Hello. My name is Anna, and I will be your operator today. At this time, I would like to welcome everyone to the Cenovus 2022 Annual General Meeting of shareholders. As a reminder, today's meeting is being recorded. I will now hand the meeting to Brett Harris, Director of Communications for Cenovus. Mr. Harris?
Thank you, Operator, and good afternoon, everyone. Thanks for joining us today. This is the third year in a row that Cenovus is holding its shareholders' meeting in this virtual format, and we view the use of technology-enhanced shareholder communications as a method to facilitate greater individual investor participation, regardless of physical location. In addition, the virtual-only format for the meeting will help mitigate health and safety risks to our community, shareholders, employees, and other stakeholders. I will just take a minute to explain how this works. Your information screen displays instructions on how to participate in the meeting by voting and submitting questions. Vote and question functionality are available only for registered shareholders and duly appointed proxy holders. All other guests are in listen-only mode.
Also, please note that because today's meeting is being webcast, there is a slight delay between what our speakers are saying in real time and what participants of the meeting hear. Polling is now open, and voting is displayed on your information screen. If you've already voted, you do not need to take any further action unless you would like to change your vote. If you are a shareholder or proxy holder, you may submit your questions at any time during the meeting by selecting the messaging icon on the information section of the screen and typing in your question. Please note that questions related to the business of today's shareholder meeting will be addressed during the formal portion of the meeting. All other questions will be answered following the meeting.
When answering your questions, we may aggregate those that are similar, and any questions of a general nature that we do not address here will be posted to our website, cenovus.com, in the coming days. Now, I will ask Mr. Keith MacPhail, Chair of Cenovus' Board, to call the meeting to order. Mr. MacPhail.
Thank you, Mr. Harris, and welcome to Cenovus' Annual Meeting of Shareholders. Before we begin the formal portion of the meeting, I would like to highlight that after approximately 16 months since closing the Husky transaction, the integration of the two companies is largely complete, including the newly constituted board, which consists of four new members representing Husky, who all bring a wide diversity of skills and experience to the boardroom. In 2021, the directors from both Legacy Cenovus and Legacy Husky spent time becoming more familiar with Cenovus' new asset mix and continue to increase our knowledge about the company's environmental, social, and governance performance. This was achieved through a variety of board education sessions that were scheduled throughout the year.
I want to take this opportunity to thank our entire board for their continued support and guidance and thank them for agreeing to stand for reelection and serving for another year. As part of our ongoing board succession and renewal process, the board has committed to 30% female representation of its members by the end of our annual meeting of shareholders in 2023. In addition, we have an aspirational target of at least 40% of our non-management directors to self-identify as women, Indigenous peoples, persons with disabilities, and visible minority by year-end 2025. Now, we'll move on to the business of the day. In accordance with Cenovus' bylaws, I will chair the meeting. Natasha Dhillon- Penner, our Assistant Corporate Secretary, will act as Secretary, and Stephen Bandola from Computershare Investor Services, Inc., will act as Scrutineer.
The record date for determining shareholders entitled to receive notice and vote at this meeting was fixed on March 1st, 2022. 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 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 report on attendance. I now call the meeting to order. Mr. Alex Pourbaix, our President and Chief Executive Officer, is on the line today, along with John McKenzie, our Chief Operating Officer, Jeff Hart, our Chief Financial Officer, Rhona DelFrari, our Chief Sustainability Officer and Senior Vice President, Stakeholder Engagement, and Kam Sandhar, our Executive Vice President, Strategy and Corporate Development.
They are all available to answer your questions following the formal portion of the meeting. The rest of the Cenovus leadership team and our board members are joining us virtually 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 1st, 2022, that was delivered and filed in advance of this meeting. A link to the circular and annual report is available on the document icon on the information section of your screen and can also be found on Cenovus' website.
The business of today's meeting is to receive the audited financial statements for the year-ended December 31st, 2021, and to consider and vote on three items as set forth on pages six to seven of the circular: the appointment of our auditor, the election of directors, and the non-binding advisory vote on the corporation's approach to executive compensation. For efficiency, we have prearranged for John McKenzie, Jeff Hart, Rhona DelFrari, and Kam Sandhar, all 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 31st, 2021.
