UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 under the Securities Exchange Act of 1934

 

For April 2021    Commission File Number: 1-34513

 

 

 

CENOVUS ENERGY INC.

(Translation of registrant’s name into English)

4100, 225 6 Avenue S.W.

Calgary, Alberta, Canada T2P 1N2

(Address of principal executive office)

 

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☐  Form 40-F  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):              

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):              

DOCUMENTS FILED AS PART OF THIS FORM 6-K

See the Exhibit Index to this Form 6-K.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 8, 2021

 

CENOVUS ENERGY INC.                
(Registrant)                
By:          /s/ Elizabeth McNamara                        
                Name:   Elizabeth McNamara
                Title:     Assistant Corporate Secretary


Form 6-K Exhibit Index

 

Exhibit No.

   
99.1   Notice of Annual Meeting of Shareholders and Management Information Circular
99.2   Form of proxy
99.3   Registered Shareholders’ Notice of Annual Meeting and Notice of Availability of Meeting Materials
99.4   Non-Registered (Beneficial) Shareholders’ Notice of Annual Meeting and Notice of Availability of Meeting Materials
99.5   Cenovus Virtual Annual Meeting Guide


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Exhibit 99.1

LOGO

Management Information Circular Notice of Annual Meeting of Shareholders May 12, 2021 cenovus ENERGY


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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF CENOVUS ENERGY INC.

The Annual Meeting of Shareholders (the “Meeting”) of Cenovus Energy Inc. (the “Corporation”, “Cenovus”, “we”, “us”, or “our”) will be held on Wednesday, May 12, 2021 at 1:00 p.m. Calgary time in a virtual-only format that will be conducted via live webcast accessible at https://web.lumiagm.com/445299876 with password “cenovus2021” (case sensitive) for the following purposes (with reference to the relevant section of the management information circular (the “Circular”) for additional details):

 

1.

to receive the consolidated financial statements of the Corporation, together with the auditor’s report thereon, for the year ended December 31, 2020 (see Financial Statements);

 

2.

to appoint the auditor of the Corporation (see Appointment of Auditor);

 

3.

to elect directors of the Corporation (see Election of Directors);

 

4.

to consider, and if deemed fit, approve an ordinary resolution amending and reconfirming the Corporation’s shareholder rights plan (see Amendment and Reconfirmation of the Shareholder Rights Plan);

 

5.

to consider, and if deemed fit, approve a non-binding advisory shareholder resolution on the Corporation’s approach to executive compensation (see Shareholder Advisory Vote on Executive Compensation); and

 

6.

to transact such other business as may properly be brought before the Meeting or any adjournment(s) or postponement(s) thereof.

You are entitled to receive notice of and vote at the Meeting if you are a holder of common shares of the Corporation (a “shareholder”) at the close of business on March 15, 2021.

Notice and Access We are using the “notice and access” procedures adopted by the Canadian Securities Administrators for the delivery of the Circular. The principal benefit of the notice and access procedure is that it reduces costs and the environmental impact of producing and distributing large quantities of paper documents. Shareholders who have consented to delivery of materials are receiving this Notice of Meeting in an electronic format. For additional information, see Voting and ProxyQuestions & Answers in the Circular. You should access and review all information contained in the Circular before voting.

Virtual Meeting The Meeting will be held in a virtual-only format conducted via live webcast online at https://web.lumiagm.com/445299876 (password “cenovus2021” (case sensitive)). Technology is re-shaping many traditional business practices. We view the use of technology-enhanced shareholder communications as a method to facilitate individual investor participation and consistent with the goals of regulators, stakeholders, and others invested in the corporate governance process. Applying technology to the Meeting by allowing virtual participation is a way to make the Meeting more relevant, accessible and engaging for all involved, by permitting a broader base of shareholders to participate in the Meeting – regardless of their location. The virtual-only format for the Meeting will also help mitigate health and safety risks to the community, shareholders, employees and other stakeholders. At this website, shareholders and duly appointed proxyholders will be able to hear the meeting live, submit questions and vote their Common Shares on all items of business while the Meeting is being held. While shareholders and duly appointed proxyholders will not be able to attend the Meeting in person, regardless of geographic location and ownership, they will have an equal opportunity to participate at the Meeting and vote on the matters to be considered at the Meeting.

Shareholders and duly appointed proxyholders will be able to ask questions immediately before and during the Meeting by typing their question into the viewing screen of the virtual Meeting platform. Additionally, shareholders may submit questions in advance of the Meeting by sending them to the attention of the Corporate Secretary, Cenovus Energy Inc., 225 – 6 Avenue S.W., P.O. Box 766, Calgary, Alberta, Canada, T2P 0M5. Questions relating to the business of the Meeting will be addressed during the Meeting. All other questions will be answered following the Meeting. Similar questions may be aggregated by the moderator, and questions and answers will be posted on our website following the Meeting. Non-registered (beneficial) shareholders who do not appoint themselves as their proxyholder in accordance with the instructions in this Circular and provided by their intermediary, will be able to participate as guests at the virtual Meeting but will not be able to vote. Guests will be able to listen to the proceedings of the Meeting but cannot vote. The Circular accompanying this Notice contains important instructions and details on how to participate at the virtual Meeting and vote your common shares by proxy or online during the Meeting. The specific details of the matters proposed to be put before the Meeting are also set forth in the Circular.

Included with this Circular is our Virtual Meeting User Guide. If you have any difficulties accessing the Meeting, please visit our webcast provider’s Frequently Asked Questions page of their website at https://go.lumiglobal.com/faq, which contains their virtual assistant “LumiBot”, or contact them directly at support@lumiglobal.com.

Registered and Non-Registered (Beneficial) Shareholders If you are a registered shareholder, you have a choice of voting by proxy on the internet, by telephone, by mail or by fax using your proxy form to appoint another person to attend the virtual Meeting and act for you, or voting in person (virtually) at the Meeting. If you are a non-registered (beneficial) shareholder, you must vote using your voting instruction form, which

 

Cenovus Energy Inc.     2021 Management Information Circular


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typically allows you to vote by proxy on the internet, by telephone, by mail or by fax and, if you want to vote in person (virtually) at the Meeting, you must appoint yourself as a proxyholder. If you vote by proxy on the internet, by telephone, by mail or by fax in advance of the Meeting, your vote will be counted, whether or not you attend the virtual Meeting. Even if you attend the virtual Meeting, you may find it convenient to vote in advance. Please refer to your proxy form or voting instruction form, as applicable, and to the Voting and ProxyQuestions & Answers section in the Circular for assistance in determining whether you are a registered or non-registered (beneficial) shareholder and for more information on the voting methods available to you.

Completed proxy forms must be received by the transfer agent and registrar of the Corporation, Computershare Investor Services Inc., 8th Floor, 100 University Avenue, Toronto, Ontario, M5J 2Y1, no later than 1:00 p.m. Calgary time on May 10, 2021 or, in the case of any adjournment or postponement of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and statutory holidays) before the time of any adjourned or postponed meeting. Completed voting instruction forms must be returned in accordance with the instructions on the form. Registered shareholders who appoint a proxyholder, and beneficial shareholders who appoint themselves or a proxyholder to participate in the virtual Meeting, must also visit https://www.computershare.com/CenovusEnergy to register their or their proxyholder’s name and email address so that, after the proxy deadline of 1:00 p.m. Calgary time on May 10, 2021 or, in the case of any adjournment or postponement of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and statutory holidays) before the time of any adjourned or postponed meeting, Computershare can send via email a Username that will be required (with case-sensitive password “cenovus2021”) to log into the Meeting.

Your vote is important. Please read the enclosed materials carefully. If you have questions about any of the information or require assistance in completing your proxy form or voting instruction form, as the case may be, please contact our strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, toll-free in North America at 1-866-851-4179 or by email at contactus@kingsdaleadvisors.com. A recording of the Meeting will be available on our website at cenovus.com following the Meeting.

By order of the board of directors of Cenovus Energy Inc.

/s/ Gary F. Molnar

Gary F. Molnar

Corporate Secretary

Calgary, Alberta

March 15, 2021

 

Cenovus Energy Inc.     2021 Management Information Circular


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INVITATION LETTER

Dear fellow shareholders:

On behalf of Cenovus Energy Inc.’s Board of Directors, management and employees, we invite you to attend our 2021 Annual Meeting of Shareholders (the “Meeting”). The items of business to be considered and acted on at the Meeting are described in the Notice of Annual Meeting of Shareholders of Cenovus Energy Inc. and accompanying management information circular.

Following the formal portion of the Meeting, management will review our 2020 financial and operational performance, provide an overview of our priorities for 2021 and virtually open the floor to questions from shareholders.

This will be our third meeting of shareholders held in a virtual only format, which we have found permits a broader base of our shareholders to participate in the Meeting – regardless of their location. The virtual-only format for the Meeting will also help mitigate health and safety risks posed by the COVID-19 pandemic to the community, our shareholders and employees and other stakeholders. Please join us via the live webcast online at https://web.lumiagm.com/445299876 (password “cenovus2021” (case sensitive)).

Your vote is important to us. Your vote will be counted, whether you vote in person (virtually) at the Meeting or vote in advance of the virtual Meeting by proxy on the internet, by telephone, by mail or by fax. Even if you attend the Meeting, you may find it convenient to vote in advance.

We have included a Voting and ProxyQuestions & Answers section in the accompanying management information circular, or you can contact our strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, toll-free in North America at 1-866-851-4179 or by email at contactus@kingsdaleadvisors.com, for assistance voting or if you have questions relating to the enclosed materials.

While 2020 was a turbulent year for Cenovus and for our industry, it was also a critical milestone for our company. The work done last year to advance our combination with Husky Energy Inc. (“Husky”) has left Cenovus well-positioned to create shareholder value in the years ahead. Today, we are a more diversified, integrated oil and natural gas producer than we were a year ago, with significantly enhanced resilience and financial flexibility to withstand economic volatility as well as improved capacity to generate significant free funds flow.

In connection with Cenovus’s acquisition of Husky pursuant to a plan of arrangement on January 1, 2021, Messrs. Steven Leer and George Lewis and Ms. Susan Dabarno resigned from the Board of Directors. We would like to thank them for the wealth of experience they each brought to the Board of Directors and for their years of dedication and service to Cenovus.

We also welcomed Messrs. Canning Fok, Wayne Shaw and Frank Sixt and Mrs. Eva Kwok as members of the Board of Directors on January 1, 2021. In addition to each of their individual skills and experience, they have perspective and depth of knowledge of the Husky business and assets, having all sat on the Board of Directors of Husky prior to our business combination with Husky.

Our 2020 Annual Report is available on our website at cenovus.com. We encourage you to visit our website throughout the year for updated information and to find out more about our business.

Yours truly,

 

/s/ Keith A. MacPhail    /s/ Alexander J. Pourbaix
Keith A. MacPhail    Alexander J. Pourbaix
Board Chair    President & Chief Executive Officer

 

Cenovus Energy Inc.     2021 Management Information Circular


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TABLE OF CONTENTS

 

  1     VOTING AND PROXY – QUESTIONS & ANSWERS
  6     BUSINESS OF THE MEETING
  6     1. FINANCIAL STATEMENTS
  6     2. APPOINTMENT OF AUDITOR
  6     3. ELECTION OF DIRECTORS
  7     4. AMENDMENT AND RECONFIRMATION OF THE SHAREHOLDER RIGHTS PLAN
  9     5. SHAREHOLDER ADVISORY VOTE ON EXECUTIVE COMPENSATION
  10     INFORMATION ON DIRECTOR NOMINEES
  10     DIRECTOR NOMINEES
  22     CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS
  23     CORPORATE GOVERNANCE
  23     OUR COMMITMENT TO SHAREHOLDER ENGAGEMENT
  24     DIRECTOR COMPENSATION
  24     PHILOSOPHY
  24     GOVERNANCE
  24     OVERVIEW
  28     EXECUTIVE COMPENSATION
  28     LETTER TO SHAREHOLDERS
  30     COMPENSATION DISCUSSION AND ANALYSIS
  31     COMPENSATION GOVERNANCE
  31     SUMMARY OF KEY COMPENSATION GOVERNANCE PRACTICES
  31     ROLE OF THE BOARD AND HRC COMMITTEE
  34     COMPENSATION PHILOSOPHY
  37     EXECUTIVE COMPENSATION PROGRAM DESIGN
  37     ELEMENTS OF COMPENSATION
  43     2020 EXECUTIVE COMPENSATION
  43     2020 NAMED EXECUTIVE OFFICERS
  43     2020 EXECUTIVE COMPENSATION DECISIONS
  47     COMPENSATION TABLES
  53     INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
  53     ADDITIONAL INFORMATION
  A-1     SCHEDULE A – SUMMARY OF STOCK OPTION PLAN, HUSKY STOCK OPTION PLAN AND ADDITIONAL COMPENSATION PLAN INFORMATION
  B-1     SCHEDULE B – CORPORATE GOVERNANCE
  C-1     SCHEDULE C – SUSTAINABILITY, ENVIRONMENTAL, SOCIAL & GOVERNANCE HIGHLIGHTS
                   D-1     SCHEDULE D – SUMMARY OF CENOVUS SHAREHOLDER RIGHTS PLAN
                     Advisory-1   ADVISORY

 

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VOTING AND PROXY – QUESTIONS & ANSWERS

 

 

This management information circular (the “Circular”) dated March 15, 2021 is delivered in connection with the solicitation by or on behalf of management (“Management”) of Cenovus Energy Inc. (“Cenovus”, the “Corporation”, the “Company”, “we”, “us” or “our”) of proxies for use at the annual meeting of shareholders of Cenovus (the “Meeting”) to be held on Wednesday, May 12, 2021 in a virtual-only format that will be conducted via live webcast accessible at https://web.lumiagm.com/445299876 with password “cenovus2021” (case sensitive) for the purposes indicated in the Notice of Annual Meeting of Shareholders of Cenovus Energy Inc.

The solicitation will be primarily by mail, but proxies may also be solicited personally, by telephone, facsimile or other similar means by directors, employees or agents of Cenovus. We have also retained Kingsdale Advisors to solicit proxies for us in Canada and the United States (“U.S.”) at a fee of approximately $40,000, plus out-of-pocket expenses. The cost of soliciting proxies will be borne by Cenovus. Additionally, Cenovus may utilize the Broadridge QuickVote service to assist Non-Registered (Beneficial) Shareholders (as defined herein) with voting their common shares of the Corporation (“Common Shares”) over the telephone.

Your vote is very important to us. If you have any questions about any of the information in this Circular or require assistance in completing your proxy form or your voting instruction form, please contact our proxy solicitation agent, Kingsdale Advisors, toll-free in North America at 1-866-851-4179 or by email at contactus@kingsdaleadvisors.com.

Completed proxy forms must be received by our transfer agent and registrar, Computershare Investor Services Inc. (“Computershare”), no later than 1:00 p.m. Calgary time on May 10, 2021 or, in the case of any adjournment or postponement of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and statutory holidays) before the time of the adjourned or postponed meeting. Completed voting instructions must be returned in accordance with the instructions on the proxy form.

Unless otherwise stated, the information contained in this Circular is given as at the close of business on March 15, 2021 and dollar amounts are expressed in Canadian dollars. As at March 15, 2021, to the knowledge of the directors and executive officers of Cenovus, no person or company beneficially owns, or controls or directs, directly or indirectly, Common Shares carrying

10 percent or more of the voting rights attached to the Common Shares other than the following:

 

Name of Holder

 

 

Number of
Common
Shares

 

 

Percentage of
Securities
Owned(1)

 

 

Hutchison Whampoa Europe Investments S.à r.l.(2)

 

 

 

316,927,051

 

 

 

 

15.7

 

 

 

L.F. Investments S.à r.l.(3)

 

 

 

231,194,699

 

 

 

 

11.5

 

 

 

Capital Research Global Investors

 

 

 

210,364,704

 

 

 

 

10.4

 

 

 

ConocoPhillips Company

 

 

 

208,000,000

 

 

 

 

10.3

 

 

 

(1) 

Represents the percentage of Cenovus’s issued and outstanding Common Shares.

(2) 

Hutchison Whampoa Europe Investments S.à r.l. is 100 percent indirectly owned by CK Hutchison Holdings Limited of which Mr. Li Ka Shing is the Senior Advisor. Mr. Li Ka Shing and trusts of which members of Mr. Li Ka Shing’s family are discretionary beneficiaries hold approximately, directly and indirectly, a 30.15 percent interest in CK Hutchison Holdings Limited.

(3) 

L.F. Investments S.à r.l. is indirectly wholly-owned by a trust of which members of Mr. Li Ka Shing’s family are discretionary beneficiaries.

When and where is the Meeting being held? There is no physical location for the Meeting. The Meeting will be held on Wednesday, May 12, 2021 at 1:00 p.m. (Calgary time) in a virtual-only format that will be conducted via live webcast accessible at https://web.lumiagm.com/445299876 with password “cenovus2021” (case sensitive).

Such format will be conducted to make the Meeting more relevant, accessible and engaging for all involved, by allowing a broader base of shareholders to participate in the Meeting – regardless of their location. The virtual-only format for the Meeting will also help mitigate health and safety risks to the community, shareholders, employees and other stakeholders.

How do I access the virtual Meeting? Registered Shareholders (as defined herein) and duly appointed proxyholders can access and vote at the Meeting as follows:

 

  Go to https://web.lumiagm.com/445299876 in a web browser on a smartphone, tablet or computer at least 30 to 60 minutes prior to the start of the Meeting. The latest versions of Google Chrome, Safari, Microsoft Edge or Firefox will be needed. Please ensure the browser being used is compatible by logging in early. You should allow ample time to check into the virtual Meeting to check compatibility and complete the related procedures.

 

  Select “I have a Control Number/Username” and enter your 15-digit Control Number (your Control Number is located on your form of proxy) and the password: “cenovus2021” (case sensitive).
 

 

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Guests, including Non-Registered (Beneficial) Shareholders who have not duly appointed themselves as proxyholders, can log in to the Meeting as set out below. Guests can listen to the Meeting but are not able to vote.

Go to https://web.lumiagm.com/445299876 in a web browser on a smartphone, tablet or computer at least 30 to 60 minutes prior to the start of the Meeting. The latest versions of Google Chrome, Safari, Microsoft Edge or Firefox will be needed. Please ensure the browser being used is compatible by logging in early. You should allow ample time to check into the virtual Meeting to check compatibility and complete the related procedures.

 

  Select “I am a guest” and then complete the online form.

For information on how a Non-Registered (Beneficial) Shareholder can participate in the Meeting and vote its Common Shares, see the question below “How do I vote if I am a Non-Registered (Beneficial) Shareholder?

If you have any difficulties accessing the Meeting, visit the Frequently Asked Questions page of the webcast provider’s website at https://go.lumiglobal.com/faq, which also contains the webcast provider’s virtual assistant “LumiBot”, or contact them directly at support@lumiglobal.com.

Am I entitled to vote? You are entitled to vote if you were a holder of Common Shares as of the close of business on March 15, 2021, the record date for the Meeting. Each holder is entitled to one vote for each Common Share held on such date.

A simple majority (50 percent plus one) of votes cast in person (virtually) or by proxy at the Meeting is required to approve each of the matters to be voted on that are described herein, except for the advisory resolution on executive compensation, which is not binding on the Corporation. As of March 15, 2021, there were 2,017,461,576 issued and outstanding Common Shares.

What matters are to be voted on? The appointment of the auditor; the election of directors; amendment and reconfirmation of our shareholder rights plan; and a non-binding advisory resolution on our approach to executive compensation.

What if there are amendments? As of the date of this Circular, Management is not aware of any amendment, variation or other matter that will come before the Meeting. If you attend the Meeting and are eligible to vote, you can vote on any amendment, variation or other matters that properly come before the Meeting in accordance with your wishes. If you are voting by proxy, the persons named in the proxy form will have discretionary

authority to vote on any such amendment, variation or other matter that may properly come before the Meeting.

How can I vote? The easiest way to vote is by proxy on the internet, by telephone, by mail or by fax. Only registered shareholders and duly appointed proxyholders can vote at the Meeting in person (virtually). Procedures for each voting method depend on whether you are a registered shareholder of the Corporation (a “Registered Shareholder”) or a non-registered (beneficial) shareholder of the Corporation (a “Non-Registered (Beneficial) Shareholder”).

How do I know if I am a Registered or Non-Registered (Beneficial) Shareholder?

 

  Registered Shareholder: You are a Registered Shareholder if your Common Shares are registered in your name and you have a share certificate or a direct registration advice evidencing ownership.

 

  Non-Registered (Beneficial) Shareholder: You are a Non-Registered (Beneficial) Shareholder if your broker, investment dealer, bank, trust company, trustee, nominee or other intermediary (each, an “Intermediary”) holds your Common Shares.

 

  If you are not sure if you are a Registered Shareholder or Non-Registered (Beneficial) Shareholder, please contact our strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, toll-free in North America at 1-866-851-4179 or by email at contactus@kingsdaleadvisors.com.

How will Meeting materials be delivered? Notice and access is being used to deliver this Circular (and other meeting-related materials, including the Corporation’s audited consolidated financial statements for the fiscal year ended December 31, 2020, together with the auditor’s report therein and related management’s discussion and analysis, collectively, the “Annual Report”), to both Registered Shareholders and Non-Registered (Beneficial) Shareholders. This means that the Circular and Annual Report will be posted online for shareholders to access electronically. You will receive a package in the mail with a notice (the ‘‘Notice’’) outlining the matters to be addressed at the Meeting and explaining how to access and review the Circular and Annual Report electronically, and how to request a paper copy at no charge. You will also receive a form of proxy or a voting instruction form in the mail, so you can vote your Common Shares. All applicable Meeting related materials will be indirectly forwarded to Non-Registered (Beneficial) Shareholders at Cenovus’s expense.

