Source Energy Services Ltd. (SHLE) Earnings Call Transcript

Good morning, everyone. I would like to welcome all of you to the Annual and Special Meeting of the Shareholders of Source Energy. My name is Stew Hanlon, and I am the Chair of the Board of Directors of Source Energy Services Limited. Pursuant to the interim order granted by the Court of Queen's Bench of Alberta on October 26, 2020, I will act as Chair of the meeting and administer these proceedings. Ms. Tracy Nielsen will act as secretary of the meeting. Today's meeting is being held virtually as a result of the impact of COVID-19, the related advisories and recommendations of the federal and provincial governments and the need to ensure the health and welfare of our security holders, employees and other stakeholders. Registered shareholders received a control number on their proxy form and shareholders who have validly appointed their own proxy holder to vote at this virtual meeting by following the proxy appointment process were given a control number by Computershare Trust Company of Canada, Source's transfer agent. These control numbers will act as your log-in credentials for this meeting for voting purposes. Procedure for voting will be discussed shortly. All others attending as guests are able to listen and submit written questions but are not able to vote at this meeting. In the event of technical difficulties prevent me from completing the meeting, I hereby appoint Brad Thomson, Chief Executive Officer, to act as Chair of the meeting in my place. As previously announced, in connection with our key strategic priority of maintaining financial strength and liquidity, Source has reviewed and evaluated potential options and alternatives to improve our capital structure, obtain liquidity and maximize value for all stakeholders. As part of this process, Source has engaged in extended discussions with parties across our capital structure in connection with advancing potential transaction alternatives. Following Source's strategic review efforts and detailed consultation and negotiations undertaken with key stakeholders in connection with the consensual recapitalization transaction, Source's Board determined that the recapitalization transaction, as set out in greater detail in the management information circular dated November 2, 2020, is the best available transaction for Source in these circumstances and is in the best interest of Source and its stakeholders. The recapitalization transaction was approved at the Noteholders Meeting today -- held today at 11:00 a.m. Today's Annual and Special Meeting of the Shareholders is being held to consider and vote only on those specific matters set forth in the management information circular previously mailed to the company's shareholders of record as of October 29, 2020. I now call the formal part of the meeting to order. In order to expedite the meeting, I've asked certain shareholders to make certain motions at appropriate times. This is not intended to preclude shareholder discussion, but only to assist you in the progress of the meeting. I welcome questions or comments from shareholders at any time. I appoint Kyle Gould, a representative of Computershare Trust Company of Canada to act as scrutineer of the meeting. I received a declaration as to the distribution of the notice of the meeting, together with the management information circular and proxy form to all registered shareholders of record as of the close of business on the record date of the meeting. This declaration will be filed with the minutes of the meeting. I have received a report of the scrutineer, which indicates that we have a quorum for the meeting. I hereby adopt and report -- I hereby adopt the report of the scrutineer and declare that there is a quorum of shareholders present at the meeting. Notice having been given in accordance with the interim order granted by the Court of Queen's Bench of Alberta on October 26, 2020, and a quorum being present, I declare that this meeting is duly constituted for the transaction of business. I direct that the scrutineer's report on attendance be annexed to the minutes of this meeting. We will conduct the votes on matters considered at this meeting by online ballot. As explained earlier, registered shareholders received a control number on their proxy form and shareholders who have validly appointed their own proxy holder to vote at this meeting rather than voting in advance of this meeting by proxy. By following the proxy appointment process were required to obtain a control number prior to the meeting from Computershare. These control numbers are required in order to vote at this meeting. If you did not receive a control number, you will not be able to vote at this meeting and are only able to attend as a guest. Voting is open and will close when indicated by me at the end of the formal part of the meeting. Participants will have been presented with voting buttons on the Lumi platform. By clicking on the voting button, participants will see the resolutions we will be voting on today, together with the voting options. Please cast your vote promptly, and you should be presented with a vote received message to confirm your ballot has been cast. While the resolutions are being brought forward, we will open up the meeting for discussion on the resolutions, which will be done by way of submitting online questions to the chair of the meeting. Participants can ask a question at any time during the meeting by selecting the messaging icon with a red circle on the top of your screen, typing your question and submitting it. Please note that all questions are moderated before going to the Chair in order to eliminate repeated questions and to ensure a normal meeting protocol for appropriateness is applied. As your question may be similar in nature to that of another participant, please be aware that the question may be presented to the meeting in a more generic format. If you intend to submit a question, you're invited to do so now. Any questions that are unrelated to the motion before the meeting are on the order and will not be addressed by the Chair. The first item of business is the approval of the shareholders arrangement resolution as set out in Appendix E to the circular. Pursuant to the interim order, the plan of arrangement must be approved by at least 2/3 of the votes cast by shareholders present in-person or represented by proxy and entitled to vote at the meeting. In addition, pursuant to the rules of the TSX, the issuance of common shares of Source, pursuant to the recapitalization transaction, must be passed by a simple majority of the votes cast by shareholders other than certain excluded shareholders, present in-person or represented by proxy and entitled to vote at the meeting as further described in the management information circular. I will now ask Derren Newell for a motion, please.

I move that the special resolution to approve the shareholders arrangement resolution as attached to the circular as Appendix E be approved.

I second the motion.

Previously mentioned, voting is open and will close when indicated. The next business is the approval of the share consolidation in respect of the common shares of Source on a 12:1 basis as set out in Appendix D to the circular. The share consolidation resolution requires approval by at least 2/3 of the votes cast by shareholders present in-person or represented by proxy and entitled to vote at the meeting. I will ask Derren Newell for a motion.

I move that the special resolution to consolidate common shares of Source as attached to the circular as Appendix D be approved.

I second the motion.

As previously mentioned, voting is open and will close when indicated. The next item of business is the approval of the reduction of stated capital in respect of the common shares of Source to $10 million as set out in Appendix F to the circular. The stated capital reduction resolution requires approval by at least 2/3 of the votes cast by shareholders present in-person or represented by proxy and entitled to vote at the meeting. I will ask Derren Newell for a motion.

I move that the special resolution to reduce the stated capital in respect of the common shares of Source to $10 million as attached to the circular as Appendix F be approved.

I second the motion.

As previously mentioned, voting is open and will close when indicated. We will now proceed to the next business and present the annual financial statements of Source for the fiscal year ended December 31, 2019, and the auditor's report thereon. Shareholders do not have to take any action regarding the financial statements, and we will now move on to the next item of business. The next element of business is to fix the number of directors of source to be elected at the meeting. I will ask Derren Newell for a motion.

I move that the number of directors to be elected at the meeting be fixed at 7 directors.

I second the motion.

As previously mentioned, voting is open and will close when indicated. The next item of business is the election of directors. The proposed nominees are: Brad Thomson, Stew Hanlon, James McMahon, Jeff Belford, Michael MacBean, Kenneth Seitz, Carrie Lonardelli. If elected, these individuals will hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed. I ask Derren Newell for a motion that each of the proposed nominees be nominated for election as directors of Source.