AGM 2019

May 7, 2019

Welcome to the Annual and Special Shareholders Meeting for Gibson Energy. My name is Jim Esti, and I am Chairman of the Board. We will start the meeting with a safety moment from Shirley Wong, our Vice President of Projects Development and Engineering. Shirley? Thanks, Jim. So just some quick housekeeping rules. In event of emergency, exits are in the front and out the back as well as bathrooms are just out the door in the back to your right. So safety moment for today. These are Gibson Energy's life saving rules. We stood these up last year to supplement our Stop Work Authority program. A lot of these are in place to protect our field workers, but there is one here that applies to all workers and that's fit for duty. When most people think about fit for duty, they don't think about the one thing that affects all of us and that's mental health. So this week is actually National Mental Health Week in Canada as well as May is also mental health month in the US. A lot of folks confuse mental health with mental illnesses or mental health problems and they're actually quite different. For example, someone diagnosed with a mental health illness could have good mental health and vice versa. What's most alarming about mental health is that 1 in 5 Canadians live with a mental health problem, mental illness or addiction. Women are twice as likely to experience a mental health problem in their lifetime. And by the time Canadians reach the age of 40, 1 in 2 has experienced a mental health problem. So when we think about this year's campaign, it's all about getting loud about what mental health really is. So it is about having a sense of purpose, strong relationships, feeling connected to our communities, knowing who we are, coping with stress and enjoying life. It's never too early to start talking about mental health and never too late to start promoting mental health. So if you or you know someone who's experiencing a mental health problem, there are plenty of resources available. Thank you. Thank you very much, Shirley. Before we start the formal part of the meeting, I have a little story I want to tell you. Yesterday, the Board had a meeting with a number of employees. And as is custom, we go around the table and everybody introduces themselves. So as we were going around, this one individual said they'd been at Gibson for 16 years. And I said 16 years. And I said, did you get a watch after 15 years? And she said, no Gibson's too cheap. So Patricia, I would like you to come up here. I have a present for you. It's hard to buy a watch and call it at 9:30 at night. So don't complain. As is our custom, the people making motions and seconding motions have been asked to discuss and talk about how they created value and added value for Gibson. So as we've done in past years, we'll do that again this year and we're looking forward to it. Okay. In accordance with the bylaws of Gibson, I will act as Chairman of the meeting. The meeting will now come to order. During the first portion of the meeting, we will deal with formal business, followed by a brief corporate presentation and question and answers. Before we begin, I would like to introduce the other members of the Board. Doug Blum, Jim Cleary, John Festival, our newest member of the Board, Susan Jones. Susan's Executive Vice President of Potash and obviously works with Nutrien and is fortunate enough to live in that great city of Saskatoon, Saskatchewan. Marshall McCray, Mary Ellen Peters and Steve Spaulding. Officers in attendance today are Steve Spaulding, President and CEO Sean Brown, Senior Vice President and Chief Financial Officer Sean Wilson, Senior Vice President and Chief Administrative Officer and Mike Lindsay, Senior Vice President of Operations and Engineering. In order to attempt to deal with the formal proceedings as efficiently as possible, we have prearranged with designated shareholders to move in second motions. This is in no way to discourage any comments, questions or discussions. Sean Wilson will act as secretary of the meeting and Bart Winerack, a representative of our trust agent will act as a scrutineer. I have received a declaration of mailing from our transfer agent confirming that the proxy materials and the financial statements have been duly mailed to shareholders. This declaration will be kept by the Secretary with the minutes of the meeting. If there is no objection, the reading of the notice of meeting will be dispensed with. The scrutineers report received and it shows that a quorum is present. I now declare that the meeting is called to order and properly constituted for business. To my knowledge, each of the resolutions considered today will be passed by the proxies deposited in advance of the meeting. We will conduct voting by ballot for the election of directors, the advisory vote on executive compensation and the approval of allocated awards under the long term incentive plan. The appointment of auditors will be by a show of hands. Registered shareholders of valid proxies should have been given a ballot when they were registered with Computershare Trust Company. If you are a registered shareholder and hold a valid proxy and have not received a ballot, please raise your hand and a representative of Computershare will provide you with one. We would also like to collect all the remaining ballots at this time. If you have not returned your ballot, please raise your hand so that the scrutineer can collect them now. Okay, thank