AGM 2018

May 9, 2018

My name is Jim Espey. I am the Chairman of Gibson. I want to welcome you to the Annual General Meeting. We will start today with a safety moment from Dan, our General Manager of the Environment, Health and Safety. Dan? Thank you, Jim. First, a little bit of housekeeping. With regards to fire alarms for our room and our facility within the Westin here, an initial fire alarm will ring at about 90 rings per minute. We won't evacuate at that point. We'll watch and listen for directions from a Weston associate. An evacuation is needed. We'll ring at about 120 rings per minute and a Wesson associate will meet us in the room and escort us out. The emergency muster point is out these doors to the to your south end over here. We will go down the stairs and the emergency evacuation muster point is outside the Starbucks. Washrooms are located at the end of the hall, turn right and there's washrooms there. Those are the only washrooms on the floor. Safety moment. At Gibson, we strive to bring safety in all that we do and create a culture that delivers excellent performance. Many of you traveled here today from a long ways away. You can ride by various means coming downtown this time of day and this time of year can create challenges. We thank you for arriving safely. We thought a safety moment would give us an opportunity to ensure you also get home safe. A couple of do's and don'ts when driving and commuting here in the city or wherever you're from, we do ask that you always be self aware, understand your tendencies and limitations and just as important, understand the tendencies and limitations of others. Do plan your route, method of transport and let people know your plan, journey management. Do always wear your seatbelt, simple but true. Some don'ts, don't drive when you're tired or fatigued, find an alternate plan. Don't text while driving, it seems pretty obvious, but many people still do, and don't speak. Those are basically some of our life saving rules. Thank you. Thank Thank you, Daniel. Sorry, sorry, sorry. Okay. Just before I start the meeting, I've got a couple of things that I'd like to mention. Number 1, I want to thank the Board of Directors for their support in the last year. There's been a lot of challenges and I really appreciate your support and how hard you've worked. So thank you very much. I'd also like to thank Steve Spalding for our 1st year together. It's probably seemed to you like more than a year, but you've done a great job, well done and thank you very much. There are a lot of important people here today, but there are 2 people that I want to stand up. I would like to stand up Tammy Spaulding and Wendy Bloom, please stand up. Welcome to the AGM. Thank you very much for coming. Clayton Whitas, as you know, didn't stand for reelection and I want to take this time to thank Clayton for his contributions, too numerous to mention. Clayton has been a personal mentor of mine and we really, really appreciate it. But we are delighted to be voting today on John Festival. John is a veteran of the oil and gas business. We are very lucky to have him and welcome aboard John. After my after the AGM, Steve will make a presentation and he is going to tell us how we are all going to get rich on our Gibson Holdings and I am not kidding. I have also asked the people making motions and seconders in addition to saying their name to tell us where they work in the firm and where they've added value in the last period of time for the shareholders, because we are a shareholder focused organization and we're here because we work for the shareholders. So without further ado, I'll get on with the least exciting part of the meeting. I will now introduce the directors and officers. First the directors, Doug Bloom, Jim Cleary, Marshall McCrae, Mary Ellen Peters and our new Director, John Fenton. Joining us from Senior Executives, Steve Spalding, Director, President and Chief Executive Officer Sean Brown, Chief Financial Officer George Staneker, Chief Commercial Officer Sean Wilson, Chief Administrative Officer and Mike Lindsay is Operations and Engineering and Mike is in the midst of doing his MBA. So Mike is not here today. In conducting the meeting, shareholders have been asked to move the proposals and will be called upon. However, this is not to discourage other individuals from making motions or asking questions. Should any shareholder or proxy holder wish to speak on a matter, please raise your hand and be approached by one of the individuals with a microphone set up in the aisle, so that you may be heard on our webcast. Unless your comments relate to the motions being considered, please hold your comments until after the formal meeting. The Annual General Meeting will now come to order. I appoint Sean Wilson to act as Secretary of the meeting. I appoint Jacqueline Fisher and Erica Rowe of Computershare Trust Company to act as scrutineers. I have received a declaration prepared by Computershare indicating that the notice of the meeting, information circular and the form of proxy were mailed or delivered on April 3, 2018 to shareholders of record as of March 21, 2018. With the consent, reading of the notice of meeting will be dispensed with. The