The 2021 annual report containing these audited financial statements was delivered to shareholders in advance of the meeting, and a link can be found on the information section of your screen and on cenovus.com. We will now move on to the voting items. The polls are still open for voting on items of business. As mentioned earlier, voting will be conducted by online polling, and your 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 do not 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 six of the circular. Could I have a motion?
Mr. Chair, my name is Jon McKenzie, and I move for a vote on item one to appoint our auditor, as set forth on page six of the circular.
Thank you, Mr. McKenzie. Is there a seconder for the motion?
Mr. Chair, my name is Rhona DelFrari, and I second the motion.
Thank you, Ms. DelFrari. Are there any questions on the motion?
Mr. Chair, there are no questions on this motion.
Okay. We will move now on to item two on the agenda, the election of director nominees, as set forth on pages six and seven of the circular, being Keith Casey, Kenneth Fok, Jane Kinnear, Carol Howes, Eva Kwok, myself, Keith MacPhail, Richard Marcogliese, Claude Mongeau, Alex Pourbaix, Wayne Shaw, Frank Sixt, and Rhona DelFrari. Could I have a motion?
Mr. Chair, my name is Jeff Hart, and I nominate the individuals you have listed and as set forth on pages six and seven of the circular.
Thank you, Mr. Hart. 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 this motion?
Mr. Chair, there are no questions on this motion.
Okay. We will move on then to item three, a non-binding advisory resolution to approve the corporation's approach to executive compensation. Could I have a motion?
I move for a vote on item three, a non-binding advisory resolution to approve the corporation's approach to executive compensation, as set forth on page seven of the circular.
Thank you, Ms. DelFrari. Is there a seconder for the motion?
Mr. Chair, I second the motion.
Thank you, Mr. Hart. Are there any questions on the motion?
Mr. Chair, there are no questions on this motion.
Okay. We will pause for a moment to allow those voting online now to do so. Okay. Online polling is now closed. In order for today's resolution to be passed, the approval by a simple majority of the votes cast by shareholders who voted by proxy at this meeting must be received. I have received the scrutineer's report and confirm as follows. PricewaterhouseCoopers LLP are appointed as auditor of Cenovus. Each director nominee is elected to the board. The non-binding advisory vote to accept the approach to executive compensation passed by more than 97% 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 security regulators and included in our news release following the meeting. The formal business of the meeting is now complete.
May I have a motion to conclude the meeting?
I move that this meeting conclude.
Thank you, Mr. McKenzie. I declare the formal business of the meeting is concluded. We now invite Mr. Alex Pourbaix to give his CEO remarks, followed by a question-and-answer session.
Thanks, Keith, and good afternoon, everyone. Before I begin, please note the advisory on your 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 2021 annual report. In the 16 months since we completed the transaction combining Husky Energy with Cenovus, we've made tremendous progress. While there's still more work to do, we've largely integrated the assets and people of the two legacy companies. We are now an even stronger, more resilient, integrated energy leader with world-class operations. Through it all, we've kept the health and safety of our people as our primary focus, including our continued vigilance against COVID-19. As we've advanced the integration work, we've remained laser-focused on delivering on our commitments to enhance shareholder value.
Foremost among these commitments is the deleveraging of our balance sheet, which has proceeded rapidly and continues to do so. As you will have seen in our news release this morning, we reduced our net debt by another $1.2 billion in the first quarter. We expect to achieve net debt below $8 billion imminently, and if current commodity prices hold, we could approach our ultimate net debt floor of $4 billion by the end of this year. With the deleveraging achieved to date, our board has approved tripling Cenovus' base dividend starting in the second quarter of 2022. To give our shareholders a much clearer picture of how we intend to reward you in the months ahead, we've also further defined how we'll allocate capital going forward.
When we have excess free funds flow, we intend to provide additional returns to shareholders through continued opportunistic share buybacks supplemented by variable dividends. The full details are outlined in our first quarter news release, and I spoke about them on our results conference call and webcast this morning. We are very excited about this framework and especially how it reinforces the alignment between Cenovus and our shareholders on the importance of a strong balance sheet to deliver continuing growth in shareholder returns over time. Our goal is to be a leader in our industry peer group when it comes to delivering total shareholder returns, and we are already well down that road. Driven by our strong operational and financial performance and last year's recovering commodity prices, the value of Cenovus' shares doubled in 2021.