you. The first half of the business is the presentation of the audited financial statements for the year ended December 31, 2018. If there is no objection, the reading of such financial statements will be dispensed with. There are extra copies of the financial statements available to shareholders upon request. The next item of business is the election of directors. As noted in our information circular, our bylaws contain advanced notice provisions, which provide a procedure to be followed for the nomination of directors at meetings for shareholders. In accordance with the advance notice provision, the only individuals entitled to be nominated as directors at this meeting are persons named as nominee in the Gibson Information Circular: James Esty, Douglas Bloom, James Cleary, John Festival, Susan Jones, Marshall McCrae and Mary Ellen Peters are hereby nominated as Directors of Gibson to hold office until the next annual election of directors or until their successors are elected or appointed subject to the provisions of the Business Corporation Act and the bylaws of Gibson. Is there any discussion? In accordance with our majority voting policy, the election of directors have been conducted by way of ballot allowing registered shareholders and proxy holders to register their votes for or to be withheld against each individual director. I've been advised by the scrutineers the results that more than 50% are in favor of each director and in accordance with legal requirements and our majority voting policy, those nominated are duly elected as directors. The next item of business is the appointment of auditors. Hi, my name is Patrick Inglis. I'm an crude oil trader in our crude oil trading department at Gibson Energy. I add shareholder value by providing marketing service solutions for producers and refiners by utilizing Gibson Energy's strategically located assets in Canada. I move that PricewaterhouseCoopers LLP chartered professional accountants to be appointed auditors of Gibson until the next annual meeting or until their successors are appointed and that the remuneration as such be fixed by the Board of Directors. Thank you, Pat. What have you got say? You've already got to watch. I would like. It's 11:15. Have you got it on? I'm Patricia Hendrix and I'm the General Manager of the Scheduling and Rail Logistics team. My team and I add shareholder value by leveraging our assets to provide our customers with slow assurance and the optimal value for every commodity product. And I second that motion. Thank you very much, Patricia. Is there any discussion on the motion? All in favor, raise signified by raising their right hand. Contrary, if any? Carrie. Can you hear in the back when they speak? Great. Thank you. The next set of business is the advisory vote on executive compensation, which is described in detail in Gibson's information circular. Alastair? Good morning. My name is Alastair Ross and I'm the Manager of Supply Chain for the Operations Group. Myself and my team, we add value through implementing supply chain management processes and best practices to improve efficiency. We also ensure proper prequalification and evaluation of suppliers and finally, through undertaking cost saving and risk reduction initiatives. I move that in the ordinary resolution in respect of the advisory vote on executive conversation as described in detail in the information circular relating to the meeting be approved. Thank you, Alastair. Hello. My name is Sue Gullan. I'm the General Manager of HR Operations at Gibson Energy. My team and I add shareholder value by providing strategic HR and business services to Gibson stakeholders in support of people and leadership and execution of our strategic plan. I second the motion. Thanks, Sue. Is there any discussion on this motion? Voting of this resolution has been conducted by way of a ballot and I've been advised by the scrutineer that the advisory vote on executive compensation has passed by the requisite majority. The next item of business is the approval of allocated awards under the Gibson Long term incentive plan. Good morning. My name is Alison Denny and as Project Execution Manager for Gibson's Project Development and Engineering team, we add value by ensuring capital projects are delivered safely, on time and on budget without foregoing quality in design and construction. And I move that the ordinary resolution in respect of the approval of unallocated awards under Gibson's long term incentive plan as described in detail in the information circular relating to the meeting be approved. Thank you, Alison. Good morning. Good morning. My name is Steve Smythe. And as a member of the legal team, add shareholder value by providing timely legal and business advice that seeks creative and practical solutions to say yes to commercial agreements that further Gibson's strategy, minimizes risk on commercial and compliance matters and puts Gibson's best foot forward when seeking to enforce rights and entitlement. Thanks, Steve. Is there any discussion on this motion? Voting on this resolution has been conducted by way of a ballot and I've advised by the scrutineer that the approval of unallocated awards under the long term incentive plan have been passed by the requisite majority. That concludes the formal portion of the meeting, and I direct the scrutineer report to be kept by the Secretary within minutes of the meeting. Unless there are any other questions from the floor, the Chairman