secretary has requested to keep a copy of the notice of meeting and computer shares declaration with the minutes. The scrutineers have provided me with the attendance report for the meeting and I declare the requisite quorum of shareholders is present. The secretary is requested to keep the scrutineers report with the minutes. I now declare that this meeting has been properly called and is duly constituted for the transaction of business. As the first matter of business, I table the financial statements for the year ended December 31, 2017 with the auditor's report. With consent, the reading of such financial statements and auditor's report will be dispensed with. The shareholders will be asked to approve the financial statements tabled. However, Sean Brown will be available to answer any questions concerning the financial statements you may have. Shareholders who have not yet voted their common shares by proxy are asked to signify their voting by raising their hand. The votes of the shareholders who have been deposit proxies in favor of management representatives will be cast in accordance with the instructions herein or in the absence of such instructions for the motion. The next item of business is the election of directors. I now declare the meeting open for nominations. Mr. Chairman, my name is Jessica Ferguson and I am the General Manager of Legal of Gibson Energy. I add shareholder value by providing strategic legal and business advice to Gibson stakeholders to support win win solutions for our customers, while maximizing the value we generate from our corporate assets and opportunities. I nominate James Esty, Douglas Blum, James Cleary, John Festival, Marshall McCrae, Mary Ellen Peters and Steve Spaulding as Directors of Gibson Energy Inc. To serve until the next annual meeting of shareholders or until their No further nominations were made No further nominations were made in accordance with bylaw number 3 and nominations are closed. May I now have a nomination motion on the election of directors? Mr. Chairman, my name is Kelly Houchljague and I am the contract records management specialist at Gibson Energy. I add shareholder value by assisting with the implementation of plans and processes to ensure Gibson is compliant with legal and regulatory compliance requirements around management of its information. I move that each of the individual nominees presented at this meeting be elected as Directors of Gibson Energy Inc. To serve until the next annual meeting of shareholders or until their successors are duly elected or appointed. Thank you very much, Kelly. The motion is now open for discussion. If there is no further discussion, I'll ask all those in favor of James Esty, for Director, to raise their hand. Make sure you raise your hand. You remember, I am on the compensation committee too. I am probably not supposed to say that, am I? Abstentions, if any, I will close my eyes. I will ask all those in favor of Doug Blum, for Director, to raise their hand. Abstentions, if any. I will ask all those in favor of Jim Cleary for Director to raise their hand, abstentions if any. I will ask all those in favor of John Festel for Director to raise their hand, abstentions, if any. I will ask all those in favor of Marshall McCrae for Director to raise their hand, abstentions if any. I'll ask all those in favor of Mary Ellen Peters, for Director, to raise their hand, abstentions, if any. I'll ask all those in favor of Steve Spalding, for Director, to raise their hand. Abstentions, if any? I declare the resolution carried and Mr. Esty, Mr. Bloom, Mr. Cleary, Mr. Festival, Mr. McCrae, Mrs. Peters, Mr. Spaulding to be duly elected directors to serve until the next annual meeting or until their successors are duly elected or appointed. The next side of my business is the appointment of auditors for the ensuing year. May I please have a nomination for the appointment of auditors? Mr. Chairman, my name is Doug Atkins and I am Vice President Terminals with Gibson Energy. I add shareholder value through maximizing revenue and future growth primarily with Edmonton and Hardisty Terminals as well as across Canada. I move that PricewaterhouseCoopers LLP auditors of Gibson Energy Inc. To hold office until the next annual meeting of shareholders at such remuneration as maybe fixed by the Board of Directors of Gibson Energy Inc. Thank you very much. Mr. Chairman, my name is Leslie McMillan and I am the Stakeholder Relations Advisor of Gibson Energy. I add shareholder value by developing and implementing public consultation initiatives to support our growth projects. I second the motion. Thank you, Leslie. Is there any discussion on the motion? All in favor, please signify by raising your hand. Abstentions, if any. I declare the resolution carried. The next side of business is the advisory vote on our approach to executive compensation. As this is an advisory vote, the results will not be binding on the Board of Directors. May I please have a motion on the advisory resolution? Mr. Chairman, my name is Ricardo Silvestro. I am the Manager, Human Resources Services and Payroll at Gibson Energy. In my role, I add shareholder value by ensuring the effective and efficient delivery of HR services