Exhibit 99.1

 

 

NOTICE OF 2022 ANNUAL AND SPECIAL MEETING

AND

MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT

 

 

 

		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON THURSDAY, JUNE 16, 2022

 

NOTICE IS HEREBY GIVEN that an annual and special meeting (the “Meeting”) of the holders (“Shareholders”) of the common shares (“Shares”) of Obsidian Energy Ltd. (“Obsidian Energy”) will be held at the corporate head office of Obsidian Energy, located at 200 – 207 9^th Avenue SW Calgary, Alberta on Thursday, June 16, 2022, at 9:00 a.m. (Mountain Daylight Time) for the following purposes:

 

1.	to receive the consolidated financial statements of Obsidian Energy for the year ended December 31, 2021 and the auditors’ report thereon;

 

2.	to appoint the auditors of Obsidian Energy for the ensuing year;

 

3.	to elect directors of Obsidian Energy for the ensuing year;

 

4.	to hold a non-binding advisory vote on Obsidian Energy’s approach to executive compensation as more particularly described in the accompanying management information circular and proxy statement of Obsidian Energy dated May 4, 2022 (the “Information Circular”); and

 

5.	to transact such further and other business as may properly be brought before the Meeting or any adjournment or postponement thereof.

The specific details of the matters proposed to be put before the Meeting are set forth in the accompanying Information Circular.

The record date (the “Record Date”) for determining Shareholders entitled to receive notice of and to vote at the Meeting is May 2, 2022. Only Shareholders whose names have been entered in the register of Shares on the close of business on the Record Date will be entitled to receive notice of and to vote at the Meeting, provided however that, to the extent a Shareholder transfers the ownership of any of such Shareholder’s Shares after the Record Date and the transferee of those Shares establishes that the transferee owns the Shares and demands, not later than 10 days before the Meeting, to be included in the list of Shareholders eligible to vote at the Meeting, such transferee will be entitled to vote those Shares at the Meeting. Each Share entitled to be voted at the Meeting will entitle the holder to one vote on any matter at the Meeting.

A registered Shareholder may attend the Meeting in person or may be represented by proxy. Registered Shareholders who are unable to attend the Meeting or any adjournment or postponement thereof in person are requested to date, sign and return the accompanying form of proxy for use at the Meeting or any adjournment or postponement thereof. To be effective, the proxy must be received by Obsidian Energy’s registrar and transfer agent, TSX Trust Company (formerly, AST Trust Company (Canada)) at Proxy Department, P.O. Box 721, Agincourt, Ontario M1S 0A1, by internet at www.tsxtrust.com/vote-proxy, by facsimile at 1-866-781-3111 (from within Canada and the United States) or 1-416-368-2502 (from any other country) or by email at proxyvote@tmx.com in each case by not later than 9:00 a.m. (Mountain Daylight Time) on June 14, 2022 or, in the case of any adjournment or postponement of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time of any adjourned or postponed Meeting. Registered Shareholders may

also use a telephone to transmit voting instructions on or before the date and time noted above, although Shareholders cannot use the telephone voting service to designate another person to attend and vote on their behalf at the Meeting. For information regarding voting by telephone and voting by internet or appointing an alternative proxyholder by internet, see the form of proxy for Shareholders and/or the Information Circular enclosed herewith.

The proxyholder has discretion and authority under the accompanying form of proxy to consider amendments or variations of the matters of business identified in this Notice of Annual and Special Meeting, as well as any other matters properly brought before the Meeting, or any adjournment or postponement thereof. Shareholders are encouraged to review the Information Circular carefully before submitting the form of proxy.

Non-registered or beneficial Shareholders who do not hold Shares in their own name but rather through a broker, financial institution, trustee, nominee or other intermediary must complete and return the voting instruction form provided to them or follow the telephone or internet-based voting procedures described therein in advance of the deadline set forth in the voting instruction form in order to have such Shares voted at the Meeting on their behalf. See “Voting Information” in the accompanying Information Circular.

As a result of the continuing uncertainty relating to the COVID-19 pandemic, the Corporation will continue to monitor provincial and federal governmental guidance and, where necessary, will implement measures to protect its Shareholders, employees and the community. At this time, the Corporation intends to hold an in-person Meeting, however, if changes to the Meeting are required, including an adjournment or postponement, the Corporation will provide an update by way of news release as promptly as practicable. Shareholders are encouraged to monitor the Corporation’s website at www.obsidianenergy.com or the Corporation’s SEDAR profile at www.sedar.com, where copies of such news releases, if any, will be posted.

Any questions regarding voting your Shares should be directed to our Investor Relations department, who can be reached at (403)-777-2500, or Toll Free at 1-888-770-2633, or by email at investor.relations@obsidianenergy.com

Dated at the City of Calgary, in the Province of Alberta, this 4^th day of May, 2022.

 

TABLE OF CONTENTS

 

VOTING INFORMATION			2
MATTERS TO BE ACTED UPON AT THE MEETING			8
INFORMATION CONCERNING THE BOARD AND DIRECTOR NOMINEES			11
BIOGRAPHICAL AND OTHER INFORMATION FOR DIRECTOR NOMINEES			11
STANDING COMMITTEE COMPOSITIONS			15
DIRECTOR INDEPENDENCE			15
DIRECTOR ATTENDANCE RECORD			16
BOARD AND COMMITTEE MEETINGS			16
OTHER PUBLIC COMPANY BOARD MEMBERSHIPS			17
DIRECTORS’ TERM AND RETIREMENT POLICY			17
REMUNERATION OF DIRECTORS			17
OVERVIEW OF DIRECTOR REMUNERATION PROGRAM			17
DEFERRED SHARE UNIT PLAN			19
DIRECTOR EQUITY OWNERSHIP REQUIREMENTS			21
DIRECTOR REMUNERATION DATA			22
OTHER BOARD INFORMATION			25
BOARD AND DIRECTOR PERFORMANCE ASSESSMENT			25
DIRECTOR ORIENTATION AND EDUCATION			25
BOARD MEMBERSHIP IN 2021			26
OTHER DISCLOSURES FOR DIRECTOR NOMINEES			26
COMPENSATION DISCUSSION & ANALYSIS			28
OBJECTIVE OF EXECUTIVE COMPENSATION DISCLOSURE			28
IDENTIFICATION OF NAMED EXECUTIVE OFFICERS			28
APPROACH TO EXECUTIVE COMPENSATION			29
EXECUTIVE COMPENSATION PEER GROUP AND BENCHMARKING			31
EXECUTIVE COMPENSATION DECISIONS FOR 2021			32
EXECUTIVE COMPENSATION REVIEW PROCESS			39
MANAGING COMPENSATION RISK			40
EXECUTIVE COMPENSATION DATA			43
PERFORMANCE GRAPH			48
SUMMARIES OF EQUITY COMPENSATION PLANS			50
EMPLOYEE RETIREMENT/SAVINGS PLAN			50
RESTRICTED AND PERFORMANCE SHARE UNIT PLAN			50
DATA REGARDING OUTSTANDING SHARE UNIT AWARDS			53