 

 

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Notice and access is an environmentally friendly and cost-effective way to distribute the Circular and Annual Report because it reduces printing, paper and postage.

How can I request a paper copy of the Circular and proxy-related materials? Both Registered Shareholders and Non-Registered (Beneficial) Shareholders can request a paper copy of the Circular and Annual Report for up to one year from the date it is filed on SEDAR (sedar.com). If you would like to receive a paper copy of the Circular and/or Annual Report, please follow the instructions provided in the Notice. The Circular and Annual Report will be sent to you at no charge upon request. If you request a paper copy of the Circular and/or Annual Report, you will not receive a new form of proxy or voting instruction form, so you should keep the original form sent to you in order to vote.

Cenovus will provide paper copies of the Circular and Annual Report to shareholders who have standing instructions to receive, or for whom Cenovus has otherwise received a request to provide, paper copies of materials.

If you have any questions about our use of notice and access, please contact our proxy solicitation agent, Kingsdale Advisors, toll-free in North America at 1-866-851-4179 or by email at contactus@kingsdaleadvisors.com.

What is electronic delivery? Electronic delivery is a voluntary e-mail notification sent to shareholders, in place of receiving the Notice by mail, when documents such as this Circular and our annual report and quarterly reports are available on our website. If you wish, you may elect to be notified by e-mail when documentation is posted on our website. Electronic delivery will save paper, reduce our impact on the environment and reduce costs.

What is the deadline for receiving my proxy form or voting instruction form?

 

  Registered Shareholders: If you are voting your Common Shares by proxy form, Computershare must receive your completed proxy form no later than 1:00 p.m. Calgary time on May 10, 2021 or, in the case of any adjournment or postponement of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and statutory holidays) before the time of the adjourned or postponed meeting.

 

  Non-Registered (Beneficial) Shareholders: Your completed voting instruction form must be returned on or before the deadline specified on the form.

 

  The time limit for deposit of proxies may be waived or extended by the Chair of the Meeting at their discretion, without notice.

How do I vote if I am a Registered Shareholder? A Registered Shareholder may vote in one of the following ways:

 

  Internet: Go to the website indicated on the proxy form and follow the instructions. You will need your control number which is noted on your proxy form.

 

  Telephone: Call 1-866-732-8683 (toll-free in North America) and follow the voice instructions. You will need your control number which is noted on your proxy form. If you vote by telephone, you cannot appoint anyone other than the appointees named on your proxy form as your proxyholder.

 

  Mail: Complete, sign and date your proxy form and return it to Computershare in the envelope provided.

 

  Fax: Complete, sign and date your proxy form and send it by fax to Computershare at 1-866-249-7775 (toll-free in North America) or 1-416-263-9524 (outside North America).

 

  During the virtual Meeting: You do not need to complete or return your proxy form. You can attend the Meeting by going to https://web.lumiagm.com/445299876 in a web browser on a smartphone, tablet or computer, selecting “I have a Control Number/Username” and entering your 15-digit Control Number (your Control Number is located on your form of proxy) and the password: “cenovus2021” (case sensitive). Follow the instructions to access the Meeting and vote when prompted.

How do I vote if I am a Non-Registered (Beneficial) Shareholder?

 

  You will receive a voting instruction form from your Intermediary asking for your voting instructions before the Meeting. Follow these instructions carefully to ensure your Common Shares are voted in accordance with your instructions. Please contact your Intermediary if you did not receive a voting instruction form.

 

  Vote by proxy: In most cases, a voting instruction form allows you to vote by proxy by providing your voting instructions on the internet, by telephone, by mail or by fax. If you have the option of providing your voting instructions on the internet or by telephone, go to the website or call the number indicated on your voting instruction form and follow the instructions. You will need your control number which is noted on your voting instruction form.

 

 

Vote during the virtual Meeting: You can attend and vote at the Meeting by filling in your name in the blank space provided on the voting instruction form and appointing yourself as proxyholder and sending in your completed

 

 

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    voting instruction form to the address specified on the voting instruction form in advance of the Meeting.

You must also visit https://www.computershare.com/CenovusEnergy to register your name and email address so that after the proxy deadline of 1:00 p.m. Calgary time on May 10, 2021 or, in the case of any adjournment or postponement of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and statutory holidays) before the time of any adjourned or postponed meeting, Computershare can send you via email a Username that will be required (with case-sensitive password “cenovus2021”) to log into the Meeting.

You can then attend the Meeting by going to https://web.lumiagm.com/445299876 in a web browser on a smartphone, tablet or computer, selecting “I have a Control Number/Username”, entering the Username that you received in an email from Computershare, password “cenovus2021” (case sensitive), and then follow the instructions to access the Meeting and vote when prompted.

Non-Registered (Beneficial) Shareholders who have not duly appointed themselves as proxy will not be able to vote online at the virtual Meeting. You will be able to join a live webcast of the Meeting by going to https://web.lumiagm.com/445299876, clicking on “I am a guest” and filling in the form.

How does voting by proxy work?

When you sign or electronically submit, as applicable, the proxy form, you authorize appointees, Keith A. MacPhail, Chair of our board of directors, or failing him, Alexander J. Pourbaix, President & Chief Executive Officer, and a member of our board of directors (the “Board” or the “Board of Directors”), to vote your Common Shares for you at the Meeting according to your instructions. See “How will my Common Shares be voted if I vote by proxy?” below for further details.

You have the right to appoint a person other than the directors designated in the enclosed proxy form as proxyholder, by following the steps below:

The following applies to shareholders who wish to appoint as their proxyholders individuals other than those named in the proxy or voting instruction form. This includes Non-Registered (Beneficial) Shareholders who wish to appoint themselves as proxyholders to attend, participate in or vote at the Meeting. Make sure the person you appoint is aware that he or she has been appointed as a proxyholder and is planning to attend the Meeting for your vote to count.

Shareholders who wish to appoint as their proxyholders individuals other than those named in the proxy or voting instruction form to attend and participate in the Meeting and vote their securities MUST submit their proxies or voting instruction forms, as applicable, appointing such individuals as proxyholders AND register such proxyholders online, as described below. Registering your proxyholder is an additional step to be completed AFTER you have submitted your proxy or voting instruction form. Failure to register the proxyholder will result in the proxyholder not receiving a Username that is required to vote at the Meeting.

Step 1: Submit your proxy or voting instruction form: To appoint someone other than the individuals named in the proxy or voting instruction form as proxyholder, insert that person’s name in the blank space provided in the proxy or voting instruction form (if permitted) and follow the instructions for submitting such proxy or voting instruction form. This must be completed before registering such proxyholder, which is an additional step to be completed once you have submitted your proxy or voting instruction form.

If you are a Non-Registered (Beneficial) Shareholder and wish to vote at the Meeting, you must insert your own name in the space provided on the voting instruction form sent to you by your Intermediary, follow all of the applicable instructions provided by your Intermediary AND register yourself as your proxyholder, as described below in Step 2. By doing so, you are instructing your Intermediary to appoint you as proxyholder. It is important that you comply with the signature and return instructions provided by your Intermediary. Please also see further instructions below under the heading “How do I vote if I am a Non-Registered (Beneficial) Shareholder?

If you are a Non-Registered (Beneficial) Shareholder located in the United States and wish to vote at the Meeting or, if permitted, appoint a third party as your proxyholder, in addition to the steps described below under “How do I vote if I am a Non-Registered (Beneficial) Shareholder?”, you must obtain a valid legal proxy from your Intermediary. Follow the instructions from your Intermediary included with the legal proxy form sent to you or contact your Intermediary to request a legal proxy form if you have not received one. After obtaining a valid legal proxy from your Intermediary, you must then submit such legal proxy to Computershare. Requests for registration from Non-Registered (Beneficial) Shareholders located in the United States that wish to vote at the

 

 

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- VOTING AND PROXY – QUESTIONS & ANSWERS -

 

 


Meeting or, if permitted, appoint third parties as their proxyholders must be sent by e-mail or by courier to: uslegalproxy@computershare.com (if by e-mail); or Computershare Investor Services, Inc., Attention: Proxy Department, 8th Floor, 100 University Avenue, Toronto, ON M5J 2Y1, Canada (if by courier), and in both cases, must be labeled “Legal Proxy” and received no later than 1:00 p.m. Calgary time on May 10, 2021 (or, in the case of any adjournment or postponement of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and statutory holidays) before the time of any adjourned or postponed meeting).

Step 2: Register your proxyholder: To register a third-party proxyholder, you must visit https://www.computershare.com/CenovusEnergy by no later than1:00 p.m. Calgary time on May 10, 2021 or, in the case of any adjournment or postponement of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and statutory holidays) before the time of the adjourned or postponed meeting, and provide Computershare with the required proxyholder contact information so that Computershare may provide the proxyholder with a Username via email. Without a Username, proxyholders will not be able to vote at the Meeting but will be able to participate as guests.

If you need help completing your proxy form, please contact our strategic shareholder advisor and proxy solicitation agent, Kingsdale Advisors, toll-free in North America at1-866-851-4179 or by email at contactus@kingsdaleadvisors.com.

How will my Common Shares be voted if I vote by proxy? You can:

 

  Choose to vote “For” or “Withhold” your vote from the election of each of the persons nominated for election as directors and the appointment of PricewaterhouseCoopers LLP as auditor.

 

  Choose to vote “For” or “Against” the amendment and reconfirmation of our shareholder rights plan and the non-binding advisory resolution on our approach to executive compensation.

Your Common Shares will be voted or withheld from voting in accordance with your instructions; however, if you return your proxy form but do not indicate how you want to vote your Common Shares, and do not appoint a person other than the

directors on the proxy form, your vote will be cast FOR the election of each person nominated for election as director, FOR the appointment of PricewaterhouseCoopers LLP as auditor, FOR the amendment and reconfirmation of our shareholder rights plan and FOR our approach to executive compensation.

If you appoint a person other than the directors as proxyholder and you do not specify how you want your Common Shares voted, your proxyholder will vote your Common Shares as he or she sees fit for each item of business at the Meeting.

Can I change or revoke my vote?

Registered Shareholders can change a previously made proxy vote:

 

  By completing a proxy form that is dated later than a previously submitted proxy, provided the new proxy form is received by Computershare no later than 1:00 p.m. Calgary time on May 10, 2021 or, in the case of any adjournment or postponement of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and statutory holidays) before the time of the adjourned or postponed meeting; or

 

  By accessing the Meeting by following the instructions under the heading “How do I access the virtual Meeting” above and voting their Common Shares during the designated time.

Registered Shareholders can revoke a previously made proxy vote:

 

  By sending a notice of revocation in writing to the attention of our Corporate Secretary at Cenovus Energy Inc., 225 – 6 Avenue S.W., P.O. Box 766, Calgary, Alberta, Canada, T2P 0M5, so that it is received by the close of business Calgary time on May 11, 2021 or, in the case of any adjournment or postponement of the Meeting, on the business day immediately preceding the adjourned or postponed meeting; or

 

  By giving a notice of revocation in writing to the Chair of the Meeting on the day of, but prior to the commencement of, the Meeting or any adjournment or postponement of the Meeting; or

 

  In any other manner permitted by law.

Non-Registered (Beneficial) Shareholders can change or revoke a vote by notifying their Intermediary in accordance with their Intermediary’s instructions.

 

 

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BUSINESS OF THE MEETING

 

 

1. FINANCIAL STATEMENTS

The consolidated financial statements of Cenovus for the year ended December 31, 2020 and the auditor’s report thereon are included in our 2020 Annual Report, which is available on our website at cenovus.com.

2. APPOINTMENT OF AUDITOR

The Board of Directors of Cenovus unanimously recommends that PricewaterhouseCoopers LLP, Chartered Professional Accountants, Calgary, Alberta, be appointed auditor of Cenovus to hold office until the close of the next annual meeting of shareholders. PricewaterhouseCoopers LLP was first appointed as our auditor on November 30, 2009. The following table provides information about the fees billed to Cenovus for professional services rendered by PricewaterhouseCoopers LLP in the years ended December 31, 2020 and 2019:

 

 

($ thousands)

 

  

 

2020

 

    

 

2019

 

 

 

Audit Fees

 

    

 

2,598

 

 

 

    

 

2,938

 

 

 

 

Audit-Related Fees

 

    

 

382

 

 

 

    

 

226

 

 

 

 

Tax Fees

 

    

 

128

 

 

 

    

 

2

 

 

 

 

All Other Fees

 

    

 

46

 

 

 

    

 

284

 

 

 

 

Total

 

    

 

3,154

 

 

 

    

 

3,450

 

 

 

Audit Fees consist of the aggregate fees billed for the audit of the Corporation’s annual financial statements or services that are normally provided in connection with statutory and regulatory filings or engagements.

Audit-Related Fees consist of the aggregate fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Corporation’s financial statements and are not reported as Audit Fees. The services provided in this category include audit-related services in relation to Cenovus’s prospectuses, systems development, controls testing and participation fees levied by the Canadian Public Accountability Board. Fees related to the acquisition or divestiture of assets are also included in Audit-Related Fees.

Tax Fees consist of the aggregate fees billed for tax compliance, tax advice and tax planning.

All Other Fees relate to fees billed for the review of Extractive Sector Transparency Measures Act filings, advisory services around Enterprise Resource Planning and the Corporation’s Innovation Process.

Unless instructed otherwise, the persons designated in the accompanying proxy form intend to vote FOR the appointment of PricewaterhouseCoopers LLP as auditor of Cenovus.

For information on governance procedures related to our auditor, including audit partner rotation, see Schedule B – Corporate GovernanceAudit Committee to this Circular.

3. ELECTION OF DIRECTORS

Cenovus’s articles provide that there must be at least three and no greater than 17 directors. There are currently 12 directors.

In accordance with our by-laws, the Board has determined that 12 directors will be elected at the Meeting. Shareholders will be asked at the Meeting to elect, individually, as directors each of the nominees listed below.

 

1. Keith M. Casey 7. Richard J. Marcogliese
2. Canning K.N. Fok 8. Claude Mongeau
3. Jane E. Kinney 9. Alexander J. Pourbaix
4. Harold N. Kvisle 10. Wayne E. Shaw
5. Eva L. Kwok 11. Frank J. Sixt
6. Keith A. MacPhail 12. Rhonda I. Zygocki

Eight of the proposed nominees were duly elected as directors at the annual meeting of shareholders held on April 29, 2020. Three of the proposed nominees were appointed to replace former directors who resigned in connection with Cenovus’s acquisition of Husky Energy Inc. (“Husky”) pursuant to a plan of arrangement on January 1, 2021; and one additional director was appointed in connection with the Husky transaction. Each director elected at the Meeting will hold office until the close of the next annual meeting of the shareholders of the Corporation or until such office is earlier vacated.

Unless instructed otherwise, the persons designated in the accompanying proxy form intend to vote FOR the election of each nominee named below under Information on Director Nominees – Director Nominees.

Majority Voting Policy

Our Policy on Directors’ Voting Procedures (“Majority Voting Policy”) provides that in an uncontested election of directors, if any nominee does not receive a greater number of votes “For” than votes “Withheld” from his or her election, the nominee shall be considered not to have received the support of the shareholders, even though duly elected. If such a nominee is an existing member of the Board standing for re-election, the Majority Voting Policy requires such a director to immediately tender his or her resignation to the Board, to take effect upon acceptance by the Board. The Nominating and Corporate Governance Committee (the “NCG Committee”) will expeditiously consider the resignation and make a recommendation to the Board on how to proceed. The Board, in the absence

 

 

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of exceptional circumstances, will accept the resignation consistent with an orderly transition. The director will not participate in any Board or Board committee deliberations on the resignation offer. The Board will make its decision to accept or reject the resignation within 90 days after the date of the relevant shareholder meeting. Cenovus will promptly issue a news release regarding the Board’s decision. If the Board determines not to accept a resignation, the news release will state the reasons for that decision. The Board may fill the vacancy in accordance with the by-laws of Cenovus and applicable corporate law. Shareholders should note that, because of the Majority Voting Policy, a “Withhold” vote is effectively the same as a vote against a director nominee in an uncontested election. The Majority Voting Policy is available on our website at cenovus.com.

This policy does not apply if there is a proxy contest over the election of directors.

 

4.

 AMENDMENT AND RECONFIRMATION OF THE SHAREHOLDER RIGHTS PLAN

Background

In connection with a plan of arrangement, effective November 30, 2009, and completed under Section 192 of the Canada Business Corporations Act involving Encana Corporation (‘‘Encana’’) and Cenovus, a shareholder rights plan for Cenovus (the “Cenovus Shareholder Rights Plan”) was adopted as of October 20, 2009 and subsequently amended and restated as of November 30, 2009, April 25, 2018 and January 1, 2021. In 2012, Cenovus shareholders approved various amendments, a restatement and a continuation of the Cenovus Shareholder Rights Plan for an additional three years. In 2015, Cenovus shareholders reconfirmed the Cenovus Shareholder Rights Plan for an additional three years. In 2018, Cenovus shareholders approved various amendments, a restatement and a continuation of the Cenovus Shareholder Rights Plan for an additional three years. On January 1, 2021, Cenovus acquired Husky pursuant to a plan of arrangement under section 193 of the Business Corporations Act (Alberta) involving Husky, the Husky shareholders and optionholders, and Cenovus (the “Arrangement”), pursuant to which (among other things) Cenovus acquired all of the issued and outstanding common shares of Husky in consideration for Common Shares and warrants to purchase Common Shares issuable pursuant to the Arrangement (“Arrangement Warrants”). At the special meeting of Cenovus shareholders held on December 15, 2020 to consider the Arrangement, the Cenovus shareholders approved an ordinary resolution authorizing and approving, among other things,

certain consequential amendments to the Cenovus Shareholder Rights Plan to ensure that an acquisition of Common Shares, or of rights to acquire Common Shares, pursuant to the Arrangement or dealings in share purchase rights issued in connection therewith did not inadvertently cause a trigger (“flip-in”) event under the Cenovus Shareholder Rights Plan, following which the share purchase rights outstanding thereunder might otherwise separate from the Common Shares and become exercisable.

Shareholders will be asked at the Meeting to consider and, if deemed appropriate, approve an ordinary resolution, the text of which is set forth below (the “2021 Cenovus Shareholder Rights Plan Resolution”), to amend and reconfirm the Cenovus Shareholder Rights Plan. For the Cenovus Shareholder Rights Plan to continue in effect after the Meeting, it must be reconfirmed by a simple majority of votes cast by the Independent Shareholders at the Meeting. “Independent Shareholders” is defined in the Cenovus Shareholder Rights Plan, in effect, as all holders of Common Shares, excluding any Acquiring Person (as defined in the Cenovus Shareholder Rights Plan), any person that is making or has announced a current intention to make a take-over bid for the Common Shares, affiliates, associates and persons acting jointly or in concert with such excluded persons, and any employee benefit, deferred profit sharing, stock participation or other similar plan or trust for the benefit of employees of Cenovus unless the beneficiaries of the plan or trust direct the manner in which the Common Shares are to be voted. As of March 15, 2021, Cenovus is not aware of any shareholders that would be excluded from the vote on the basis that such holder is not an Independent Shareholder. If the 2021 Cenovus Shareholder Rights Plan Resolution is not approved, the Cenovus Shareholder Rights Plan will terminate on May 12, 2021.

Purpose of the Cenovus Shareholder Rights Plan

The primary objectives of the Cenovus Shareholder Rights Plan are to provide every shareholder an equal opportunity to participate in a take-over bid made for Cenovus and to provide sufficient time to explore and develop all options to maximize shareholder value if such a bid is made. The Cenovus Shareholder Rights Plan encourages a potential acquiror to proceed either by way of a Permitted Bid (as defined in the Cenovus Shareholder Rights Plan), which requires the take-over bid to satisfy certain minimum standards designed to promote fairness, or with the concurrence of the Board.

 

 

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Proposed Amendments to the Cenovus Shareholder Rights Plan

Cenovus is proposing certain technical and administrative amendments to the Cenovus Shareholder Rights Plan. The changes to the Cenovus Shareholder Rights Plan (the “2021 Cenovus Shareholder Rights Plan”) include:

 

  amending the definition of Exempt Acquisition (as set out in Schedule D to this Circular) to: (i) clarify that certain transactions, statutory or otherwise, that are approved by the shareholders and the Board qualify as Exempt Acquisitions; and (ii) provide that distributions of Voting Shares (within the meaning of the 2021 Cenovus Shareholder Rights Plan), or securities convertible into or exchangeable for Voting Shares, by way of a private placement by the Corporation, a securities exchange take-over bid circular or upon the exercise by an individual employee of the right to purchase Common Shares (whether from treasury or otherwise) pursuant to any dividend reinvestment plan or any employee benefit, stock option or similar plan qualify as Exempt Acquisitions provided that all necessary stock exchange approvals are obtained in connection with such distribution and the person acquiring such securities does not become the beneficial owner (within the meaning of the 2021 Cenovus Shareholder Rights Plan) of more than 25 percent of the Common Shares outstanding immediately prior to the distribution; and

 

  certain additional non-substantive, technical and administrative amendments, including to delete references to “the Arrangement” in the definitions of “Exempt Acquisition”, “Separation Time” and “Take-Over Bid” in the 2021 Cenovus Shareholder Rights Plan since the Arrangement was completed on January 1, 2021.

Cenovus is not proposing the foregoing amendments in response to or in anticipation of any acquisition or take-over bid that is known to Management of Cenovus. The 2021 Cenovus Shareholder Rights Plan is not intended to prevent a take-over of Cenovus, to secure continuance of current management or the directors in office, or to deter fair offers for the Common Shares. The 2021 Cenovus Shareholder Rights Plan may, however, increase the price paid by a potential offeror to obtain control of Cenovus and may discourage certain transactions.

