‘Their impatience is at an end’: Crescent Point shareholders want change at the top, poll suggests


Friday is showdown day between the activists who want board and management change at Crescent Point Energy and those who argue the current group needs more time.

The showdown also marks the first time in recent memory shareholders of a major oil and gas company have been given a choice of directors between what the company wants and what the dissident group wants (it is pushing for four of its nominees to be voted to the board). Shareholders have until Wednesday at 10 a.m. MT to make their choice with the meeting occurring the day after the company reports its first quarter results.

Against the background of generating returns that have lagged its peers (in absolute numbers the share price is below what it was in 2001), executives being too well-compensated (hence its poor record on say-on-pay matters), the company losing its premium multiple, its costs being higher than its peers, and its considerable debt and too frequent equity issues, shareholders have been given a smorgasbord of choices by the proxy advisory firms.

Proxy advisory firm ISS said the dissident “has made a reasonably compelling case for some change to the incumbent board to facilitate improvements to capital allocation decisions, to enhance profitability and to ensure appropriate alignment of executive compensation.” It recommended shareholders vote for two of its four nominees. The four own more stock than the nine non-management nominees.

After looking at the same fundamentals, institutional investor Glass Lewis & Co. said none of the four was worth voting for.

A third report, this one from consulting firm Brendan Wood International, was very supportive of the dissident. As part of its regular shareholder polling, the firm’s latest update was released Friday night.

On four key questions — Are you in favour of replacing the CEO; Are you in favour of revamping strategy; Are you in favour of a senior management upgrade; and Are you in favour of replacing board majority — more than 80 per cent of shareholders were either very positive or positive. The results varied from 83 per cent (to the question about a senior management upgrade) to 90 per cent (strategy revamp) to 91 per cent (replacing the CEO) to 93 per cent (replacing a majority of the board.)

In an interview Monday, Brendan Wood said after building a “sizable business,” Crescent Point has disappointed its shareholders over the past couple of years relative to its peers. “Shareholders have been focused on the recent period where the disparity between Crescent Point and the peer group is so significant that a lot regretted being in the stock and felt somewhat trapped,” added Wood, noting he is not getting paid by either side for his work.

When the company does nothing dramatic, a void is created — for instance less than half the shares were voted at the 2017 annual meeting — and that sets the stage for activism. “Shareholders are waiting for the CEO and the board to turn things around and that’s been a long time coming,” said Wood.

“The run of things has not worked for them. Shareholders are impatient and feel their impatience is at an end,” he said. In such an environment, made worse because “Crescent Point has “no succession plan,” looking at a new coach and a new general manager,” is “very normal” in business.

In this case, the dissident — backed by two seasoned executives and two investment bankers — opted for incremental activism rather than bringing in a new management team. “The history of it is very successful,” he said.

For Wood, the bottom line is for Crescent Point to embrace the dissident and argues that an “elegant solution” would be to take the four nominees on as directors. “If it falls flat, the recent increase in the share price (because of the ‘smell of a turnaround,’) may be affected.”

Financial Post

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