 

		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

STOCK OPTION PLAN			53
DATA REGARDING OUTSTANDING OPTIONS			59
TERMINATION AND TERMINATION UPON CHANGE OF CONTROL BENEFITS			59
NEO AGREEMENTS			59
TERMINATION BENEFITS FOR STEPHEN LOUKAS			64
TABLE OF ESTIMATED TERMINATION AND TERMINATION UPON CHANGE OF CONTROL AMOUNTS			64
CONTINUOUS SHAREHOLDER ENGAGEMENT			65
MISCELLANEOUS MATTERS			66

 

		APPENDIX A:		FORM 58-101F1 – CORPORATE GOVERNANCE DISCLOSURE
		APPENDIX B:		MANDATE OF THE BOARD OF DIRECTORS
		APPENDIX C:		GLOSSARY OF FREQUENTLY USED DEFINED TERMS, NON-GAAP AND OTHER FINANCIAL MEASURES ADVISORY, OIL AND GAS INFORMATION ADVISORY AND FORWARD-LOOKING STATEMENT ADVISORY

 

		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT DATED MAY 4, 2022

FOR THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS OF

OBSIDIAN ENERGY LTD.

TO BE HELD ON THURSDAY, JUNE 16, 2022

 

 

VOTING INFORMATION

 

Solicitation of Proxies

This Information Circular is furnished in connection with the solicitation of proxies by management of Obsidian Energy Ltd. for use at the Annual and Special Meeting of the holders of the common shares of Obsidian Energy to be held on Thursday, June 16, 2022, at 9:00 a.m. (Mountain Daylight Time) at the corporate head office of Obsidian Energy located at Suite 200, 207 9th Avenue SW, Calgary, Alberta and at any adjournment or postponement thereof, for the purposes set forth in the Notice of Annual and Special Meeting enclosed herewith. Defined terms used in this Information Circular that are not otherwise defined herein have the meanings ascribed thereto in Appendix C – Glossary of Frequently Used Defined Terms, Non-GAAP and Other Financial Measures Advisory, Oil and Gas Information Advisory and Forward-Looking Statement Advisory. Unless otherwise indicated, all information provided in this Information Circular is given as at May 4, 2022.

The solicitation of proxies will be made primarily by mail. In addition to the solicitation of proxies by mail, directors and officers and certain employees of Obsidian Energy may solicit proxies personally by telephone or other telecommunication, but will not receive additional compensation for doing so.

Accompanying this Information Circular is an Instrument of Proxy for use by registered Shareholders. Instruments of Proxy must be received by TSX Trust Company (formerly, AST Trust Company (Canada)) at Proxy Department, P.O. Box 721, Agincourt, Ontario M1S 0A1, by internet at www.tsxtrust.com/vote-proxy, by facsimile at 1-866-781-3111 (from within Canada or the United States) or 1-416-368-2502 (from any other country) or by email at proxyvote@tmx.com, by not later than 9:00 a.m. (Mountain Daylight Time) on June 14, 2022 or, in the case of any adjournment or postponement of the Meeting, not less than 48 hours (excluding Saturdays, Sundays and holidays) prior to the time of any adjourned or postponed Meeting. The time limit for the deposit of proxies may be waived or extended by the Chair of the Meeting at his or her discretion without notice. See “Voting Options – Voting by Registered Shareholders” below.

The Record Date for the Meeting is the close of business on May 2, 2022. Only Shareholders of record as at that date are entitled to receive notice of the Meeting. Shareholders of record will be entitled to vote those Shares included in the list of Shareholders entitled to vote at the Meeting prepared as at the Record Date even if the Shareholder has since that time disposed of his or her Shares, provided however that, to the extent a Shareholder transfers the ownership of any of such Shareholder’s Shares after the Record Date and the transferee of those Shares establishes that the

 

2		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

transferee owns those Shares and demands, not later than 10 days before the Meeting, to be included in the list of Shareholders eligible to vote at the Meeting, such transferee will be entitled to vote those Shares at the Meeting.

An instrument appointing a proxy (including the accompanying Instrument of Proxy) shall be in writing and shall be executed by the Shareholder or his or her attorney authorized in writing or, if the Shareholder is a corporation, under its corporate seal or by an officer or attorney thereof duly authorized. A proxy signed by a person acting as attorney or in some other representative capacity should reflect such person’s capacity following his or her signature and should be accompanied by the appropriate instrument evidencing qualification and authority to act.

The persons named in the enclosed Instrument of Proxy are directors and/or officers of Obsidian Energy. Each registered Shareholder has the right to appoint a proxyholder other than the persons designated in the enclosed Instrument of Proxy, who need not be a Shareholder, to attend and to act for the Shareholder and on behalf of the Shareholder at the Meeting. To exercise such right, the name of the Shareholder’s appointee should be legibly printed in the blank space provided.

Notice to Beneficial Shareholders

The information set forth in this section is of significant importance to many Shareholders, as a substantial number of Shareholders do not hold Shares in their own name. Shareholders who do not hold their Shares in their own name should note that only proxies deposited by Shareholders whose names appear on the records of the registrar and transfer agent for Obsidian Energy as the registered holders of Shares can be recognized and acted upon at the Meeting. If Shares are listed in an account statement provided to a Shareholder by a broker, then in almost all cases those Shares will not be registered in the Shareholder’s name on the records of the registrar and transfer agent for Obsidian Energy. Such Shares will more likely be registered under the name of the Shareholder’s broker or an agent of that broker. In Canada, the vast majority of such Shares are registered under the name of CDS & Co. (the registration name for CDS Clearing and Depository Services Inc., which acts as nominee for many Canadian brokerage firms). Shares held by brokers or their nominees can only be voted (for or against resolutions) or withheld from voting upon the instructions of the Beneficial Shareholder. Without specific instructions, the broker/nominees are prohibited from voting Shares for their clients. Obsidian Energy does not know for whose benefit the Shares registered in the name of CDS & Co. are held. The majority of Shares held in the United States are registered in the name of Cede & Co., the nominee for The Depository Trust Company, which is the United States equivalent of CDS Clearing and Depository Services Inc.

Applicable regulatory policy requires intermediaries/brokers to seek voting instructions from Beneficial Shareholders in advance of Shareholders’ meetings. Every intermediary/broker has its own mailing procedures and provides its own return instructions, which should be carefully followed by Beneficial Shareholders in order to ensure that their Shares are voted at the Meeting. Often, the form of proxy or Voting Instruction Form supplied to a Beneficial Shareholder by its broker is substantially similar to the Instrument of Proxy provided to registered Shareholders; however, its purpose is limited to instructing the registered Shareholder how to vote on behalf of the Beneficial Shareholder. The majority of brokers and other intermediaries now delegate responsibility for obtaining voting instructions from clients to Broadridge. Broadridge typically mails a scannable Voting Instruction Form in lieu of the Instrument of Proxy provided to registered Shareholders. The Beneficial Shareholder is requested to complete and return the voting instruction form to Broadridge by mail or facsimile.

