Good morning, and welcome everyone to Cenovus' 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 U.S., 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, Chair of Cenovus' Board, I'll take a minute to explain how the meeting will work. If you are a registered shareholder or duly appointed proxyholder, 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 proxyholders 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 proxyholder, you may submit questions at any time during the meeting. Select the questions tab found at the left or bottom of the screen and type in your question. Please note that questions related to voting matters will be addressed during the formal portion of the meeting. To ensure questions related to voting matters are addressed before we close the polls, we may need to return to earlier agenda items.
We may also aggregate questions that are similar. Questions that aren't related to voting matters will either be addressed during the Q&A session, which follows the formal portion of the meeting and remarks from our CEO, or they 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, chair of the board, to call the meeting to order. Mr. Pourbaix.
Thank you, Kim, and welcome everyone to Cenovus' 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. We appreciate your continued support and confidence in our strategy and execution. As you'll hear from our CEO, Jon McKenzie, we are positioned to further build on our momentum in 2026 and beyond, focusing on our strategic priorities and continuing to deliver value across the business. 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' bylaws, I will chair the meeting. Colin Ritchie, Assistant Corporate Secretary, will act as secretary, and Stephen 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 10th, 2026. I've 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 now call the meeting to order.
Jon McKenzie, President and Chief Executive Officer, is here today, along with members of Cenovus' executive team, including Andrew Dahlin, Executive Vice President and Chief Operating Officer; Kam Sandhar, Executive Vice President and Chief Financial Officer; Jeff Lawson, Executive Vice President, Corporate Development & Chief Sustainability Officer; Susan Anderson, Senior Vice President, Legal and General Counsel; Candace Newman, Senior Vice President, People Services; Eric Zimpfer, Head of Downstream; and Geoff Murray, Executive Vice President, Commercial. They are all available to answer your questions following the formal portion of this meeting. Also with us today and available to answer questions are Ryan Lundeen and Ali Arnell, 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 10th, 2026, 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 found at the left or on the bottom of your screen, and they can also be found on Cenovus' website and on SEDAR+. The business of today's meeting is to receive the audited financial statements for the year ended December 31st, 2025, 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 pre-arranged for Andrew Dahlin 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 31st, 2025. The 2025 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.com and on SEDAR+. We'll now move on 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 Dahlin. I move for a vote on item one to appoint our auditor.
Thank you, Mr. Dahlin. 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.
Okay. We will now move to item two on the agenda, the election of each of the director nominees as set forth on page 13 of the circular, being Stephen Bradley, Keith Casey, Michael Crothers, James Girgulis, Jane Kinney, Eva Kwok, Melanie Little, Richard Marcogliese, Chana Martineau, Jon McKenzie, Claude Mongeau, myself, Alex Pourbaix, Frank Sixt, and Rhonda Zygocki. There having been no further nominations received in advance of the meeting, in accordance with Cenovus' bylaw number one, I declare the nominations closed. Could I have a motion?
Mr. Chair, my name is Kam Sandhar. I nominate each of the individuals you've listed. 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 Dahlin, and I second the motion.
Thank you, Mr. Dahlin. 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 page 14 of the circular. Could I have a motion?
Mr. Chair, my name is Andrew Dahlin, 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. Dahlin. 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. 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: PwC is appointed as auditor of Cenovus as approved by 99.67% of the votes cast by shareholders. Each director nominee is elected to the board. The non-binding to accept the approach to executive compensation was approved by 97.39% 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 the 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.
Thank you, Alex. On behalf of Cenovus, our employees, and our shareholders, I'd like to thank you for your continued leadership, stewardship. As Chair of the Board, I'm looking forward to another year of close collaboration in 2026. I'd like to first bring your attention to the advisory on the screen, which refers to some of the information I'm about to discuss. Additional information about forward-looking statements and financial information can be found in our first quarter news release, first quarter management's discussion and analysis, and our 2025 annual report. These are all available on cenovus.com under Investors. I will begin with safety, the cornerstone of everything we do. The safety of each of our employees and contractors is our top priority, supported by a safety culture that is deeply embedded across all our operating sites.
Our strong performance in 2025 includes top quartile process safety performance for the third consecutive year. We remain committed to continuous improvement to ensure our people go home safe every day. In 2025, we executed a long list of priorities across the company. Operationally, our teams delivered exceptional performance, setting multiple Upstream production records across our assets and demonstrating top quartile Downstream reliability. Our Upstream production of 834,000 BOE per day was the highest ever for Cenovus, up 3% from 2024, and that doesn't include the impact of acquiring MEG Energy and its Christina Lake asset. We exited the year producing over 970,000 BOE per day. In the Downstream, our refineries ran reliably through the year with a combined utilization rate of 95% across the Canadian and U.S. segments while enhancing the competitiveness of their margins and unit costs.
