Veren Inc. (VRN) Earnings Call Transcript & Summary

Good morning, everyone. My name is Barbara Munroe, and as Chair of the Board at Crescent Point, I will act as Chair of the meeting this morning. On behalf of the Board of Directors, it is my pleasure to welcome you to the Annual and Special Meeting of Shareholders of Crescent Point Energy Corp. The Board and management thank you for your interest in attendance today. We have made the decision to hold the meeting virtually to maximize shareholder attendance and maintain cost and environmental alignment. Next, I acknowledge that we are in the southern Alberta, which is the traditional territory of many nations, including the Blackfoot Confederacy, Tsuu T'ina, the Nakoda Nations and Métis nation Region 3. In the spirit of reconciliation, I pay respect to all of those who have come before us in the Treaty 7 region of Southern Alberta. 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. James Craddock, John Dielwart, Mike Jackson, Jennifer Koury, François 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. With respect to the logistics of the meeting, if you wish to vote or participate in the formal part of the meeting, you must have been a registered shareholder of record on March 28, 2024, or must be a duly appointed proxy holder of Crescent Point. If you are so qualified and wish to vote or ask a question, please do so by selecting the appropriate icon at the top of your screen. In attendance today are Craig Bryksa and Kenn Lamont, who will be available after the formal portion of the meeting is completed. And after Mr. Bryksa has completed his presentation, will answer any questions you have already submitted or that you submit during the meeting using the virtual interface. Relevant questions, if any, regarding the procedural matters or directly related to the motions before the meeting will be addressed during the meeting. Additional questions will be addressed during the question period after the formal portion of the meeting. You can submit questions or comments at any time by clicking on the Q&A tab. 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. Anyone in attendance today who has not yet voted and is not signed in as a guest will have an opportunity to vote online in real time using the virtual meeting platform. 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, the scrutineer can provide you with a detailed breakdown after the meeting. I will now call the Crescent Point Annual and Special 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. Jennifer Oliver of Computershare Canada, our transfer agent, is in attendance today, and I appoint her 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 3, 2024, to shareholders of record on March 28, 2024. A copy of the notice and proof of service will be filed with the records of this meeting. Scrutineers have provided me with a preliminary report on attendance. An account indicates that 199 shareholders are present by webcast or by proxy representing 278,067,185 common shares. Accordingly, 44.89% 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 18, 2023 have been verified and signed and have been filed in the corporation's minutes book. Anyone wishing to receive a copy of the minutes may request them by contacting us at [email protected]. The first item of business is the receipt of the annual consolidated financial statements of corporation and the auditor's report for the year ended December 31, 2023. 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. We request the Secretary file a copy of the annual financial statements and auditor's report with the minutes of the meeting. Ryan Lundeen 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 election of the directors is the first 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 not have less than 1 and not more than 11 directors. It is proposed that 9 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 and depth of expertise and to meet all corporate governance requirements. I request a motion to fix the number of directors to be elected at this meeting at 9.

My name is [ Justine Secram Mulan ] and I am a shareholder and proxy holder. I move that the number of directors of Crescent Point to be elected at this meeting be fixed at 9.

My name is [ David Gowland ], and I am a shareholder and proxy holder. I second the motion.

Thank you, [ Justine ] and David. The online polls are open. 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. 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 9 nominees being Barbara Munroe, Craig Bryksa, James Craddock, John Dielwart, Mike Jackson, Jennifer Koury, François Langlois, Myron Stadnyk and Mindy Wight.

I nominate Barbara Munroe, Craig Bryksa, James Craddock, John Dielwart, Mike Jackson, Jennifer Koury, François Langlois, Myron Stadnyk and Mindy Wight 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 ]. Crescent Point's advance notice bylaw 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 than 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 nominee 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 again, [ Justine ] 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. The next item of business is the appointment of auditors. I 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.

I so move.

I second the motion.

