Cation to urge removal of Crescent board chair in new letter – sources

Cation Capital will urge Crescent Point Energy [TSX: CPG] to replace its chairman of the board, and reiterate a call to appoint a permanent CEO, in a letter to the company’s shareholders that could be issued as soon as today, according to two people familiar with the situation.

Cation will point out that a change of culture at the Calgary-based oil & gas producer will not be possible if board chair Peter Bannister and interim CEO Craig Bryksa retain their roles, the people said. They are part of the old leadership that is responsible for several years of value destruction for shareholders, they said.

Bannister has been on the board of Crescent and its predecessor since 2003 while Bryksa has held senior management roles with the company since 2006, based on their respective bios.

The letter will identify two candidates that are ready to fill the board chair and CEO positions and have discussed the opportunity with Cation, the people said. Both are highly qualified North American oil & gas operators, who were not involved in the activist’s previous campaign, the people said.

Crescent and Cation have been at odds since April, when the latter nominated a slate of four board candidates and demanded changes ranging from the appointment of a new CEO, to capital allocation fixes, as well as a board refresh.

The activist ultimately lost the fight as all the company’s incumbents were re-elected at the AGM in early May. But the vote showed significant shareholders discontent, forcing the company to respond.

Cation owned 0.3% of the CAD 4.35bn market cap group going into the AGM but two of its four nominees received support from over 20% of shares outstanding.

In late May, the company launched the search for a new CEO after Scott Saxberg resigned, and promoted Bryksa to fill his shoes temporarily. The company also introduced other changes at the senior management level, kicked-off a business review and discontinued minor operations, among other initiatives. No changes were made at the board level.

These actions failed to lift the company’s stock, which rose as high as CAD 11.60 per share during the proxy contest but fell back below CAD 10 per share in the summer and is today trading at around CAD 8 per share.

Crescent Point has been paying a CAD 0.03 monthly dividend since April 2016, when it was cut from CAD 0.10. That translates into a 4.5% yield at current prices.

Cation issued a letter in late July after the company said it was still looking for its new chief executive when it released 2Q earnings. The missive stressed the continued frustration of the activist for the lack of meaningful progress and said it continued to buy shares after the AGM.

Aside from lining up replacements for the board chair and CEO roles, the upcoming letter will have Cation identify the quantum of assets Crescent should put on the block to improve its debt/cash flow ratio, the people said. It will also express the intention of having a town hall call with shareholders to share concerns and ideas, the people said.

Cation will say that it expects the company to engage in substantial change to its leadership and come up with a credible plan in a timely fashion, the people said. The activist will also warn in the letter that, if the company fails to deliver or the plan lands poorly with the market, an outright sale of the company will become the only available option in its view, the people said.

Cation intended to discuss the issues outlined in the new letter with the company in private but was denied the opportunity of an in-person meeting under reasonable terms, the people said.

Crescent did not respond to a request for comment. Cation declined to comment.

by David Carnevali