On total shareholder returns, Cenovus outperformed both the S&P TSX Composite and S&P TSX Energy Indexes last year. All of this has been the result of a lot of hard work and dedication by our teams to ensure our facilities and assets continue to perform safely and reliably and that our integration efforts succeed. The proof is in our results. Turning to the first quarter, this morning we announced first quarter adjusted funds flow of nearly $2.6 billion, free funds flow of more than $1.8 billion, and cash from operating activities of nearly $1.4 billion. All of this was driven by total upstream production of nearly 800,000 barrels of oil equivalent per day. This was a continuation of our strong performance in 2021 when Cenovus generated adjusted funds flow of more than $7.2 billion for the year and free funds flow of nearly $4.7 billion.
The significant cash flow generating potential of our business is underpinned by the strength of our asset base, our cost and capital discipline, and by our progress in realizing substantial benefits from the Husky transaction. That includes cost and capital synergies. As we announced last quarter, we've exceeded our planned $1.2 billion in annual run rate synergies from the transaction. We did it well ahead of schedule and we're not done. We'll keep looking for additional opportunities to further reduce costs and increase efficiencies across the company. In addition, we've continued to optimize and streamline our portfolio with strategic asset sales, using the proceeds to further deleverage our balance sheet. Over the last 16 months, we announced more than $1.5 billion in asset sales, including the divestiture of our Martin Hills, Wembley, and Tucker properties, as well as the pending sale of our Husky retail fuel network.
In 2021, we also made progress advancing the culture of our combined company. We established a new corporate purpose, energizing the world to make people's lives better. We defined a set of tangible values for our staff to live by in their daily work. Even with challenges of the integration and COVID-19, we also continue to advance our personal and process safety performance. Some parts of the company, like our conventional and Lloydminster thermal operations teams, recorded zero safety incidents last year, a noteworthy achievement. In 2022, our teams remained focused on ensuring we meet our occupational and process safety targets so our staff can get home safely every day. Of critical importance to the future of our business, we also affirmed our commitment to leading environmental, social, and governance, or ESG, performance.
In December, we set ambitious yet achievable targets for our five ESG focus areas: climate and greenhouse gas emissions, water stewardship, biodiversity, indigenous reconciliation, and inclusion and diversity. Our targets include reducing absolute emissions from our operations by 35% by year-end 2035. Our longer-term ambition remains to reach net zero emissions by 2050. We are currently working on our 2021 ESG report, which will provide much more detailed plans for how our company expects to achieve its climate and other targets. Cenovus' emissions reduction goals are supported by the work of the Oil Sands Pathways to Net Zero Alliance. Jointly founded last year by Cenovus and our peers, the alliance includes six producers who operate about 95% of Oil Sands production.
Over the past year, about 100 professionals from Pathways Alliance companies have been working tirelessly to advance a three-phase plan to achieve net zero emissions from Oil Sands production by 2050. This includes working collaboratively with governments to invest in a foundational carbon capture and storage network that runs through the heart of the Oil Sands region of Northern Alberta. In last month's federal budget, the government announced a substantial investment tax credit for carbon capture and storage infrastructure. While far more work is needed to ensure a fiscal and policy framework that will allow the Pathways vision to succeed, this was a significant step forward for the alliance and one that will be key to helping Canada reach its climate goals. Stay tuned for more news to come on the Pathways work.
As I look forward to the rest of this year and beyond, I am excited about the future of our company. From an industry perspective, our macroeconomic environment is better today than it has been at any time since 2014. Over this past year, we saw the demand for oil and gas recover as the global economy began to emerge from the COVID-19 pandemic. This increasing demand, coupled with recent geopolitical instability, has underscored the need for reliable, affordable, and responsibly produced oil and gas. There is a growing acknowledgment of the important role the Canadian industry can play in ensuring global energy security while helping the world transition to a lower carbon economy. That said, we're not planning our business around high oil and gas prices. We have the ability to deliver meaningful shareholder returns at WTI prices as low as $45 U.S. per barrel.
Another priority for Cenovus in 2022 is our U.S. manufacturing business. Last year, our financial performance was largely driven by the operational strength of our upstream and Canadian manufacturing businesses, supported by our ability to capture efficiencies across our newly integrated asset base. In 2022, we are focused on building an equally strong track record within U.S. manufacturing, a business segment that will play a key role in generating additional long-term value for our shareholders. While the company got off to a good start in the first quarter with strong operating and financial performance, we expect even greater momentum in the second half of the year as more of the headwinds we've been facing fall away. This includes our facilities returning to at or near normal operating capacity as we wind down substantial turnaround activity taking place in the second quarter.