Thank you, [ David ] and [ Justine ]. 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 do so. 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 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 now ask for a motion that on an advisory basis and not to diminish the role and responsibility 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 discussed 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. The final item of business is the resolution to amend the corporation's name to Veren Inc. We believe that this name change reflects our evolution of the corporation, gives us renewed vision and demonstrates our responsibility to safely deliver on our commitments to shareholders and stakeholders. In order to be effective, the name change resolution must be passed by a majority of not less than 2/3 of the votes cast on the resolution by shareholders present in person or by proxy at the meeting. I now ask for a motion to pass the resolution to amend the corporation's articles to change the corporation's name as disclosed in the information circular.

I move that the shareholders pass the form of resolution to amend the corporation's name.

I second the motion.

Thank you. 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. We are about to close the polls. If you haven't finished indicating your vote on any selections, please do so now. Polls on all items of business brought before the meeting are now closed. We will now pause for a moment while the scrutineer provides the final results. [Voting]

I declare that all resolutions put to the meeting have been carried and that Craig Bryksa, James Craddock John Dielwart, Mike Jackson, Jennifer Koury, François Langlois, Myron Stadnyk, Mindy Wight and I have each been elected Directors for Crescent Point to hold office until the next Annual Meeting of Shareholders or until successors are elected or appointed. I declare that the advisory vote with respect to say-on-pay has been carried with approximately 96% voting in favor of the resolution and that the special resolution to amend the corporation's name has been carried with approximately 97% voting in favor of the resolution. The 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 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, everyone. Thank you for joining us today for our Annual and Special Meeting of Shareholders. To encourage wider participation, we conducted our AGM virtually this year. I appreciate everyone joining us online today. I'm going to run through a quick presentation that first speaks to our operational execution in 2023. It was a great year for our company on many fronts, and I'll get into that shortly. After that, I'll step back even further. As many of you know, we have executed a significant transformation over the last several years, creating a stronger and more sustainable company for the future. We fundamentally rebuilt this company in many ways through our leadership team, our asset portfolio, how we operate, our disciplined capital allocation process, our culture and many other key changes. We are a different organization today. And because of that, we believe it is time to embrace a new name that represents who we are today and where we are headed tomorrow. I'm pleased to see the overwhelming support we've received from our shareholders for our name change. As I look to the future, I'm excited about our long-term trajectory. We boast a top quartile asset base with significant premium inventory that positions us to generate strong long-term excess cash flow, which will allow us to return a meaningful amount of capital back to our shareholders. With that, let's get into it. And I look forward to taking questions from those online at the end of the presentation. 2023 was a pivotal and successful year for us. We achieved our safest year on record for the third consecutive time. This is even more impressive when you consider some of the operational challenges the industry faced, primarily those caused by the Alberta wildfires. It was also a busy year in the field as we successfully integrated 2 Alberta Montney assets. I'm proud of our staff for prioritizing safe -- safe operations above all else. Beyond our safety results, we delivered another strong year of operational execution and capital discipline. Our production and capital expenditures were both in line with guidance. And we generated approximately $1 billion of excess cash flow for the year, returning $600 million to shareholders through dividends and share repurchases. We also had a strong year of reserves growth, organically replacing 150% of our production on a proved plus probable basis, including A&D, we replaced over 900% of our production. All our accomplishments in 2023 tie back to our corporate strategy. Everything we've done and we'll continue to do is with purpose and consistent with our overall strategic vision. Our management team and Board regularly pressure test our core convictions to challenge ourselves on what we truly believe about our industry. Our role in it and how our core convictions are reflected in our strategy. Our beliefs drive our sub-strategies that outline how we think of all aspects of our business, including our portfolio, our business plan, our people and our stakeholders. We're dedicated to staying true to our principles by following the processes we have put in place and by executing at every level of our organization, ultimately delivering long-term value as a company. We put our strategic framework in place over 5 years ago, and we've never wavered from it. The last thing I'd like to highlight on this slide is a section from our