Hello, and welcome to the annual and special meeting of shareholders of Canadian Natural Resources Limited. Please note that today's meeting is being recorded. During the meeting, you will be able to submit questions by clicking on the message icon.
It is now my pleasure to turn today's meeting over to Mr. Murray Edwards, Executive Chairman of Canadian Natural. Mr. Edwards, the floor is yours.
Thank you, Carter. Given the appointed time has arrived, we'll commence the meeting. Good afternoon, ladies and gentlemen, and welcome to the annual and special meeting of the shareholders of Canadian Natural Resources. It says here my name is Murray Edwards, in case I didn't know that on my script, but I am, and I'm the Chairman of the corporation. On behalf of Canadian Natural, we wish to thank you for attending this meeting.
Due to the challenging, changing travel and gathering restrictions implemented as a result of the COVID-19 pandemic, we are again holding this year's annual and special meeting of the shareholders in a virtual format. However, we do hope that next year we will be able to return to meetings in person, which will have an opportunity to meet many of our long-term shareholders and staff and talk about the future opportunities of the corporation.
In fact, just today, we had our first in-person board meeting in over two years, and our directors, who are across North America, returned to Calgary for an in-person meeting, and had an opportunity to get a strategic review last night by our conventional natural gas part of the business. I know that most of the directors were quite positive by the fact being able to return to in-person meetings.
Pursuant to the bylaws of the corporation, I select the Chairman of this meeting. The purpose of this meeting is the routine annual business of the corporation, which is the receipt of the annual report of Canadian Natural, containing the consolidated financial statements and the report of the auditors thereon. Second, the election of directors of Canadian Natural, and third, the appointment of auditors.
In addition, the shareholders will be asked for two other matters. First, to consider a resolution reapproving the stock option plan of the corporation. Second, the shareholder will be asked to consider, on an advisory basis, a resolution on the corporation's approach to executive compensation.
Participation at the meeting is a right reserved solely for registered shareholders of Canadian Natural or their designated proxyholder. A number of people who are not shareholders of Canadian Natural have also joined the meeting online. You're welcome to attend the meeting to follow the proceedings. Only registered shareholders or their designated proxyholders should ask questions on matters, should raise them at the appropriate time.
This meeting is being held virtually via live webcast. We think it is necessary to set out a few rules for the ordinary conduct of the meeting. One, questions in respect to the motion can be submitted by any registered shareholder or duly appointed proxyholder using the instant messaging service of the virtual interface. Please note there will be a slight delay in the publication of the communications received.
Second, when asking a question, please indicate your name, which entity you represent, if any, and confirm that you are a registered shareholder or duly appointed proxyholder. Three, for the purpose of meeting today, voting on all matters will be conducted by electronic ballot. Registered shareholders and their duly appointed proxyholders will be asked to vote on each business item.
Finally, four, when you're able to vote, you will receive a message on the virtual interface requesting you to register your votes. This will be only, again, for registered shareholders and their duly appointed proxyholder. When you receive that message, you only have a certain amount of time to do so once the poll is closed.
With those four instructions, we'll now proceed with today's meeting. To expect the formal part of the meeting, we will present all motions as moved. First, I select Mr. Paul Mendes, Vice President, Legal, General Counsel, and Corporate Secretary of the Corporation, to act as Secretary of the meeting, and Computershare Trust Company of Canada, through its representatives, to act as scrutineers to compute the votes taken at this meeting and report thereon.
The notice calling this meeting of shareholders, together with the form of proxy, Management Information Circular, and the audited consolidated financial statements for the corporation, were mailed to the shareholders, the directors, and the auditors of the corporation. A formal declaration as to such mailing has been provided by Computershare as the corporation's transfer agent.
The Secretary has been instructed to attach the declaration of the mailing to the minutes of this meeting. For this meeting, quorum, as set out in the bylaws of the corporation, is shareholders present in person or by proxy, representing not less than 5% of the common shares of the corporation then outstanding. We are advised that there is a quorum present, and we propose, therefore, to proceed with the formal business of the meeting.
As such, we now declare this annual and special meeting of the shareholders of Canadian Natural Resources Limited to be regularly convened and properly constituted for the transaction of business. We will now open the polls. As we mentioned, voting today will be conducted by electronic ballot. The ballots are now open.
At this point, all registered holders or their duly appointed proxyholders who have previously logged in with their control numbers or username and wish to vote will be able to see on the screen all motions being brought forward at this meeting. This is the approval of the minutes of the Corporation's last annual meeting, which was held virtually on May 6th, 2021. As there is no matters arising from the last annual shareholders, and there's been no intervening meetings, I suggest we take the minutes of the last meeting as read and approved.
