Crescent Point investors seek signs of new direction after CEO shakeup

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Scott Saxberg is leaving Crescent Point.Postmedia file photo

Scott Saxberg, who along with others formed an oil and gas producer that became Crescent Point Energy, ended his 17-year association with the company Tuesday. Saxberg stepped down as chief executive and was replaced on an interim basis by Craig Bryksa, a 12-year company veteran and a former vice-president of engineering.

“We built a company from scratch to over 180,000 boe/d and in doing so, we have rewarded our shareholders with $7.5 billion in dividends. After 15 years as the CEO, its time for me to move on,” said Saxberg.

The leadership change, made about a month after the company fended off a proxy challenge by Cation Capital — an activist that sought four board seats — met with a favourable market response. On a day during which the oil price and the overall market were lower, Crescent Point bucked the trend and rose by $0.29 to close at $10.27. Its volume on the TSX and the NYSE was about 25 per cent higher than normal.

Now all eyes will presumably be on the interim CEO, to see if he does things differently.

Despite the recent vote, shareholders have been clamouring for a return of the days when Crescent Point was one of the darlings of the oil patch. Of late, it has traded at a valuation discount to its peers.

That message may be getting through. On Tuesday, it noted it will “prioritize key value drivers, including continuing improvement of the balance sheet, capital allocation, cost reductions, strong rates of return on capital employed and free cash flow generation.” Those goals are not that different from what the dissidents said in the leadup to the May 4 vote.

In a release Tuesday, Sandy Edmonstone, Cation’s founder, said: “This is a clear victory for all shareholders. While eerily similar to the issues Cation pushed to address, the company’s focus on capital allocation, cost reduction and returns on capital employed is a step in the right direction. With Scott’s departure, we would also expect some semblance of independent leadership to hold management accountable in realizing these goals.”

Indeed, observers are focused on the pace of change. Cody Kwong, an analyst at GMPFirstEnergy said “it would appear that the company is taking a new direction and change is afoot,” adding the “first step toward significant change” could involve “changing the corporate/capital structure, asset prioritization and capital allocations.”

But National Bank’s Travis Wood sees challenges ahead. “Meaningful value creation from conventional, Western Canadian Sedimentary Basin assets is a difficult task and we believe that quantified change at the corporate level will take time to manifest itself into value capture,” he said.

Wood termed the change “an interesting step with respect to addressing some of the strategic concerns around direction.” But he wants to see “a specific, measurable agenda under the new leadership to help line-of-sight to reaching the higher-level goals.”

The exact nature of Saxberg’s departure was not made clear, though from the way the release was written it seems the decision was mutual. Peter Bannister, the chairman, was not available for comment.

But the term used to describe Saxberg’s exit has different financial implications. In the circular prepared for the 2018 meeting, a resignation would have generated a zero payout; a resignation with “good reason” (and also death) would have come with a $13.476 million payout; a termination without cause would have come with a $17.195 million payout while a double-trigger change of control would have meant a $19.689 million payment. All figures relate to Dec. 31, 2017.

Financial Post

bcritchley@postmedia.com

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