strategy statement where we say we will maintain a resilient, balanced and sustainable portfolio. You have witnessed how we have consistently executed our strategy in alignment with this statement and strategically built our asset base. I'm very proud of what we've accomplished. We now own high-quality assets in 2 of the world's most prolific basins. How do we do that? We started by doing a detailed analysis of the energy sector north and south of the border to guide how we would move forward. Through this process, we focused on 5 basins in North America and then zeroed in on the Kaybob Duvernay and the Alberta Montney, both of which fit our criteria of providing strong returns, possessing size and scalability and enhancing our long-term sustainability and excess cash flow generation to support a healthy balance sheet and ultimately leading to more shareholder returns. The chart on the right shows how we focused our asset base over time. Not only have we improved our asset quality through our portfolio transformation, we've also significantly built our premium core for inventory to 20 years. Here is a quick snapshot of our current portfolio. Our short-cycle assets in Alberta provide significant running room and growth potential. We have paired them with our high netback, low-decline, long-cycle assets in Saskatchewan. Taken together, we generate a sustainable combination of disciplined per share growth and significant excess cash flow. One benefit of our portfolio transformation is the improved cost structure and immediate corporate synergies. We lowered our operating expenses, royalties, G&A and enhanced our capital efficiencies by bringing in our Alberta assets and by disposing of noncore properties. In addition to achieving these benefits off the top, I firmly believe that our technical teams will unlock additional value over time as we apply our operating expertise. We are seeing these results already as we are drilling better and more efficient wells from a productivity and cost standpoint. Our results to date in the Kaybob Duvernay have proven that. we believe that we can duplicate what we've done in Kaybob and further improve our early success in the Alberta Montney. As a result of our success, our 5-year plan has never looked stronger. Our expected total return to shareholders over the 5-year plan is very compelling. On a compounded annual growth rate basis, we are forecasting 10% per share excess cash flow or 15%, including share repurchases, along with 6% organic production growth over this time period. We expect to generate $5.2 billion of cumulative excess cash flow under our 5-year plan as we stand today, that works out to over 2/3 of our market cap. And we plan to return at least 60% of that back to our shareholders. Our approach to returning capital is simple. We want to maximize the percentage of excess cash flow that we return to shareholders while strengthening our business. We do this by first targeting a sustainable base level dividend that is tested to withstand low commodity prices. Secondly, we direct our remaining excess cash flow to share repurchases as we believe our shares currently trade below our intrinsic value. As our business continues to grow on a per share basis and as we strengthen our balance sheet, we will look to increase our base level dividend and increase our allocation of excess cash flow to our shareholder returns. Together with this operational and financial improvements we have made, we remain steadfast in our commitment to strong environmental, social and governance practices. I already highlighted our exceptional safety record at the start of this presentation. I'm also proud to report that we are on track to achieve our environmental targets that span emissions reductions and lowering our fresh water use. With our Q1 results to date, we also announced that we have achieved our target of reducing our inactive wells by 30%, far ahead of our original announced time frame. We also remain committed to being an active partner in our operating communities through volunteer and financial contributions and our strategic long-term partnerships with indigenous communities. Moving forward, our strategic priorities will focus on operational execution with a disciplined capital allocation process, optimizing our balance sheet to achieve near- and long-term leverage targets. And as our balance sheet improves, we will look to increase our return of capital to shareholders. Given our incredible transformation and bright future ahead, it's time to welcome a new era for our company. We believe we reached a turning point that requires a new identity, symbolizing who we are today and where we are headed tomorrow. I'm excited to introduce our new name, Veren. Our new brand brings to life our purpose statement of bringing energy to our world the right way and serves as a unifying identity across our operations. It represents who we are, what we do and how we do it. With shareholders' approval today, look for our new identity to be formally launched over the next week with a new website and trading symbol. Before I open up the questions and answer period, I'd like to thank our shareholders for all their support and continued engagement over the last several years. I'd also like to thank our staff for their contributions to our success. We're incredibly excited for what the future has in store. I'm happy to take questions from the listeners. To submit a question, please use the Q&A function that accompanies the webcast player. As there seems to be no questions, I'll turn it back to the operator.

This concludes the meeting. You may now disconnect.