 

3		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

Alternatively the Beneficial Shareholder can call a toll-free telephone number or access the internet to vote the Shares held by the Beneficial Shareholder. Broadridge then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of Shares held by Beneficial Shareholders and to be represented at the Meeting. A Beneficial Shareholder receiving a Voting Instruction Form cannot use that Voting Instruction Form to vote Shares directly at the Meeting. The Voting Instruction Form must be returned as directed therein well in advance of the Meeting in order to have the Shares voted.

Although you may not be recognized directly at the Meeting for the purposes of voting Shares registered in the name of your broker or other intermediary, you may attend at the Meeting as a proxyholder for the registered Shareholder and vote your Shares in that capacity. If you wish to attend the Meeting and vote Shares you hold as a Beneficial Shareholder, you must do so as proxyholder for the registered Shareholder. To do this, you should enter your own name in the blank space on the Voting Instruction Form provided to you and return the document to Broadridge or your broker or other intermediary in accordance with the instructions therein well in advance of the Meeting.

The Corporation will not send proxy-related materials directly to non-objecting Beneficial Shareholders – such materials will be delivered to non-objecting Beneficial Shareholders by Broadridge or through the non-objecting Beneficial Shareholder’s intermediary. Obsidian Energy will pay for the costs of an intermediary to deliver the proxy-related materials and Form 54-101F7 – Request for Voting Instructions Made by Intermediary to objecting Beneficial Shareholders.

As a result of the continuing uncertainty relating to the COVID-19 pandemic, the Corporation will continue to monitor provincial and federal governmental guidance and, where necessary, will implement measures to protect its Shareholders, employees and the community. At this time, the Corporation intends to hold an in-person Meeting, however, if changes to the Meeting are required, including an adjournment or postponement, the Corporation will provide an update by way of news release as promptly as practicable. Shareholders are encouraged to monitor the Corporation’s website at www.obsidianenergy.com or the Corporation’s SEDAR profile at www.sedar.com, where copies of such news releases, if any, will be posted.

Revocability of Proxy

A registered Shareholder who has submitted a proxy may revoke it at any time prior to the exercise thereof. If a person who has given a proxy attends the Meeting in person at which such proxy is to be voted, such person may revoke the proxy and vote in person. In addition to revocation in any other manner permitted by law, a proxy may be revoked by instrument in writing executed by the Shareholder or his attorney authorized in writing or, if the Shareholder is a corporation, under its corporate seal or by an officer or attorney thereof duly authorized and deposited either at the above mentioned office of TSX Trust Company at any time up to and including the last business day preceding the day of the Meeting, or any adjournment or postponement thereof, at which the proxy is to be used, or with the Chair of the Meeting on the day of the Meeting prior to the commencement of the Meeting, or any adjournment thereof, and upon either of such deposits, the proxy is revoked.

Exercise of Discretion by Proxy

The Shares represented by Instruments of Proxy shall be voted for or against (or withheld from voting), as applicable, in accordance with the instructions of the Shareholder on any matter to be acted upon at the Meeting and, where the Shareholder specifies a choice with respect to any matter to be

 

4		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

acted upon, the Shares shall be voted for or against (or withheld from voting), as applicable, on any matter in accordance with the specification so made.

In the absence of such specification, the Shares represented by an Instrument of Proxy will be voted in favour of the matters to be acted upon at the Meeting. The persons named in the Instrument of Proxy furnished by Obsidian Energy will have discretionary authority with respect to any amendments or variations of the matters of business to be acted on at the Meeting or any other matters properly brought before the meeting or any adjournment or postponement thereof, in each instance, to the extent permitted by law, whether or not the amendment, variation or other matter that comes before the Meeting is routine and whether or not the amendment, variation or other matter that comes before the Meeting is contested. As of the date of this Information Circular, management of Obsidian Energy knows of no such amendment, variation or other matter to be acted on at the Meeting.

Voting Options

Voting by Registered Shareholders

You are a registered Shareholder if your Shares are held in your name or if you have a certificate for Shares bearing your name. As a registered Shareholder you can vote in the following ways:

 

In Person		Attend the Meeting and register with the transfer agent TSX Trust Company upon your arrival. Do not fill out and return your Instrument of Proxy if you intend to vote in person at the Meeting.
Mail		Enter voting instructions, sign the Instrument of Proxy and send your completed proxy to:   TSX Trust Company Proxy Department, P.O. Box 721, Agincourt, Ontario M1S 0A1   For your Shares to be voted at the Meeting, your signed Instrument of Proxy must be received by not later than 9:00 a.m. (Mountain Daylight Time) on June 14, 2022 or 48 hours (excluding Saturdays, Sundays and holidays) prior to the time of any adjourned or postponed Meeting (the “Proxy Deadline”).
Telephone		Call toll-free 1-888-489-5760 (English Only) and follow the instructions provided. You will need your 13-digit control number appearing on your Instrument of Proxy to vote. If you vote by telephone, your vote must be received by not later than the Proxy Deadline.   Shareholders cannot use the telephone voting service if they wish to designate a person other than the management designees appearing on the Instrument of Proxy to attend and vote on their behalf at the Meeting.

 

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Internet		Go to www.tsxtrust.com/vote-proxy. Enter your 13-digit control number located on the Instrument of Proxy and follow the instructions on the website to vote your Shares. If you vote by internet, your vote must be received by not later than the Proxy Deadline.   The website may be used to appoint a proxyholder other than the management designees appearing on the Instrument of Proxy to attend and vote on a Shareholder’s behalf at the Meeting and to convey a Shareholder’s voting instructions. Please note that if a Shareholder appoints an alternative proxyholder and submits their voting instructions and subsequently wishes to change their appointment or voting instructions, a Shareholder may resubmit their proxy, prior to the Proxy Deadline. When resubmitting a proxy, the most recently submitted proxy will be recognized as the only valid one, and all previous proxies submitted will be disregarded and considered revoked, provided that the last proxy is submitted by the deadline noted above.
E-mail		Scan both sides of your completed, signed Instrument of Proxy. Attach the scanned document to an e-mail and send your e-mail to proxyvote@tmx.com so that it is received not later than the Proxy Deadline.
Fax		1-866-781-3111 (from within Canada or the United States) or 1-416-368-2502 (from any other country) – Fax both pages of your completed, signed Instrument of Proxy to one of the numbers provided so that it is received not later than the Proxy Deadline.
Questions		Call our Investor Relations department, who can be reached at (403)-777-2500, or Toll Free at 1-888-770-2633 , or by email at investor.relations@obsidianenergy.com

Voting for Non-Registered or Beneficial Shareholders

If a Shareholder’s Shares are not registered in such Shareholder’s name, such Shares will be held in the name of a “nominee”, usually a bank, trust company, broker, securities dealer or other financial institution and, as such, that nominee will be the legal entity entitled to vote those Shares and must seek the Beneficial Shareholder’s instructions as to how to vote the Beneficial Shareholder’s Shares. See “Notice to Beneficial Shareholders” above and the accompanying Voting Instruction Form for instructions on how to vote your Shares.