The 2021 Cenovus Shareholder Rights Plan does not affect in any way Cenovus’s financial condition. The initial issuance of the rights will not dilute the Common Shares and will not affect reported earnings or cash flow per share until the rights separate from the underlying Common Shares and become exercisable. The 2021 Cenovus Shareholder

Rights Plan will not lessen or affect the duty of the Board to give due and proper consideration to any offer that is made and to act honestly, in good faith, and in the best interests of Cenovus and its shareholders.

A summary of the principal terms of the 2021 Cenovus Shareholder Rights Plan is set out in Schedule D.

The Board of Directors unanimously recommends that shareholders vote in favour of the 2021 Cenovus Shareholder Rights Plan Resolution. The text of the 2021 Cenovus Shareholder Rights Plan Resolution, subject to such amendments, variations or additions as may be approved at the meeting, is set forth below:

Proposed Resolution

“RESOLVED AS AN ORDINARY RESOLUTION OF THE HOLDERS OF COMMON SHARES THAT:

 

1.

The Amended and Restated Shareholder Rights Plan Agreement (the “2021 Cenovus Shareholder Rights Plan”) dated as of May 12, 2021 between Cenovus Energy Inc. (the “Corporation”) and Computershare Investor Services Inc. as Rights Agent, and as described in the Corporation’s Management Information Circular dated March 15, 2021 and delivered in advance of the 2021 annual meeting of shareholders, is confirmed and approved.

 

2.

The making on or prior to May 12, 2021 of any revisions to the 2021 Cenovus Shareholder Rights Plan as may be required by the Toronto Stock Exchange or by professional commentators on shareholder rights plans in order to give effect to the foregoing revisions or to conform the 2021 Cenovus Shareholder Rights Plan to versions of shareholder rights plans then prevalent for public reporting issuers in Canada, as may be approved by any two of the Chair of the Board, the Chief Executive Officer, the Executive Vice-President & Chief Financial Officer, the Executive Vice-President & Chief Operating Officer, any Executive Vice-President or a director, is hereby approved.

 

3.

The 2021 Cenovus Shareholder Rights Plan, as amended and restated in accordance with paragraphs 1 and 2 above, be and it is hereby reconfirmed and approved.

 

4.

Any director or officer of the Corporation is authorized and directed for and on behalf of the Corporation (whether under its corporate seal or otherwise) to enter into, to execute and deliver all such instruments, agreements, corollary agreements and documents, including all notices, consents, applications, acknowledgements, certificates and other instruments (herein the “Instruments”) and do, or cause to be done, all such other acts and

 

 

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  things (herein “Acts”) as may be necessary for the purpose of giving effect to the foregoing resolutions or to comply with any Instrument or Act, and such Instruments and Acts authorized and approved by these resolutions shall constitute valid and binding obligations of the Corporation, and the performance by the Corporation under such Instruments and pursuant to such Acts is hereby authorized.”

Unless instructed otherwise, the persons named in the accompanying proxy form intend to vote FOR the 2021 Cenovus Shareholder Rights Plan Resolution.

 

5.

 SHAREHOLDER ADVISORY VOTE ON EXECUTIVE COMPENSATION

Background

The Board believes that shareholders should have the opportunity to receive information to assist them in understanding the objectives, philosophy and principles used in the Corporation’s approach to executive compensation. In 2010, the Board adopted a Shareholder Advisory Vote on Executive Compensation Policy (the “Say on Pay Policy”), a copy of which is available on our website at cenovus.com.

The Say on Pay Policy requires an annual, non-binding advisory vote on the Corporation’s approach to executive compensation, commonly referred to as a “say on pay” advisory vote. The purpose of this advisory vote is for the Board to be accountable for its compensation decisions by giving shareholders a formal opportunity to provide their views on the disclosed objectives of the executive compensation plans and on the plans themselves. In 2020, 96.26 percent of the votes were cast in favour of the Corporation’s approach to executive compensation.

Shareholders will be asked at the Meeting to vote, on an advisory basis, on the acceptance of Cenovus’s approach to executive compensation as set forth in the Compensation Discussion and Analysis section of this Circular. Shareholders are encouraged to carefully review the information set forth in that section before voting on this matter. The Compensation Discussion and Analysis section discusses our compensation philosophy, the objectives of the different elements of our

compensation programs and the way the Board assesses performance and makes decisions regarding compensation matters. It explains how our compensation programs are centered on a pay for performance culture and are aligned with the long-term development strategy of our business in the interest of our shareholders.

As this is an advisory vote, the results will not be binding upon the Board, however, the Board will take the results of the vote into account, as appropriate, when considering future compensation policies, procedures and decisions. The Corporation will disclose the results of the shareholder advisory vote as a part of its report on voting results for the Meeting.

If the advisory resolution is not approved by a majority of the votes cast at the Meeting, the Board will consult with its shareholders (particularly those who are known to have voted against the advisory resolution) to understand their concerns and will review the Board’s approach to compensation in the context of those concerns. Results from the Board’s review, if necessary, will be discussed in the management information circular for the annual meeting of shareholders of Cenovus to be held in 2022. Shareholders may contact the Board to discuss their specific concerns in accordance with the Board Shareholder Communication & Engagement Policy (see Corporate Governance – Our Commitment to Shareholder Engagement for additional information).

Advisory Resolution

The text of the advisory resolution, subject to such amendments, variations or additions as may be approved at the Meeting, is set forth below:

“RESOLVED THAT, ON AN ADVISORY BASIS AND NOT TO DIMINISH THE ROLE AND RESPONSIBILITIES OF THE BOARD OF DIRECTORS of Cenovus Energy Inc. (the “Corporation”), the shareholders accept the Corporation’s approach to executive compensation as disclosed in the Compensation Discussion and Analysis section in the Corporation’s Management Information Circular dated March 15, 2021 and delivered in advance of the 2021 Annual Meeting of Shareholders.”

Unless instructed otherwise, the persons designated in the accompanying proxy form intend to vote FOR the advisory resolution.

 

 

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INFORMATION ON DIRECTOR NOMINEES

 

DIRECTOR NOMINEES

 

 

  Keith M. Casey

 

   

 

LOGO

 

 

 

Director since April 2020

Independent

Age: 54

San Antonio, Texas U.S.

 

Share Ownership:

Common Shares(1): 0

DSUs(2): 35,094

Meets Requirement: Yes

Share Ownership Multiple: 2.8x

 

 

 

Skills and Experience:

 

•   Senior Level Oil & Gas Industry Experience

•   Executive Officer Experience

•   Strategic Planning & Execution

•   Refining

•   Marketing & Transportation

•   Financial, Accounting & Capital Markets

•   Risk Management

•   Human Resources, Compensation & Organizational Management

•   Government & Stakeholder Relations

•   Governance

•   Safety, Environment & Health

 

Mr. Casey is Chief Executive Officer of Tatanka Midstream LLC, a private midstream company. Mr. Casey spent five years with Andeavor Corporation (“Andeavor”), formerly known as Tesoro Corporation, an integrated petroleum refining, logistics, and marketing company. Mr. Casey was Executive Vice-President Commercial and Value Chain of Andeavor, from August 2016 to October 2018, and was responsible for overseeing the integrated commercial value chain focused on maximizing Andeavor’s asset base through its midstream, infrastructure and refining assets. Prior to that, Mr. Casey was Executive Vice-President, Operations of Andeavor from May 2014 to August 2016, and Senior Vice-President, Strategy and Business Development of Andeavor from April 2013 to May 2014.

Prior to joining Andeavor, Mr. Casey was Vice-President with BP Products North America Inc., from 2006 to 2013. Mr. Casey has worked in the refining industry since 1998 and prior to that, he held leadership and operational roles with Praxair Incorporated and Union Carbide Corp.

Mr. Casey served as a director of Andeavor Logistics LP, formerly Tesoro Logistics LP, a publicly traded midstream service company, from April 2014 to April 2015 and has served as a director of a number of private midstream companies.

Mr. Casey holds a Bachelor of Science degree in Metallurgical and Materials Engineering from California Polytechnic State University, San Luis Obispo.

 

 

Board and Board Committee

Memberships

 

2020
Meeting Attendance

 

Board

  9 of 9(3)   100%      

Human Resources and Compensation Committee

  5 of 5(3)   100%      

Safety, Environment, Responsibility and Reserves Committee

  3 of 3(3)   100%      

See Notes to “Information on Director Nominees” on page 22.

 

Voting Results of

2020 Annual Meeting

 

Number Percentage

Votes For:

  993,821,303                     99.87  

Votes Withheld:

  1,270,542         0.13  

 

 

Other Public Company Board /

Committee Memberships

 

 

  Stock      

Exchange    

 

None

 

 

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  Canning K.N. Fok

 

   

 

 

LOGO

 

 

Director since January 2021

Non-Independent(4)

Age: 69

Hong Kong, Special Administrative Region

 

Share Ownership:

Common Shares(1): 200,334

DSUs(2): 15,578

Meets Requirement: Yes

Share Ownership Multiple: N/A(5)

 

 

 

Skills and Experience:

 

•   Senior Level Oil & Gas Industry Experience

•   Executive Officer Experience

•   Strategic Planning & Execution

•   Operational & Resource Development

•   Financial, Accounting & Capital Markets

•   Risk Management

•   Human Resources, Compensation & Organizational Management

•   Government & Stakeholder Relations

•   Governance

•   Safety, Environment & Health

 

Mr. Fok is an Executive Director and Group Co-Managing Director of CK Hutchison Holdings Limited, a publicly traded ports and related services, retail, infrastructure and telecommunications company. Mr. Fok is also Chairman and a Director of Hutchison Telecommunications Hong Kong Holdings Limited, a publicly traded telecommunications services operator; Hutchison Telecommunications (Australia) Limited, a publicly traded telecommunications service provider; Hutchison Port Holdings Management Pte. Limited as the trustee-manager of Hutchison Port Holdings Trust, manager of a publicly traded container port business trust; Power Assets Holdings Limited, a publicly traded global energy investor; HK Electric Investments Manager Limited as the trustee-manager of HK Electric Investments, manager of a publicly traded power industry focused trust; and HK Electric Investments Limited, a publicly traded power industry focused trust. Mr. Fok is also Deputy Chairman and an Executive Director of CK Infrastructure Holdings Limited, a publicly traded global infrastructure investment and development company, and a Non-executive Director of TPG Telecom Limited, a publicly traded telecommunications service provider company. Mr. Fok was Co-Chair of the Board of Husky, a former listed international integrated energy company that was acquired by the Corporation on January 1, 2021 from August 2000 to December 31, 2020 and is currently a Director of Husky. Mr. Fok was also Group Managing Director of Hutchison Whampoa Limited, a former publicly traded investment holdings company, from August 1993 to June 2015.

Mr. Fok holds a Bachelor of Arts degree from St. John’s University, Minnesota and a diploma in Financial Management from the University of New England, Australia. He is a member and fellow of the Chartered Accountants Australia and New Zealand.

 

 

Board and Board Committee

Memberships

 

2020
Meeting Attendance

Board

  N/A(6)   N/A        

 

 

Voting Results of

2020 Annual Meeting

 

Number Percentage

Votes For:

N/A(7) N/A  

Votes Withheld:

N/A(7) N/A  

See Notes to “Information on Director Nominees” on page 22.

 

Other Public Company Board /

Committee Memberships

 

 

Stock
Exchange

 

CK Hutchison Holdings Limited

SEHK

CK Infrastructure Holdings Limited

SEHK

HK Electric Investments Limited (Chair)

        Remuneration Committee

SEHK

Hutchison Port Holdings Management

Pte. Limited as trustee manager of

Hutchison Port Holdings Trust (Chair)

SGX

Hutchison Telecommunications

(Australia) Limited (Chair)

        Governance, Nomination &

        Compensation Committee (Chair)

ASX

Hutchison Telecommunications

Hong Kong Holdings Limited (Chair)

        Nomination Committee

        Remuneration Committee

SEHK

Power Assets Holdings Limited

        Remuneration Committee

SEHK

TPG Telecom Limited

ASX
 

 

Cenovus Energy Inc.   11   2021 Management Information Circular


Table of Contents

- INFORMATION ON DIRECTOR NOMINEES -

 


 

 

  Jane E. Kinney

 

   

 

LOGO

 

 

Director since April 2019

Independent

Age: 63

Toronto, Ontario, Canada

 

Share Ownership:

Common Shares(1): 4,200

DSUs(2): 54,258

Meets Requirement: Yes

Share Ownership Multiple: 3.2x

 

 

 

Skills and Experience:

 

•   Strategic Planning & Execution

•   Financial, Accounting & Capital Markets

•   Risk Management

•   Human Resources, Compensation & Organizational Management

•   Government & Stakeholder Relations

•   Governance

 

Ms. Kinney is a director of Intact Financial Corporation, a publicly traded insurance company, and a director of Nautilus Indemnity (Europe) DAC, a private insurance company. She is a seasoned business leader with over 30 years of experience in providing advisory services to global financial institutions and has extensive experience in enterprise risk management, regulatory compliance, cyber and IT risk management, digital transformation and stakeholder relations. Ms. Kinney spent 25 years with Deloitte LLP Canada (“Deloitte”) and was admitted to the Partnership in 1997. She was appointed Vice Chair, Leadership Team Member of Deloitte in June 2010 and served in this role until her retirement in June 2019. Previous positions with Deloitte include Canadian Managing Partner, Quality & Risk from May 2010 to June 2015, Global Chief Risk Officer from June 2010 to May 2012, and Risk and Regulatory Practice Leader from June 1999 to May 2010. She has also served as a lecturer at the University of Manitoba, Dalhousie University and Saint Mary’s University.

She is a member of the Perimeter Institute for Theoretical Physics, and Chair of the Patron’s Council of the Alzheimer Society of Toronto. Ms. Kinney is former Board Chair of Toronto Finance International and a former member of the board of directors of the Women’s College Hospital Foundation.

Ms. Kinney is a leader of her profession and has been recognized as a Fellow of the Chartered Professional Accountants of Ontario. Ms. Kinney holds a Mathematics degree from the University of Waterloo. In 2013 she was awarded the Math Alumni Achievement Medal from the University of Waterloo and in 2014 was recognized as one of Canada’s Most Powerful Women by the Women’s Executive Network.

 

 

Board and Board Committee

Memberships

 

2020
Meeting Attendance

 

Board

  13 of 13  

100%     

Audit Committee

  5 of 5  

100%     

Safety, Environment,

Responsibility and

Reserves Committee

 
5 of 5
 

100%     

See Notes to “Information on Director Nominees” on page 22.

 

Voting Results of

2020 Annual Meeting

 

Number

Percentage

 

Votes For:

  993,738,644                     99.86  

Votes Withheld:

  1,353,495         0.14  

 

 

Other Public Company Board /

Committee Memberships

 

 

Stock
Exchange

 

Intact Financial Corporation

        Audit Committee (Chair)

        Risk Management Committee

  TSX  
 

 

Cenovus Energy Inc.   12   2021 Management Information Circular


Table of Contents

- INFORMATION ON DIRECTOR NOMINEES -

 

 


 

  Harold (Hal) N. Kvisle

 

 

LOGO

 

 

 

Director since April 2018

Independent

Age: 68

Calgary, Alberta, Canada

 

Share Ownership:

Common Shares(1): 132,000

DSUs(2): 75,601

Meets Requirement: Yes Share Ownership Multiple: 11.6x

 

 

 

Skills and Experience:

 

•   Senior Level Oil & Gas Industry Experience

•   Executive Officer Experience

•   Strategic Planning & Execution

•   Operations & Resource Development

•   Refining

•   Marketing & Transportation

•   Financial, Accounting & Capital Markets

•   Risk Management

•   Human Resources, Compensation & Organizational Management

•   Government & Stakeholder Relations

•   Governance

•   Safety, Environment & Health

 

Mr. Kvisle is a director and Chairman of ARC Resources Ltd., a publicly traded oil and gas company; and a director and Board Chair of Finning International Inc., a publicly traded heavy equipment company. Mr. Kvisle served as a director of Cona Resources Ltd. (“Cona”), a publicly traded heavy oil company, from November 2011 to May 2018 when Cona was acquired by Waterous Energy Fund (May 22, 2018); and as President and Chief Executive Officer of Talisman Energy Inc. (“Talisman”), a publicly traded oil and gas company, from September 2012 to May 2015 and as a director of Talisman from May 2010 to May 2015. From 2001 to 2010, Mr. Kvisle was President and Chief Executive Officer of TransCanada Corporation, now TC Energy Corporation (“TC Energy”), a publicly traded pipeline and power company. Prior to joining TC Energy in 1999, he was the President of Fletcher Challenge Energy Canada Inc. Previously, he held engineering, finance and management positions with Dome Petroleum Limited. Mr. Kvisle has worked in the oil and gas industry since 1975 and in the utilities and power industries since 1999.

Mr. Kvisle is the founding Chair of the Business Council of Alberta, the former Chair of the Interstate Natural Gas Association of America, the former Chair of the Mount Royal College Board of Governors and the former Chair of the Nature Conservancy of Canada.

Mr. Kvisle holds a Bachelor of Science in Engineering degree from the University of Alberta, a Master’s in Business Administration degree from the University of Calgary, an Honorary Bachelor of Arts degree from Mount Royal University and an Honorary Doctor of Laws degree from the University of Calgary.

 

 

Board and Board Committee

Memberships

 

2020
Meeting Attendance

 

Board

  13 of 13   100%      

Audit Committee

  5 of 5   100%      

Nominating and Corporate

Governance Committee

  5 of 5   100%      

See Notes to “Information on Director Nominees” on page 22.

 

 

Voting Results of

2020 Annual Meeting

 

Number

 

Percentage

 

Votes For:

  983,666,932                 98.85  

Votes Withheld:

  11,424,913     1.15  

 

 

Other Public Company Board /

Committee Memberships

 

 

Stock
Exchange

 

ARC Resources Ltd. (Chair)

TSX

Finning International Inc. (Chair)

TSX
 

 

Cenovus Energy Inc.   13   2021 Management Information Circular


Table of Contents

- INFORMATION ON DIRECTOR NOMINEES -

 


 

 

  Eva L. Kwok

 

   

 

LOGO

 

 

Director since January 2021

Independent

Age: 78

Vancouver, British Columbia

 

Share Ownership:

Common Shares(1): 8,012

DSUs(2): 15,578

Meets Requirement: Yes

Share Ownership Multiple: N/A(5)

 

 

 

Skills and Experience:

 

•   Senior Level Oil & Gas Industry Experience

•   Executive Officer Experience

•   Strategic Planning & Execution

•   Risk Management

•   Human Resources, Compensation & Organizational Management

•   Government & Stakeholder Relations

•   Governance

 

Mrs. Kwok is Chairman, a Director and Chief Executive Officer of Amara Holdings Inc., a private investment holding company. Mrs. Kwok is also a Director of CK Life Sciences Int’l., (Holdings) Inc., a publicly traded nutraceutical, pharmaceutical and agriculture-related company; and CK Infrastructure Holdings Limited, a publicly traded global infrastructure investment and development company. Mrs. Kwok has been a Director of Husky, an international integrated energy company, since August 2000.

Mrs. Kwok is also a Director of the Li Ka Shing (Canada) Foundation. Mrs. Kwok holds a Master’s degree in Science from the University of London and received an Honorary Doctor of Laws degree from Royal Roads University, British Columbia.

 

 

Board and Board Committee

Memberships

 

 

2020
Meeting Attendance

 

Board

  N/A(6)   N/A     

Human Resources and Compensation Committee

  N/A(6)   N/A     

Nominating and Corporate Governance Committee

 
N/A(6)
 

N/A     

See Notes to “Information on Director Nominees” on page 22.

 

Voting Results of

2020 Annual Meeting

 

Number

 

    Percentage

 

Votes For:

           N/A (7)                        N/A  

Votes Withheld:

  N/A (7)    N/A  

 

 

Other Public Company Board /

Committee Memberships

 

 

  Stock
  Exchange

 

CK Infrastructure Holdings Limited

        Nomination Committee (Chair)

  SEHK  

CK Life Sciences Int’l (Holdings) Limited

        Remuneration Committee (Chair)

  SEHK
 

 

Cenovus Energy Inc.   14   2021 Management Information Circular


Table of Contents

- INFORMATION ON DIRECTOR NOMINEES -

 

 


 

  Keith A. MacPhail

 

 

LOGO

 

 

 

Director since April 2018

Independent

Age: 64

Calgary, Alberta, Canada

 

Share Ownership:

Common Shares(1): 526,000

DSUs(2): 87,728

Meets Requirement: Yes Share Ownership Multiple: 25.9x

 

 

 

Skills and Experience:

 

•   Senior Level Oil & Gas Industry Experience

•   Executive Officer Experience

•   Strategic Planning & Execution

•   Operations & Resource Development

•   Marketing & Transportation

•   Risk Management

•   Human Resources, Compensation & Organizational Management

•   Government & Stakeholder Relations

•   Governance

•   Safety, Environment & Health

 

Mr. MacPhail is a director of NuVista Energy Ltd. (“NuVista”), a publicly traded oil and gas company. Mr. MacPhail served as Chairman of NuVista from July 2003 to May 2020. He also served as a director of Bonavista Energy Corporation, formerly Bonavista Petroleum Ltd. (“Bonavista”) from November 1997 to August 2020; Chairman from March 2012 to August 2020; Executive Chairman from 2012 to 2018; Chairman and Chief Executive Officer from 2008 to 2012; and as President and Chief Executive Officer from 1997 to 2008. Prior to joining Bonavista in 1997, Mr. MacPhail held progressively more responsible positions with Canadian Natural Resources Limited, with his final position being Executive Vice President and Chief Operating Officer. Previously, he held the position of Production Manager with Poco Petroleums Ltd.

