Welcome to Cenovus's 2025 Annual General Meeting.
Good afternoon, and welcome to Cenovus's virtual annual meeting of shareholders. I'm Kim Guttormson , Director of Communications. I'd first like to acknowledge that in our many operating areas, we work on the traditional lands of multiple Indigenous peoples. In Canada, this includes First Nations, Métis, and Inuit, and in the United States, this includes Tribal Nations. We extend our most sincere thanks and respect to the members of these nations. Today, we're holding our annual meeting in a virtual format, which allows a broader base of shareholders to participate regardless of your location. Before turning the meeting over to Alex Pourbaix, Executive Chair of Cenovus's Board, I'll take a minute to explain how the meeting will work. If you are a registered shareholder or duly appointed proxy holder, your information screen displays instructions on how to participate in the meeting, including voting and submitting questions.
The ability to vote or ask a question is available for registered shareholders and duly appointed proxy holders only. All other guests are in listen-only mode. Polling is now open, and voting details are displayed on your information screen. If you've already voted, you don't need to take any further action unless you'd like to change your vote. We'll close the polls following the final voting matter. If you are a registered shareholder or duly appointed proxy holder, you may submit questions at any time during the meeting. Select the messaging icon at the left or bottom of the screen and type in your question. Please note that questions related to the business of today's meeting will be addressed during the formal portion of the meeting. To ensure questions regarding voting matters are addressed before we close the polls, we may need to return to earlier agenda items.
Questions that aren't related to voting matters will be addressed during the Q&A session, which follows the formal meeting and remarks from our CEO. We may aggregate questions that are similar. Any questions of a general nature that we don't address during this meeting will be posted to our website, cenovus.com, in the coming days, and these will include management's response. I'll now ask Alex Pourbaix, Executive Chair, to call the meeting to order. Mr. Pourbaix.
Thank you, Kim, and welcome everyone to Cenovus's annual meeting of shareholders. Before we start the formal portion of the meeting, I'd like to take a moment to thank you, our shareholders. Your continued support and confidence in our strategy and execution is appreciated. As you'll hear from our CEO, Jon McKenzie, we are staying the course on the strategic priorities that have underpinned our success, continuing to deliver strong operational performance and capture margin across the business. As part of the Board's leadership succession planning, at the conclusion of the AGM today, I will step down as Executive Chair and continue as non-independent Chair of the Board. Claude Mongeot will continue in his role as lead independent director. I'm also pleased that Shana Martineau is nominated for election today, along with our current Board members.
I would like to thank all of our directors for their continued commitment to our success. Now on to the business of the day. In accordance with Cenovus's bylaws, I will chair the meeting. Colin Ritchie, Assistant Corporate Secretary, will act as Secretary, and Steven Bandola from Computershare will act as Scrutineer. The record date for determining shareholders who are entitled to receive notice of and vote at this meeting was fixed at March 12, 2025. I have been advised by the Secretary that notice of this meeting was properly given and a quorum is present. Accordingly, I declare the meeting properly called and constituted for the transaction of business. The reading of the notice of meeting will be dispensed with, and I direct the Secretary to include with the minutes a copy of the meeting materials, confirmation of mailing to shareholders, and the report on attendance.
I will now call the meeting to order. Jon McKenzie, President and Chief Executive Officer, is here today, along with Andrew Deline, Executive Vice President and Chief Operating Officer, Kam Sandhar, Executive Vice President and Chief Financial Officer, Jeff Lawson, Executive Vice President, Corporate Development and Chief Sustainability Officer, and Susan Anderson, Senior Vice President, Legal and General Counsel. They are all available to answer your questions following the formal portion of the meeting. Also with us today and available to answer questions are Ryan Lundine and Ryan McKay, Partners at our auditor, PwC. The rest of the Cenovus leadership team and our Board members are also joining the meeting but are in listen-only mode. The business of today's meeting is described in the notice of meeting and management information circular dated March 12, 2025, which were delivered and filed in advance of this meeting.