and programs, adhering to good governance practices and compliance to support and execute the corporate strategy. And I move that the shareholders accept the approach to executive compensation as disclosed in the meeting materials. Thank you very much. Mr. Chairman, my name is Michelle Jeong and I am the supervisor of payroll of Gibson Energy. I add shareholder value by ensuring the company's employees are paid accurately, on time and in compliance with legislation requirements. I second the motion. Thank you very much. Is there any discussion on the motion? All in favor of the motion, please signify by raising their hand, abstentions, if any. I declare the motion carried. Is there any further business to be brought to the meeting? As there is no further business, may I please have a motion to terminate the meeting? Mr. Chairman, my name is Chad Friesen. I'm a manager in the Corporate Planning Group with Gibson Energy. I add shareholder value by developing the long term forecast, monitoring it and ensuring it adheres with the strategic plan. And you're going to do what you were told to do. So why am I talking, right? You can take the boy out of Saskatchewan, but you can't take Saskatchewan out of the boy. This is the 2nd time I've employed this guy. You would have thought I'd learned from the previous night. I move that the meeting be terminated. Thank you, Chad. Mr. Chairman, my name is Omar Saif. I'm GM of Ops Services for Gibson Energy. I add shareholder value by overseeing the integrity management of our tanks, vessels and pipes to improve customer benefit by safely operating our assets. And I move to second the motion. Thank you very, very much. All those in favor of the motion, please signify by raising your hand. I declare the motion carried and the formal part of the business meeting terminated. I just want to thank those people who came up. I only gave them a little time notice and I thought you all did really well and it shows how focused we are on creating value for our shareholders. So, thank you very, very much. Now I will turn it over to Steve, who I had mentioned earlier is going to make us rich in our ownership of Gibson. Thank you, Jim. Good morning, everyone, and thank you for joining us today at our 2018 Annual General Meeting. As our Chairman mentioned, with the formal portion of today's meeting complete, we wanted to take the opportunity to speak to the meaningful distance we have traveled in the last year and provide color on some of our focus areas in the coming year. I joined Gibson Energy in June of last year, shortly after the AGM, having spent the majority of my career in midstream leadership, commercial and operations. I'm pleased to join a company with a long history of building and operating an asset base that is integral to the oil industry in Canada. Today, Gibson touches 1 in 4 barrels produced in Canada, moving over 1,000,000 barrels a day through our Hardisty terminal alone. As a key part of the Canadian energy industry, it's vital that we remain steadfast, committed to being a strong corporate citizen in terms of protecting the environment, maintaining a focus on safety and being a partner to the communities we operate. When we look at the safety metrics over the past few years, we have continued to improve in both total recordable injury frequency or TRIF, lost time incident frequencies, TIF or LTIF, LTIF, and comparing our TRIF performance to the industry averages, we believe we are performing well, but we are focused on continual improvement in safety. We are committed to being a strong corporate citizen through our community investment programs. In 2017, Gibson Energy and its employees donated over $500,000 which we believe is meaningful for a company of our size. Over half these donations are targeted towards the causes that support community based organizations and first responders to increase the overall safety of the communities we operate. We also believe that if communities thrive, so do the businesses and the residences and the residents. For this reason, we also support programs and initiatives that bring people together, address local needs and build on the unique strengths of each community. And in addition to ensuring we remain good corporate citizens, I can tell you that this Board and management team is committed to maintaining and growing the value of Gibson Energy. Over the last year, we reviewed our strategies relative to our strengths and where we see opportunities in the future. And more importantly, we have taken meaningful actions in putting that strategy into action. As we outlined in our Investor Day in January, we're going to accelerate the shift in the business to an oil infrastructure company with high quality cash flows. We also want to have a business that delivers attractive growth profile to underpin a secure and growing dividend. What hasn't changed is the appreciation that our terminals, particularly Hardisty, are the heart of this company. These are world class infrastructure assets. We will continue leveraging our strong competitive position to drive growth in new tankage. We will also grow beyond tankage. Within the fence line of our terminals, we can add additional infrastructure on behalf