Mr. MacPhail holds a Bachelor of Science (Honours) degree in Petroleum Engineering from the Montana College of Mineral Science and is a member of the Association of Professional Engineers and Geoscientists of Alberta. Mr. MacPhail was appointed as a Member of the Order of Canada on June 27, 2019.

 

 

Board and Board Committee

Memberships

 

2020
Meeting Attendance

 

Board

  12 of 13(8)   92%        

Human Resources and
Compensation Committee

  2 of 2(9)   100%        

Safety, Environment,

Responsibility and

Reserves Committee

  2 of 2(9)   100%        

See Notes to “Information on Director Nominees” on page 22.

 

 

Voting Results of

2020 Annual Meeting

 

    Number    

 

  Percentage  

 

Votes For:

  985,226,671             99.01  

Votes Withheld:

  9,865,174         0.99  

 

 

Other Public Company Board /

Committee Memberships

 

 

Stock
Exchange

 

NuVista Energy Ltd.

        Reserves Committee

        Compensation & Governance Committee

TSX
 

 

Cenovus Energy Inc.   15   2021 Management Information Circular


Table of Contents

- INFORMATION ON DIRECTOR NOMINEES -

 


 

 

  Richard J. Marcogliese

 

   

 

LOGO

 

 

Director since April 2016

Independent

Age: 68

Alamo, California, U.S.

 

Share Ownership:

Common Shares(1): 60,000

DSUs(2): 109,759

Meets Requirement: Yes Share Ownership Multiple: 9.2x

 

  

 

Skills and Experience:

 

•   Senior Level Oil & Gas Industry Experience

•   Executive Officer Experience

•   Strategic Planning & Execution

•   Operations & Resource Development

•   Refining

•   Financial, Accounting & Capital Markets

•   Risk Management

•   Human Resources, Compensation & Organizational Management

•   Government & Stakeholder Relations

•   Governance

•   Safety, Environment & Health

 

Mr. Marcogliese is the Principal of iRefine, LLC, a privately owned petroleum refining consulting company and a director of Delek US Holdings, Inc., a publicly traded downstream energy company. Mr. Marcogliese served as Executive Advisor of Pilko & Associates L.P., a private chemical and energy advisory company from June 2011 to December 2019; Operations Advisor to NTR Partners III LLC, a private investment company from October 2013 to December 2017; and from September 2012 to January 2016, as Operations Advisor to the Chief Executive Officer of Philadelphia Energy Solutions, a partnership between The Carlyle Group and a subsidiary of Energy Transfer Partners, L.P. that operated an oil refining complex on the U.S. Eastern seaboard. His more than 40-year career in the U.S. refining industry also includes over 25 years with Exxon Mobil Corporation (“Exxon”). In 2000, he joined Valero Energy Corporation (“Valero”), a publicly traded international manufacturer and marketer of transportation fuels, petrochemical products and power, as a result of an acquisition from Exxon, at which point he led an organizational transition from a major integrated oil company business model to Valero’s independent refiner business model. Mr. Marcogliese held increasingly senior positions with Valero including Senior Vice President of Strategic Planning in 2001, Senior Vice President of Refining Operations from October 2001 to November 2005 and Executive Vice President, Operations of Valero from December 2005 to October 2007. He served as Executive Vice President and Chief Operating Officer of Valero from October 2007 to December 2010 during which time he was responsible for the operation of Valero’s North American refinery system which processed three million barrels of oil per day.

Mr. Marcogliese is a past Chairman of the Western States Petroleum Association and holds a Bachelor of Engineering degree in Chemical Engineering from the New York University School of Engineering and Science.

 

Board and Board Committee

Memberships

2020
Meeting Attendance

Board

  13 of 13  

100%     

Human Resources and Compensation Committee

  7 of 7  

100%     

Safety, Environment,

Responsibility and

Reserves Committee (Chair)(10)

  5 of 5  

100%     

See Notes to “Information on Director Nominees” on page 22.

 

Voting Results of

2020 Annual Meeting

 

    Number    

 

  Percentage  

 

Votes For:

  993,106,818                 99.80  

Votes Withheld:

  1,985,178         0.20  

 

 

Other Public Company Board /

Committee Memberships

 

 

Stock
Exchange

 

Delek US Holdings, Inc.

      Audit Committee

      Compensation Committee

      Environmental, Health and Safety

      Committee (Chair)

NYSE
 

 

Cenovus Energy Inc.   16   2021 Management Information Circular


Table of Contents

- INFORMATION ON DIRECTOR NOMINEES -

 

 


 

  Claude Mongeau

 

   

 

LOGO

 

 

Director since December 2016

Independent

Age: 59

Montreal, Quebec, Canada

 

Share Ownership:

Common Shares(1): 261,495

DSUs(2): 109,967

Meets Requirement: Yes

Share Ownership Multiple: 18.8x

 

 

 

Skills and Experience:

 

•   Executive Officer Experience

•   Strategic Planning & Execution

•   Marketing & Transportation

•   Financial, Accounting & Capital Markets

•   Risk Management

•   Human Resources, Compensation & Organizational Management

•   Government & Stakeholder Relations

•   Governance

•   Safety, Environment & Health

 

 

Mr. Mongeau is a director of The Toronto-Dominion Bank, an international financial institution, and Norfolk Southern Corporation, a publicly traded North American rail transportation provider. He served as a director of TELUS Corporation, a publicly traded telecommunications company, from May 2017 to August 2019. He also served as a director of Canadian National Railway Company (“CN”), a publicly traded railroad and transportation company, from October 2009 to July 2016 and as President and Chief Executive Officer from January 2010 to June 2016. During his tenure with CN, he served as Executive Vice-President and Chief Financial Officer from October 2000 until December 2009 and from the time he joined CN in 1994 he held the titles of Vice-President, Strategic and Financial Planning and Assistant Vice-President, Corporate Development. Prior to joining CN, Mr. Mongeau was the Manager, Business Development for Imasco Inc. from 1993 to 1994, a partner with Groupe Secor Inc., a Montreal-based management consulting firm providing strategic advice to large Canadian corporations, from 1989 to 1993, and a consultant at Bain & Company from 1988 to 1989. Mr. Mongeau also served as a director of SNC-Lavalin Group Inc. from August 2003 to May 2015 and as a director of Nortel Networks Corporation and Nortel Networks Limited from June 2006 to August 2009.

Mr. Mongeau was Chairman of the Board of the Railway Association of Canada. He was named one of Canada’s Top 40 under 40 in 1997 and selected as Canada’s CFO of the Year in 2005 by an independent committee of prominent Canadian business leaders. Mr. Mongeau holds a Master of Business Administration degree from McGill University and has received honorary doctoral degrees from St. Mary’s and Windsor University.

 

 

Board and Board Committee

Memberships

 

2020

Meeting Attendance

 

Board

  13 of 13        100%       

Audit Committee (Chair)

  5 of 5        100%       

Safety, Environment,

Responsibility and

Reserves Committee

  4 of 5(11)   80%       

See Notes to “Information on Director Nominees” on page 22.

 

Voting Results of

2020 Annual Meeting

 

    Number    

 

  Percentage  

 

Votes For:

  991,665,966                 99.66  

Votes Withheld:

  3,426,247         0.34  

 

 

Other Public Company Board /

Committee Memberships

 

 

Stock
Exchange

 

Norfolk Southern Corporation

        Compensation Committee

        Finance and Risk

        Management Committee

        Safety Committee

  NYSE

The Toronto-Dominion Bank

        Audit Committee

  TSX, NYSE
 

 

Cenovus Energy Inc.   17   2021 Management Information Circular


Table of Contents

- INFORMATION ON DIRECTOR NOMINEES -

 


 

 

  Alexander J. Pourbaix

 

 

 

LOGO

 

 

Director since November 2017

Non-Independent, Management(12)

Age: 55

Calgary, Alberta, Canada

 

Share Ownership:

Common Shares(1)(13): 710,997

DSUs(2): 74,651

Meets Requirement: Yes

Share Ownership Multiple: 9.96x(14)

 

 

 

Skills and Experience:

 

•   Senior Level Oil & Gas Industry Experience

•   Executive Officer Experience

•   Strategic Planning & Execution

•   Marketing & Transportation

•   Financial, Accounting & Capital Markets

•   Risk Management

•   Human Resources, Compensation & Organizational Management

•   Government & Stakeholder Relations

•   Safety, Environment & Health

 

Mr. Pourbaix has served as President & Chief Executive Officer of Cenovus since November 6, 2017. Prior to leading Cenovus, Mr. Pourbaix spent 27 years with TC Energy and its affiliates in a broad range of leadership roles, including Chief Operating Officer from October 2015 to April 2017, during which time he was responsible for the company’s commercial activity and overseeing major energy infrastructure projects and operations. Prior to his role as Chief Operating Officer, Mr. Pourbaix held increasingly senior positions with TC Energy including Executive Vice-President and President, Development from March 2014 to September 2015, when he was responsible for leadership and execution of all of TC Energy’s growth initiatives; President, Energy & Oil Pipelines from July 2010 to February 2014; and President, Energy from July 2006 to June 2010. During his tenure at TC Energy, he gained extensive experience in corporate strategy, business development, mergers, acquisitions and divestitures, as well as stakeholder relations. Mr. Pourbaix was appointed a director of Canadian Utilities Limited, a publicly traded diversified global energy infrastructure corporation, on November 1, 2019 and was a director of Trican Well Service Ltd., a publicly traded oilfield services provider, from May 2012 until December 31, 2019.

Mr. Pourbaix is Chair of the Board of Governors of the Canadian Association of Petroleum Producers and of the Mount Royal University Board of Governors, a director of the Business Council of Canada, a member of the Business Council of Alberta and previous Chair of the Board of Directors for the Canadian Energy Pipeline Association. Mr. Pourbaix holds a Bachelor of Law degree and a Bachelor of Arts degree from the University of Alberta.

Mr. Pourbaix is not an independent director of the Board due to his position as President & Chief Executive Officer of Cenovus.

 

 

Board and Board Committee

Memberships(15)

 

2020
Meeting Attendance

 

Board

  13 of 13 100%    

See Notes to “Information on Director Nominees” on page 22.

 

Voting Results of

2020 Annual Meeting

 

    Number    

 

  Percentage  

 

Votes For:

  992,058,033                 99.70  

Votes Withheld:

  3,033,812         0.30  

 

 

Other Public Company Board /

Committee Memberships

 

 

Stock  
Exchange  

 

Canadian Utilities Limited

Strategic Operations Council

  TSX
 

 

Cenovus Energy Inc.   18   2021 Management Information Circular


Table of Contents

- INFORMATION ON DIRECTOR NOMINEES -

 

 


 

  Wayne E. Shaw

 

   

 

LOGO

 

 

 

Director since January 2021

Independent

Age: 76

Toronto, Ontario

 

Share Ownership:

Common Shares(1): 12,821

DSUs(2): 15,578

Meets Requirement: Yes

Share Ownership Multiple: N/A(5)

 

 

 

Skills and Experience:

 

•   Strategic Planning & Execution

•   Risk Management

•   Government & Stakeholder Relations

•   Safety, Environment & Health

 

Mr. Shaw has served as the President of G.E. Shaw Investments Limited, a private investment holding company, since 2012, and serves on the board of directors of a number of private companies. Mr. Shaw has been a Director of Husky, an international integrated energy company, since August 2000. Prior to Mr. Shaw’s retirement in April 2013, he was a Senior Partner with Stikeman Elliott LLP, Barristers and Solicitors.

Mr. Shaw is also a Director of the Li Ka Shing (Canada) Foundation. Mr. Shaw holds a Bachelor of Arts degree and a Bachelor of Laws degree, both from the University of Alberta. He is a member of the Law Society of Ontario.

 

 

Board and Board Committee

Memberships

 

2020
Meeting Attendance

 

Board

  N/A(6)   N/A      

Audit Committee

  N/A(6)   N/A      

Safety, Environment,

Responsibility and

Reserves Committee

  N/A(6)  



N/A      

See Notes to “Information on Director Nominees” on page 22.

 

Voting Results of

2020 Annual Meeting

 

Number

 

  Percentage  

 

Votes For:

N/A(7)           N/A  

Votes Withheld:

N/A(7)   N/A  

 

 

Other Public Company Board /

Committee Memberships

 

 

Stock
Exchange

 

None

 

 

Cenovus Energy Inc.   19   2021 Management Information Circular


Table of Contents

- INFORMATION ON DIRECTOR NOMINEES -

 


 

 

  Frank J. Sixt

 

   

 

LOGO

 

 

Director since January 2021

Non-Independent(4)

Age: 69

Hong Kong, Special Administrative Region

 

Share Ownership:

Common Shares(1): 55,064

DSUs(2): 15,578

Meets Requirement: Yes

Share Ownership Multiple: N/A(5)

 

 

 

Skills and Experience:

 

•   Senior Level Oil & Gas Industry Experience

•   Executive Officer Experience

•   Strategic Planning & Execution

•   Operational & Resource Development

•   Financial, Accounting & Capital Markets

•   Risk Management

•   Human Resources, Compensation & Organizational Management

•   Government & Stakeholder Relations

•   Governance

•   Safety, Environment & Health

Mr. Sixt is the Non-executive Chairman of TOM Group Limited, a publicly traded technology and media company. Mr. Sixt is also an Executive Director, Group Finance Director and Deputy Managing Director of CK Hutchison Holdings Limited, a publicly traded ports and related services, retail, infrastructure and telecommunications company; a Director of CK Infrastructure Holdings Limited (formerly known as Cheung Kong Infrastructure Holdings Limited), a publicly traded global infrastructure investment and development company; a Director of TPG Telecom Limited and of Hutchison Telecommunications (Australia) Limited (“HTAL”), both publicly traded telecommunications service provider companies; an Alternate Director to a Director of HTAL, of HK Electric Investments Manager Limited as the trustee-manager of HK Electric Investments, manager of a publicly traded power industry focused trust; and of HK Electric Investments Limited, a publicly traded power industry focused trust and he serves on the board of directors of a number of private companies. Mr. Sixt has been a Director of Husky, an international integrated energy company, since August 2000. Mr. Sixt was also Group Finance Director of Hutchison Whampoa Limited, a former publicly traded investment holdings company, from January 1998 to June 2015.

Mr. Sixt is a Director of the Li Ka Shing (Canada) Foundation and a Director of the Li Ka Shing Foundation Limited. He holds a Master’s degree in Arts from McGill University and a Bachelor’s degree in Civil Law from Université de Montréal. He is a member of the Bar and of the Law Society of the Provinces of Québec and Ontario, Canada.

 

 

Board and Board Committee

Memberships

 

 

2020
Meeting Attendance

 

Board

N/A(6) N/A   

Nominating and Corporate Governance Committee

N/A(6) N/A   

See Notes to “Information on Director Nominees” on page 22.

 

Voting Results of

2020 Annual Meeting

 

Number

 

  Percentage  

 

Votes For:

N/A(7)           N/A  

Votes Withheld:

N/A(7)   N/A  

 

 

Other Public Company Board /

Committee Memberships

 

 

Stock
Exchange

 

CK Hutchison Holdings Limited

        Sustainability Committee (Chair)

SEHK

CK Infrastructure Holdings Limited

SEHK

HK Electric Investments Limited

SEHK

Hutchison Telecommunications (Australia) Limited

        Audit & Risk Committee

ASX

TOM Group Limited (Chair)

        Remuneration Committee

SEHK

TPG Telecom Limited

        Governance, Remuneration &

        Nomination Committee

ASX
 

 

Cenovus Energy Inc.   20   2021 Management Information Circular


Table of Contents

- INFORMATION ON DIRECTOR NOMINEES -

 

 


 

  Rhonda I. Zygocki

 

 

 

LOGO

  

 

Director since April 2016

Independent

Age: 63

Friday Harbor, Washington, U.S.

 

Share Ownership:

Common Shares(1): 40,034

DSUs(2): 110,255

Meets Requirement: Yes

Share Ownership Multiple: 7.9x

 

 

 

Skills and Experience:

 

•   Senior Level Oil & Gas Industry Experience

•   Executive Officer Experience

•   Strategic Planning & Execution

•   Operations & Resource Development

•   Financial, Accounting & Capital Markets

•   Risk Management

•   Human Resources, Compensation & Organizational Management

•   Government & Stakeholder Relations

•   Governance

•   Safety, Environment & Health

 

 

Ms. Zygocki spent 34 years with Chevron Corporation (“Chevron”), a publicly traded integrated energy company, including as Executive Vice President, Policy and Planning from March 2011 until her retirement in February 2015. In this role, she was responsible for global corporate functions overseeing strategy and planning, policy, government and public affairs, health, environment and safety, real estate and technology ventures, and served as Secretary to the Public Policy Committee of the board of directors. Prior to that, she held a number of senior management and executive leadership positions in international operations, public affairs, strategic planning, policy, government affairs and health, environment and safety, including Vice President, Policy, Government and Public Affairs from May 2007 to March 2011 and Vice President, Health, Environment and Safety from April 2003 to May 2007. During her tenure with Chevron, Ms. Zygocki represented Chevron in high profile external engagements on topics covering climate change policy, responsible development, shale gas and hydraulic fracturing, global gas flaring reduction, energy policy, corporate responsibility, public-private partnerships, development in Africa and the fight against HIV/AIDS.

She is a former advisory board member of the Woodrow Wilson International Center of Scholars Canada Institute and a past Management Committee Chair of the International Association of Oil and Gas Producers. Ms. Zygocki graduated from Memorial University of Newfoundland with a Bachelor’s degree in Civil Engineering. In 2014, she was named by the National Diversity Council as one of the Top 50 Most Powerful Women in Oil and Gas. In 2015, she received the Award for Leadership Development from the Washington, D.C. chapter of the Society of International Development.

 

 

Board and Board Committee

Memberships

 

2020

Meeting Attendance

 

Board

  13 of 13 100%     

Human Resources and
Compensation Committee (Chair)

  7 of 7 100%     

Nominating and Corporate
Governance Committee

  5 of 5 100%     

See Notes to “Information on Director Nominees” on page 22.

 

Voting Results of

2020 Annual Meeting

Number Percentage    

Votes For:

  990,486,607 99.54      

Votes Withheld:

  4,605,617 0.46      

 

 

Other Public Company Board /

Committee Memberships

Stock
Exchange

None

 

 

 

Cenovus Energy Inc.   21   2021 Management Information Circular


Table of Contents

- INFORMATION ON DIRECTOR NOMINEES -

 


 

Notes to “Information on Director Nominees”:

 

(1)

Common Shares refers to the number of Common Shares, excluding fractional Common Shares, beneficially owned, or controlled or directed, directly or indirectly, by the nominee (and the nominee’s associates or affiliates, if applicable) as at March 15, 2021.

 

(2)

Deferred Share Units (“DSUs”) are not voting securities. See the Director Compensation section of this Circular for a description of DSUs. The number of DSUs is reported for each nominee as at March 15, 2021, including dividend equivalents earned, but excluding fractional units. DSUs held by Mr. Pourbaix were attained as an officer of Cenovus and not in his role as a director. On August 4, 2021, following his April 29, 2020 election to the Board and expiry of a trading blackout, Mr. Casey received an award of DSUs with a grant date fair value of $120,000, based on the volume weighted average trading price of the Common Shares on the Toronto Stock Exchange (“TSX”) of $6.3103, which converted to approximately 14,262 DSUs. On January 1, 2021 in connection with the Husky transaction, Messrs. Fok, Shaw and Sixt and Mrs. Kwok were appointed to the Board and received an award of DSUs with a grant date fair value of $120,000, based on the volume weighted average trading price of the Common Shares on the TSX of $7.7031, which converted to approximately 15,578 DSUs.

 

(3)

Mr. Casey was elected as a director on April 29, 2020 and was appointed as a member of the Human Resources and Compensation Committee (“HRC Committee”) and Safety, Environment, Responsibility and Reserves Committee (“SERR Committee”) as of the same date.

 

(4)

Based on input from Messrs. Fok and Sixt, the Board determined that they are not independent.

 

(5)

Messrs. Fok, Shaw and Sixt and Mrs. Kwok were appointed on January 1, 2021, and none received director compensation from Cenovus in 2020. Compliance with Cenovus director share ownership is determined using a multiple of each director’s total compensation received from the Corporation for the most recently completed year ended December 31.

 

(6)

This section is not applicable because Messrs. Fok, Shaw and Sixt and Mrs. Kwok became members of the Board on January 1, 2021.

 

(7)

This section is not applicable because Messrs. Fok, Shaw and Sixt and Mrs. Kwok were not nominees elected at the 2020 annual meeting of shareholders.

 

(8)

Mr. MacPhail was unable to attend a Board meeting on November 10, 2020 due to a scheduling conflict.

 

(9)

Mr. MacPhail was a member of the HRC Committee and the SERR Committee until April 28, 2020. On April 29, 2020, Mr. MacPhail became Board Chair and an ex officio member of each standing committee of the Board.

 

(10)

Mr. Marcogliese became Chair of the SERR Committee on April 29, 2020 following Mr. Thomson’s retirement from the Board.

 

(11)

Mr. Mongeau was unable to attend a meeting of the SERR Committee on October 28, 2020 due to a prior business commitment.

 

(12)

See the Compensation Discussion and Analysis section of this Circular for detailed information relating to Mr. Pourbaix’s compensation as an officer of Cenovus.

 

(13)

Does not include Common Shares acquired since December 31, 2020 by Mr. Pourbaix as a result of Cenovus matching of personal contributions pursuant to the Corporation’s investment plan.