If you have any questions or require more information with respect to voting your Shares at the Meeting, please contact our Investor Relations department, who can be reached at (403)-777-2500, or Toll Free at 1-888-770-2633, or by email at investor.relations@obsidianenergy.com

Notice-and-Access

Obsidian Energy has elected to use the “notice-and-access” provisions under National Instrument 54-101 Communications with Beneficial Owners of Securities of a Reporting Issuer (the “Notice-and-Access Provisions”) for the Meeting in respect of mailings to its Beneficial Shareholders but not in respect of mailings to its registered Shareholders. The Notice-and-Access Provisions are rules developed by the Canadian Securities Administrators that reduce the volume of materials that must be

 

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physically mailed to shareholders by allowing a reporting issuer to post an information circular in respect of a meeting of its shareholders and related materials online.

Obsidian Energy has also elected to use procedures known as “stratification” in relation to its use of the Notice-and-Access Provisions. Stratification occurs when a reporting issuer uses the Notice-and-Access Provisions to provide a paper copy of an information circular and, if applicable, a paper copy of financial statements and related Management’s Discussion and Analysis (“Financial Information”), to some shareholders together with the notice (the “Notice-and-Access Notification”) provided to shareholders under the Notice-and-Access Provisions. In relation to the Meeting, in addition to a Notice- and-Access Notification and request for voting instructions, Beneficial Shareholders who have previously requested to receive them will receive a paper copy of this Information Circular.

Beneficial Shareholders who have not already received but wish to receive a paper copy of this Information Circular should contact TSX Trust Company (formerly, AST Trust Company (Canada)) at the toll-free number 1-888-433-6443 or 1-416-882-3801 outside Canada and the U.S., by email at tsxt-fulfilment@tmx.com, or online at www.meetingdocuments.com/TSXT/obe or through Obsidian Energy’s profile on SEDAR at any time up to one year after the date of the Meeting or any adjournment or postponement thereof. In order to allow Beneficial Shareholders a reasonable time to receive paper copies of the Information Circular and related materials prior to providing their voting instructions in respect of their Shares, any Beneficial Shareholders wishing to request paper copies as described above should ensure that such request is received by 3:30 p.m. (Mountain Daylight Time) on June 2, 2022. A Beneficial Shareholder may also call Obsidian Energy at 1-888-770-2633 (toll free) to obtain additional information about the Notice-and-Access Provisions.

Voting Shares and Principal Holders thereof

Obsidian Energy is authorized to issue an unlimited number of Shares and up to 90,000,000 preferred shares. As at May 4, 2022, 82,077,296 Shares and no preferred shares were issued and outstanding. At the Meeting, upon a show of hands, every Shareholder present in person or represented by proxy and entitled to vote shall have one vote. On a poll or ballot, every Shareholder present in person or by proxy has one vote for each Share held.

If two or more persons hold Shares jointly, one of those Shareholders present at the Meeting may in the absence of the others vote the Shares, but if two or more of those persons who are present, in person or by proxy, vote, they shall vote as one on the Shares jointly held by them.

To the knowledge of the directors and executive officers of Obsidian Energy, no person or company beneficially owns, controls or directs, directly or indirectly, Shares carrying 10 percent or more of the voting rights attached to the issued and outstanding Shares.

Quorum for Meeting

At the Meeting, a quorum shall consist of two (2) or more persons either present in person or represented by proxy and representing in the aggregate not less than 25% of the outstanding Shares entitled to vote at the Meeting. If a quorum is not present at the beginning of the Meeting, the Shareholders present may adjourn the Meeting to a fixed time and place but may not transact any other business.

 

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Approval Requirements

All of the matters to be considered at the Meeting are ordinary resolutions requiring approval by a majority of the votes cast in respect of the resolution by or on behalf of Shareholders present in person or represented by proxy at the Meeting, other than the advisory vote on Obsidian Energy’s approach to executive compensation, which shall not be binding on Obsidian Energy.

 

 

MATTERS TO BE ACTED UPON AT THE MEETING

 

Presentation of Financial Statements

The consolidated financial statements of Obsidian Energy for the year ended December 31, 2021, together with the auditors’ report on those statements, have been mailed to the Shareholders who have requested such materials, in addition to this Information Circular, in accordance with applicable securities laws. A copy of such financial statements is also available through the internet on Obsidian Energy’s SEDAR profile at www.sedar.com, on EDGAR at www.sec.gov, and on Obsidian Energy’s website at www.obsidianenergy.com

Appointment of Auditor

The Board recommends that KPMG LLP (“KPMG”) be appointed auditor of Obsidian Energy for the ensuing year at a remuneration to be approved by the Board. KPMG has been the auditor of Obsidian Energy since August 23, 2021.

Shareholders will consider an ordinary resolution to appoint the firm of KPMG to serve as auditors of Obsidian Energy until the next annual meeting of the Shareholders. The Board of Directors and Management plan to vote FOR and recommend that you vote FOR this ordinary resolution at the Meeting.

Unless otherwise directed by the Shareholders appointing them proxy, the persons named in the enclosed Instrument of Proxy intend to vote IN FAVOUR of this ordinary resolution at the Meeting.

Election of Directors of Obsidian Energy

The articles of Obsidian Energy provide for a minimum of three (3) directors and a maximum of twelve (12) directors. There are currently seven (7) directors and the Board of Directors has fixed the number of directors to be elected at the Meeting for the ensuing year at seven (7) directors. All of the current directors have been elected for a term that ends at the close of the Meeting. Management does not contemplate that any of the director nominees will be unable to serve as a director but, if that should occur for any reason prior to the Meeting, the persons named in the enclosed Instrument of Proxy reserve the right to vote for another nominee at their discretion. Each director elected will hold office until the close of the next annual general meeting or until his or her successor is elected or appointed, unless his or her office is vacated earlier.

Management’s seven (7) nominees for election as directors of Obsidian Energy by Shareholders are as follows:

 

Shani Bosman		John Brydson
Raymond D. Crossley		Michael J. Faust
Edward H. Kernaghan		Stephen E. Loukas
Gordon Ritchie

 

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The Board of Directors and Management plan to vote FOR and recommend that you vote FOR each of the aforementioned nominees for election as a director of Obsidian Energy at the Meeting.

Unless otherwise directed by the Shareholders appointing them proxy, the persons named in the enclosed Instrument of Proxy intend to vote FOR the election of each such nominee as a director of Obsidian Energy at the Meeting.

Information in respect of the nominees for election as directors of Obsidian Energy is set forth below under “Information Concerning the Board and Director Nominees – Biographical and Other Information for Director Nominees”.