of our customers. Usually these are smaller projects in the $5,000,000 to $10,000,000 range, but these add up and typically contribute 20 dollars to $30,000,000 a year in investment opportunities. Outside the fence, in Canada, we recently announced the $50,000,000 Viking pipeline extension, which gives us a strong position on the Canadian side of one of the most economic oil plays in Canada. We believe this is a very attractive opportunity for us and our producers. It also demonstrates that the new Gibson is competitive in the pipeline space and we fully expect we will secure other gathering system opportunities in the future in Canada. In the U. S, our focus is the Permian Basin and the Oklahoma SCOOPSTACK. We will use our injection stations and trucking capabilities as enablers to secure additional infrastructure investment opportunities, again primarily focused on gathering systems like the Viking gathering system I just spoke of in Canada. In all, we are well positioned to meet our 10% per year growth target. With the sanction of the 3 additional tanks at Hardisty in September of last year, as well as the sanction of the Viking pipeline this February, we have a line of sight of growing the target of growth target through 2019. Beyond 2019, we expect to grow our tanks 1 to 2 tanks per year, which translate to that mid single digit growth. It's through a mix of these incremental infrastructure opportunities I just spoke about, like Viking, other gathering system opportunities, building in and around our terminals, the U. S. Infrastructure and gathering systems, we believe that double digit growth is well in sight in the loan in our long term future. Also, it's important that we maintain a strong balance sheet and pay a dividend that is underpinned with high quality cash flows. Our growth capital through the end of 2019 is fully funded by our non core divestitures. And when these projects come into service, the incremental cash flows will push our payout ratios beyond that 70% to 80% target range. We will maintain a prudent capital structure and we'll be well positioned to fund future growth from internal cash flows. We are very excited about the direction the company is headed and the complete transformation of our business. Perhaps the most, we are delivering on this strategy and we will continue to execute. In 2017, we announced the sale of industrial propane, which was our largest non core business. We then moved to put the U. S. Environmental Services business into the market and we announced its sale earlier this year. We are also very close to completing the transaction of our non core U. S. Trucking business in the U. S. And injection stations in the Rockies, South Texas, East Texas, Mississippi and Louisiana. At that, we should hope we hope to close by the end of this month on all these transactions. Only to focus on a suite of assets in the Permian Basin and in the SCOOPSTACK. On this side of the border, we are making excellent progress our divestitures. We expect to be in position to announce the sale of the NGL wholesale business in the next couple of months and expect to have a Canadian trucking business in the market by mid year as well. We are also diligently pursuing to prepare for the non core segments of our Canadian Environmental Services business for sale. As we talked about at the Investor Day, our intention was to divest these non core businesses in a timely and structured manner and we believe we are executing. There's lots of room there's lots of work left to do, but we certainly see the potential to close these non core divestitures ahead of initial schedule and realized proceeds above our initial target range. It's important to note that we continue to grow and deliver on our core business. We've made significant changes throughout the organization, particularly in the leadership levels in order to drive a commercial focus and remove any silos. As part of the organizational and cultural changes we're trying to drive, we have updated our corporate values to better reflect the type of organization we look to build. Clearly, safety and environment is the forefront in how we operate. Also to be successful with the business, we need to have the right people and we need to empower them to succeed. We also need to have an execution and commercial focus in everything we do and always with the highest integrity. We are seeing the benefits of these changes. On the business development side, there has been a pronounced increase in the number of opportunities both north and south of the border. The Viking pipeline expansion was a big win for us and we are very optimistic about the opportunity the team has the team the opportunities the team are working on. We also see the benefits of the increased integration within our wholesale group. We were able to take advantage of a supported macro environment in the Q1 to post strong quarter from wholesale, but our ability to capitalize on these opportunities is also in part a result of how well the team working together. I will also mention our cost focus. With the changes we have made, we have become more cost focused. We believe this is a real area of opportunity for us. And as you have read in the proxy