AGM 2022

Apr 19, 2022

Ladies and gentlemen, welcome to the annual shareholders meeting for PrairieSky Royalty Ltd. Please note the meeting will be recorded. I would like to introduce Mr. Jim Estey, Chairman of the company. Mr. Estey, the floor is yours. Thank you very much. Welcome to the annual shareholder meeting for PrairieSky Royalty. My name is Jim Estey, and I am Chairman of the Board. In accordance with the bylaws of the company, 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 the formal business, followed by a brief corporate presentation and remarks by PrairieSky Royalty's CEO, Andrew Phillips. Before we begin, I would like to welcome the other members of the board who are online with us today. Jane Gavan, Margaret McKenzie, Bob Rivoli, Myron Stadnyk, Sheldon Steeves, Grant Zawalsky, our newest member. We would like to welcome Leanne Bellegarde, and Andrew Phillips. Officers online with us today are Andrew Phillips, President and Chief Executive Officer, Cam Proctor, Chief Operating Officer, and Pam Kazeil, Chief Financial Officer. In order to deal with the formal portion of the meeting as effectively as possible, we have prearranged with designated shareholders to move and second motions. This is not intended to discourage any questions by registered shareholders or duly appointed proxy holders on any motion. Only registered shareholders and duly appointed proxy holders of record at the close of business on February 28th, 2022 are entitled to vote at this meeting. If you have already sent in your proxy, your vote has already been counted, and you do not need to vote at this meeting. Questions can be submitted by registered shareholders and duly appointed proxy holders electronically on the virtual platform by following the instructions on the platform. The company's corporate secretary will assist me in reviewing and responding to any questions. Questions will be answered in relation to each item of business in the order that they are received. Cam Proctor will act as secretary of the meeting, and Patricia Shelby of TSX Trust will act as 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. The reading of the notice of the meeting will be dispensed with. In accordance with the bylaws of the company, business may be transacted at this meeting if not less than two persons are present or represented by proxy, not less than 25% of the shares entitled to vote at the meeting. The scrutineer's report has been received, and it shows that a quorum is present. I now declare that the meeting is called and properly constituted for the transaction of business. To my knowledge, each resolution considered today will be passed by proxies deposited in advance of the meeting. We will conduct voting by electronic ballot on all matters. Voting will be open for all resolutions at the same time, which will allow you to choose to vote on each resolution immediately or wait until the conclusion of the discussion on each resolution prior to casting your vote. To vote, simply click for, or withhold, or against as applicable. Once you have submitted your vote, a confirmation page will appear confirming your vote has been received. There will be an opportunity to ask questions on each resolution in turn. Once discussion on all items of business has concluded, voting will be closed on all resolutions. The results will be tallied by the scrutineer and will be posted on SEDAR and our website following the meeting. The polls are now open on all resolutions. The first item of business is the presentation of the audited financial statements for the year ended December 31st, 2021. A copy of those materials have been mailed to each registered shareholder and are available on our website and on SEDAR. The next item of business is the election of directors. As noted in the company's information circular, our bylaws contain advance notice provision, which provides a procedure to be followed for the nomination of directors at this meeting of shareholders of the company. In accordance with the advance notice provisions, the only individuals entitled to be nominated as directors at this meeting are the nine persons named as nominees in the company's information circular. James Estey, Leanne Bellegarde, Jane Gavan, Margaret McKenzie, Andrew Phillips, Robert Rivoli, Myron Stadnyk, Sheldon Steeves, and Grant Zawalsky are hereby nominated as directors of the company to hold office until the next annual election of directors or their successors are elected or appointed, subject to the provisions of the Business Corporations Act and the bylaws of the company. In accordance with the majority voting policy, the elections of directors will be conducted by allowing registered shareholders and proxy holders to electronically register votes for or to be withheld for each individual director. Mr. Secretary, have any questions been received on this motion? There's no questions on this motion, Mr. Chair. Thank you, Cam. Please vote for each individual director now if you have not already done so. The next item of business is the appointment of auditors. I move that KPMG LLP Chartered Professional Accountants be appointed auditors of the company until the next annual meeting or until their successors are appointed, and that their remuneration as such be fixed by the board of directors. I second the motion. Thank