You can find a link to the circular and annual report by clicking on the document icon at the left or bottom of your screen, and they can also be found on Cenovus's website and on SEDAR+. The business of today's meeting is to receive the audited financial statements for the year ended December 31, 2024, and to consider and vote on three items as set forth on pages 12 to 14 of the circular. First, the appointment of our Auditor. Second, the election of directors. Third, the non-binding advisory vote on the Corporation's approach to executive compensation. For efficiency, we have prearranged for Andrew Deline and Kam Sandhar, both Cenovus shareholders, to move and second the formal business motions. We will now proceed with the formal business of the meeting.
The first item of business is to receive the consolidated financial statements and the auditor's report for the year ended December 31, 2024. The 2024 annual report containing these audited financial statements was delivered to shareholders in advance of the meeting, and a link can be found at the left or bottom of your screen, as well as on Cenovus's website and on SEDAR+. We will now move to the voting items. A reminder, the polls are still open for voting on the items of business. As mentioned earlier, voting will be conducted by online polling, and voting options will be visible on your screen if you are a registered shareholder or duly appointed proxy holder. If you have already voted, you don't need to take any further action unless you would like to change your vote.
Item one on the agenda is the appointment of our Auditor, as set forth on page 12 of the circular. Could I have a motion?
Mr. Chair, my name is Andrew Deline, and I move for a vote on item one to appoint our Auditor.
Thank you, Mr. Deline. Is there a seconder for the motion?
Mr. Chair, my name is Kam Sandhar, and I second the motion.
Thank you, Mr. Sandhar. Are there any questions on the motion?
There are no questions on the motion.
We will now move to item two on the agenda, the election of each of the director nominees, as set forth on pages 12 and 13 of the circular, being Steven Bradley, Keith Casey, Michael Crothers, James Gurglas, Jane Kinney, Eva Kwok, Melanie Little, Richard Marco Glace, Shana Martineau, Jon McKenzie, Claude Mongeot, myself, Alex Pourbaix, Frank Sixt, and Ronda Zaygaki. There have been no further nominations received in advance of the meeting. In accordance with Cenovus's bylaw number one, I declare the nominations closed. Could I have a motion?
Mr. Chair, my name is Kam Sandhar, and I nominate each of the individuals you have listed, and I move that each nominee be elected a director of Cenovus.
Thank you, Mr. Sandhar. Is there a seconder for the motion?
Mr. Chair, my name is Andrew Deline, and I second the motion.
Thank you, Mr. Deline. Are there any questions on the motion?
There are no questions on the motion.
We will now move on to item three, a non-binding advisory resolution to approve the Corporation's approach to executive compensation, as set forth on pages 13 and 14 of the circular. Could I have a motion?
Mr. Chair, my name is Andrew Deline, and I move for a vote on item three, a non-binding advisory resolution to approve the Corporation's approach to executive compensation.
Thank you, Mr. Deline. Is there a seconder for the motion?
Mr. Chair, my name is Kam Sandhar, and I second the motion.
Thank you, Mr. Sandhar. Are there any questions on the motion?
There are no questions on the motion.
Online polling is now closed. While we tabulate the results, please enjoy our corporate video.
What do you call a company that explores? A company that innovates? A company that builds? Always looking up? Always looking forward? What do you call a company that has your back and works to get everyone home safely every day? What do you call a company that delivers on its promises? That puts things back the way they found them? A company that invests in our economy and supports the communities where its people work and live? What do you call a company that strives to be a great neighbor? A company with operations around the globe whose purpose is to energize the world and make our lives better? A company that does it all by producing, refining, and delivering the energy products we use every day? What do you call a company with deep roots and a long, proud history?
A company that's proud of its people and its community? What do you call a company that cares? You call that company Cenovus.
In order for today's resolutions to be passed, the approval by a simple majority of the votes cast by shareholders who voted online or by proxy at this meeting must be received. I have received the Scrutineer's report and confirm as follows. First, PwC is appointed as Auditor of Cenovus as approved by 99.58% of the votes cast by shareholders. Second, each director nominee is elected by the Board. Third, the non-binding advisory vote to accept the approach to executive compensation was approved by 97.32% of the votes cast by shareholders. I direct the Secretary to file the final Scrutineer's report with the minutes of the meeting. Details of the voting results will be filed with Securities Regulators and included in the news release, which will be issued later today. The formal business of this meeting is now complete. May I have a motion to conclude the meeting?