The next item is the presentation of the Corporation's consolidated financial statements and management and audit report for the year ending December 31st, 2021. All these have been made available to the shareholders, and unless there is an objection, we will dispense with reading of the management report, the consolidated financial statements, and the audit report.
In addition, Ms. Alisa Sorochan, who is partner of the chartered accountant firm PricewaterhouseCoopers, our auditors, and is the Managing Partner on our file, is on the line and has agreed to respond to any questions in regards to the audit, auditor. If there are any questions regarding the auditor for Alisa, please submit your questions now using the instant message function. We're just checking to see if any questions come in. No questions. Thank you. As there are no questions, we'll now proceed with the next item of business.
The next item of business is the election of directors. The election of directors is now in order to proceed with this election pursuant to the articles of incorporation, the corporation must have a minimum of three directors and a maximum of 50 directors. It is proposed that a total of 12 individuals be elected as directors of the corporation at this meeting.
The following 12 nominees of the corporation have agreed to stand for election. They are as follows: Catherine Best, Elizabeth Cannon, Dawn Farrell, Chris Fong, Gordon Giffin, Wilfred Gobert, Steve Laut, Timothy S. McKay, Frank McKenna, David Tuer, Annette Verschuren, and Murray Edwards. Are there any further nominations for directors? Paul, any further nominations?
No.
Corporate Secretary has advised there are no further nominations. I therefore now declare the nomination closed. I am advised that based on the calculation of proxies received, each director nominee will be elected as a director by a majority of the votes cast at the meeting in favor of their election.
As such, I now declare the following to be duly elected directors of the corporation to serve until the next annual meeting of shareholders, or until their respective successors have been duly elected or appointed. Those elected are as follows, Catherine Best, Elizabeth Cannon, Dawn Farrell, Chris Fong, Gordon Giffin, Wilf Gobert, Steve Laut, Tim McKay, Frank McKenna, David Tuer, Annette Verschuren, and Murray Edwards.
The next formal item of business is the appointment of auditors and a resolution to authorize the audit committee of the board to fix their remuneration. We have been advised that, based on the calculation of proxies received and the resolution regarding the appointment of auditors of the corporation, the resolution regarding the appointment of auditors of the corporation and the authority of the audit committee to fix their remuneration will be approved. They deemed that motion to be passed.
Now, we move to the final two items. Number one is the approval of unallocated stock options. This meeting has been called to consider, and if thought advisable, pass, with or without amendment, an ordinary resolution of the corporation reapproving the stock option plan of the corporation and approving the grant of the unallocated stock options under the plan.
When stock options are granted pursuant to the corporation's stock option plans, the common shares that are reserved for issuance under outstanding stock options are referred to as allocated common shares. The corporation has additional common shares that may be reserved for issue pursuant to future grants of stock options, but as they've not been subject to current grants of stock options, they are referred to as unallocated stock options.
On May 9th, 2019, three years ago, the shareholders last approved an amendment of the stock option plan, provided that the aggregate number of common shares reserved for issue pursuant to all share-based compensation plans, including stock options, not on a rolling basis, not exceed 7% of the issued and outstanding common shares of the corporation outstanding from time to time.
As a result, there may be unallocated stock options reserved under the stock option plan from time to time. The rules of the Toronto Stock Exchange governing the corporation provide that as the stock option plan does not have a fixed maximum number of common shares issuable, a majority of the directors and shareholder must approve unallocated options every three years.
As I mentioned previously, at the corporation's annual meeting held on May 9th, 2019 , the appropriate approvals of the corporation, directors and stockholders were last obtained. I can also confirm that directors of the corporation have reapproved the new stock option plan and authorized the unallocated stock options contemplated hereunder. Now, we're looking for shareholder approval for the annual three-year approval of the stock option plan. If there are any questions on that, please submit the questions using the instant messaging function. Any questions, Paul?
There are no questions.
No questions. Paul, t hank you. As there are no questions, I am advised from Computershare that based on the calculations of proxy received, the resolution regarding the approval and authorization of unallocated stock options for this pursuant to stock option plan will be approved.
The final vote on this meeting is the vote on executive compensation. In this vote, we will have an advisory vote on the corporation's approach to executive compensation. Although this is an advisory vote only and not binding the corporation, the results of the vote will be considered by the Compensation Committee of the Board of Directors in determining its approach to executive compensation in the future. If you have any questions, again, please use the instant message function to ask the question. Paul, any questions received?
No questions.
There are no questions received. This resolution on executive compensation is required to be passed by a simple majority of the votes cast at the meeting. We've been advised by Computershare that based on the calculation of proxies received, the resolution regarding the approach to accept will be approved by a majority just under 98% in favor and just over 2% opposed.