 

(14)

As a member of Management, Mr. Pourbaix complies with the share ownership guidelines for Cenovus’s executives. See the heading Executive Share Ownership Status in the Compensation Discussion and Analysis section for detailed information relating to Mr. Pourbaix’s share ownership multiple.

 

(15)

As a member of Management, Mr. Pourbaix does not serve on any standing committee of the Board.

CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS

To our knowledge, none of our proposed directors are, as at the date of this Circular, or have been, within 10 years prior to the date of this Circular, a director, chief executive officer or chief financial officer of any company that:

 

(a)

was subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation, that was in effect for a period of more than 30 consecutive days (collectively, an “Order”) and that was issued while the proposed director was acting in the capacity as director, chief executive officer or chief financial officer; or

 

(b)

was subject to an Order that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer of the company being the subject of such an Order and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.

To our knowledge, none of our proposed directors:

 

(a)

is, as at the date of this Circular, or has been within 10 years prior to the date of this Circular, a director or executive officer of any company that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or

 

(b)

has, within 10 years prior to the date of this Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the proposed director.

To our knowledge, none of our proposed directors have been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (b) any other penalty or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for a proposed director.

 

Cenovus Energy Inc.   22   2021 Management Information Circular


Table of Contents

 

CORPORATE GOVERNANCE

 

 

The Board recognizes that corporate governance is important to positioning long-term shareholder value. The Board is committed to attaining the highest standards of corporate governance and has designed systems to ensure the interests of Cenovus shareholders are protected. The Board monitors Canadian and U.S. developments affecting corporate governance, accountability and transparency of public company disclosure while continually assessing and updating its systems in response to changing practices, expectations and legal requirements.

Our corporate governance practices reflect rules and guidelines adopted by the Canadian Securities Administrators (the “CSA”) and the U.S. Securities and Exchange Commission (the “SEC”), including applicable rules adopted by the SEC to give effect to the provisions of the Sarbanes-Oxley Act of 2002. The corporate governance rules of the New York Stock Exchange (the “NYSE”) are generally not applicable to non-U.S. companies; however, we are required pursuant to section 303.A.11 (Foreign Private Issuer Disclosure) of the NYSE Listed Company Manual to disclose the significant differences between our corporate governance practices and the requirements applicable to U.S. companies listed on the NYSE under NYSE corporate governance standards. Except as summarized on our website at cenovus.com, we are in compliance with the NYSE corporate governance standards in all significant respects.

Our approach to corporate governance meets or exceeds the practices enunciated under CSA National Policy 58-201 Corporate Governance Guidelines. This approach has been approved by the Board, on the recommendation of the NCG Committee, and is based on National Instrument 58-101 Disclosure of Corporate Governance Practices (“NI 58-101”). Also included

are statements with respect to applicable SEC rules, reflecting certain provisions of the Sarbanes-Oxley Act of 2002, NYSE rules and Canadian rules relating to audit committees pursuant to National Instrument 52-110 Audit Committees. See Schedule B – Corporate Governance for more information on our approach to Corporate Governance at Cenovus.

OUR COMMITMENT TO SHAREHOLDER ENGAGEMENT

Our Board Shareholder Communication & Engagement Policy (the “Engagement Policy”) is designed to further the Board’s commitment to facilitate communication and engagement with our shareholders. The Engagement Policy describes the Board’s approach to shareholder engagement and provides information on how interested shareholders can contact our Board.

Cenovus understands and values the importance of meaningful engagement with shareholders. Transparency and informed dialogue with our shareholders assists our Board in leading the Corporation. Since 2017 our Board has actively engaged with shareholders to ensure further alignment of interests and goals.

Due to the COVID-19 pandemic and the focus on completing the Husky transaction, the Board’s regular shareholder engagement sessions were deferred in 2020.

Shareholders and other interested parties can communicate directly with any director, including our Board Chair, at the following address:

c/o Board of Directors

Cenovus Energy Inc.

225 – 6 Avenue S.W.

P.O. Box 766,

Calgary, Alberta, Canada, T2P 0M5

 

 

Below are highlights of our communications and external engagement activities.

 

Shareholder Engagement Policy   Cenovus has adopted the Engagement Policy to reinforce our commitment to meaningful communication and engagement with our shareholders. The policy is available on our website at cenovus.com.
Conference Calls with Investment Community   Management engaged in quarterly conference calls and webcasts with the investment community to review financial and operating results. Webcasts and presentations are available at cenovus.com.
Management Shareholder/Investor Engagement Program   Management held numerous virtual meetings and conference calls with shareholders, noteholders and other investors over the course of the year.

 

 

Cenovus Energy Inc.   23   2021 Management Information Circular


Table of Contents

 

DIRECTOR COMPENSATION

 

 

PHILOSOPHY

Cenovus’s non-employee director compensation is designed to attract individuals with the qualities, expertise and industry experience necessary to function as effective stewards of the Corporation, to reflect the time commitment and responsibilities assumed when serving on our Board and the committees of the Board (the “Committees”), and to align directors’ interests with shareholders.

GOVERNANCE

The NCG Committee is responsible for reviewing and making recommendations to the Board regarding the non-employee director compensation program and non-employee directors’ minimum share ownership guidelines.

When reviewing Board compensation, the NCG Committee engages an independent compensation consultant to benchmark director compensation relative to the Executive Compensation Peer Group (as defined in the Compensation Discussion and Analysis section of this Circular), and to provide information on Board compensation governance and best practice trends. Advice, peer data and other information and recommendations received from the independent compensation consultant, as well as recommendations and materials provided by Management, are factors considered by the NCG Committee in formulating recommendations to the Board in addition to the discretion of the NCG Committee and the Board.

OVERVIEW

In 2018, the Corporation implemented a flat fee structure for our non-employee director compensation program. This structure eliminates meeting fees and shifts the annual DSU grant from a fixed number of DSUs to a number of DSUs based on a fixed target grant date value (see Director Deferred Share Unit Plan for additional information). The program is intended to promote the objectivity of directors as stewards of the Corporation and was targeted in a lower range relative to the Executive Compensation Peer Group.

The total compensation package for non-employee directors consists of an annual equity-based award with a fixed target grant date value for the allocation of DSUs (which may only be redeemed upon the departure of the director from Cenovus), annual retainers and travel fees, where applicable.

The changes to the non-employee director compensation program were designed to: (i) reduce the variability of directors’ fees; (ii) promote objectivity and independence; (iii) reflect the expected time commitment of directors; and

(iv) enhance alignment of director compensation with the interests of shareholders.

The President & Chief Executive Officer does not receive compensation for serving as a director of Cenovus. For information regarding the compensation received by Mr. Pourbaix, refer to the Compensation Discussion and Analysis.

Effective May 1, 2020, the Board approved a 25 percent reduction in director compensation, in alignment with the Corporation-wide implemented rollbacks on employee base salary in excess of $100,000, to demonstrate commitment to ensuring the Corporation’s resiliency through the economic downturn. Full director compensation was reinstated on November 1, 2020, when all employee base salary rollbacks were lifted given the improvement of oil prices.

Director Deferred Share Unit Plan

Each non-employee director is provided an annual grant of DSUs under the Corporation’s Deferred Share Unit Plan for Directors (“DSU Plan”). DSUs are entirely cash-based bookkeeping entries on the books of the Corporation, the grant date notional value of which is based on the volume weighted average trading price of a Common Share on the Toronto Stock Exchange (“TSX”) over the last five trading days immediately preceding the grant date (the “Market Value”). Dividend equivalents are credited, in the form of additional DSUs, consistent with dividends declared on Common Shares. Newly appointed or elected directors receive an initial grant of DSUs upon joining the Board. Non-employee directors also have the option to elect to receive all or a portion of their regular remuneration (retainers, meeting fees and travel fees, special remuneration being any special project fees and any ad hoc or special independent Board Committee) in the form of DSUs.

DSUs vest immediately when they are credited to the director’s account but may be redeemed only upon the departure of the director from Cenovus (resignation, termination or retirement). When a director departs, DSUs held by the departing director must be redeemed by December 15 of the first calendar year following the year of departure from the Board. Special rules apply in respect of directors who are United States taxpayers or where the U.S. Internal Revenue Code of 1986, as amended, is applicable. The value of DSUs that may be redeemed is equal to the number of DSUs in the director’s account on the date of redemption multiplied by the Market Value immediately prior to the date of redemption. This amount is paid to the director in cash subject to any applicable tax and other withholdings.

 

 

Cenovus Energy Inc.   24   2021 Management Information Circular


Table of Contents

- DIRECTOR COMPENSATION -

 

 


Director Compensation Structure

The following table sets out the compensation structure for our non-employee directors:

 

 

Board Chair(1)

 

 

 

Annual Retainer(2)

 

$ 190,000

 

Annual DSU Award(3)

 

$ 140,000

 

Non-employee Directors (excluding Board Chair)

 

 

 

Annual Retainer(2)

 

$ 70,000

 

Annual DSU Award(3)

 

$ 120,000

 

Annual Committee Chair Retainers(2)(4)

 

 

Audit Committee Chair

 

$ 25,000

 

Human Resources and Compensation Committee Chair

 

$ 15,000

 

Nominating and Corporate Governance Committee Chair

 

$ 10,000

 

Other Committee Chairs (each)

 

$ 12,500

 

Annual Committee Member Retainer(2)

 

$ 5,000

 

All Non-employee Directors (where applicable)

 

 

 

Travel fee (per instance)(5)

 

$ 1,500

Notes:

(1)

As an ex officio non-voting member of each of the Committees, the Board Chair does not receive any Committee Member Retainer.

(2)

Annual retainers are pro-rated for periods of partial service.

(3)

Each director shall, in accordance with the DSU Plan, receive an annual equity-based award value in the form of DSUs.

(4)

There is no separate Committee Member Retainer paid when the Committee member is the Committee Chair.

(5)

A travel fee of $1,500 is paid for each Board or Committee meeting where a director travels outside of the province or state of his or her normal residence, or outside the country of his or her normal residence in the case of a director who is not normally resident in either Canada or the U.S., to attend at the location of a meeting of the Board or a committee of the Board.

Director Compensation Table

The following table summarizes the total compensation provided to our non-employee directors for the year ended December 31, 2020.

 

Name

 

     Fees
     Earned
     ($)

 

 

     Share-based
     Awards
     ($)

 

     Total(4)
     ($)

 

 

Keith A. MacPhail (Board Chair)(1)

 

 

 

130,202

 

 

 

 

120,000

 

 

 

 

250,202

 

 

 

Patrick D. Daniel (Retired Board Chair)(2)

 

 

 

62,115

 

 

 

 

140,000

 

 

 

 

202,115

 

 

 

Keith M. Casey(3)

 

 

 

43,810

 

 

 

 

90,000

 

 

 

 

133,810

 

 

 

Susan F. Dabarno

 

 

 

71,463

 

 

 

 

120,000

 

 

 

 

191,463

 

 

 

Jane E. Kinney

 

 

 

71,463

 

 

 

 

120,000

 

 

 

 

191,463

 

 

 

Harold N. Kvisle

 

 

 

69,963

 

 

 

 

120,000

 

 

 

 

189,963

 

 

 

Steven F. Leer

 

 

 

74,336

 

 

 

 

120,000

 

 

 

 

194,336

 

 

 

M. George Lewis

 

 

 

69,963

 

 

 

 

120,000

 

 

 

 

189,963

 

 

 

Richard J. Marcogliese

 

 

 

75,570

 

 

 

 

120,000

 

 

 

 

195,570

 

 

 

Claude Mongeau

 

 

 

88,955

 

 

 

 

120,000

 

 

 

 

208,955

 

 

 

Wayne G. Thomson(2)

 

 

 

28,248

 

 

 

 

120,000

 

 

 

 

148,248

 

 

 

Rhonda I. Zygocki

 

 

 

80,209

 

 

 

 

120,000

 

 

 

 

200,209

 

 

 

Total:

 

 

 

866,297

 

 

 

 

1,430,000

 

 

 

 

2,296,297

 

 

Notes:

(1)

Mr. MacPhail was appointed Board Chair on April 29, 2020. Mr. MacPhail’s fees prior to and following his Board Chair appointment have been pro-rated accordingly.

(2)

Messrs. Daniel and Thomson retired from the Board on April 29, 2020.

(3)

Mr. Casey was first elected as a director on April 29, 2020. His initial Annual DSU Award reflects the 25 percent reduction in director compensation as his grant date was made during the 25 percent reduction in director compensation for the period May 1, 2020 to October 31, 2020.

(4)

Reflects actual total compensation received by each director, reflecting the 25 percent reduction in director compensation for the period May 1, 2020 to October 31, 2020.

 

Cenovus Energy Inc.   25   2021 Management Information Circular


Table of Contents

- DIRECTOR COMPENSATION -

 


 

Director Detailed Fees

 

Below is a detailed breakdown of the fees earned by our non-employee directors for the year ended December 31, 2020, excluding share-based awards (i.e. the annual award of DSUs). A significant portion of our non-employee directors’ total compensation was elected by directors to be received in the form of DSUs, enhancing alignment of director interests with shareholders. See Board Committees in our Corporate Governance section of this Circular, attached as Schedule B, for additional information on Board Committee membership.

  LOGO

 

Name

 

 

  Board

  Retainer

  Fees

  ($)

 

Committee

Chair

Retainer

Fees

($)

 

 

Committee

Member

Retainer

Fees

($)

 

Travel

Fees

($)

 

  Total

  Fees

  Earned(1)

  ($)

 

  Fees

  Taken
  in DSUs

  ($)

 

  Fees

  Taken
  in DSUs

  (%)

 

    Fees

    Taken
    in Cash

    ($)

 

Fees

Taken
in Cash

(%)

 

Keith A. MacPhail (Board Chair)(2)

 

 

 

126,933

 

 

 

 

 

 

 

 

3,269

 

 

 

 

 

 

 

 

130,202

 

 

 

 

130,202

 

 

 

 

100

 

 

 

 

 

 

 

 

 

 

Patrick D. Daniel (Retired Board Chair)(3)

 

 

 

62,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62,115

 

 

 

 

62,115

 

 

 

 

100

 

 

 

 

 

 

 

 

 

 

Keith M. Casey(4)

 

 

 

38,334

 

 

 

 

 

 

 

 

5,476

 

 

 

 

 

 

 

 

43,810

 

 

 

 

33,315

 

 

 

 

76

 

 

 

 

10,495

 

 

 

 

24

 

 

Susan F. Dabarno

 

 

 

61,218

 

 

 

 

 

 

 

 

8,745

 

 

 

 

1,500

 

 

 

 

71,463

 

 

 

 

71,463

 

 

 

 

100

 

 

 

 

 

 

 

 

 

 

Jane E. Kinney

 

 

 

61,218

 

 

 

 

 

 

 

 

8,745

 

 

 

 

1,500

 

 

 

 

71,463

 

 

 

 

71,463

 

 

 

 

100

 

 

 

 

 

 

 

 

 

 

Harold N. Kvisle

 

 

 

61,218

 

 

 

 

 

 

 

 

8,745

 

 

 

 

 

 

 

 

69,963

 

 

 

 

69,963

 

 

 

 

100

 

 

 

 

 

 

 

 

 

 

Steven F. Leer

 

 

 

61,218

 

 

 

 

8,745

 

 

 

 

4,373

 

 

 

 

 

 

 

 

74,336

 

 

 

 

74,336

 

 

 

 

100

 

 

 

 

 

 

 

 

 

 

M. George Lewis

 

 

 

61,218

 

 

 

 

 

 

 

 

8,745

 

 

 

 

 

 

 

 

69,963

 

 

 

 

 

 

 

 

 

 

 

 

69,963

 

 

 

 

100

 

 

Richard J. Marcogliese(5)

 

 

 

61,218

 

 

 

 

6,845

 

 

 

 

6,007

 

 

 

 

1,500

 

 

 

 

75,570

 

 

 

 

75,570

 

 

 

 

100

 

 

 

 

 

 

 

 

 

 

Claude Mongeau

 

 

 

61,218

 

 

 

 

21,864

 

 

 

 

4,373

 

 

 

 

1,500

 

 

 

 

88,955

 

 

 

 

88,955

 

 

 

 

100

 

 

 

 

 

 

 

 

 

 

Wayne G. Thomson(6)

 

 

 

22,526

 

 

 

 

4,087

 

 

 

 

1,635

 

 

 

 

 

 

 

 

28,248

 

 

 

 

 

 

 

 

 

 

 

 

28,248

 

 

 

 

100

 

 

Rhonda I. Zygocki

 

 

 

61,218

 

 

 

 

13,118

 

 

 

 

4,373

 

 

 

 

1,500

 

 

 

 

80,209

 

 

 

 

80,209

 

 

 

 

100

 

 

 

 

 

 

 

 

 

 

Total:

  739,652   54,659   64,486   7,500   866,297   757,591   87   108,706   13

Notes:

(1)

Amounts reflect aggregate value of fees and retainers earned, excluding the annual DSU award.

(2)

Mr. MacPhail became Board Chair on April 29, 2020 and his Board Chair Annual Retainer of $190,000 has been pro-rated accordingly. Mr. MacPhail’s Board and Committee Member Retainers prior to his Board Chair appointment have been pro-rated accordingly.

(3)

Mr. Daniel received the Board Chair Annual Retainer until his retirement from the Board on April 29, 2020. His retainer fees have been pro-rated accordingly. Mr. Daniel did not receive Committee Member Retainers.

(4)

Mr. Casey was first elected as a director on April 29, 2020 and was appointed a member of the HRC Committee and the SERR Committee as of the same date. Board and Committee Member Retainer fees have been pro-rated accordingly.

(5)

Mr. Marcogliese was appointed Chair of the SERR Committee on April 29, 2020. Mr. Marcogliese’s SERR Committee Member Retainer has been pro-rated for the period January 1, 2020 to April 28, 2020 and his SERR Committee Chair Retainer has been pro-rated from his appointment date of April 29, 2020 to December 31, 2020.

(6)

Mr. Thomson retired from the Board on April 29, 2020, and his Board and Committee Member Retainer fees, including the SERR Committee Chair Retainer, have been pro-rated accordingly.

 

Cenovus Energy Inc.   26   2021 Management Information Circular


Table of Contents

- DIRECTOR COMPENSATION -

 

 


Outstanding Director Awards

The following table shows all share-based awards (i.e. DSUs) vested in 2020 for our non-employee directors and provides the value vested in relation to share-based awards during the year ended December 31, 2020, as well as the aggregate value of all share-based awards held by our non-employee directors as of December 31, 2020. Cenovus does not grant stock options to non-employee directors. For further details, see the Director Compensation – Director Deferred Share Unit Plan section of this Circular.

 

Name

 

 

 

   Total DSUs
   Awarded/Accrued

   During 2020(1)
   (#)

 

 

 

 

     Value of DSUs
     Awarded/Accrued
     During 2020(2)
     ($)

 

 

         Total Value of DSUs Held  

         at December 31, 2020(3)   

         ($)  

 

 

Keith A. MacPhail (Board Chair)

 

     

 

35,380

 

 

     

 

274,195

 

 

     

 

539,044

 

 

 

Keith M. Casey

 

     

 

19,517

 

 

     

 

151,257

 

 

     

 

151,257

 

 

 

Susan F. Dabarno

 

     

 

26,808

 

 

     

 

207,762

 

 

     

 

592,263

 

 

 

Jane E. Kinney

 

     

 

25,912

 

 

     

 

200,818

 

 

     

 

299,770

 

 

 

Harold N. Kvisle

 

     

 

25,848

 

 

     

 

200,322

 

 

     

 

465,171

 

 

 

Steven F. Leer

 

     

 

27,895

 

 

     

 

216,186

 

 

     

 

820,849

 

 

 

M. George Lewis

 

     

 

9,571

 

 

     

 

74,175

 

 

     

 

152,621

 

 

 

Richard J. Marcogliese

 

     

 

27,864

 

 

     

 

215,946

 

 

     

 

729,903

 

 

 

Claude Mongeau

 

     

 

31,064

 

 

     

 

240,746

 

 

     

 

731,515

 

 

 

Rhonda I. Zygocki

 

     

 

29,155

 

 

     

 

225,951

 

 

     

 

733,747

 

 

Total:

      259,014       2,007,358       5,216,140

Notes:

(1)

Includes DSUs awarded as an initial or annual grant of DSUs as part of the non-employee director compensation program; DSUs awarded as a result of the director electing to take all or a portion of their fees in the form of DSUs; and any dividend equivalents credited, in the form of additional DSUs, consistent with dividends declared on Common Shares during the year ending December 31, 2020. Fractional units are excluded.

(2)

The value of DSUs awarded or accrued during 2020 was determined by multiplying the number of DSUs awarded to or accrued by each director during 2020, by the closing price of the Common Shares on the TSX on December 31, 2020 of $7.75.

(3)

The value of the total number of DSUs held by each director as at December 31, 2020, multiplied by the closing price of the Common Shares on the TSX on such date of $7.75.

Director Share Ownership Guidelines

Each non-employee director is required to maintain minimum holdings of Common Shares (including DSUs) representing a value equal to at least three times that director’s total compensation received from the Corporation for the most recent year ended December 31. New directors are required to achieve the share ownership guidelines within five years of joining the Board. These requirements are intended to enhance alignment of director and shareholder interests. Downward fluctuations in the market price of Common Shares may result in previously compliant directors no longer satisfying the share ownership guidelines. In July 2020 a mechanism was adopted to allow previously compliant directors to restore compliance by December 31 of the following year. Director shareholding compliance is reviewed annually. As of March 15, 2021, all of our directors were in compliance with the applicable share ownership guidelines. The following table illustrates the value of our non-employee directors’ holdings as at March 15, 2021.