would entertain a note motion to terminate the meeting. Good morning. My name is Matthew Haynen and I'm a Senior Commercial Development Representative with Gibson Energy. I add value to shareholders through the development and execution of Canadian infrastructure initiatives, specifically around the contracting of long term tankage at Hardisty, which contributes to the strategic objective of sanctioning 2 to 4 tanks annually. I move that the meeting be terminated. Thanks, Matt. Good morning. My name is Christie Hall and I am the Administrative Assistant for Operations and Project Execution Teams for Gibson Energy. What's your other job though? I'm getting to that. I'm sorry. I have a bad habit of interrupting. Sorry. I add shareholder value by supporting the operations management team to implement our operations management system in the field. I also volunteer for many Gibson initiatives such as the United Way and Social Club to promote company culture and strengthen employee engagement. I second the motion. Thank you very much. Christie is a very enthusiastic member of our Social Club and does a great job. All in favor, signified by raising your right hand. I can't believe anybody's going to vote against ending this meeting. Contrary, if any? Carried. I declare this meeting terminated and I will now pass it over to Steve. Thank you very much. So thank you everyone for joining us today. Now that the formal meeting is over, I figured we would talk about Gibson Energy, talk about our successes last year and really our strategy on a go forward basis. So Gibson Energy is an important part of Canada's energy infrastructure and that we touch 1 in 4 barrels produced in Canada. So 1 in 4 barrels of every crude oil produced in Canada flows through our terminals over 1,000,000 barrels a day. Another thing that's very important to Gibson Energy is we strive to be a good corporate citizen. This includes protecting the people, the community and the environment. I don't have a clicker. There we go. So I wanted to go over our safety performance this year. This year we came in and our total recordable instrument incident at 1.14 and we set our goals for 2019 at 0.9. When we compare ourselves to our peers of 1.4, we're doing okay, but we want to be top tier and we define top tier as 0.4 to 0.6. And we think we have the processes in place and the commitment from our leadership across Gibson to get there. So I also wanted to talk about diversity and inclusion. We just this year came up with our diversity and inclusion policy to set the standard of our commitment to diversity. To drive that forward, we've developed a diversity team to help set up what diversity looks like to Gibson and also to set the path forward of how we're going to meet the goals that they put in place. Another thing very important to Gibson is community giving. Last year, we gave over $500,000 and this year, we've committed ourselves to give 750% more. So community is extremely important to us. We want to be that neighbor that everybody wants on their block. So when you look, we've talked about environmental health and safety. We've talked about diversity and inclusion. We've talked about giving and community. These are important things to us and you'll continue to hear as we go down our path and continue to develop our procedures and move forward. So let's talk about last year and what we were able to do last year. So at our Investor Day last January 2018, we laid out our strategy of who Gibson Energy was going to be. So if you look at Gibson Energy today versus Gibson Energy last year, we're a very different Gibson Energy. Last year, we set a goal to build 1 to 2 tanks a year at Hardisty. We built 4 and we changed our long term outlook to build 2 to 4 tanks at Hardisty. We said we were going to grow outside the outside our terminals in Canada. We built the 100 mile Viking pipeline project, 100 kilometers, I'm American, so you got to watch out. So this is the first significant pipeline project that Gibson Energy has built in over 2 decades. We said we were going to look into the states to build infrastructure in the states and we announced the Paiute to Wink pipeline project and gathering system project. This is a US100 $1,000,000 project. This when this goes in service in the Q3, this will be the 1st true infrastructure Gibson Energy has ever placed in service or built or operated in the United States. We said that we were going to divest of our non core assets. In June, we'll divest of our trucking business and that will close. We will close everything. We sold all of our assets within the schedule we laid out and right down the middle of the midpoint that we projected. We said that we were going to get our balance sheet in shape. We said that was going to be late 2019. It actually happened in 2018 where we got our debt to debt in order, we got our payout ratio in order. So our debt to EBITDA ratio and our payout ratio for our dividend are well below our long term targets. Next slide. So one of the ways to truly look at how a company is doing is how is it performing versus its peers, so shareholder return. And in 2018, we were the top performing stock among all peers in the Canadian Midstream sector. We were also rewarded with our strong balance sheet and our stable cash flows with the 1st credit investment grade credit rating that Gibson Energy has ever received. So we're excited about that. We hope to get one later in the year or soon or soon after. So one