Individual Director Nomination and Majority Voting Policy

Obsidian Energy has a director nomination and majority voting policy providing for individual director nomination and majority voting. Such policy provides that in uncontested elections (i.e. elections where the number of nominees for directors is equal to the number of directors to be elected):

 

1.

In the event that any nominee for director receives a greater number of votes “withheld” than votes “for” his or her election as a director, then immediately following the meeting of Shareholders at which such votes were cast, such director shall submit his or her resignation to the Human Resources, Governance & Compensation Committee, to be effective on Board acceptance.

 

2.

In the event a resignation is submitted in accordance with section 1 above, the Human Resources, Governance & Compensation Committee shall consider whether or not it is appropriate to recommend to the Board that such resignation be accepted, having regard to all factors considered relevant in the discretion of the Human Resources, Governance & Compensation Committee, including but not limited to the performance review feedback received from members of the Board pursuant to Obsidian Energy’s annual Board performance review process. The Board shall accept the resignation absent exceptional circumstances. A director who tenders a resignation pursuant to the policy will not participate in any meeting of the Human Resources, Governance & Compensation Committee or the Board at which the resignation is considered.

 

3.

Within 90 days of the Shareholders’ meeting at which the votes were cast, a news release will be issued by Obsidian Energy announcing whether or not the director in question will continue to serve on the Board, a copy of which will be provided to the Toronto Stock Exchange. If the Board determines not to accept a resignation, the news release will state the reasons for that decision.

In accordance with this policy, the Instruments of Proxy and Voting Instruction Forms for this Meeting provide for voting for individual directors as opposed to voting for a slate of directors.

Advance Notice By-Law

The Board has adopted an advance notice by-law (“By-law No. 2”), which was approved by Shareholders at the Corporation’s 2013 Annual General Meeting. By-law No. 2 sets forth procedures that must be followed by any Shareholder who intends to nominate any person for election as a director

 

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of the Corporation, other than pursuant to a proposal made in accordance with the ABCA, or a requisition of a shareholder meeting made pursuant to the ABCA. By-law No. 2 stipulates a deadline by which Shareholders must notify the Corporation of their intention to nominate directors and also sets out the information that Shareholders must provide regarding each director nominee and the nominating Shareholder in order for the requirements of By-law No. 2 to be met. These requirements are intended to provide all Shareholders, including those voting by proxy, with the opportunity to evaluate the nominees and vote in an informed and timely manner regarding said nominees. By-law No. 2 also ensures orderly and efficient shareholder meetings by providing a structured and transparent framework for nominating directors. No person nominated by a Shareholder will be eligible for election as a director of the Corporation unless nominated in accordance with the provisions of By-law No. 2. A copy of By-law No. 2 is available on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov).

Non-Binding Advisory Vote on Approach to Executive Compensation

As part of Obsidian Energy’s ongoing commitment to robust governance practices, Shareholders are being provided an opportunity to participate in a non-binding ‘say on pay’ shareholder advisory vote with respect to Obsidian Energy’s approach to executive compensation as disclosed in this Information Circular, particularly under the heading “Compensation Discussion & Analysis.”

This non-binding advisory vote on executive compensation will provide Shareholders with the opportunity to vote “For” or “Against” our approach to executive compensation through the following resolution:

“BE IT RESOLVED THAT, on an advisory basis and not to diminish the role and responsibilities of the Board of Directors, the Shareholders accept the approach to executive compensation disclosed in the Information Circular of Obsidian Energy Ltd. (the “Corporation”) dated May 4, 2022 and delivered in connection with the 2022 Annual and Special Meeting of Shareholders of the Corporation.”

As this is an advisory vote that is not required to be submitted to a vote of Shareholders under applicable securities and corporate laws, and therefore the results will not be binding upon the Board of Directors. However, the Board will consider the outcome of the vote in reviewing the Corporation’s approach to executive compensation in the future.

The Board of Directors and Management plan to vote FOR and recommend that you vote FOR this non-binding advisory resolution at the Meeting.

Unless otherwise directed by the Shareholders appointing them proxy, the persons named in the enclosed Instrument of Proxy intend to vote FOR this non-binding advisory resolution at the Meeting.

 

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INFORMATION CONCERNING THE BOARD AND DIRECTOR NOMINEES

 

BIOGRAPHICAL AND OTHER INFORMATION FOR DIRECTOR NOMINEES

 

The following tables and notes thereto provide certain information in respect of the nominees for election as directors of Obsidian Energy, including their names, municipalities, provinces and countries of residence, present principal occupations, principal occupations during the last five years, the year in which each became a director of Obsidian Energy (or one of its predecessors), to the extent applicable, and the number of securities of Obsidian Energy beneficially owned or controlled or directed, directly or indirectly, by each nominee as at May 4, 2022.

 

SHANI BOSMAN     Calgary, Alberta, Canada Age: 52 Independent Director Director Since: May 4, 2022		Ms. Bosman is a business strategist and transformational leader with diverse global experience across strategic decision-making processes, corporate transformation, and operational execution. Since 2021, she founded the boutique independent consulting firm BINGWA Inc., with specialty advisory services for new and innovative strategic frameworks, portfolio & long-range business planning, technical & operational performance execution, process & system improvement, corporate restructuring and energy transformation initiatives. Prior to that, Ms. Bosman was the Vice President, Corporate Strategy, Performance, Planning & Investor Relations from 2019 to 2021, and held Director roles in Technical Operations & Business and Asset Development at Husky Energy Inc., prior to 2019. Ms. Bosman holds an MBA from the Haskayne Business School, University of Calgary, Masters Certificate in Project Management from Mount Royal University and a Bachelor Degree in Chemical Engineering from the University of Pretoria, South Africa.
		Ownership
		Shares:		0 (1)
		Deferred Share Units:		0

Board / Standing Committee Membership in 2021		Attendance		Attendance (Total)
N/A

 

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JOHN BRYDSON     Greenwich, Connecticut, USA   Age: 69 Independent Director Director Since: June 4, 2014		Mr. Brydson has over 30 years of experience in the financial sector and has occupied senior roles in both major investment and commercial banks. Since 2012, Mr. Brydson has been a private investor. From 2010 until the end of 2012, he was Chairman of a small full-service management consulting firm, Hestan Consulting Group (“HCG”), which he founded. Prior to HCG, Mr. Brydson was a Managing Director with Credit Suisse First Boston, now Credit Suisse (“CS”), from 1995 until 2009, where he was in charge of the Multi-Product Event Trading group. He was also a Managing Director with Lehman Brothers in a similar function from 1983 until he joined CS. The early years of his career were spent as an equity analyst before joining Chase Manhattan Bank (“Chase”) in London in 1977. He transferred to the head office in New York in 1980 where he became a Vice President in the Project Finance Group, specializing in international projects in the energy, mining and metals sectors. He left Chase to join Lehman Brothers in 1983. Mr. Brydson holds an Honors Degree in Economics from Heriot-Watt University in Edinburgh, Scotland. Mr. Brydson served over 10 years as the President and a Board Member of The American Friends of Heriot-Watt University, a charitable organization.
		Ownership
		Shares:		408,571(1)
		Deferred Share Units:		483,143(2)