 

Name

 

 

At-Risk Investment Beneficial  Shareholdings(1)

 

As a Multiple of
2020 Total
Compensation

 

Share
Ownership
Guideline

($)

 

Status

 

    Common Shares

    ($)

 

         DSUs    

     ($)

 

         Total    

     ($)

 

 

Keith A. MacPhail (Board Chair)

 

 

 

5,559,820

 

 

 

 

927,285

 

 

 

 

6,487,105

 

 

 

 

25.9

 

 

 

 

750,606

 

 

 

 

In compliance

 

 

 

Keith M. Casey

 

 

 

 

 

 

 

370,944

 

 

 

 

370,944

 

 

 

 

2.8

 

 

 

 

401,430

 

 

 

 

In compliance

 

 

 

Canning K.N. Fok(2)

 

 

 

 

2,117,530

 

 

 

 

164,659

 

 

 

 

2,282,190

 

 

 

 

N/A

 

 

 

 

N/A

 

 

 

 

In compliance

 

 

 

Jane E. Kinney

 

 

 

44,394

 

 

 

 

573,507

 

 

 

 

617,901

 

 

 

 

3.2

 

 

 

 

574,389

 

 

 

 

In compliance

 

 

 

Harold N. Kvisle

 

 

 

1,395,240

 

 

 

 

799,103

 

 

 

 

2,194,343

 

 

 

 

11.6

 

 

 

 

569,889

 

 

 

 

In compliance

 

 

 

Eva L. Kwok(2)

 

 

 

84,687

 

 

 

 

164,659

 

 

 

 

249,346

 

 

 

 

N/A

 

 

 

 

N/A

 

 

 

 

In compliance

 

 

 

Richard J. Marcogliese

 

 

 

634,200

 

 

 

 

1,160,153

 

 

 

 

1,794,353

 

 

 

 

9.2

 

 

 

 

586,710

 

 

 

 

In compliance

 

 

 

Claude Mongeau

 

 

 

2,764,002

 

 

 

 

1,162,351

 

 

 

 

3,926,353

 

 

 

 

18.8

 

 

 

 

626,865

 

 

 

 

In compliance

 

 

 

Wayne E. Shaw(2)

 

 

 

135,518

 

 

 

 

164,659

 

 

 

 

300,177

 

 

 

 

N/A

 

 

 

 

N/A

 

 

 

 

In compliance

 

 

 

Frank J. Sixt(2)

 

 

 

582,026

 

 

 

 

164,659

 

 

 

 

746,686

 

 

 

 

N/A

 

 

 

 

N/A

 

 

 

 

In compliance

 

 

 

Rhonda I. Zygocki

 

 

 

423,159

 

 

 

 

1,165,395

 

 

 

 

1,588,555

 

 

 

 

7.9

 

 

 

 

600,627

 

 

 

 

In compliance

 

 

Notes:

(1)

The value of “At-Risk Investment – Beneficial Shareholdings” was determined by multiplying the number of Common Shares and DSUs held by each director as of March 15, 2021, by the closing price of the Common Shares on the TSX on such date of $10.57.

(2)

Messrs. Fok, Shaw and Sixt and Mrs. Kwok were appointed on January 1, 2021 in connection with the Husky transaction. None of Messrs. Fok, Shaw and Sixt or Mrs. Kwok received director compensation from Cenovus in 2020.

 

Cenovus Energy Inc.   27   2021 Management Information Circular


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EXECUTIVE COMPENSATION

 

LETTER TO SHAREHOLDERS

Dear Fellow Shareholders,

We are pleased to present the Compensation Discussion and Analysis, which explains the Corporation’s executive compensation philosophy and practices, and how they were applied to reach our executive compensation decisions for 2020.

By all accounts, 2020 was an unprecedented year for our industry and company. The collapse of global oil prices and the impact of COVID-19 and the related economic downturn, among other things, impacted Cenovus’s results in 2020. The increased focus on environmental, social and governance (“ESG”) considerations by shareholders and other stakeholders also influenced our business focus.

Corporate Performance Management continues to use a balanced corporate scorecard approach to focus employees on safety & environmental, operational and financial measures that contribute to shareholder value. The corporate scorecard was set in late 2019 and, due to the uncertainty of the pandemic and expected prolonged volatility, we did not adjust the corporate scorecard targets or ranges approved for 2020.

In determining not to exercise its discretion to alter the corporate score, the Human Resources and Compensation Committee (“Committee”) and the Board considered:

 

   

the impacts of COVID-19 and the related economic downturn;

 

   

the outperformance on the safety & environmental, upstream non-fuel operating costs and capital spending metrics being balanced by the underperformance of the free funds flow, net debt to adjusted EBITDA and production metrics;

 

   

the total corporate score being less than 100 was reflective of the challenging year; and

 

   

an assessment of alignment of the 2020 corporate score with the Cenovus 2020 shareholder experience.

Safety & environmental, operational and financial performance delivered a combined corporate score of 92, which is significantly lower compared to the 2019 corporate score of 164.

We invite you to read more about our corporate scorecard results on page 44 of the Compensation Discussion and Analysis section of this Circular.

Strong Leadership Cenovus’s resiliency through 2020 is directly related to Mr. Pourbaix’s strong leadership. Under his leadership, the Corporation took definitive and quick action to manage costs in the face of the collapse of global oil prices and the COVID-19 economic downturn. He also led Cenovus through the successful completion of the business combination with Husky Energy Inc. (“Husky”), which helped address the Corporation’s three strategic priorities of market access, cost structure and improving break-evens, and an accelerated path to deleveraging. All of this was completed while also achieving top quartile safety performance in process safety and significant incident frequency. Finally, Mr. Pourbaix also delivered outstanding employee engagement and satisfaction results, which were a dramatic improvement from the prior survey in 2018 and in most categories outperformed the oil & gas/mining benchmark, which includes both Canadian and international companies.

To reflect the continued growth and performance in the President & Chief Executive Officer role, Mr. Pourbaix’s target total direct compensation was increased from $8.0 million to $9.5 million. To maintain balance between rewarding growth in his role and aligning to shareholder experience, 90 percent of the overall increase was tied to performance based short- and long-term incentives with 85 percent of the increase tied to share price performance. Mr. Pourbaix’s base salary of $1,100,000 (up from $1,000,000 since he joined the Corporation as President & Chief Executive Officer in late 2017) and 2020 long-term incentive award of $7.0 million (up from $5.7 in 2019) was determined in February 2020, before the economic downturn. The result positioned his target total direct compensation at the 46th percentile for comparable roles relative to the Executive Compensation Peer Group with a greater emphasis on variable pay relative to peers. Although Mr. Pourbaix’s target total direct compensation increased year over year, cash compensation decreased and realizable pay opportunity remains aligned with shareholders given the impact of share price on the current value of long-term incentives. You can read more about Mr. Pourbaix’s pay opportunity and realizable pay on page 45 of the Compensation Discussion and Analysis section of this Circular.

Mr. Pourbaix received an additional transaction award in 2021 valued at 1.0x his annual performance bonus target, designed to reward his contribution and leadership in the transaction with Husky. The entire transaction award was an RSU grant that vests after one year, aligning the award with shareholder value. Select other Named Executive Officers (“NEOs”) also received a similar award for their roles in the transaction.

 

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- EXECUTIVE COMPENSATION -

 

 


Pay for Performance Achieving alignment with the long-term shareholder experience is a core objective of our executive compensation philosophy. Our compensation mix balances annual financial and operational performance, share price performance over time compared to our peers, and absolute share price growth. The average NEO total direct compensation pay opportunity in 2020 is essentially unchanged from 2015. Realizable total direct compensation over this same period is slightly over 50 percent of the pay opportunity. This indicates that realized compensation is strongly correlated to shareholder experience and the economic realities the industry has endured over this period. Our NEOs also have best practice share ownership guidelines, which also aligns them with the shareholder experience.

Emphasis on Governance We continue to emphasize strong governance supporting our compensation practices. The clawback policy adopted by the Board in 2020 is now in force and applies to all of our executive officers. During 2020 the Committee mandate was amended to reflect the ESG matters for which the Committee has oversight. We also continued the gradual downward recalibration of the annual performance bonus for the general employee population, including our executives. In addition, in 2021:

 

   

we approved double-trigger change of control provisions for long-term incentive awards for all plan participants, applicable for 2021 and future grants;

 

   

we reconsidered the criteria for our compensation peer groups and revised them to more accurately reflect the market with which Cenovus competes for talent, including, for the first time, three non-oil and gas companies; and

 

   

we revised the performance share unit performance scale to require relative total shareholder return at the 90th percentile, instead of the 75th percentile, to achieve a maximum payout.

Please see the Compensation Discussion and Analysis section in this Circular for more detail on Cenovus’s executive compensation philosophy, governance and outcomes for 2020 including for the other NEOs. As always, we welcome shareholder feedback on Cenovus’s executive compensation and business practices. You can contact us directly at the address set out in the Corporate Governance section of this Circular.

 

/s/ Keith A. MacPhail    /s/ Rhonda I. Zygocki
Keith A. MacPhail    Rhonda I. Zygocki
Board Chair    Chair of the HRC Committee

 

Cenovus Energy Inc.   29   2021 Management Information Circular


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- EXECUTIVE COMPENSATION -

 


 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

TABLE OF CONTENTS

 

  31     COMPENSATION GOVERNANCE
  31    

SUMMARY OF KEY COMPENSATION GOVERNANCE PRACTICES

  31    

ROLE OF THE BOARD AND HRC COMMITTEE

  31    

Independent Directors

  32    

Skills and Experience

  32    

Compensation Consultants

  33    

Executive Compensation Decision Making

  33    

Compensation Risk Oversight

  34    

COMPENSATION PHILOSOPHY

  36    

Executive Compensation Peer Group

  37     EXECUTIVE COMPENSATION PROGRAM DESIGN
  37    

ELEMENTS OF COMPENSATION

  37    

Base Salary

  38    

Annual Performance Bonus Award

  39    

Long-Term Incentives

  42    

Retirement and Pension Benefits

  42    

Other Compensation

  43     2020 EXECUTIVE COMPENSATION
  43    

2020 NAMED EXECUTIVE OFFICERS

  43    

2020 EXECUTIVE COMPENSATION DECISIONS

  45    

CEO Pay Opportunity vs. Realizable Pay

  46    

Performance Graph

  47    

COMPENSATION TABLES

  47    

Summary Compensation Table

  48    

Outstanding Option-based and Share-based Awards

  49    

Incentive Plan Awards – Value Vested or Earned During the Year

  49    

Defined Benefit Plan Table

  50    

Defined Contribution Plan Table

  50    

Termination and Change of Control Benefits

  52    

Executive Share Ownership Status

 

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COMPENSATION GOVERNANCE

 

SUMMARY OF KEY COMPENSATION GOVERNANCE PRACTICES

 

 

 

 Key Practices

 

 

 

 

Our HRC Committee is comprised exclusively of independent directors

 

 

Our HRC Committee engages an independent executive compensation advisor

 

 

We pay for performance – 88 percent of President & CEO target total direct compensation and 79 percent of the average of other NEO target total direct compensation is performance contingent

 

 

Our incentive metrics and corporate goals are strategically aligned

 

 

Our benchmarking peer group is geographically, size and industry relevant

 

 

Beginning in 2021, the maximum performance score of 2.0 for performance share units will require relative total shareholder return performance at the 90th percentile or higher

 

 

Our realizable pay outcomes are analyzed and considered

 

 

We maintain best practice share ownership guidelines for our executive officers

 

 

Beginning in 2022, until an executive’s share ownership guidelines are satisfied, 50 percent of the after-tax value of all performance share unit payouts must be used to purchase Common Shares

 

 

We have a Clawback Policy for executive officers

 

 

We conduct an annual compensation risk assessment

 

 

Our long-term incentive plans contain double-trigger provisions in the event of a change of control for all plan participants

 

 

We have closed our defined benefit pension plan to new hires

 

 

We proactively engage with key shareholders and proxy advisory firms

 

 

We seek shareholder approval of material Stock Option Plan amendments

 

 

We do not permit the hedging of Cenovus securities

 

 

We do not re-price options

 

 

 

ROLE OF THE BOARD AND HRC COMMITTEE

The Board is responsible for approval of compensation for our President & Chief Executive Officer and other executive officers. The HRC Committee assists the Board in carrying out its responsibilities by reviewing compensation and human resource matters in support of the achievement of the Corporation’s business strategy and by making recommendations to the Board. In particular, the HRC Committee is responsible for reviewing and approving corporate goals and objectives relevant to President & Chief Executive Officer compensation, evaluating the President & Chief Executive Officer’s performance against those goals and objectives and, based on that evaluation, recommending remuneration of the President & Chief Executive Officer, including salary, short-term incentive awards and long-term incentive awards.

A description of the HRC Committee Mandate, which sets out the responsibilities, powers and operations of the HRC Committee, is found in the Human Resources and Compensation Committee section in Schedule B – Corporate Governance of this Circular and the full mandate is available on our website at cenovus.com.

Independent Directors

Our HRC Committee is comprised exclusively of independent directors who bring different perspectives, approaches and experience to the governance of our compensation program. They are highly experienced senior executives who have dealt with numerous compensation issues over the course of their careers. They are well equipped to inquire, debate and ultimately make decisions in respect of a wide range of human resources and compensation issues, as well as other matters for which they are responsible, as outlined in the HRC Committee Mandate. As such, the HRC Committee provides a strong level of leadership and governance in respect of the design and execution of our compensation program.

 

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Skills and Experience

A general description of the skills and experience of the members of the HRC Committee is set out in the individual director biographies and the skills matrix chart, found respectively in the Information on Director Nominees section of this Circular and in the Key Skills and Experience section of Schedule B to this Circular. Following the Husky transaction on January 1, 2021, the HRC Committee was reconstituted. The following is a brief description of the direct experience of the current HRC Committee members that is relevant to his or her responsibilities as a Committee member:

Rhonda I. Zygocki (HRC Committee Chair) Ms. Zygocki has been a member of the HRC Committee since April 27, 2016 and HRC Committee Chair since April 25, 2018. Ms. Zygocki held a number of senior management and executive leadership positions during her 34-year tenure at Chevron Corporation, from which she brings a breadth of knowledge and understanding of oil industry compensation practices.

Keith A. MacPhail (Board Chair) Mr. MacPhail has been Board Chair of Cenovus since April 29, 2020 and as such, is an ex officio non-voting member of the HRC Committee. Prior to becoming Board Chair, Mr. MacPhail was a member of the HRC Committee since April 25, 2018. Mr. MacPhail is a director of NuVista, and was Chairman from July 2003 to May 2020. He also has been Chair of NuVista’s Corporate Governance & Compensation Committee since May 2020 and has been a member since 2012. He was a director of Bonavista Energy Corporation, formerly Bonavista Petroleum Ltd., from November 1997 to August 2020 and was Chairman from March 2012 to August 2020.

Keith M. Casey Mr. Casey has been a member of the HRC Committee since April 29, 2020. Mr. Casey is the Chief Executive Officer of Tatanka Midstream LLC and has served as a director of a number of private midstream companies. Mr. Casey was an executive leader with Andeavor Corporation, formerly known as Tesoro Corporation, an integrated petroleum refining, logistics, and marketing company, from 2013 to 2018.

Harold N. Kvisle Mr. Kvisle has been a member of the HRC Committee since January 1, 2021. Mr. Kvisle is a director and Chairman of ARC Resources Ltd. and is a director and Board Chair of Finning International Inc. He is a former director of Cona Resources Ltd., was President and Chief Executive Officer of Talisman Energy Inc., now Repsol Oil & Gas Canada Inc., from 2012 to 2015 and a director from 2010 to 2015. Mr. Kvisle was also the President and Chief Executive Officer of TransCanada Corporation, now TC Energy Corporation, from 2001 to 2010.

Eva L. Kwok Mrs. Kwok has been a member of the HRC Committee since January 1, 2021. Mrs. Kwok is Chairman, director and Chief Executive Officer of Amara Holdings Inc., director and Chair of the Remuneration Committee of CK Life Sciences Int’l., (Holdings) Inc., and director of CK Infrastructure Holdings Limited. Mrs. Kwok has been a director of Husky since August 2000 and was a member of the Compensation Committee.

Prior to its January 1, 2021 reconstitution, Messrs. Steven F. Leer, M. George Lewis and Richard J. Marcogliese were members of the HRC Committee.

The Board believes the collective skills and experience of the individual members of the HRC Committee enable the Committee to make decisions on the suitability of the Corporation’s compensation policies and practices.

Compensation Consultants

Willis Towers Watsonand Hugessen Consulting Willis Towers Watson (“WTW”) has provided compensation consulting services to Cenovus since the inception of the Company. From August 2019 onward Cenovus has engaged the services of WTW as compensation consultant to both the HRC Committee and Management. Specifically, WTW provides advice on compensation philosophy, peer group determinations, policy and program design, executive compensation competitiveness, trends and best practices. Since appointment as the compensation consultant for Cenovus as a whole, there has been a clear reporting relationship between WTW and the HRC Committee, regular meetings have been held between WTW and the HRC Committee without Management present, and executive compensation consulting advice has been retained and managed directly by the Chair of the HRC Committee. In addition, the individuals at WTW leading the work for the HRC Committee are not involved in or compensated for any other work done by WTW at the request of Management (for example, pension and related investment asset management advice).

The HRC Committee retained the services of Hugessen Consulting (“Hugessen”) from January 2016 until July 2019 as its independent compensation consultant. Hugessen provided advice and perspective to the HRC Committee on analysis and recommendations put forward by Management and WTW, particularly with respect to executive compensation peer group determinations, incentive plan design, disclosure and other matters.

 

Cenovus Energy Inc.   32   2021 Management Information Circular


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Executive Compensation-Related Fees Executive compensation-related fees consist of the aggregate fees billed for services related to determining compensation for any of the Corporation’s directors and executive officers. The executive compensation-related fees paid by Cenovus to each of Hugessen and WTW in 2019 and 2020 are set out in the table below.

All Other Fees In addition to the fees disclosed below, WTW assisted with certain matters including, but not limited to, pension and benefits (including actuarial services), non-executive compensation advice and corporate risk and brokering services, and services related to the Husky transaction. Total fees payable to WTW for the foregoing services were approximately $1,913,824 in 2020 and approximately $1,564,000 in 2019, which excludes the Executive Compensation-Related Fees outlined below. Other than the fees disclosed below, no other fees were paid by Cenovus to Hugessen in 2020 and 2019.

 

     

 

Executive Compensation-Related Fees

 

Executive Compensation Consultant

 

  

 

2019

(000’s)

 

  

 

2020

(000’s)

 

Hugessen Consulting

 

     $51

 

        –

 

Willis Towers Watson

 

   $305

 

      $644(1)

 

Note:

(1)

Of the executive compensation-related fees, $222,644 are attributable to the Husky transaction.

Neither the Board nor HRC Committee pre-approve the existing ongoing services retained by Management since they are standard in nature and do not present any conflicts with the services retained by the HRC Committee.

Executive Compensation Decision Making

The advice, information and recommendations provided by WTW are factors considered in the HRC Committee recommendations and the Board’s decisions regarding executive compensation; however, the HRC Committee and the Board do not rely exclusively on such advice, information and recommendations. The decisions of the HRC Committee and Board with respect to executive compensation reflect a number of factors and considerations, including but not limited to, compensation consultant advice and guidance, current industry trends and best practices, legal advice, peer data, and other information and recommendations from Management and the discretion of the HRC Committee and the Board.

Compensation Risk Oversight

The HRC Committee’s primary duties and responsibilities are to approve the Corporation’s compensation philosophy and compensation program design; review the potential risks posed to Cenovus’s financial or reputational well-being by the Corporation’s executive compensation program; recommend to the Board for approval the President & Chief Executive Officer’s compensation, executive share ownership guidelines, amendments to long-term incentive plans, and pension and investment plan governance, design and funding; and approve and report to the Board on executive officer compensation, succession planning for executive officers, and performance measures for short and long-term incentive plans.

The executive compensation program design considers the risks to which Cenovus is exposed in the pursuit of its strategic objectives. Executive compensation is linked to operational risk management so that financial incentives reinforce a focus on safety, execution excellence, environmental and social responsibility, and shareholder value creation. Effective risk management and sound operational business practices and controls are aligned to shareholder value creation and evidenced by the linkage that over 50 percent of executive compensation is tied to share price. WTW completed a comprehensive compensation risk assessment in the fall of 2020 to identify policies and practices that could encourage inappropriate excessive risk taking by an employee group or individual; and to identify any risks arising from the existing compensation policies, incentive programs and practices that would be likely to have a material adverse effect on Cenovus. There were no risks identified that would be reasonably likely to have a material adverse effect on the Corporation.

Clawback Policy In March 2020, we adopted a Clawback Policy applicable to all executive officers. The Clawback Policy allows for the discretionary recovery by the Board of incentive-based compensation, including annual bonus amounts. Pursuant to the policy, the Board will have discretion to cancel any bonus payments or unvested incentive awards and/or require reimbursement of paid bonuses or incentive awards, as applicable, where: (i) an accounting restatement of all or a portion of Cenovus’s financial statements is required due to material non-compliance with any financial reporting requirement under securities laws, and the executive officer’s intentional misconduct or fraud caused or materially contributed to the need for the restatement; or (ii) the executive officer was financially enriched by his or her fraud, theft or failure to disclose a material conflict of interest that affected the business, reputation, operations or capital of Cenovus in a manner that

 

Cenovus Energy Inc.   33   2021 Management Information Circular


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resulted in a material decrease in the price of the Common Shares. The Clawback Policy applied immediately upon adoption to our President & Chief Executive Officer and our Executive Vice-President & Chief Financial Officer (now Executive Vice-President & Chief Operating Officer), and for all other executive officers applies to incentive-based compensation earned on or after January 1, 2021. The Clawback Policy is in addition to any other clawback mechanism that may apply under law.