We also executed major milestones on our highly efficient growth projects, completing the Narrows Lake tieback to Christina Lake, a first of its kind extended steam reach pipeline, facilities work on the Foster Creek optimization project, which delivered production growth well ahead of schedule, and construction, installation, and tie-ins of the West White Rose platform. 2025 also saw us complete two significant transactions. We closed the acquisition of MEG on November 13th, adding 110,000 barrels a day of top-tier resource located next to our largest producing SAGD asset. Consolidating the Christina Lake area will generate a projected CAD 400 million of annual operating and corporate synergies by 2028, with work already underway. We also sold our interest in refineries and now have full operational, commercial, and strategic control of our downstream business, which is a critical component of our heavy oil value chain.
Together, these transactions position the company for continued growth and value creation over the long term. From a financial perspective, our balance sheet remains robust, and we continue to prioritize the flexibility that comes with a CAD 4 billion net debt level, which represents an under-levered balance sheet. Following the MEG acquisition, our capital allocation framework was adjusted to balance deleveraging and shareholder returns while we maintain a long-term net debt target of CAD 4 billion. In 2025, we returned above CAD 3.8 billion to shareholders through dividends, share repurchases, and the redemption of preferred shares. Strong operational performance, meaningful progress capturing MEG synergies, and a robust balance sheet positions us well to continue to deliver value from our portfolio of assets.
With the completion of our three-year investment cycle this past year, we have delivered incremental production increases while reducing the amount of growth capital we plan to spend year-over-year. At Narrows Lake, we used extended steam reach to unlock some of the best resource in our portfolio. Production rates at Christina Lake continue to rise as we bring down our steam oil ratio and allocate more steam to the newest pads at Narrows Lake. At Foster Creek, we delivered the optimization project ahead of schedule, increasing capacity of one of our largest and highest quality assets by approximately 30,000 barrels per day. Drilling at West White Rose has now commenced, and we expect first oil in the third quarter of this year. This asset is expected to reach peak production of about 45,000 barrels a day net to Cenovus by 2028.
Its high net back production and decrease in capital spend position it to generate considerable free cash flow. Looking forward, our Christina Lake North expansion project will drive production growth of about 40,000 barrels per day by the end of 2028 as we add two new steam generators and debottleneck the water and oil handling capacity. We plan to exit 2026 at a production rate of about 1 million BOE per day, a significant and exciting milestone for our company. It is a testament to all the talented people that work for us. With these key growth projects online, we will continue to grow to around 1.1 million BOE per day by 2028. We remain financially disciplined and do not expect to change our capital plans in response to short-term volatility in commodity prices.
Our opportunity-rich portfolio gives us optionality for investment in the long term, you should expect us to continue to find and invest in high return growth projects across our business going forward. When looking at investments, we test economics to meet our return thresholds at $45 WTI and expect to maintain our overall capital spending in and around the CAD 5 billion mark in both 2026 and 2027. As we enter 2026, our business has never been stronger. We remain focused on protecting and extending our competitive advantages. A low cost, long life resource base, a conservative capital structure, disciplined, cycle-resistant investment, and continued commitment to increasing returns to our shareholders. With these foundations in place, we are well-positioned to navigate the year ahead. We know the geopolitical unrest has put more attention than ever on energy security.
We will continue to focus on competitiveness and advocate for regulatory and policy environment that allows us to produce the resources North America and the world need. I want to thank our shareholders, our Board, and our employees and contractors for your ongoing support, and I'm looking forward to the exciting year ahead.
Thanks, Mr. McKenzie.
We will now answer questions that were submitted online. Please click on the questions tab found at the left or bottom of your screen to submit your question. We may group questions that are similar for a single response. All questions and our answers will be posted on Cenovus' website within five business days. If we run out of time today and don't get to your submitted question, it will be posted there as well. We have the following question from Jessica Carradine with Investors for Paris Compliance, representing shareholder Salal Foundation.
The question, "We have withheld our vote for the reappointment of the auditor due to ongoing gaps in the portrayal of decommissioning liability in Cenovus' financials. My question is for PwC. Auditing standards require the disclosure of critical audit matters which communicate highly material areas that involved significant estimation uncertainty. In the 2025 financial statements, Cenovus lists decommissioning costs as a key area for estimation uncertainty. In your audit of Cenovus, how did you determine that decommissioning liabilities did not meet the threshold to be included as a critical audit matter? What procedures did you perform to assess the sensitivity of these liabilities to core assumptions such as asset lives or the discount rate?"