of the things we also did is we looked at our policies and we wanted to drive ownership policy at the employee level. So we increased our ESOP contribution to our employees and we changed how much ownership our vice presidents and higher had to own outright. It means they had it wasn't deemed vested, it's actually had vested. We increased that number. Because at Gibson, we think to think like an owner, you need to be an owner. So when we look at our strategy that we laid out in 2018, we recently had another Investor Day about a month and a half ago. Our strategy remains consistent. We'll continue to leverage and grow our terminals at Hardisty and Edmonton. We'll continue to look for opportunities to grow outside the fence in Canada and we'll continue to grow the platform that we've established in the Permian Basin. Last year, we spent $300,000,000 in capital. This year, we have already sanctioned $225,000,000 and we expect to spend over $250,000,000 before the year's end. All of this is fully funded. We funded that with the asset dispositions and with the outside earnings from our business. So that's so going forward, we will stay fully funded in our capital programs and remain with a strong balance sheet. So we are delivering on all aspects of our strategy. We're focused we are a focused oil infrastructure company with terminals and pipelines with long term stable cash flows. We have clear visibility through 2020 of 10% plus growth on a distributable cash flow per share. We have the platforms in Canada and in the Permian Basin for attractive long term growth and will remain a strong financial position. So I wanted this is our kind of our special treat. This is a visual tour of Hardisty that we put together this winter. And this kind of really depicts just how strong a position we have at Hardisty and how stable these and who Gibson Energy really is. Welcome to the Gibson Hardisty Terminal, which for over 60 years has been a key piece of energy infrastructure in Western Canada. Let's take a few minutes to explore the terminal and take closer look at what goes into building and operating energy infrastructure of this scale. We are currently located above the top of the hill build out, looking west. As we continue to rise, we can see the Gibson Hardisty East Terminal right in front and the Gibson Hardisty Terminal just behind that. Beyond, we can see tanks related to the largest egress pipeline out of Hardisty. Panning to the right to look north, we can see the origin of the 2nd largest egress pipeline, with the 3rd largest egress pipeline starting southwest of our current position. We are now looking at a bird's eye view of the Gibson Hardisty East Terminal. From a height of just over 100 meters, we can start to get an appreciation for the scale of these tanks. As we hover beside 1 of Gibson's 500,000 barrel tanks, what is really striking is the size of each one of these tanks and the overall size of the Hardisty facility. We can really get a sense of the scale of this infrastructure relative to one of Gibson's employees walking in the foreground. Another important factor to note is all the piping within the footprint, as that is the key to the level of service Gibson offers to customers at the terminal. With best in class connectivity to 11 inbound and 8 outbound pipelines, the Gibson Hardisty terminal can access any crude grade in Western Canada and all major pipelines in Hardisty. As crude oil comes into Hardisty on one of the many inbound pipelines, it would then pass through the connection to that pipe and is routed through a series of valve matrices such as this one until it ultimately reaches the intended tank. When it's time for a batch of crude to head to market, it's this backbone that will deliver the crude into the right part of Hardisty. It's also the connectivity that allows Gibson to blend crude oil or NGLs on behalf of customers. Another distinguishing factor that sets Gibson apart from its competition is the company's technical and operational ability. While it might seem that anyone can build and operate a tank, when we see the size, scale and complexity involved in offering customers the flexibility to transport their product through a variety of methods and the planning and execution required to manage throughput of over 1,000,000 barrels per day in a safe, efficient and environmentally responsible manner, the expertise required is clearly evident. So what does 10,000,000 barrels of storage in Hardisty look like? Gibson has a total of 34 tanks at 4 separate terminals. Most of the tanks would be between 300,000,500,000 barrels, with this tank being at the large end of that scale. Each 500,000 barrel tank is approximately 75 meters in diameter and about 30 meters tall, equivalent to a 6 story building and covering the area of 3 professional hockey ice surfaces. We are now looking down at the Gibson Hardisty East Terminal, comprised of 9 tanks with a total capacity of 3,700,000 barrels of storage, as well as 8 kilometers of piping. Going back to the storage analogy, that would contain a professional hockey arena about 4 times. Now looking to the east, we can see the top of the hill. We're going to fly over it in a second. But what is important to notice is the change in elevation. It is hard to see from a map, but it really is at the top of a hill, 9 stories high, and it's something that Gibson needed to consider as an engineer to build out. Given the large increase in elevation from the center