Mr. Chair, my name is Kam Sandhar, and I move that this meeting conclude.
Thank you, Mr. Sandhar. I declare the formal business of this meeting is concluded. I now invite Mr. Jon McKenzie, Cenovus' President and Chief Executive Officer, to give his remarks, which will be followed by a question-and-answer session.
Great, and thanks, Alex. On behalf of Cenovus, our employees, and our shareholders, I would like to thank you for your contributions as Executive Chair over the past two years, and I look forward to continuing working with you as Chairman of the Board. I'd like to bring your attention to the advisory on this screen, which refers to some of the information I'm about to discuss. Additional information about our forward-looking statements and financial information can be found in our first quarter news release, first quarter management's discussion and analysis, and our 2024 annual report. These are all available on cenovus.com under Investors. At the core of our success is safety, which remains fundamental to everything we do. In 2024, we marked our best-ever process safety performance, making us a top quartile performer in this category. A trend Cenovus has continued since 2022.
During this year, we had 14 process safety events, down from 25 in 2023, and significantly below our target of 24 for the year. Our continued focus on safety, operational efficiency, and financial discipline positions us well for future growth and to navigate the evolving energy landscape. In 2024, Cenovus achieved a number of significant operational and financial milestones, marking a year of solid performance and meaningful returns to our shareholders. Our financial discipline has resulted in one of the strongest balance sheets in our industry. In 2024, we achieved our $4 billion net debt target, and we are now returning to 100% of excess free funds flowed to shareholders over and above our base dividend. In fact, we returned around $3.2 billion to shareholders last year through dividends, share repurchases, and the redemption of preferred shares.
Our financial performance in 2024 was driven by the continued strong operational performance in our upstream assets, including our oil sands segment, where we set daily and annual production records. We are about to bring on the start of our first of our 150,000 bbl per day of growth. This year, we will see the completion of a number of our growth projects after achieving significant project milestones in 2024. This positions us to deliver additional sustained returns to our shareholders. On the West White Rose project, we reached mechanical completion on both the concrete gravity structure and the topsides and finished the asset life extension work on the Sea Rose floating production storage and offloading vessel. This extends the life of the field for another 14 years.
We've also reached mechanical completion of the Narrows Lake pipeline, which ties into our Christina Lake facility, and now have the infrastructure in place to access some of the highest quality resource in our portfolio. In the downstream, 2024 marked the first year our U.S. refining network was fully operational, and we're moving quickly to make that business more competitive and profitable. Throughput, utilization, and costs are all trending positively, and I'm pleased with the work underway to further strengthen this part of our business. Mid to late 2025 will mark a significant inflection point for our company. As we complete a number of key projects, we'll see a reduction in growth capital spending, and we'll begin to see the first of the 150,000 bbl per day of incremental production we plan to bring on by 2028. All of our key growth projects remain on track towards completion.
It bears repeating that these projects open up high-quality, long-term reservoirs. Narrow Lake has begun steaming the first of two well pads for anticipated production later this year and access some of the best resource across the entire Christina Lake region. The Foster Creek Optimization Project is now 75% complete and on track for production in early 2026. The two main West White Rose components are scheduled to be installed later this summer, with first production in 2026. This project increases our production of oil that receives Brent-based pricing with immediate access to global markets. When these projects are producing, they are all expected to contribute to a material rate of change in our free cash flow through 2026 and beyond.
This free cash flow profile, along with our strong balance sheet, prepares us to manage continued volatility in commodity prices while returning cash to shareholders and strategically investing in the business. As we look to the future, we are focused on maintaining our value proposition and our competitive advantage: a low-cost, long-life reserve base, a conservative capital structure, disciplined investment which can withstand commodity price fluctuations, and increasing our returns to shareholders. Ensuring our business is resilient is essential, never more than in this time of constantly evolving market dynamics and geopolitical and economic unrest. We know that North America and the world rely on the essential natural resources we provide. Cenovus will continue to vigorously advocate for our company and industry, helping stakeholders and the public understand the benefits our sector responsibly delivers.