Board / Standing Committee Membership in 2021		Attendance		Attendance (Total)
Board		11/11		22/22   (100%)
Audit Committee		6/6
Operations and Reserves Committee		4/4
HRG&C Committee(3)		1/1

 

RAYMOND D. CROSSLEY     Calgary, Alberta, Canada Age: 63 Independent Director Director Since: March 6, 2015		Mr. Crossley is a financial executive and corporate director. He is the Chief Financial Officer of the Calgary Health Foundation and the lead independent member of the Alberta Securities Commission. Mr. Crossley retired in 2015 from PricewaterhouseCoopers (“PwC”) after more than 33 years of service. Mr. Crossley served as an elected member of the Partnership Board (PwC’s governing body), from 2001-2005. From 2005-2011, Mr. Crossley was the Managing Partner of PwC’s Calgary office, and from 2011-2013 was Managing Partner, Western Canada. In this role, he led PwC’s market activities in Western Canada. He holds the ICD.D designation from the Institute of Corporate Directors and is a Chartered Professional Accountant. He graduated from the University of Western Ontario with a degree in Economics and Political Science.
		Ownership
		Shares:		4,714(1)
		Deferred Share Units:		267,287(2)

Board / Standing Committee Membership in 2021		Attendance		Attendance (Total)
Board		11/11		21/21   (100%)
Audit Committee (Chair)		6/6
HRG&C Committee		4/4

 

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MICHAEL J. FAUST   Anchorage, Alaska, USA Age: 61 Independent Director Director Since: May 11, 2018		Mr. Faust has 34 years of industry, financial and leadership experience within the oil and gas sector, including diverse geological, geophysical and technical reservoir experience spanning many different basins and formations throughout the world. Mr. Faust was the Interim President and Chief Executive Officer of Obsidian Energy from March 18, 2019 to December 4, 2019. Mr. Faust is a consultant with Quartz Geophysical LLC, a geophysical consulting business. Mr. Faust is currently a board member of the now private corporation SAExploration Holdings, Inc., where he was also the President and CEO until December 31, 2021. He is also a director of Parker Drilling and he was the Vice President, Exploration and Land at ConocoPhillips Alaska, Inc., where he oversaw and managed the company’s exploration organization and strategy in Alaska. Mr. Faust earned his Master of Arts degree in Geophysics from the University of Texas at Austin in 1984, after receiving his Bachelor of Science degree in Geology from the University of Washington in 1981. Mr. Faust is a Certified Petroleum Geologist and a member of the American Association of Petroleum Geologists, the Society of Exploration Geophysicists, and served as the President of the Geophysical Society of Alaska from 2001 to 2002.
		Ownership
		Shares:		56,508(1)
		Deferred Share Units:		332,813(2)

Board / Standing Committee Membership in 2021		Attendance		Attendance (Total)
Board		11/11		16/16   (100%)
Operations and Reserves Committee (Chair)(3)		4/4
HRG&C Committee(3)		1/1

 

EDWARD H. KERNAGHAN     Toronto, Ontario, Canada Age: 50 Independent Director Director Since: January 3, 2018		Mr. Kernaghan holds a Master of Science Degree from the University of Toronto. He is Senior Investment Advisor of Kernaghan & Partners Ltd., a brokerage firm. He is also President of Principia Research Inc., a research and investment company, and of Kernwood Ltd., an investment holding company. Mr. Kernaghan also sits on the Board of Directors of Waterloo Brewing Company, Boralex Inc.(6), Exco Technologies Ltd., Black Diamond Group Limited and Velan Inc.
		Ownership
		Shares:		100,421(1)
		Deferred Share Units:		233,994(2)

Board / Standing Committee Membership in 2021		Attendance		Attendance (Total)
Board		11/11		19/19   (100%)
Operations and Reserves Committee		4/4
HRG&C Committee		4/4

 

13		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

STEPHEN E. LOUKAS     Rye, New York, USA Age: 44 Director, Interim President & Chief Executive Officer Director Since: May 11, 2018		Mr. Loukas is partner, managing member, and portfolio manager at FrontFour Capital Group LLC, a value-based investment management firm. Mr. Loukas was appointed Interim President and Chief Executive Officer of Obsidian Energy on December 5, 2019. Previously, Mr. Loukas held roles including Director at Credit Suisse Securities where he was a Portfolio Manager and Head of Investment Research of the Multi-Product Event Proprietary Trading Group, and at Pirate Capital where he was a senior investment analyst. Mr. Loukas has also worked within the Corporate Finance & Distribution Group of Scotia Capital where he focused on the structuring and syndication of leveraged loans and high yield debt. Mr. Loukas started his career at restructuring firm Zolfo Cooper where he assisted corporate clients in the development and implementation of operational and financial restructuring plans. Mr. Loukas has previously served as a director of Xinergy Ltd. Mr. Loukas received a B.S. in Finance and Accounting from New York University.
		Ownership
		Shares:		4,520,666(1)(5)
		Deferred Share Units:		118,197(2)

Board / Standing Committee Membership in 2021		Attendance		Attendance (Total)
Board(4)		11/11		11/11
				(100%)

 

GORDON RITCHIE     Calgary, Alberta, Canada Age: 69 Independent Chair of the Board Director Since: December 1, 2017		Mr. Ritchie retired in 2016, following a career spanning over 37 years with RBC Capital Markets LLC. From 2005 through 2016, Mr. Ritchie served as Vice Chairman, with primary responsibility for many of RBC’s top energy clients. During this period Mr. Ritchie led teams completing many of the largest energy M&A and financing transactions in Canada, aggregating in excess of $200 billion. From 2000 through 2005, he served as Managing Director and Head of the Global E&P Energy Group. Before that, Mr. Ritchie spent six years in New York where he served as President and Chief Executive Officer of RBC’s U.S. Broker/Dealer Operations (1993 to 1999); was Managing Director of RBC’s International Corporate Finance Group based in London, England (1989 to 1993); was Vice President, Corporate Finance in Calgary (1984 to 1988); and Energy Research Analyst (1979 to 1983). Throughout his career Mr. Ritchie gained extensive experience in research and investment banking in Europe, the United States and Canada. Mr. Ritchie holds an MBA from the University of Western Ontario and a Bachelor of Arts (Economics) from the University of Alberta.
		Ownership
		Shares:		42,071(1)
		Deferred Share Units:		333,302(2)

Board / Standing Committee Membership in 2021		Attendance		Attendance (Total)
Board		11/11		15/15
Audit Committee(3)		4/4		(100%)

Notes to Biographical and Other Information for Director Nominees:

 

(1)

Reflects the number of Shares beneficially owned or controlled or directed, directly or indirectly, by each nominee as at May 4, 2022, and based on information reported on SEDI other than for Ms. Bosman who is in the process of setting up her account given her appointment on May 4, 2022. In the case of Mr. Loukas, it does not include any Shares that may have been acquired by him, directly or indirectly, under the Savings Plan since December 31, 2021.