of the Hardisty operations, the crew requires pumping in order to be delivered up the hill. We are now above the top of the hill with a really good view of the various phases of tank construction. On the right, we can see Phase 1, which was placed into service earlier this year. Above and to the left of Phase 1, we can see the Phase 2 tanks where the walls are being built and both a floating roof and fixed roof will be placed on top. Just left of those tanks are 2 Phase 3 tanks where civil earthwork has been completed, the foundation has been poured and the construction of the tanks has begun. You might be wondering why it takes 15 to 18 months to build a tank. A large part of that is winter. When the ground is hard, civil work cannot be completed, and it is challenging to pour foundations. To the right of the foundations for the Phase 3 tanks is where the Phase 4 tank will be built, with room available for 2 more tanks, which will fill out the Top of the Hill footprint. Once Top of the Hill is complete, it will be the largest area of development for Gibson to date at 4,600,000 barrels and 10 tanks. With top of the hill nearly built out, where will future tanks be built? As we look south, we can see 80 acres of unused land just south of top of the hill, which connects to an additional 160 acres further south of that. To put it simply, Gibson could more than double its current tankage footprint. Looking to the east from the top of the hill, you can see the HURC rail facility 2 miles in the distance. Through an exclusive partnership with USD Group, Gibson's terminal is the only one at Hardisty that offers customers the ability to move Western Canada crude out by unit train. The facility was recently expanded to accommodate an additional train per day, increase in capacity to 3 unit trains or about 180,000 barrels a day. As we conclude our tour, we have one last look across the landscape at Hardisty, with Gibson right at the center of it. As we have seen, the scale of this infrastructure is very impressive and requires significant technical expertise and operational ability to operate safely and efficiently. Touching about 1 in 4 barrels exported from Western Canada, Gibson's Hardisty terminal Greeley is a key part of Canada's crude oil infrastructure. So my presentation had some forward looking statements. I've talked to Jessica, who's our General Counsel and she said this is as brief as we can get. She's very excited about this language and she wants you to take the time to read it afterwards. So if you can, you can read it afterwards. But now we'll start our official Q and A. So is there any questions? Not everyone jumped up at one time. I'm actually okay answering questions, much better than giving presentations. Jessica, do you have a question? Where is Jessica? I think you do have a question. It's definitely on our radar. We talked about it at the Board meeting yesterday for quite a long time. Sean, why don't you you tell us where we're going with ESG and what give us a quick update of where we're headed? Yes. So ESG and sustainability in general has been very important to our company. About 6 months ago, we actually really dug into what would that look like for our company and how can we fit some of those ESG. And for those of you who don't you've got your environment, you've got your governance and you've got your social. So really kind of think about it from a sustainability point of view and how does that fit into our strategy. So again, we've got a number of different initiatives going on in our organization from an operations perspective, but how can we actually be a sustainable company on a go forward basis, not just operating safely, operational excellence, but also looking at our workforce from a diversity perspective, attracting, retaining folks. So again, over the last 6 months, really dug into that quite a bit. We've got some folks that we're working with to help us understand what good looks like. And we're very excited about where we're going with that and look forward to kind of filling you in a little bit more as we go forward. But work is ongoing and it's important to us. Yes. We think we'll score very highly when it comes to ESG. It's just a matter of disclosing what we're doing. And so we'll be working on that over the next year. Any other questions? My question is just on the U. S. Operations. Is it similar to our Canadian operations? It's similar to the hardest gathering asset, which was called our Provo system. So it is just a gathering system where we gather at central batteries and bring it in to emerging hub called Wink. So Wink is in the Delaware Basin, which is kind of below New Mexico there in that boot of Texas. Being built into Wink are 3 pipelines currently. So the 3 36 inches pipelines that are currently being built into Wink. So they the pipelines and leaving Wink will have over 3,500,000 barrels when they're placed in service. They'll have over 3,500,000 barrels leaving the Wink terminal, the Wink area. And to put that in perspective, that's more than the capacity that leaves Hardisty today. And so our goal is to build out a gathering system there. We've acquired 160 acres there at Wink with the goal of using our expertise at Hardisty to hopefully build out a terminal in the future. But we're going to take this very slowly. We're going to be very disciplined in how we deploy that capital. Thank you for the question. Well, that's all. I will adjourn. Have a great day. Thank you.