Non-Competition and Non-Solicitation Provision Our President & Chief Executive Officer terms of employment include a non-competition and non-solicitation provision pursuant to which, during employment with the Corporation and for a period of time thereafter, our President & Chief Executive Officer may not, without the Corporation’s prior written consent: (i) accept employment with or consult for any entity that carries on the business of oil and/or natural gas exploration or production in any of Cenovus’s operating areas and is included in Cenovus’s PSU Peer Group (as defined in the Compensation Discussion and Analysis section of this Circular) for a specified period after leaving the Corporation; (ii) solicit, encourage or cause to cease to work with the Corporation, any person who is then an employee of the Corporation; and (iii) solicit, encourage or cause any contractor, service provider or supplier of the Corporation to cease doing business with the Corporation. In the event of a breach or threatened breach of these obligations by the executive, the Corporation will be entitled to injunctive relief as well as any other applicable remedies available at law or in equity.

Executive Share Ownership Guidelines We believe it is important to closely align the interests of our executive officers with our shareholders. One way we accomplish this is to require that our executive officers maintain best practice minimum holdings of Common Shares (which may include holdings of DSUs). The executive share ownership guidelines and compliance are reviewed regularly by the HRC Committee. The share ownership guideline for the President & Chief Executive Officer is 6.0 times annual base salary, to be satisfied within two years from the date of appointment and the share ownership guideline for executive vice-presidents of the Corporation is 3.0 times annual base salary to be achieved within five years from the date of appointment. In February 2021, two provisions were added to the share ownership guidelines: first, executives are permitted to include within the calculation of their share ownership requirements the value, based on the market price of Common Shares, unvested tranches of performance share units (“PSUs”) wherein the performance for a period has been determined; and second, commencing in 2022, 50 percent of the after-tax value of all PSU payouts must be used to purchase Common Shares, until such time that such executive’s share ownership requirement is satisfied.

Each of our current Named Executive Officers (“NEOs”) is in compliance with the executive share ownership guidelines. See Executive Share Ownership Status in the Compensation Discussion and Analysis section of this Circular for more information on share ownership of our current NEOs.

Prohibition on Hedging Cenovus employees and directors are prohibited from entering into financial derivative transactions which could result in profit from Cenovus’s share price falling. Prohibited transactions include purchasing financial derivatives, prepaid variable forward contracts, equity swaps, collars or units of exchange funds that are designed to hedge or offset decreases in the market value of Cenovus securities granted or held, directly or indirectly, by the employee or director.

COMPENSATION PHILOSOPHY

The HRC Committee approves and reports to the Board on the Corporation’s compensation philosophy.

Our executive compensation philosophy demonstrates our executive compensation objectives including how we align executive interests with the interests of our shareholders. Specifically:

 

 

We pay for performance, reflecting both individual and corporate results that are aligned to our business strategy over the short and long-term as well as expected behaviours.

 

 

Our total compensation opportunity includes salary, annual and long-term incentives and benefits to support attraction, retention and engagement.

 

 

Our total direct compensation (“TDC”) is aimed at the 50th percentile of the Executive Compensation Peer Group for target performance with flexibility to provide superior pay for superior performance.

 

 

We differentiate individual total compensation based on capability, performance and potential.

 

Cenovus Energy Inc.   34   2021 Management Information Circular


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The following outlines the typical timing and key responsibilities of the HRC Committee in the determination of annual compensation for the Corporation’s NEOs:

 

 

LOGO

 

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Executive Compensation Peer Group

Our Executive Compensation Peer Group is used to benchmark the compensation of the NEOs, representing companies with North American oil and gas or related operations of similar size and complexity, with which the Corporation competes for talent. The Executive Compensation Peer Group was determined by considering a number of factors including size, complexity of business, revenue, assets, market capitalization, enterprise value, total employees, geographic scope of operations and ownership structure.

The table below reflects Cenovus’s positioning relative to the Executive Compensation Peer Group in terms of 2020 revenue and market capitalization at December 31, 2020.

 

Company

 

  

2020 Revenue
($Billion)

 

  

Market Capitalization
    (as at December 31, 2020)    

($Billion)

 

  

 

Total Enterprise Value

    (as at December 31, 2020)    

($Billion)

 

 

Canadian Natural Resources Limited

 

    

 

 

 

 

16.9

 

 

 

 

    

 

 

 

 

36.1

 

 

 

    

 

 

 

 

58.8

 

 

 

 

Crescent Point Energy Corp.

 

    

 

 

 

 

1.5

 

 

 

 

    

 

 

 

 

1.6

 

 

 

    

 

 

 

 

4.0

 

 

 

 

Devon Energy Corporation

 

    

 

 

 

 

6.5

 

 

(1) 

 

    

 

 

 

 

7.7

 

 

(2) 

 

    

 

 

 

 

10.8

 

 

(2) 

 

 

Enbridge Inc.

 

    

 

 

 

 

39.1

 

 

 

 

    

 

 

 

 

82.4

 

 

 

    

 

 

 

 

160.4

 

 

 

 

Husky Energy Inc.

 

    

 

 

 

 

13.3

 

 

 

 

    

 

 

 

 

6.3

 

 

 

    

 

 

 

 

14.1

 

 

 

 

Imperial Oil Limited

 

    

 

 

 

 

22.4

 

 

 

 

    

 

 

 

 

17.7

 

 

 

    

 

 

 

 

22.3

 

 

 

 

Marathon Oil Corporation

 

    

 

 

 

 

4.2

 

 

(1) 

 

    

 

 

 

 

6.7

 

 

(2) 

 

    

 

 

 

 

12.8

 

 

(2) 

 

 

Murphy Oil Corporation

 

    

 

 

 

 

2.6

 

 

(1) 

 

    

 

 

 

 

2.4

 

 

(2) 

 

    

 

 

 

 

7.2

 

 

(2) 

 

 

Ovintiv Inc.

 

    

 

 

 

 

6.1

 

 

 

 

    

 

 

 

 

4.8

 

 

 

    

 

 

 

 

15.0

 

 

 

 

Pembina Pipeline Corporation

 

    

 

 

 

 

6.2

 

 

 

 

    

 

 

 

16.6

 

    

 

 

 

 

31.1

 

 

 

 

Suncor Energy Inc.

 

    

 

 

 

 

24.7

 

 

 

 

    

 

 

 

 

32.6

 

 

 

    

 

 

 

 

52.4

 

 

 

 

TC Energy Corporation

 

    

 

 

 

 

13.0

 

 

 

    

 

 

 

 

48.6

 

 

 

    

 

 

 

 

102.8

 

 

 

 

50th percentile

 

    

 

 

 

 

9.7

 

 

 

 

    

 

 

 

 

12.1

 

 

 

    

 

 

 

 

18.7

 

 

 

 

Cenovus Energy Inc.(3)

 

    

 

 

 

 

13.2

 

 

 

    

 

 

 

 

9.5

 

 

 

    

 

 

 

 

18.5

 

 

 

Source: Bloomberg

Notes:

(1)  U.S.

dollars converted to Canadian dollars at the 2020 average annual exchange rate of US $1.00 = CDN $1.34.

(2)  U.S.

dollar values converted to Canadian dollars at December 31, 2020 exchange rate of US $1.00 = CDN $1.27.

(3)  Data

reflects pre-closing of the Husky transaction.

In 2020, the HRC Committee undertook a thorough review of the Executive Compensation Peer Group and, given the consolidation in the Canadian oil and gas industry limiting the number of direct peers and that the talent market for executive talent was expanding to include other related industrial companies, determined that adjustments were required to more accurately reflect the market within which the Corporation competes for talent. The expansion beyond oil and gas companies was also seen as a positive approach that better considers broader market dynamics. Based on a review of the constituents of the Executive Compensation Peer Group relative to updated selection criteria, which includes Western Canadian industrial companies of similar size and scale, the HRC Committee approved the removal of Crescent Point Energy Corp. and Murphy Oil Corporation and the addition of ATCO Ltd., Nutrien Ltd. and Teck Resources Limited.

In 2021, the HRC Committee reconsidered the Executive Compensation Peer Group in light of the Husky transaction and the resulting changes to the Corporation’s size, scale and talent markets. Based on the review, the HRC Committee approved the removal of Devon Energy Corporation and Marathon Oil Corporation and the addition of two U.S.-based companies of similar size to Cenovus following the Husky transaction: Valero Energy Corp. and Hess Corporation. The revised Executive Compensation Peer Group will be used to benchmark the 2021 compensation of our NEOs.

 

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EXECUTIVE COMPENSATION PROGRAM DESIGN

 

ELEMENTS OF COMPENSATION

The following table illustrates the elements of our 2020 executive compensation program and how these elements work together to provide pay for performance and shareholder alignment.

 

   

 

Total Direct Compensation

 

       

Indirect

Compensation

 

 
             

Program

  Base Salary       

Annual

Performance Bonus

 

Maximum award level at two times target

       Long-term Incentives         



Benefits &

Perquisites
(including
pension)

 

 
 
 

                 
                   

Performance

Share Units

50%

 

Performance

multiplier of zero to two times

     

Stock Options 50%(1)

            
             

Purpose

  Intended to
reflect individual
capability and
sustained
performance in
executing day-

to-day
accountabilities
of the position.

       Intended to reward individual and corporate performance achieved in the year.        Intended to reward achievement of longer-term Company performance and align interests with shareholders.         




Intended to
promote
retention and
provide long-
term financial
security.
 
 
 

 
 
               

Performance  

Period

  Annual reviews        1 Year        3 Years       7 Year term             
   
  Increases based
on performance
and market data
       Payout at risk(2)       



Low risk,

financial security
and retention
focused




 

Notes:

(1)

For additional information on the Stock Option Plan, see Schedule A – Summary of Stock Option Plan, Husky Stock Option Plan and Additional Compensation Plan Information of this Circular.

(2)

The payout at risk for the President & Chief Executive Officer is 88 percent of the target total direct compensation, consisting of annual performance bonus and long-term incentives. 12 percent of total direct compensation consists of base salary. For the other NEOs, the average payout at risk is 79 percent of the target total direct compensation, consisting of annual performance bonus and long-term incentives, and 21 percent of the total direct compensation consists of base salary.

Base Salary

We determine the base salary of our executive officers annually based upon comparisons to the most recently available market data. We consider experience, scope of responsibilities, individual performance and strategic leadership over the course of the year.

 

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Annual Performance Bonus Award

The annual performance bonus rewards performance achieved in the year. It is made up of two components: corporate and individual performance. The target opportunity is aligned to the 50th percentile of the Executive Compensation Peer Group. The target annual performance bonus award opportunity, payout range, and weightings for the NEOs are as follows:

 

Name & Principal Position

 

Target Award
Opportunity
(% of Salary)

 

 

Award Range
(% of Target
Award
Opportunity)

 

Weighting
(% of Target Award Opportunity)

 

 

Corporate

 

 

Individual

 

 

Alexander J. Pourbaix

President & Chief Executive Officer

 

125%

 

 

 

80

 

%

 

 

 

20

 

%

 

 

Jonathan M. McKenzie

Executive Vice-President & Chief Financial Officer(1)

 

 

75%

 

 

Harbir S. Chhina

Executive Vice-President & Chief Technology Officer(2)

 

70%

 

 

 

0-200

 

%

 

 

J. Drew Zieglgansberger

Executive Vice-President, Strategy & Corporate Development(3)

 

70%

 

 

 

70

 

%

 

 

 

30

 

%

 

 

Alan C. Reid

Executive Vice-President, Stakeholder Engagement, Safety, Legal & General Counsel(4)

 

65%

 

Notes:

(1)

Until December 31, 2020, Mr. McKenzie held the role of Executive Vice-President & Chief Financial Officer. He was appointed Executive Vice-President & Chief Operating Officer effective January 1, 2021.

(2)

Until December 31, 2020, Mr. Chhina held the role of Executive Vice-President & Chief Technology Officer. He was appointed Chief Technology Officer effective January 1, 2021, and ceased to be an executive officer.

(3)

Until December 31, 2020, Mr. Zieglgansberger held the role of Executive Vice-President, Strategy & Corporate Development. He was appointed Executive Vice-President, Upstream – Conventional & Integration effective January 1, 2021.

(4)

Until December 31, 2020, Mr. Reid held the role of Executive Vice-President, Stakeholder Engagement, Safety, Legal & General Counsel. He was appointed Transition Advisor effective January 1, 2021, and ceased to be an executive officer.

Corporate Component of Annual Performance Bonus Award: Corporate Scorecard The corporate component of the annual performance bonus award is assessed based on the corporate scorecard which includes performance measures in the areas of safety and environment, operational, and financial. The performance measure categories are intended to focus performance on important elements of our business and strategy, while observing Cenovus’s corporate risk policies. Targets are set within defined performance ranges based on the capital and operating budget approved by the Board for the year.

Following the end of the financial year, Cenovus’s corporate performance is assessed by the HRC Committee and the Board. The sum of the performance score for each measure with the respective weightings applied results in an overall corporate performance score between zero and 200 percent and is recommended by the HRC Committee to the Board for approval. From time to time, the HRC Committee and the Board may exercise discretion with respect to the corporate performance score, where considered appropriate based on the specific circumstances. See 2020 Annual Performance Bonus Awards section of this Circular for details specific to 2020.

Individual Component of Annual Performance Bonus Award For each calendar year, all of our employees, including our executive officers, identify specific goals and objectives that are outlined in their individual annual performance agreements. The goals and objectives align with our business plan and strategy, including environmental, social and governance (“ESG”) factors and objectives, and provide performance focus throughout the year. The President & Chief Executive Officer’s goals are set in consultation with the Board, and each remaining NEO’s goals are set in consultation with and approved by the President & Chief Executive Officer.

The HRC Committee reviews and evaluates the President & Chief Executive Officer’s performance in light of these goals and objectives. The President & Chief Executive Officer reviews and evaluates the remaining NEOs. These assessments determine the percentage of the annual performance bonus award based on individual performance. The HRC Committee has continued the gradual downward recalibration of the individual component of the annual performance bonus for the general employee population, including our executives.

 

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Board Discretion in Determining Annual Performance Bonus Awards From time to time, the Board may exercise discretion to adjust the President & Chief Executive Officer’s annual performance bonus award and, similarly, the HRC Committee may exercise discretion to adjust the other NEOs’ annual performance bonus awards, where considered appropriate, based on the specific circumstances. See 2020 Executive Compensation Decisions – 2020 Annual Performance Bonus Awards section of this Circular.

Long-Term Incentives

Our Long-Term Incentive (“LTI”) program is designed to align the interests of our executive officers and employees with our shareholders. Executives are required to hold a significant equity interest in the Corporation through our executive share ownership guidelines (see Compensation Risk Oversight – Executive Share Ownership Guidelines in the Compensation Governance section of this Circular). In addition to the intrinsic share price performance risk contained within equity-based incentives, we believe it is important to include additional performance measures that will determine eligibility for vesting.

LTIs are granted on an annual basis, in conjunction with our annual compensation cycle, taking into consideration competitive market data, individual performance, prior grants, and potential and retention, as required. The Board reserves the right to exercise discretion in determining the amount granted. The types of LTIs we provide to our NEOs, as well as key plan terms for each type of LTI are reflected in the following table.

 

Key Terms

 

 

 

Stock Options

(“Options”)(1)

 

 

 

Performance Share Units

(“PSUs”)

 

Term   7 years   3 years
Description   Options to acquire Common Shares   Whole share units subject to performance criteria
Primary Objective   Align interests with share price performance   Aligns interests with share price performance and rewards performance of specific objectives
Performance Measures   Value accrues when the Common Share price exceeds the exercise price   Vesting determined by relative total shareholder return (“RTSR”) performance for the 2018 and 2020 PSU grants. The 2019 PSU grant is based on RTSR and Net Debt
Vesting   Three-year vesting: 30 percent on the first anniversary of the grant date, 30 percent on the second anniversary of the grant date and 40 percent on the third anniversary of the grant date   See “Performance Share Units” below for a further description of vesting for PSUs
Payout   On exercise, the option to acquire Common Shares at the price determined at the time of grant or receive in cash the realized value accrued over the exercise price   Paid in cash or Common Shares based on the volume weighted average trading price of the Common Shares on the TSX for five trading days prior to the end of the performance period

 

Note:

(1)

For additional information on the Stock Option Plan, see Schedule A – Summary of Stock Option Plan, Husky Stock Option Plan and Additional Compensation Plan Information of this Circular.

Prior to its acquisition by Cenovus, Husky granted options to its officers and employees to purchase common shares of Husky (“Husky Options”) pursuant to an incentive stock option plan dated November 16, 2018 (the “Husky Stock Option Plan”). As a result of the Corporation’s acquisition of Husky, any Husky Options outstanding immediately prior to the acquisition on January 1, 2021 were transferred to Cenovus in exchange for options to purchase Common Shares (“Replacement Options”) equal to the number of Husky common shares that were issuable upon exercise of such Husky Options immediately before their transfer multiplied by 0.7845 and rounded down to the nearest whole share. Similarly, the exercise price for each Replacement Option was divided by 0.7845 and rounded up to the nearest whole cent. All Husky Options transferred to Cenovus were concurrently cancelled. Although no new Replacement Options or any other options will be granted under the Husky Stock Option Plan, the Replacement Options will vest and may be exercised until all Replacement Options are exercised, expired, or terminated in accordance with the Husky Stock Option Plan, at which point the Husky Stock Option Plan will be terminated. For additional information on the Husky Stock Option Plan, see Schedule A – Summary of Stock Option Plan, Husky Stock Option Plan and Additional Compensation Plan Information of this Circular.

 

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Performance Share Units

We grant performance-based long-term incentives in the form of Performance Share Units (“PSUs”), as described in the table above. PSUs become eligible to vest after a combination of one-year and three-year performance periods. In all instances payout only occurs after three years, provided that all performance periods in a PSU grant that are eligible to vest become vested. Details of the performance measures and performance periods are outlined in the table below:

 

Grant

 

 

Measures

 

 

                Performance Period

 

 

Weighting

 

 

Vesting Period

 

     2018 2018 RTSR January 1, 2018 to December 31, 2018 20%     3 Years
2019 RTSR January 1, 2019 to December 31, 2019 20%    
2020 RTSR January 1, 2020 to December 31, 2020 20%    
3 Year RTSR January 1, 2018 to December 31, 2020 40%    
     2019 2019 RTSR January 1, 2019 to December 31, 2019 10%     3 Years
2020 RTSR January 1, 2020 to December 31, 2020 10%    
2021 RTSR January 1, 2021 to December 31, 2021 10%    
3 Year RTSR January 1, 2019 to December 31, 2021 40%    
Net Debt As at December 31, 2021 30%    
     2020 2020 RTSR January 1, 2020 to December 31, 2020 10%     3 Years
2021 RTSR January 1, 2021 to December 31, 2021 10%    
2022 RTSR January 1, 2022 to December 31, 2022 10%    
3 Year RTSR January 1, 2020 to December 31, 2022 70%    

Dividend equivalents are credited in the form of additional PSUs consistent with dividends declared on Common Shares. PSUs that do not vest at the end of the three-year performance period are not paid out and are cancelled.

PSU Performance Criteria – Relative Total Shareholder Return Relative total shareholder return (“RTSR”) is calculated based on the percentile ranking of the Corporation’s TSR to the PSU peer group below (the “PSU Peer Group”) over the applicable performance period. The percentile ranking in turn determines a score (the “Performance Score”) for the performance period. TSR is calculated using the volume weighted average trading price of a Common Share on the TSX (the “VWAP Share Price”) for the last 30 days of the performance period, less the VWAP Share Price for the 30 trading days prior to the start of the three-year performance period, plus dividends paid during the performance period, divided by the VWAP Share Price for the 30 trading days prior to the start of the performance period. Following the completion of the Husky transaction on January 1, 2021, the Cenovus PSU Peer Group was revised and will apply to certain portions of the outstanding PSU grants. The following outlines the Original and Revised Cenovus PSU Peer Group as they apply to 2018, 2019 and 2020 PSU grants.

 

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        Original PSU Peer Group

 

  

 

        Revised PSU Peer Group

 

 

  Characteristics

  

 

•   Upstream energy producers

•   Commodity price exposure

•   Market capitalization less than $50 billion

•   Canadian operations

•   Compete for the same investor dollars

 

  

 

•   Upstream and/or integrated energy producers (excluding pure-shale)

•   Commodity price exposure

•   Enterprise value >$10 billion

•   North American/Global operations

•   Compete for the same investor dollars

 

 

  Companies

  

 

Apache Corporation

Canadian Natural Resources Limited

Crescent Point Energy Corp.

Devon Energy Corporation

Husky Energy Inc.

Imperial Oil Limited

Marathon Oil Corporation

MEG Energy Corp.

Murphy Oil Corporation

Ovintiv Inc.

Suncor Energy Inc.

 

  

 

Apache Corporation

BP Plc.

Canadian Natural Resources Limited

Chevron Corporation

ConocoPhillips

Devon Energy Corporation

Hess Corporation

Imperial Oil Limited

Ovintiv Inc.

Suncor Energy Inc.

 

 

  Applicable Years

  

 

1 year RTSR 2018, 2019 and 2020 (2018, 2019
and 2020 PSU Grant)

3 year RTSR 2018-2020 (2018 PSU Grant)

3 year RTSR 2019-2021 (2019 PSU Grant)

 

  

 

1 year RTSR 2021 (2019 and 2020 PSU Grant)

1 year RTSR 2022 (2020 PSU Grant)

3 year RTSR 2020-2022 (2020 PSU Grant)

 

The RTSR performance score for the relevant performance period, is determined as follows:

 

Performance Level

        RTSR Performance Criteria         Performance  
Score(1)
Minimum Performance        Less than 25th percentile  

 

   0.0
Threshold Performance        25th percentile or greater but less than 50th percentile        0.25
Target Performance        50th percentile or greater, but less than 75th percentile        1.0
Maximum Performance        75th percentile or greater  

 

   2.0

 

Note:

(1)  Payout is based on interpolation between the 25th and the 75th percentile.

