'll speak to you about 3 important topics: first, I'm going to speak to you about our successful execution in 2021; and second, how we are increasing shareholder returns; and three, the current macro environment. First, let's talk about some highlights from the past year. Here's a quick snapshot of our operating areas. Over the past few years, our management team has worked hard to streamline our operating areas into a focused portfolio of high-return, low-risk assets. Our concentrated asset base coupled with our track record of operational excellence has us well positioned to capitalize in the current market environment. Our production guidance of 133,000 to 137,000 BOE per day coupled with our high liquids weighting of 80%, has us poised to generate significant excess free cash flow for the company in 2022 and beyond. But before we speak to the years ahead, let's first review some of our highlights from 2021. In 2021, we saw commodity prices recover from historic lows. Our disciplined execution under this backdrop enabled us to significantly advance the 2 key pillars of our strategy: one, balance sheet strength; and two, sustainability. We strengthened our financial position by allocating over $815 million to our balance sheet and continue to reduce our net debt. As such, we are currently on track to achieve our near-term leverage target in the third quarter of this year. We also enhanced our sustainability by acquiring our Kaybob Duvernay asset, which boosted our excess cash flow generation and added over 10 years of low-risk, high-return drilling inventory. As a result of our accomplishments, we accelerated our return of capital to shareholders through multiple dividend increases and expanded share repurchase program. I'd like to thank our employees as well as our Board for their hard work and dedication in achieving these results. Our teams continue to give me great confidence in our ability to create value for this year and into the future. Our success in 2021 highlights our continued improvements we have made over the past 4 years to enhance the fundamentals of our business and allows us to capitalize on the opportunities at the current market. Over the past 4 years, we have cut our net debt in half, enhanced our excess cash flow, instituted a capital discipline or a disciplined capital allocation process, lowered our decline rate and successfully executed on our A&D strategy. As you can see, the company has transformed dramatically since 2018. We are significantly more profitable and more focused company than we were 4 years ago. We successfully navigated through the lower commodity price environments in 2019 and 2020 and emerged in even a stronger, more agile position. In a strong commodity price environment, like we're living in today, our position is even more attractive. At current commodity prices, we anticipate exiting 2022 with less than $1 billion of net debt and generating over $1.4 billion in excess cash flow. A big part of our success in 2021 was our entry into the Kaybob Duvernay play, which was immediately accretive at USD 55 per barrel WTI pricing and has only gotten more favorable for us in the current market environment. We're very pleased with the early results in this play. And our execution in Kaybob has driven notable cost efficiencies, strong initial production results that have exceeded our expectations. Our teams have done an incredible job to achieve pace-setting wells, building upon our operational excellence and knowledge transfer from other plays. This play provides us with significant excess cash flow generation, scalability and depth of inventory. Given the competitive returns and impressive wins, our teams have realized that Kaybob Duvernay has the largest capital allocation within our 2022 budget. I look forward to sharing more exciting results from this play as we continue to advance it over the quarters. I'll now touch on how we are increasing shareholder returns in 2021 and how this will continue to grow into 2022. Our success in recent years is tied to our unwavering commitment to capital discipline. Our capital allocation framework lays out our priorities and is equally important in times of both strong commodity prices and weak prices. It also gives investors great insight and transparency into how we make financial decisions. This is what gives investors confidence in our process and in our future. Through this disciplined process, we have prioritized our core pillars, balance sheet strength and sustainability. As we continue to strengthen our balance sheet and approach our near-term leverage target, look for us to allocate even a greater portion of our excess free cash to shareholder returns. As we look ahead this year, we anticipate generating $1.4 billion of excess cash flow or roughly 25% of our current market capitalization. Our significant excess cash flow benefits greatly from our top quartile netbacks, low-cost assets, our attractive royalty rates and our significant tax pools. Given our strong excess cash flow profile, we recently raised our dividend for the third time in less than a year and have committed to up to $150 million of share repurchases in the first half of 2022. Overall, this allocation of shareholder returns amounts to 30% of our excess cash flow in the first half of 2022, which we expect to grow as we get closer to our near-term leverage targets. Based on our continued execution and the current commodity price environment, we now anticipate achieving our near-term leverage target in Q3 of 2022. As we get closer to our debt target, look for us to continue to grow those shareholder returns. This will happen through base level dividend increases, share repurchases and the potential for additional dividends. Look for us to provide more color on this as we release an update to our return of capital to shareholders framework later on this year. Before I close today's presentation, I'd like to speak briefly about the current macro environment that we are working through with our industry. In recent months, we've seen continued strength in commodity prices as global supply remains tight. This is in part due to the Russia-Ukraine conflict, and our heart goes out to all those that have been impacted by this. The conflict aside, there are several other factors impacting commodity prices. Historical underinvestment in the upstream industry, growing global demand, crude inventories falling below 5-year lows and continued discipline within the energy sector. Combined, these dynamics have given commodity prices significant support in the near term as well as in long term. We've seen stability recently around the USD 100 per barrel WTI mark for longer-term outlooks and shorter-term outlooks. The fact is the world needs more energy. Canada is uniquely positioned to help the world meet these energy demands. We have the resources, we have the technology, and most importantly, we have the people to deliver secure, affordable energy that can help lower global emissions. We have among the largest approved oil reserves in the world and by far the largest among the non-OPEC producing nations. Not only that, Canadian companies are leaders in producing oil and gas to the highest of ESG standards. The energy we produce upholds our values of environmental stewardship, responsible development and human rights protection. We should proudly stamp the maple leaf on every barrel we sell and be proud of our contribution to powering global economies. In a world shifting to more accountable energy, Canada and Crescent Point for that matter, should be the supplier of choice. Crescent Point is a leader in developing responsible energy. We integrated ESG considerations to everything that we do. In 2021, we set an ambitious target to reduce our GHG emissions for both emissions intensity and methane intensity. And I'm happy to tell you that we've achieved that 3 years ahead of schedule. These are real, measurable reductions as a result of deliberate action. We also set ambitious targets with our asset retirement obligations, and I'm happy to tell you we are well on our path to achieving these. We're excited to progress our social and corporate governance performance through these various initiatives, including: our strong safety performance as evidenced by 2021 being our best year for safety, the continued renewal of our Board and our community partnerships to support the communities that we operate in. Look for us to continue our ESG journey with new performance targets included in our upcoming sustainability report, which will be released later on this year. As we look ahead to our 5-year plan, you'll note a very strong outlook. With disciplined capital and production profile, we anticipate generating significant excess cash flow that provides optionality to enhance shareholder returns. At USD 80 per barrel WTI, we expect to generate nearly $6 billion of excess cash flow after tax over the next 5 years. This strong excess cash flow enables us operation -- or optionality and flexibility within our capital allocation framework to optimize shareholder value. You can expect us to continue demonstrating capital discipline to strengthen our balance sheet and sustainability through our successful execution of our business plan in the years ahead. In closing, I'd like to thank our employees and shareholders for their continued support and engagement. We remain committed to our purpose statement of bringing energy to our world the right way. And we will continue to be proud of the value we create. Thank you for attending today's AGM. I'll now open it up for questions from the crowd -- from the audience. Sorry. And if -- with that said, if you're not comfortable asking a question, I do know that the executive team will be standing around here at the end, and you can feel free to come up and talk to any one of us at that point in time. But if you do have a question, put your hand up, and we'll make sure we get a microphone in front of you. Okay. I'll take that as no questions. Again, like I mentioned earlier, if you're not comfortable asking one in front of the crowd, please feel free to come up and meet myself or the executive team in a few minutes. So thank you, everybody. Appreciate your support. We can't do this without you. So thank you.