(2)	Reflects the number of DSUs held by each nominee as at December 31, 2021. In the case of Mr. Loukas, he has not earned any DSUs while he is Interim President and Chief Executive Officer.

(3)	Mr. Faust became Chair of the O&R Committee on June 17, 2021. He also joined the HRG&C Committee at this time. Mr. Brydson became Chair of the HRG&C Committee on June 17, 2021. Mr. Ritchie joined the Audit Committee on June 17, 2021.

 

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(4)

Mr. Loukas, effective December 5, 2019, was not a member of any standing committee of the Board other than the Commercial Committee which dissolved effective October 1, 2020; however, he attends committee meetings (excluding “in-camera” sessions of such meetings). After his appointment to Interim President and Chief Executive Officer, his committee meeting attendance was not recorded, as he was not a member of the committees.

(5)	Mr. Loukas’ joined the Board at the May 2018 AGM through being nominated by one of our largest shareholders, FrontFour Capital Group LLC. Please see SEDI for all the FrontFour Capital Group LLC affiliate holdings in the Corporation.

(6)	Mr. Kernaghan will not be seeking re-election on the Boralex Inc. board of directors on May 11, 2022, due to reaching the applicable term limit.

STANDING COMMITTEE COMPOSITIONS

 

The following table identifies the Board’s standing committees and their members as at May 4, 2022.

 

Director

Audit Committee

Human Resources, Governance and Compensation Committee

Operations and Reserves Committee

Shani Bosman

X

John Brydson

X

Chair

X

Raymond D. Crossley

Chair

X

Michael Faust

X

Chair

Edward H. Kernaghan

X

X

Stephen Loukas(1)

Gordon Ritchie(2)

X

Notes:

 

(1)	Mr. Loukas is not a member of any standing committee of the Board; however, he attends committee meetings (excluding “in-camera” sessions of such meetings). His committee meeting attendance is not recorded, as he is not a member of the committees.

(2)	Mr. Ritchie is an ex officio member of all the Committees pursuant to being appointed the Chair on February 20, 2019. Mr. Ritchie was appointed to the Audit Committee on June 17, 2021.

DIRECTOR INDEPENDENCE

 

The Board is responsible for determining whether or not each director and director nominee is independent. In making this determination, the Board applies the definition of “independence” as set forth in National Instrument 58-101 Disclosure of Corporate Governance Practices (“NI 58-101”). In applying this definition and these standards, the Board considers all relationships of the director and director nominees with Obsidian Energy, including business, family and other relationships. The Board also determines whether each member of Obsidian Energy’s Audit Committee is independent pursuant to the requirements of National Instrument 52-110 Audit Committees.

The Board has determined that Mr. Loukas is not independent, as he is the Interim President and Chief Executive Officer of Obsidian Energy. The Board has determined that all other directors and director nominees are independent under the standards of NI 58-101. In addition, all members of the Board’s committees have been determined to be independent. All Audit Committee members have been determined to be independent in accordance with National Instrument 52-110 Audit Committees, and pursuant to the Audit Committee mandate.

 

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The following table reflects the determinations made by the Board with respect to the independence of each existing director and each director nominee.

 

Director		Management		Independent		Not Independent		Reason for Non-Independence
Shani Bosman				X
John Brydson				X
Raymond D. Crossley				X
Michael J. Faust				X
Edward H. Kernaghan				X
Stephen E. Loukas		X				X		Interim President and Chief Executive Officer
Gordon Ritchie				X

DIRECTOR ATTENDANCE RECORD

 

The attendance record of each individual who served as a member of the Board in 2021 for all Board meetings and meetings of standing committees of the Board held in 2021 is set forth below.

 

Director		Board					Audit Committee					Human   Resources,   Governance &   Compensation   Committee					Operations   and   Reserves   Committee					Total
John Brydson		11					6					1					4					22
Raymond Crossley		11					6					4										21
Michael Faust		11										1					4					16
William Friley(1)		8										3					2					13
Maureen Cormier Jackson(1)		8					2					3										13
Edward H. Kernaghan		11										4					4					19
Stephen E. Loukas(2)		11																				11
Gordon Ritchie(3)		11					4															15
Totals		82					18					16					14					130

Notes:

 

(1)	Mr. Friley and Ms. Cormier Jackson resigned from the Board effective June 14, 2021.

(2)	Mr. Loukas became Interim President and Chief Executive Officer on December 5, 2019 and his committee meeting attendance was not recorded from that time on as he was not a member of any of the committees.

(3)	Mr. Ritchie is an ex officio member of all the Committees pursuant to being appointed the Chair on February 20, 2019. He was appointed to the Audit Committee on June 17, 2021.

BOARD AND COMMITTEE MEETINGS

 

The number of meetings held by the Board and each of the standing committees of the Board in 2021, and the overall attendance at such meetings by all serving directors at the times of such meetings in 2021, is summarized below.

 

Board/Committee		Total Meetings					Overall Attendance
Board				11					100	%
Audit Committee				6					100	%
Human Resources, Governance & Compensation Committee				4					100	%
Operations and Reserves Committee				4					100	%

 

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OTHER PUBLIC COMPANY BOARD MEMBERSHIPS

 

The table below sets forth the other reporting issuers for which Obsidian Energy directors and director nominees serve as directors and the stock exchanges on which such issuers are listed.

 

Director		Reporting Issuer		Stock Exchange
Shani Bosman		None		—
John Brydson		None		—
Raymond D. Crossley		None		—
Michael J. Faust		None		—
		Waterloo Brewing Company		TSX
Edward H. Kernaghan		Boralex Inc.(1)		TSX
		Exco Technologies Ltd.		TSX
		Black Diamond Group Limited		TSX
		Velan Inc.		TSX
Stephen E. Loukas		None		—
Gordon Ritchie		Pipestone Energy Corp		TSX

Note:

 

(1)	Mr. Kernaghan will not be seeking re-election on the Boralex Inc. board of directors on May 11, 2022, due to reaching the applicable term limit.

The Strategic Interlocking Board Memberships

As at May 4, 2022, none of the director nominees serve together as directors on the boards of other reporting issuers.

DIRECTORS’ TERM AND RETIREMENT POLICY

 

The nominees for election as directors of Obsidian Energy, if elected, will serve until the close of the next annual meeting of Shareholders or until their successors are duly elected or appointed. In addition, Obsidian Energy’s director retirement policy requires that each Non-Management Director, upon reaching the age of 70 (and annually thereafter), must offer their resignation as a director, following which the Board, after receiving the recommendation of the HRG&C Committee, shall determine whether to accept such resignation. None of the nominees for election as directors of Obsidian Energy are older than 70 years of age.