materials, our ability to realize those savings is going to be a meaningful part of our compensation. In summary, we believe that in the last year, we have made a significant progress affecting a dramatic transformation of our business. Our momentum is building and we hear the market loud and clear. We need to execute. When we meet next time this when we meet here next year, we expect to have completed all of our non core divestitures and sanctioned our next phase of growth, both tankage and other opportunities, both north and south of the border. And as we do these things, we expect the market will need to recognize the changes we have made in transforming Gibson Energy into one of the premier companies in the Canadian Energy Infrastructure space. Thank you for joining us at our AGM and thank you for your continued support in Gibson Energy. Moving to questions, I want to let everyone know that the directors and management will also be available following the formal Q and A. If you would like to ask any questions do I ask the questions or is there any questions? No questions. I like questions. I'm better at questions. Yes. No problem. So the question was, can we talk about payout ratios in general? I'm not sure specifically the question. I mean, our payout ratio last year was certainly elevated. I think we peaked out at about 138%. Clearly, anything above 100% is not what you'd like. At Investor Day, we came out with a longer term target of targeting 70%, 80% payout ratio. Within that deck, we had a slide that showed us being quite comfortable that we'd be below 100% when we exited this year. As we move through Q1 and as we announced this morning, we're currently at 92%. So trending in a positive direction and did in our prepared remarks this morning come out and said that we expected the payout ratio for the by the end of the year to be in the 80% to 100% range, with the key variable there being the performance of our wholesale business. So continue to feel our long term target of 78% is imminently achievable. A key distinction is even if we were at that 100% as we exit this year with the proceeds we have from the non core asset sales we're doing, we are fully funded through 20 eighteen-twenty 19. And when those dispositions are done, we would expect our payout ratio to die down to the target range very quickly. So I'm not sure if that answers your question. Any other question? Yes. I'd just speak a little about our real focus really in the Permian Basin and in the SCOOPSTACK. Within the Permian Basin, you have 2 large basins there. You have the Midland Basin and the Delaware Basin. We have a gathering system in the Delaware Basin called the Piote and we have numerous injection stations, trucking injection stations to inject crude oil into the pipelines that are transporting the product into Cushing and into the Houston Basin. So we look to actually put that pilot gathering system back into service. It was taken out of service several years ago. We will place it back in service in the Q3. And we look to really build in around that Pyote system. Pyote is on the eastern edge of the Delaware Basin near Wink. Wink is a very large hub in the Delaware Basin. We feel very confident that we will be able to continue to expand that gathering system in that region. Trucking business currently in the Permian is very hot. We've seen margins in the trucking business, triple in the last year. So and we've seen record loads for us in the Permian Basin. We continue to move assets in the basin, which are trailers and trucks. Our biggest issue with growing the Permian Basin right now is getting employees. It's a very difficult place to recruit and hold employees. Sometimes, I'm very hard to understand. I'm just wondering that I've seen Enbridge pipeline from Hardisty was to cancel because Minnesota and government, I was just wondering, is your main terminal in Hardisty is Enbridge was building the pipeline. Are you anyway connected with Enbridge to go ahead with that pipeline? Line 3 expansion that goes that Enbridge is expanding and how are we connected to Line 3, is that your question? We're connected really when you look at Hardisty and how Hardisty acts, Hardisty is a pooling point for all the Canadian production before it launches down into PADD II and PADD III in the United States. Line 3 expansion is a very important expansion that Enbridge is moving forward with. I believe that it will move forward with. We currently move it moves MSW mostly, so it's mostly a light sweet line. It's not been totally full with MSW. They've been moving some heavies on it lately, which have helped reduce that WCS, WTI spread. We do need that pipeline in place to really support the continued growth of Canadian production. That and the TMI and KMI's Trans Mountain pipeline are extremely important pipelines along with Keystone XL. These are very important for the long term viability of our Canadian oil business. Any other questions? Well, thank you for today and I truly appreciate you coming. Again, the management team and the Board of Directors are here to answer any questions afterwards that you may have. We do have plenty of cookies left. So please have a cookie too on your way out. Thank you.