At this point, I can announce that the resolution regarding advisory vote has been endorsed and passed by the shareholders with a substantial majority. Given that we have now had all formal parts of the meeting, I would ask that the scrutineers, Computershare, compile their report confirming the results of voting on all business matters conducted this meeting, and these results will then be published on SEDAR and by a press release of the corporation.
As there is no formal further business to be brought before the meeting, this concludes the formal part of the meeting. I now declare the meeting be terminated. Thank you.
Now, if any shareholders want to have any questions about the corporation, Tim McKay here, our President, and Mark Stainthorpe, our CFO, are sitting here, and would be willing to answer any questions if there are any, Paul. Paul?
Yeah. Just trying to read it.
Okay. We have a question here, Paul. Go ahead. Tim, you hear any?
It's on the NCIB.
Yeah. Okay. We have a question regarding the normal course issuer bids. As it points out that last year we repurchased 33 million shares at an average cost of roughly CAD 43 per share. The question notes that given the current share price, that was a prudent investment of funds.
The question was a concern about that when you buy back shares, sometimes you can overpay for where the market comes, and it would not be better to invest the money from a share buyback into additional growth in the business or more dividends in which you return cash to shareholders.
I guess this is a discussion that has taken place at our board on a regular basis. Our board, which is just reelected today, is 10 very strong, very thorough, very knowledgeable, independent directors, and they consider all aspects of how we deploy our capital. I think that the one thing that I know the board feels is paramount, and the most important thing is the long-term sustainability and maintenance of our base dividend payment.
I think that was exhibited through 2020 when in May of 2020, through a very challenging time for the industry, the board, after a robust discussion and meeting-- and we provided the board with ample information and paper that showed that our dividend was sustainable at a price down to CAD 30 less tax at the time-- the board, in their wisdom, agreed to retain the dividend. They felt that was imperative.
I think that is the first priority of where cash goes to providing shareholders with a regular return. The corporation has, in terms of where it invests its additional money, it looks at all opportunities. Obviously, a portion of our funds have to be annually invested into the business to keep the base business operation, what we call maintenance capital.
We feel that our base maintenance capital is somewhere between CAD 3.5 billion and CAD 4 billion a year, which is required to maintain our facilities and keep our production flat. In addition, we do have growth projects. This year we have a defined cash flow policy in which 1/2 of our cash flow goes to balance sheet and is made available for growth as long as the debt's below CAD 15. Our current debt's about CAD 13 billion.
This year we have a growth budget of CAD 750 million, in which we're incurring a number of projects. On the oil sands side, it's gonna give us growth of 63,000 barrels a day, approximately by 2025. At the same time, the other 1/2 of our cash flow right now is going back to share buybacks. Given that, right now we currently have a dividend yield of roughly just under 4%, Mark?
Yeah.
Just under 4%. Actually, buying shares today, we can borrow funds today at sub 3%. Actually, it's accretive to our shareholders right now, buying back shares and not having to fund the dividend at 4% where we can fund in our balance sheet. I think our board, with support of management, always feels that number one thing is, one, maintenance of our existing base dividend and see that grow over time. I think we've had a compound growth rate, Mark, over the last 20 years of-
22%.
22%. I think that growth dividend is clearly the most important part of our business, and we want to be able to continue to grow that in the foreseeable future. I think we want to have a balance between investment in maintenance capital, base capital, investment in growth capital opportunities. In both cases, we have to be very disciplined because the industry has had a track record of investing capital with sub-economic returns.
I think one thing we've been always very diligent on our capital investment and have been able to provide our shareholders with fairly consistent, attractive returns, and so we'll find some balance there. The extent we have excess capital beyond that, we look at a combination of balance sheet debt reduction or some share buybacks.
I think the board here, it feels that a balance of each of those approaches, Mark, as stated by our CFO, calls it the four legs of the stool. In our investor deck, which is on our website, you'll see we see about the four pillars that we take and where we allocate our cash. We think a balance is prudent, with the first imperative, the maintenance and growth of that base dividend. That was a good question. Long answer. I apologize. Any other questions, Paul?
There are no further questions.
No further questions. Okay, we'll wait here for just a minute. Oh, here's a question here. What's the estimated forecast score in the Calgary Flames hockey game tonight? I'm not gonna answer that one. I'm not objective, but both Mark and Tim are wearing Calgary Flames hats right now, so they're telling me we're in good shape.
With that, I will adjourn off the meeting. Thank everybody for your attendance and your support, and hopefully we'll see you in person next year. Thank you very much. Bye-bye.
This concludes the meeting. You may now disconnect.