you. Mr. Secretary, have any questions been received on this motion? There are no questions on this motion. Thank you, Cam. Please vote on this motion now if you have not already done so. The next item of business is the advisory vote on executive compensation, which is described in detail in the information circular. I move that the ordinary resolution in respect of the advisory vote on executive compensation, as described in detail in the information circular relating to the meeting, be approved. I second the motion. Thank you, Lisa. Mr. Secretary, have any questions been received on this motion? There are no questions. Thank you. Please vote on this motion now if you have not already done so. As there are no further motions, voting on all motions is now closed. We will pause for a moment while the results are tabulated. We're good tabulators. I've been advised by the scrutineer that the results are more than 50% in favor of each director and in accordance with legal requirements and our majority voting policy, those nominated are duly elected as directors. I have also been advised by scrutineers that all other motions have been carried. That concludes the formal portion of the meeting, and I direct the scrutineer's report be kept by the secretary with the minutes of the meeting. The chair would entertain a motion that the formal portion of the meeting be terminated. I move that the meeting be terminated. I second the motion. Please cast your vote now. The motion to terminate is carried. I declare the meeting terminated, and we will now move to a brief presentation by Andrew Phillips, which should be available through our virtual portal. Andrew? Thank you, Jim. First slide, please. PrairieSky is Canada's largest royalty owner with over 18 million royalty acres across the Western Canadian Sedimentary Basin, including 3 million acres acquired last year, well below intrinsic value. We have returned CAD 1.5 billion to shareholders, all out of free cash flow, and our current dividend of CAD 0.48 per share is a sub-30% payout ratio, the lowest in the entire sector. This low payout ratio, combined with organic growth across the portfolio, sets the stage for the strongest dividend growth rates in the energy and materials sector. Next page, please. The transformation of PrairieSky over the last 8 years is highlighted in this slide. By utilizing our strong financial position and discipline, PrairieSky acquired all of the highest quality royalty acres in Canada during downturns on an accretive basis. The royalty acreage you own today as a shareholder is represented on the right-hand side of the slide. Next slide, please. As shareholders ourselves, we have always focused on improving the per-share metrics of our business. Our production per share inflected higher in late 2020 and continues to trend higher. Our acreage per share is up over 90% since our IPO, and more importantly, the quality and liquids content of the acres has improved dramatically. Next slide, please. A very strong recovery in activity, both in leasing and drilling, has been observed broadly across PrairieSky lands. The strong activity across our royalty lands has resulted in organic growth rates in our oil royalty portfolio. Next slide, please. The Clearwater has grown to become the largest conventional oil play in Western Canada. PrairieSky is by far and away the largest acreage owner. This play will make up 3,000-5,000 barrels of net royalty oil within the next 10 years, all at no additional cost to our owners. The benefit of being the first mover into the most economic play in North America. Next slide, please. Year upon year, reserves in our business are replaced by our industry partners. 2021 year-end reserves saw strong growth due to acquisitions and organic drilling. Because PSK does not need to spend to keep its reserves flat, the majority of capital generated from the business can be returned to shareholders. Next slide, please. As capital costs per well continue to increase with demand for services, PrairieSky owners remain insulated as we are not subject to any cost of drilling, completing, or tying in wells. Next slide, please. Our industry-low payout ratio in recent years has allowed us to make accretive acquisitions without outsized issuance of equity. This will set up strong real returns to shareholders in the coming 3, 5, and 10-year periods. Next slide, please. The after-tax and after G&A cash flows of the business over the next 10 years are staggering. The main differentiating factor between PrairieSky and its peers is that substantially all of this cash can go to shareholders in returns while still maintaining the same great business every decade. Next slide, please. PrairieSky is one of the highest-ranked companies on ESG globally when compared to both our peers and all industries. This is an accomplishment we are proud of and strive for continuous improvement on this important category. Next slide, please. The leadership and board of directors would like to thank all our shareholders for their continued support and our employees for their excellent execution in a very busy three years. Thank you, and have a great day and appreciate everyone attending the annual general meeting of shareholders for PrairieSky Royalty. Ladies and gentlemen, as the meeting is now concluded, you may now disconnect.