I want to thank our shareholders and our board, employers, employees, and contractors for your ongoing support, and I'm looking forward to a significant year that we have ahead.
Thank you, Mr. McKenzie. We will now answer questions submitted online. Please click on the messaging icon at the left or bottom of your screen to submit your question. We may group questions that are similar in nature for a single response. All questions and our answers will be posted on Cenovus's website within five business days. If we do not get to your submitted question today, it will be posted there as well. We have the following question from Francois Meloche, who represents a group of retirement systems and is a long-term shareholder of Cenovus. Companies should create value while supporting a sustainable economy. We believe pricing carbon is an essential piece of achieving both these goals. The recent public letters signed by Mr. McKenzie suggest that the federal government should cease carbon pricing, leaving this responsibility to the provinces.
In contrast, we believe a consistent federal backstop, along with predictable annual increases in carbon prices, are essential for the certainty needed to build a low-carbon economy and advancing carbon reduction initiatives such as carbon capture and storage. Two questions. Was the board involved in approving Cenovus's position that the federal government should repeal the carbon levy on large emitters? Have you discussed the possibility such a policy change could make new CCS projects less viable, thus impacting the company's ability to reduce emissions?
Thanks, Kim. It's Alex Pourbaix. Given the virtual nature of this meeting, I think it's probably easiest if I answer that question. I would say that management and the board have regular and ongoing discussions on climate-related matters, including carbon policy in Canada. The first point I would want to make is to focus on the appropriate jurisdiction to make regulations on carbon emissions. We disagree with the need for a federal carbon levy on large emitters when provincial governments have robust emissions reduction policies and regulations and are best positioned to regulate businesses within their jurisdictions. I think it's also vital to remember that Canadian oil producers are in competition with global producers who overwhelmingly are from countries with no carbon pricing policies. Onerous domestic carbon pricing regulations undermine Canada's international competitiveness.
If we cripple the Canadian energy industry with huge carbon levies, investment dollars, production capacity, jobs, and resource revenues will move from Canada to lower-cost jurisdictions, none of which have the same level of transparency or stringent environmental regulations or ambitions as Canada. Our goal is for government to set emissions reduction policies that incent carbon mitigation, but also allow trade-exposed sectors like ours to compete globally. The current federal system is not competitive over the long term, and we are seeking changes to allow for growth and ongoing investment in Canada while concurrently incentivizing emission reduction. As the world strives to move to a lower-carbon future, people will continue to need access to a reliable mix of affordable energy. Hydrocarbons comprise over 80% of global energy supply and will continue to fuel global economic growth well into the future.
All credible forecasting agencies predict global oil demand will continue for many decades. We are, in fact, the only top 10 global producer of oil and gas that burdens its industry with a carbon price. Rather than penalizing their energy industry, most other producing countries have incentivized decarbonization efforts, which is the right policy to achieve decarbonization at scale without compromising our economic prosperity. When carbon pricing regulations become overly onerous, they undermine Canada's international competitiveness and lead to carbon leakage as investment dollars, production capacity, jobs, and resource revenues move to lower-cost jurisdictions that do not punish energy-intensive, trade-exposed sectors of the economy. Energy plays a key role in Canadians' lives. From keeping homes warm in the winter to transporting food and getting families to where they need to go, our sector is a reliable partner equipped to help support Canadians.
Canada must unlock our energy production potential and help ensure the availability and accessibility of energy to Canadians and our allies around the world. Oil, natural gas, and refined products are a critical component of Canada's exports, making up about 25% of Canada's balance of trade, providing $177 billion in value. Without the contribution of our sector, Canada would risk an even weaker dollar, increasing the cost of everyday essentials such as food and clothing. Canada's natural resource industries can play a pivotal role in solving the country's productivity and competitiveness challenges, but only if supported properly. It is time for Canada to rethink its mission policies, and competitiveness preservation must always be the p rimary principle when doing so.
Thank you, Mr. Pourbaix. We have no further questions.
Great. Thank you, Kim. On behalf of your board of directors and the leadership team, thank you for attending our annual meeting of shareholders.