Beginning in 2021, the maximum performance score of 2.0 for PSUs will require RTSR performance at the 90th percentile or higher.

PSU Performance Criteria – Net Debt In addition to RTSR, the 2019 PSU Grant also has a Net Debt performance criteria. Following the Husky transaction, the Net Debt performance criteria was revised to reflect the combined entity. See “Advisory – Non-GAAP Measures”. The following outlines the original and revised net debt performance criteria:

 

Performance Level

  Original Net Debt Criteria   Revised Net Debt Criteria   Performance
Score(1)
Minimum Performance   >$ 7.0 Billion   >$12.5 Billon   0.0
Threshold Performance   $7.0 Billion   $12.5 Billion   0.25
Target Performance   $6.5 Billion   $12.0 Billion   1.0
Maximum Performance   $5.5 Billion   $11.0 Billion   2.0

 

Note:

(1)  Payout is based on interpolation between the performance levels.

The resulting RTSR performance score, and Net Debt performance score (for the 2019 PSU Grant only), determine the number of PSUs eligible to vest.

The HRC Committee determines the PSU Performance Criteria, Performance Scores and any associated payout. Payment for PSUs that become eligible to vest is not made until after the end of the three-year performance period.

 

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20 for 20 Incentive Plan On February 13, 2019 (the “Effective Date”), Cenovus launched a one-time incentive program designed to drive significant value creation for shareholders and enhance employee retention. Under this program, if, at any time within five years from the Effective Date, the closing price of the Common Shares on the TSX reached or exceeded $20 for 20 consecutive trading days (the “Price Condition”), Cenovus would pay a one-time cash award to each eligible employee equal to their annual base salary.

All employees, other than the President & Chief Executive Officer, were eligible for the program and new employees were eligible for a pro-rated award based on the date their employment commenced. The 20 for 20 Incentive Plan was closed for participation by any new employee in 2020. This program has been cancelled effective February 2021 and replaced by an incentive program for non-executive employees. All possible awards under this program have been cancelled and forfeited without any payment by Cenovus of further rights or entitlements to the employee.

Retirement and Pension Benefits

Our retirement program is intended to provide long-term financial security and support retention of our employees, including our executive officers. We believe it is important to provide for the future retirement of our employees and executive officers through retirement and pension benefits.

Cenovus’s Canadian Pension Plan, which includes both a Defined Benefit option (the “DB Plan”) and a Defined Contribution option (the “DC Plan”), is a registered pension plan. Our employees, including our executive officers, participate in either the DB Plan or DC Plan. As of January 1, 2019, the DB Plan was closed to new hires.

Under the DB Plan, pension benefits are based on two percent of final average pensionable earnings multiplied by the number of years of membership in the DB Plan. The normal retirement age is 70. Employees may take their pension as early as age 60 with pension benefits reduced by three percent per year. There is no reduction in benefits for retirement between age 65 and 69.

In the DC Plan, employer contributions are made into individual employee accounts equal to eight percent of pensionable earnings for all DC Plan participants including Mr. Pourbaix, President & Chief Executive Officer. Each employee individually manages the investment of their account balances from a variety of investment options made available by Cenovus.

Pensionable earnings include base salary plus annual performance bonus capped at 40 percent of salary for our NEOs. For non-executive employees, annual performance bonus is not included in pensionable earnings.

We pay pension benefits under our DB Plan and our DC Plan up to the permitted levels for registered pension plans under the Income Tax Act (Canada). Additional pension benefits are payable from the Cenovus Energy Inc. Canadian Supplemental Pension Plan.

Other Compensation

To achieve a competitive total compensation package, we provide additional benefits at a level competitive with market practice. The other compensation that we provide include an annual allowance, parking, financial and retirement planning services, matching of personal contributions to an investment plan of up to five percent of base salary and health and wellness services.

Retention Bonuses During and as a result of the Husky transaction, Cenovus established an employee retention program with respect to certain critical employees to, among other things, ensure that Cenovus retains key personnel to complete the Husky transaction, successfully integrates the businesses of Cenovus and Husky, and achieves the anticipated synergies and other benefits intended to be realized as a result of the business combination. Payments under the program were contingent on the successful close of the Husky transaction and are expected to be made to participants between six and 12 months following the date of the Husky transaction. Neither Messrs. Pourbaix nor McKenzie were eligible to participate in the program. Each of Messrs. Chhina, Reid and Zieglgansberger are participating in the retention program and may receive cash payments up to $650,000, $520,000, and $610,000, respectively, if they meet all of the criteria of the retention program.

Husky Transaction Awards To reward the significant efforts in effecting the Husky transaction, Cenovus established a special incentive award for certain employees across both legacy companies. Eligible employees could receive up to their target bonus, depending on the employee’s respective level of contribution to the Husky transaction. The awards are a one-time cash payment for eligible non-executive employees, and a 2021 RSU grant for eligible executives that vests after one year. Messrs. Pourbaix, McKenzie, Reid and Zieglgansberger each received an RSU grant award in 2021 equal to 1.0x their annual performance bonus target for their contributions to the Husky transaction.

 

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2020 EXECUTIVE COMPENSATION

2020 NAMED EXECUTIVE OFFICERS

The following are our Named Executive Officers (or “NEOs”) for 2020:

 

 

Alexander J. Pourbaix

 

President & Chief Executive Officer

Jonathan M. McKenzie

Executive Vice-President & Chief Financial Officer(1)

Harbir S. Chhina

Executive Vice-President & Chief Technology Officer(2)

Alan C. Reid

Executive Vice-President, Stakeholder Engagement, Safety, Legal & General Counsel(3)

J. Drew Zieglgansberger

Executive Vice-President, Strategy & Corporate Development(4)

Notes:

(1)

Until December 31, 2020, Mr. McKenzie held the role of Executive Vice-President & Chief Financial Officer. He was appointed Executive Vice-President & Chief Operating Officer effective January 1, 2021.

(2)

Until December 31, 2020, Mr. Chhina held the role of Executive Vice-President & Chief Technology Officer. He was appointed Chief Technology Officer effective January 1, 2021, and ceased to be an executive officer.

(3)

Until December 31, 2020, Mr. Reid held the role of Executive Vice-President, Stakeholder Engagement, Safety, Legal & General Counsel. He was appointed Transition Advisor effective January 1, 2021, and ceased to be an executive officer.

(4)

Until December 31, 2020, Mr. Zieglgansberger held the role of Executive Vice-President, Strategy & Corporate Development. He was appointed Executive Vice-President, Upstream – Conventional & Integration effective January 1, 2021.

For the purpose of this Circular and the discussion below, “Named Executive Officer” means any one of the five Named Executive Officers and total direct compensation includes base salary, annual performance bonus, and long-term incentive awards for a performance year.

2020 EXECUTIVE COMPENSATION DECISIONS

The decisions made for the 2020 compensation of our President & Chief Executive Officer and the other NEOs as described in this Circular are based on our compensation philosophy to pay for performance and to align the interests of the NEOs with the interests of our shareholders, while balancing objectives of market competitiveness and retention. Cenovus continues with a prudent approach to executive compensation in response to market volatility, continuing market access challenges, and share price performance. Total direct compensation remains targeted at the 50th percentile of our Executive Compensation Peer Group.

Base Salaries

Mr. Pourbaix’s base salary was increased to $1,100,000, which is placed between the 25th and 50th percentile of the Executive Compensation Peer Group. Mr. Zieglgansberger’s salary was increased 2 percent while the 2020 base salaries for Messrs. McKenzie, Chhina, and Reid were unchanged. Effective May 1, 2020, Cenovus implemented rollbacks on base salary in excess of $100,000 to demonstrate commitment to ensuring Cenovus’s resiliency through the economic downturn. Mr. Pourbaix’s base salary in excess of $100,000 was reduced by 25 percent and other executive team members’ salaries in excess of $100,000 were reduced by 15 percent. Full salaries were reinstated and the rollbacks were lifted on November 1, 2020 given the improvement of oil prices.

2020 Annual Performance Bonus Awards

The annual performance bonus rewards individual and corporate performance achieved in the year. The target opportunity is aligned to the 50th percentile of the Executive Compensation Peer Group. The target annual performance bonus award opportunity, payout range, and weightings for the NEOs are described under Executive Compensation – Elements of Compensation.

As described under Executive Compensation – Elements of Compensation, corporate performance is assessed by the HRC Committee and the Board using the corporate scorecard. The 2020 corporate scorecard (the “Corporate Scorecard”) maintains the same overarching performance categories and weightings as the previous year. The Corporate Scorecard is designed to be easy to understand for both shareholders and employees and drive organizational efforts towards generating shareholder value. The performance measures are weighted to balance emphasis on safety and environment, operating and financial areas. Targets and ranges of performance were set for each measure, based on the Corporation’s 2020 pre-COVID-19 pandemic strategy and business plan. The Board’s assessment of the Corporation’s performance relative to the 2020 Corporate Scorecard targets is shown in the following table.

 

 

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2020 Corporate Scorecard

 

 

Performance Measure

 

 

Weighting

 

 

Target

 

 

Actual
Reported
Results

 

 

2020
Corporate
Scorecard
Adjusted
Results

 

 

Weighted
Score

 

Safety & Environment

  15%

Total recordable incident frequency

  2.5%   0.22   0.25     1 %

Significant incident frequency

  5%   0.12   0.01     10 %

Process safety performance (events)(1)

  5%  
<2 Tier One
£6 Tier Two

 
 

1

1


    9 %

Oil sands emissions intensity (CO2e/BOE)

  2.5%   54.81   52.01     4 %

Operating

  50%

Production (MBOE/d)

  20%   488   472     0 %

Upstream non-fuel operating costs ($/BOE)

  20%   6.29   6.04     40 %

Capital spending ($ millions)

  10%   1,431   841     20 %

Financial

  35%

Non-rent G&A ($/BOE)(2)(3)

  5%   1.19   1.13     8 %

Free funds flow ($ millions)(2)(4)

  15%   1,590   (594 )     0 %

Net Debt to Adjusted EBITDA(2)

  15%   1.7   11.9     0 %

2020 Corporate Score

  92 %

Notes:

(1)

Tier One Process Safety Event – All major scale events that involve a process release that lead to a lost time injury, a fatality, a fire or an explosion resulting in damages greater than $100,000 or a highly toxic/combustible release above Tier One Threshold.

 

Tier Two Process Safety Event – All moderate scale events that involve a process release that lead to medical treatment, a fire or an explosion resulting in damages greater than $2,500 or a highly toxic/combustible release above the Tier Two Threshold (and below Tier One Threshold).

(2)

This is a non-GAAP measure and additional information is in the Advisory section at the end of this Circular.

(3)

Excludes LTI, severance and Husky transaction costs.

(4)

For the purposes of the 2020 Corporate Scorecard, it was determined at the start of the year that free funds flow would not include any actual proceeds from acquisition and divestiture activity.

The Corporate Scorecard results are reviewed by the HRC Committee and recommended to the Board for approval. The Corporate Scorecard calculation was 92 percent for 2020. In assessing 2020 performance, the HRC Committee and the Board considered significant challenges including the COVID-19 pandemic and the effects of oil production output decisions by the Organization of Petroleum Exporting Countries (“OPEC”) and on-OPEC members, primarily Saudi Arabia and Russia, and determined not to apply discretion to the 2020 Corporate Score. A discussion of the Corporation’s 2020 performance can be found in the Corporation’s year-end news release and associated disclosure available on cenovus.com.

The President & Chief Executive Officer’s annual performance bonus award is measured based 80 percent on the corporate score and 20 percent on individual performance. Mr. Pourbaix’s 2020 individual performance rating was 105 out of 200 percent, resulting in a bonus award of $1,300,750, or 95 percent of target annual performance bonus award opportunity.

 

   

 

Key Results Considered in CEO 2020 Performance

 

•   Fostered culture of strong safety performance, supporting both Significant Incident Frequency and Process Safety events ahead of target, and significant improvement in Total Recordable Incident Frequency relative to 2019;

 

•   Demonstrated long-term vision and strategic thought in leadership through the successful completion of the Husky transaction which addressed the Corporation’s three strategic priorities, market access, cost structure and improving our break-evens, and an accelerated path to deleveraging;

 

•   Re-established Investment Grade credit ratings and demonstrated significant flexibility to preserve our balance sheet and liquidity through the weak commodity price environment in 2020;

 

•   Demonstrated strong and decisive leadership in the quick actions taken throughout the year to manage volatility, by adjusting production, reducing costs and utilizing curtailment credits to enhance margins; and

 

•   Established a capital allocation framework that addresses ESG risks in the portfolio and set ambitious ESG 2030 targets underpinned by a business plan to deliver on each of the targets.

 

   

Individual ratings for the other NEOs were each 105 out of 200 percent, resulting in annual performance bonus awards of 96 percent of the target annual performance bonus award opportunity.

 

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Long-Term Incentives

Decisions about 2020 LTI grants were made in February 2020. Mr. Pourbaix’s 2020 total grant value was $7.04 million and consisted of 50 percent Options and 50 percent PSUs (1,550,660 Options and 300,085 PSUs). Similarly, grants for the other NEOs consisted of 50 percent Options and 50 percent PSUs. The allocation has remained constant year-over-year. Aggregate values overall remain below the 50th percentile.

The 2018 PSUs completed vesting with a combined performance multiplier of 1.4860 and were paid in 2021. The grant was based on RTSR performance over four periods which is summarized in the table below:

 

Performance Period

Weighting

Cenovus

TSR

RTSR
Performance
Performance
Multiplier
  January 1, 2018 to December 31, 2018 20% -14% 44th percentile 0.81
  January 1, 2019 to December 31, 2019 20% 25% 100th percentile 2.00
  January 1, 2020 to December 31, 2020 20% -41% 37th percentile 0.62
  January 1, 2018 to December 31, 2020 40% -35% 77th percentile 2.00

CEO Pay Opportunity vs. Realizable Pay

Alignment of our President & Chief Executive Officer’s compensation experience to the experience of our shareholders is illustrated in the following table, comparing the grant date pay opportunity of TDC (as reflected in the Summary Compensation Table in the Compensation Discussion and Analysis – Compensation Tables section of this Circular) relative to the realizable TDC, which fluctuates based on the share price (measured as of December 31, 2020). The table also compares the realizable value of $100 of granted pay to the President & Chief Executive Officer in relation to the value of $100 invested in Common Shares over the same periods. Mr. Pourbaix was appointed President & Chief Executive Officer on November 6, 2017, and therefore the following table reflects Mr. Pourbaix’s total direct compensation beginning in 2018, the first full year of his leadership with Cenovus.

 

Period

CEO TDC

Pay Opportunity(1)

CEO Realizable

Pay TDC(2)

Performance Period Value of $100
President & CEO(3) Shareholder
Cumulative Value(4)
  2020 9,302,203 4,644,396 2019-12-31  to 2020-12-31 50 60
  2019 8,839,992 5,103,742 2018-12-31 to 2020-12-31 58 84
  2018 6,379,993 4,779,801 2017-12-31 to 2020-12-31 75 71
  2018-2020 24,522,188 14,527,939 2017-12-31 to 2020-12-31 59 71

Notes:

(1)

Represents base salary, annual performance bonus and grant date fair value of LTIs granted in the referenced year, as reported in the Summary Compensation Table in the Compensation Discussion and Analysis – Compensation Tables section of this Circular.

(2)

The realizable TDC includes base salary and annual performance bonus earned in the referenced year (as reported in the “Salary” and the “Non-Equity Incentive Plan Compensation – Annual Incentive Plan” columns of the Summary Compensation Table), and the LTIs granted in the referenced year valued as follows: (i) value (market price received less exercise price) of any Options that were granted in that year that were exercised as at or prior to December 31, 2020, if applicable; (ii) “in-the-money” attributed as at December 31, 2020 to Options that were granted in the referenced year that had not been exercised as at December 31, 2020, based on the closing price of the Common Shares on the TSX on December 31, 2020 of $7.75; (iii) value attributed as at December 31, 2020 to PSUs granted in the referenced year that had not vested as at December 31, 2020, assuming performance at Target and related Performance Score of 1.0 times, and based on the closing price of the Common Shares on the TSX on December 31, 2020 of $7.75; and (iv) value attributed as at December 31, 2020 to Restricted Share Units (“RSUs”) granted in the referenced year, which were not yet eligible for payout as at December 31, 2020, based on the closing price of the Common Shares on the TSX on December 31, 2020 of $7.75.

(3)

Represents the realizable value to the President & Chief Executive Officer for each $100 awarded in the Summary Compensation Table for the period as indicated, and ending December 31, 2020.

(4)

Represents the cumulative value of a $100 investment in Common Shares made on the first trading day of the period indicated, assuming quarterly dividend reinvestment.

 

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Performance Graph

The following performance graph illustrates the cumulative TSR for Cenovus on the TSX of $100 invested in Common Shares of the Corporation over the period beginning January 1, 2015 and ending December 31, 2020 compared to $100 invested in the S&P/TSX Composite Index and the S&P/TSX Energy Index over the same period, assuming quarterly reinvestment of dividends. The average NEO total direct compensation pay opportunity in 2020 is essentially unchanged from 2015. The trend in average TDC Opportunity and Realizable TDC is strongly aligned with the shareholder experience, primarily due to the significant portion of variable-based compensation delivered through LTIs and annual performance bonus.

 

LOGO

 

   2015  2016  2017  2018  2019  2020

Compounded
Annual
Growth

Rate(2)

Cenovus Common Shares (TSX) ($)*

  100   118   68   58   80   48   -13.5 %

S&P/TSX Composite Index ($)*

  100   121   132   120   148   156   9.3 %

S&P/TSX Energy Index ($)*

  100   135   126   103   125   927   -1.6 %

S&P/TSX Capped Energy Index ($)*

  100   140   125   92   100   66   -8.0 %

Cenovus NEO Average TDC Pay Opportunity ($ thousands)(3)(4)

  4,000   4,071   3,179   3,291   4,202   4,097   N/A  

Cenovus NEO Average Realizable Pay TDC ($ thousands)(5)(6)

  1,433   1,517   1,870   2,575   2,528   2,199   N/A

Notes:

*

Source: Bloomberg

(1)

In 2018, 2019 and 2020, our NEOs have only realized a portion of their pay opportunity; specifically, actual base salary paid, actual bonus paid, and Options that have vested for the 2018 and 2019 grant only. What is yet to be realized are the share-based awards and unvested Options, granted in the referenced year.

(2)

The compounded annual growth rate shown represents the time period from December 31, 2015 to December 31, 2020.

(3)

Represents average, for the named executive officers reported by Cenovus in the respective year of disclosure, of the sum of amounts reported in the “Salary”, “Share-based Awards”, “Option-based Awards”, and “Non-Equity Incentive Plan Compensation – Annual Incentive Plans” columns of the Summary Compensation Table of the management information circular or management proxy circular (as applicable) in respect of the annual meeting of shareholders of Cenovus held in the year immediately following the date indicated.

(4)

The weighted average of the combined TDC for Mr. Pourbaix and Mr. Ferguson, our former President & Chief Executive Officer, is included in the average of the named executive officers for 2017.

(5)

Represents average realizable TDC of the named executive officers for the referenced year as reported in the Summary Compensation Table in the Management Information Circular of the Corporation for the referenced year. The realizable TDC includes base salary and annual performance bonus earned in the referenced year (as reported in the “Salary” and the “Non-Equity Incentive Plan Compensation – Annual Incentive Plan” columns of the Summary Compensation Table, and the LTIs granted in the referenced year valued as follows: (i) value (market price received less exercise price) of any Options that were granted in that year that

 

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  were exercised as at or prior to December 31, 2020, if applicable; (ii) “in-the-money” attributed as at December 31, 2020 to Options that were granted in the referenced year that had not been exercised as at December 31, 2020, based on the closing price of the Common Shares on the TSX on December 31, 2020 of $7.75; (iii) value attributed as at December 31, 2020 to PSUs granted in the referenced year that had not vested as at December 31, 2020, assuming performance at Target and related Performance Score of 1.0 times, and based on the closing price of the Common Shares on the TSX on December 31, 2020 of $7.75; and (iv) value attributed as at December 31, 2020 to RSUs granted in the referenced year, which were not yet eligible for payout as at December 31, 2020, based on the closing price of the Common Shares on the TSX on December 31, 2020 of $7.75.
(6)

The weighted average of the combined TDC for Mr. McKenzie and Mr. Ruste, our former Executive Vice-President  & Chief Financial Officer, is included in the average of the named executive officers for 2018.

COMPENSATION TABLES

Summary Compensation Table

The following table sets out the compensation paid to our NEOs for the years ended December 31, 2018, 2019 and 2020.

 

Name and

Principal

Position

Year

Salary

($)

Share-
based
Awards(1)
($)
Option-
based
Awards(2)
($)

Non-Equity

Incentive Plan

Compensation

Pension

Value(4)

($)

All

Other

Compensation(5)

($)

Total

Compensation

($)

Annual

Incentive

Plans(3)

($)

 

Alexander J. Pourbaix

  2020   961,458   3,519,997   3,519,998   1,300,750   108,917   100,879   9,511,999

President &

  2019   1,000,000   2,874,994   2,874,998   2,090,000   112,000   94,325   9,046,317

Chief Executive Officer

  2018   1,000,000   2,249,993   2,250,000   880,000   82,667