We also announced earlier this month that we're suspending our crude oil price risk management program. With the strength of our balance sheet and liquidity positions, we no longer need the cash flow certainty this program provided. We will now be able to benefit to a greater degree from higher crude pricing. Finally, our contingent payment to ConocoPhillips, which was part of acquiring assets a few years ago from that company, is set to expire on May 17th of this year. In closing, I believe that our performance in 2021 and the first quarter of this year clearly demonstrates the potential of our company and why we represent compelling value for shareholders. Our value proposition is rooted in four key areas. The first is our operational strength. This includes our leading in-situ oil sands operating model, our focus on innovation, and our facilities track record for safe, reliable performance.
Secondly, our financial discipline, including our returns-focused capital allocation and ability to rapidly reduce debt. Thirdly, ESG leadership. This means focusing on strong disclosure and our five ESG focus areas, including greenhouse gas emissions and Indigenous reconciliation. Finally, our ability to generate meaningful shareholder returns even with WTI prices as low as $45 U.S. a barrel. We've done what we said we would do, and you can expect more of the same from us in the future. I would like to thank you for your support of Cenovus, and I look forward to the opportunity to continue showcasing what our company can do for the rest of this year and beyond. I would like to open the floor to questions from registered shareholders and duly appointed proxy holders.
Thank you, Mr. Pourbaix, and we will now answer questions submitted online. If you have a question, please click on the messaging icon on the information section of your screen to type and submit your question. Questions that are similar in nature may be grouped together for a single response. If we run out of time and do not get to your question, we will post the remainder of the questions and answers on cenovus.com within three business days. Mr. Pourbaix, we do have a question from shareholder Jeff Carlson. I see that Cenovus launched its first-ever share buyback program for the purchase of up to 146.5 million Cenovus common shares. I believe the use of the company earnings to repurchase its own shares is a poor use of capital and does not demonstrate a vision of long-term growth for Cenovus.
There is no way that anyone can predict what the market believes any company might be worth in the future. As such, at worst, when such purchases are made, the shares may be purchased at overvalued market prices, which therefore destroys shareholder value. Doesn't it make more sense to deploy this capital in ways that will actually grow the company or to return these earnings directly to shareholders in the form of higher or special dividends? Why was this policy adopted?
That's a good question, and thanks, Jeff, for that. I think I would say in talking about buybacks, I mean, buybacks are one of the shareholder value tools that we use to return value to shareholders. We accompany that, as you mentioned in your question, in our case, both base dividends, we've now added variable dividends.
The share repurchase is really just one leg of that stool. In our case, we've always viewed that as a very opportunistic tool. We will not do it at any share price. One of the—I think one of the challenges that our industry has had in years past is companies tended to buy back shares when they had money to do so and then turned around and tended to issue equity when they had no money, undoing any benefit they might have created through the share buyback. In our case, we are very disciplined about it. Our strategy is to only buy back shares when we can buy them back below the net asset value of the shares as measured at a sort of middle-of-the-road commodity price environment. For example, that would be around $60 U.S. WTI.
When we have those opportunities, the advantage of the share buyback is that it is permanent accretion. At those price levels, or share price levels, or below that I have been talking about, the returns on those share repurchase investments, I would argue, would compete favorably with just about any project we could find, and they would do so with next to no or no risk. That is really why we use that strategy. As I said, it is only one part of the strategy going forward. If you take a look at what we have announced today with respect to the tripling of the dividend and the implementation of the variable dividend, at these kind of prices, I think you can see pretty easily that this company is going to deliver very, very compelling value for shareholders in this kind of commodity price environment.
Thank you, Mr. Pourbaix. And at this time, we have no additional questions. Back to you.
Okay. It looks like we have no more questions. I want to thank very sincerely all of our shareholders who've taken the time to be with us today and who've had the interest and the commitment to be and remain invested in Cenovus' shares. With that, we'll give back to you the rest of your afternoon. Once again, thanks so much for your interest and attention to the company.
Ladies and gentlemen, this concludes today's meeting. We thank you for your participation.