The opportunity at Crescent Point is compelling, both in the amount of value that can be unlocked and how readily it can be achieved. A new strategy can be implemented at Crescent Point to create shareholder value over the next 18 months, focusing on maximizing shareholder value through both near and long-term initiatives around which the Cation Nominees are committed to pursue and build consensus.
|1. Elect Highly Qualified and Fully Independent New Board Members||
|2. Undertake a Fulsome Value Maximization Strategy||The reconstituted Board would undertake a 12 to 18 month fulsome evaluation of the Company’s entire operations, governance and management with a view to identifying near-term opportunities for gain while ensuring the long-term sustainability of the business|
|3. Realign the Business||
The Cation Nominees are intent on realizing immediate value for all stakeholders and eradicating the bureaucratic bloat and inefficiencies currently plaguing Crescent Point. Specific measures that may be pursued include:
|4. Redeploy the Efficiencies and Synergies into Ensuring the Sustainability of Crescent Point||
Once the Company realizes the benefit of enhanced cash flows from its realignment initiatives and reduced cost of capital, it will be able to reward shareholders through any, all or a combination of:
|5. Dividend||Initially maintain the existing dividend and review the dividend policy regularly based on the value maximization and realignment efforts outlined above and the cash flow performance of the Company|
The objective of the recommended plan is to maximize shareholder value for the benefit of ALL shareholders:
- Maximize share price
- Ensure the long-term sustainability of the business
- Restore the market’s confidence in Crescent Point
- Re-establish a competitive cost of capital
Cation’s Nominees Bring Experience and a Commitment to Restoring Shareholder Value
The first step to creating value for shareholders is to elect four new directors with the necessary expertise required to implement our strategy and that are aligned with shareholders through significant investment in the Company.
For the benefit of all shareholders, Cation has nominated talented directors to the Board. In addition to a wealth of experience comprised of high profile board work, contested corporate transactions and in-depth public markets governance experience, Cation’s nominees possess:
- Enhanced equity ownership through the direct purchase of Crescent Point shares
- Deep knowledge and experience in the energy and commodities business
- Extensive capital markets expertise required to restore market confidence and optimize capital deployment
- Demonstrated shareholder value maximization experience
Once elected, the Cation Nominees are committed to working with the other directors to implement a plan to review leadership, restore value and change the culture at Crescent Point.
The Cation Nominees to the Board are:
Dallas J. Howe. Mr. Howe is the former Chair of the Board of Potash Corporation of Saskatchewan Inc. He also is a former director and Chair of the Compensation Committee of Viterra Inc., a Canadian agribusiness built on the foundation of Saskatchewan Wheat Pool Inc. and Agricore United. Mr. Howe has served on and chaired Corporate Governance and Nominating, Audit and Compensation committees in the private, public and not-for-profit sectors. Mr. Howe has been the recipient of many achievements including, in 2009, being made an ICD Fellow by the Institute of Corporate Directors. In his role as Chair of Potash Corporation, Mr. Howe was instrumental in thwarting the hostile bid initiated by BHP Billiton. In his position at Viterra, Mr. Howe oversaw the acquisition of Viterra by Glencore International plc.
Herbert C. Pinder. Mr. Pinder brings to the board significant board experience, including corporate governance expertise. Mr. Pinder has served on more than 40 public, private, not-for-profit and crown boards with a focus on the energy sector. Mr. Pinder currently serves as a director of ARC Resources Ltd. where he is the Chair of the Policy and Board Governance Committee and is Chair of the board of directors of Astra Oil Corp. Mr. Pinder also served as a director of Renegade Petroleum Ltd. from April 2013 to March 2014 during which time Renegade successfully repelled a leading energy activist fund in a proxy contest seeking to replace the entire board.
Thomas A. Budd. Mr. Budd is the President of Focus Advisory Corp. and an independent businessman. Mr. Budd has extensive experience providing mergers, acquisitions and financial advice on a significant number of Canadian oil and gas transactions. Most recently, Mr. Budd served as President and Vice Chairman, Head of Investment Banking at GMP Corp. and Griffiths McBurney Canada Corp. from April 1996 until 2008. Mr. Budd also served as a director of Renegade Petroleum Ltd. from April 2013 to March 2014 and was the Chair of Renegade and a member of its special committee during a proxy contest in which Renegade successfully repelled a leading energy activist fund seeking to replace the entire board.
Sandy L. Edmonstone. Mr. Edmonstone is the President of Cation Capital Inc. Mr. Edmonstone was previously Executive Director and Deputy Head of Global Oil & Gas within the Macquarie Group, where he oversaw global energy platform operations. Mr. Edmonstone has advised on a variety of mergers and acquisitions, asset dispositions, restructurings and shareholder-value maximization processes. Mr. Edmonstone has been involved in mandates specifically focused on securityholder rights, ensuring securityholders receive maximum value for their investment. Recently, he led an investor initiative that resulted in approximately 500% additional consideration for securityholders than what the board had unanimously recommended. Mr. Edmonstone is also a graduate of the Institute of Corporate Directors’ Education Program, holding the ICD.D designation.
Biographies for the Cation Nominees can be found under the heading entitled “Matters to be Acted Upon at the Meeting – Election of Directors” on page 34 of this Circular.
Valuation Reset Under Cation's Strategy
Crescent Point currently trades at 2018E EV/EBITDA of 4.3x, which is at the bottom of the range of its compensation peer group. If Crescent Point traded at the peer group mean of 6.3x 2018E EV/EBITDA, it would be an increase of $4.1 billion in market capitalization. Put another way, Crescent Point would have a share price of $16.59, an 81% premium to the close price of $9.17 on April 6, 2018.
If our strategy yielded the results that should be expected of Crescent Point, investor sentiment would improve and potentially increase the Company’s trading multiple. As highlighted in the table below, if the Company’s EV/EBITDA multiple were to move up to the compensation peer group average, investors would see an increase in the share price of 81% from the April 6, 2018 closing price to $16.59 per share. More conservatively, if the multiple expands 1.0 times the share price would be $12.95 per share an increase of 41.2%
At a time in Crescent Point’s history it commanded premium trading multiples with gave the Company one of the best costs of capital in the business. Cation believes that the Company has the asset base to achieve this premium valuation once again by implementing Cation's strategy and taking all necessary steps to regain the trust of investors.