RE:RE:Nine Insiders Add SharesI asked Tamarack Investor Relations about executive compensation after Brian made a comment about how their 'comp' was based on prevoius cash flow and was aligned with shareholder's interests.
Here is the question and reply from Tamarack:
Hi Christine,
I was re-watching Margot Rubin’s interview with Brian Schmidt on Youtube and had a question.
It was the of interview Dec. 18th , 2023.
At the 8:28 minute mark Brian stated “Employees and myself are compted on 8 year debt adjusted free cash flow per share”.
Would you be able to elaborate a bit on that?
I am not sure I fully understand it.
Thanks,
Steve Jowett
PS: Nice two wells you pulled in at Charlie Lake!
Tamarack reply:
Steve,
Thank you for your note. This comment relates to how our compensation is evaluated within the context of our performance share unit (PSU) grants related to our long term incentive plans. The 8-year debt adjusted free cash flow per share metric accounted for 35% of the long-term incentive calculation in 2023. This information is available in our Management Information Circular which is posted as part of the materials for our AGM coming up May 8, 2024 (refer to page 54).
Each year we establish a long term financial outlook based on development of our asset base, which includes the 5-year plan we speak to externally, plus an additional 3 years to ensure our inventory depth continues to add value beyond the initial five years. We utilize a model baseline with pricing consistent with our budget deck for the first year and a flat US$55/bbl WTI price afterwards against the development plan to arrive at an average debt adjusted free funds flow per share value. This is designed to create alignment with our shareholders as it provides a measure for long-term per share value creation, taking into consideration the application of debt within the business model. Debt adjusting the share count enables an increase or decrease of the share count used in the denominator to reflect the impact of increases or decreases in debt (where debt changes are converted to share changes assuming a flat share price). At the end of the year we take into account actual results for the first year and the updated outlook for the subsequent years where locations and drilling plans are updated to reflect outlooks on multiple factors which include for example well performance, infrastructure/egress access, cost structures and any acquisition or divestment activity. We then use that outlook to recalculate the debt adjusted free cash flow. Our PSUs vest on three year anniversaries so realization on any potential multiplier is predicated on a three-year performance record.
I hope this is helpful.
Christine Ezinga, VP Business Development & Sustainability