Hello. It's Ryan Lundeen, assurance partner from PwC. Thank you for the question. I'd like to address both parts. First, how critical audit matters are determined under PCAOB standards, second, our work over decommissioning liabilities in the Cenovus audit. First, on the CAM determination framework. Under PCAOB auditing standards 3101, a critical audit matter is not simply any material or complex area of the financial statements. It is specifically defined as a matter that was communicated or required to be communicated to the audit committee, relates to accounts or disclosures that are material to the financial statements, and involved especially challenging, subjective, or complex auditor judgment. It is important to emphasize that the CAM threshold is about the nature of the auditor's judgment, not solely about the significance of management's estimate or the materiality of the account.
Many financial statement areas are material and involve estimation uncertainty, but do not rise to the CAM threshold because the auditor's work, while rigorous, did not involve especially challenging, subjective, or complex judgment relative to other areas of the audit. On the second part, on decommissioning liabilities specifically, we do not opine on individual balances. The fact that decommissioning liabilities were not identified as a CAM in our audit report does not mean they received less audit attention than necessary. It means that in the specific facts and circumstances of the audit, our procedures over this balance did not involve the degree of especially challenging, subjective, or complex auditor judgment that distinguishes a CAM from other significant audit areas. On that note, we did perform our audit in accordance with standards of the Public Company Accounting Oversight Board.
Our responsibility, as set out in our auditor's report, indicates that we provide an opinion on the consolidated financial statements taken as a whole in accordance with IFRS. We provided an unqualified opinion in relation to those statements based on the applicable accounting and auditing standards. If there had been material deviations from such standards, we would not have been able to issue an unqualified audit opinion. Thank you.
Thank you, Mr. Lundeen. We have a second question for, from Investors. Given the scale of Cenovus' decommissioning liabilities and the number of judgments required to estimate them, what specific steps did the committee take to scrutinize the assumptions applied by management, such as the asset lives and the discount rate, and to satisfy itself that this area received sufficient audit scrutiny, particularly in light of the absence of any critical audit matter relating to decommissioning liabilities?
Hi. It's Alex Pourbaix. The Chair of the audit committee is in listen-only mode, so I will respond to this question. I would state that Cenovus provides disclosure relating to our decommissioning liabilities, including the undiscounted amount of estimated future cash flows to settle all our decommissioning liabilities. We exercise reasonable judgment to assess liabilities and estimate future values. All of our disclosures are made in accordance with IFRS accounting standards. With respect to timing, it is important to note that oil and natural gas currently make up over 50% of total energy demand. That demand continues to grow. For example, the International Energy Agency expects oil demand to remain above 100 million barrels per day by 2050. Upstream oil production will require about $540 billion in annual investments through 2050 to maintain global supply.
I think it is important to note that recent global events have only reinforced that oil and gas remain critical strategic commodities for continued economic development. This points to an incredible opportunity for Canada to deliver our oil and natural gas to a growing world for decades to come.
Thank you, Mr. Pourbaix. We have a question from Jeff Carlson. "Using share buybacks as a way to create value for shareholders is a coin flip at best. Further, using company earnings to repurchase its own shares is not in keeping with the vision of long-term growth. 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 who have risked their own money in the form of higher or special dividends? With this in mind, my question is, why has the board adopted this policy of repurchasing its own shares?"
It's, it's Alex again. I will also take this question. I would say that our framework very intentionally delivers a balance of shareholder returns in deleveraging, targeting to return approximately 50% of excess free funds flow to shareholders while net debt is above CAD 6 billion, with the remainder allocated to deleveraging. As we have said before, our capital allocation framework is not formulaic, but guidelines, and shouldn't be viewed as something we manage quarter to quarter, but over longer timeframes. To the extent that oil prices remain elevated, you could see us having more bias towards deleveraging to bring the debt down faster. Paying debt down faster allows us to protect our equity holders if we do see weaker commodity prices in the future.
While returns on buybacks aren't as attractive at high prices, we continue to see value in repurchasing our shares and will continue to do so. Our track record has been strong. We have repurchased 337 million shares for an average price of CAD 23.25 a share, an attractive price in relation to our view of intrinsic value.
Thank you, Mr. Pourbaix. There are no further questions.
Great. On behalf of your board of directors and leadership team, thank you for attending our annual meeting of shareholders.