 

 

REMUNERATION OF DIRECTORS

 

OVERVIEW OF DIRECTOR REMUNERATION PROGRAM

 

The Board, through the HRG&C Committee, is responsible for developing and implementing the directors’ compensation program. The main objectives of the directors’ compensation program are to:

 

(a)

attract and retain highly qualified individuals as members of the Board;

 

(b)

compensate the directors in a manner that is competitive with other comparable public issuers and commensurate with the risks and responsibilities assumed in Board and Board committee membership; and

 

17		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

(c)

align the interests of the directors with the interests of Shareholders.

Unlike compensation for Obsidian Energy’s executive officers, the remuneration plan for Non-Management Directors is not designed to pay for performance. As such, Non-Management Directors receive cash retainers and meeting fees for their services in order to help ensure unbiased decision-making. Share ownership, required through ownership guidelines, serves to align the directors’ interests with the interests of the Shareholders. Consistent with this philosophy, Non-Management Directors are not currently eligible to receive Options under the Stock Option Plan (which we publicly indicated would not be used in 2022 in connection with obtaining shareholder approval of the Stock Option Plan in 2020) or RSUs or PSUs under the Award Plan, and do not participate in Obsidian Energy’s Employee Retirement/Savings Plan. In addition, Non-Management Directors participate in the DSU Plan pursuant to which they receive a portion of their compensation in the form of DSUs, which are not redeemable until after a Non-Management Director has retired from the Board. When redeemed, each DSU entitles the holder to a payment equal to the then current cash equivalent of the market price per Share, as calculated in accordance with the DSU Plan, thereby forming an additional alignment between directors’ interests and remuneration and the interests of Shareholders and Shareholder returns. Management Directors (i.e. Mr. Loukas) are not eligible to participate in the DSU Plan. As noted above, the Board may grant Options as a component of compensation for key personnel, including Non-Management Directors in the future, provided that the total number of Options granted to Non-Management Directors will never exceed 1.0% of the outstanding Shares and the value of Options granted to any single Non-Management Director during a calendar year will not exceed $100,000. The Board believes that granting Options to Non-Management Directors within these limited parameters will create further alignment between directors’ interests and remuneration and the interests of Shareholders and Shareholder returns.

On May 6, 2020, the Corporation announced that in connection with the COVID-19 pandemic and other material macro events impacting the Company, each member of the Board of Directors elected to take a temporary 10% pay cut in his or her annual retainer fees effective May 1, 2020. On March 25, 2021, the Board of Directors elected to reinstate their compensation to 100% in his or her annual retainer fees effective May 1, 2021. For further details regarding the compensation, see below the “Summary of the Non-Management Director Remuneration Program”.

Summary of the Non-Management Director Remuneration Program

The following table summarizes the fee structure for Non-Management Directors of Obsidian Energy as at May 4, 2022.

 

Annual Retainer for the Board Chair			$150,000	(1)(2)
Annual Retainer for each Board member other than the Board Chair			$100,000	(1)(2)
Annual Retainer for Audit Committee Chair			$15,000
Annual Retainer for each of the Chairs of the HRG&C Committee and Operations and Reserves Committee			$7,500
Board, Strategy Session and Committee Meeting and Attendance Fee (per meeting or event attended)			$1,500
Travel Expenses (per instance)(3)			Applicable Cost

 

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Notes:

 

(1)	In 2021, the DSU Plan provided that 50% of the Participants Annual Fixed Remuneration (as defined in the DSU Plan) was required to be received in the form of DSUs. See “Remuneration of Directors – Deferred Share Unit Plan – DSU Grants”.

(2)	The Board elected to take a 10% discount on their annual retainer, effective May 1, 2020 until May 1, 2021 as described above.

(3)

Repayment to non-employee directors for reasonable travel expenses incurred for attendance at a meeting of the Board, a Committee or a meeting of the Shareholders. In addition to the fees described in the table above, Non-Management Directors also received reimbursement for out-of-pocket expenses in carrying out their duties as a director and were eligible to participate in the health and wellness benefits programs generally available to employees of Obsidian Energy.

Management Director Compensation

Management Directors (currently being Mr. Loukas) do not receive any retainers, fees or other remuneration in their capacities as directors of Obsidian Energy. For information on the compensation received by Mr. Loukas in 2021 in his capacity as Interim President and Chief Executive Officer of Obsidian Energy, see “Compensation Discussion & Analysis – Executive Compensation Data”.

Procedure for Review of Director Compensation Program

The HRG&C Committee performs an annual review of Obsidian Energy’s director remuneration program to ensure that such program continues to achieve the objectives listed above, as well as to assess the continued appropriateness of such objectives. The HRG&C Committee formulates and makes recommendations to the Board regarding the form and amount of remuneration for directors, and the Board establishes the form and amount of compensation for directors based on these recommendations.

DEFERRED SHARE UNIT PLAN

 

Under the DSU Plan, DSUs are granted by Obsidian Energy to Non-Management Directors, providing rights to receive, on a deferred payment basis, a cash payment based on the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the date of payment. Management Directors (i.e. Mr. Loukas) are not eligible to participate in the DSU Plan.

A director’s remuneration that is required and/or elected to be received in the form of DSUs is referred to as “Deferred Remuneration”. Obsidian Energy credits DSUs in respect of Deferred Remuneration to a director’s account on the date that the director’s Deferred Remuneration would otherwise be payable. The number of DSUs to be credited is determined by dividing the amount of the Deferred Remuneration by the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the date the DSUs are credited. DSUs are issued in lieu of cash payments to the director on the grant date.

Purpose of the DSU Plan: The purpose of the DSU Plan is to: (i) promote a greater alignment of interests between Non-Management Directors of Obsidian Energy and the Shareholders by providing a means to accumulate a meaningful financial interest in Obsidian Energy that is commensurate with the responsibility, commitment and risk of Non-Management Directors; (ii) provide a compensation plan that is competitive and rewards long-term success of Obsidian Energy as measured in Total Shareholder Returns for Obsidian Energy; and (iii) assist Obsidian Energy’s ability to attract and retain qualified individuals with the experience and ability to serve as Non-Management Directors.

 

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DSU Grants: In 2021, the DSU Plan provided that:

 

(a)	each Non-Management Director is required to receive a minimum of 50% of their annual Board retainer in the form of DSUs; and

 

(b)	subject to the minimum described above, any director can elect to receive up to 100% of their remuneration in the form of DSUs.

For information regarding the Share ownership requirements for directors, see “Remuneration of Directors – Director Equity Ownership Requirements”.

Treatment of Dividends: When dividends are paid on Shares, additional DSUs are credited to a director’s account as of the dividend payment date, based on the aggregate dollar amount of the dividends notionally payable in respect of such number of Shares as is equal to the number of DSUs credited to the director’s account on the dividend payment date, divided by the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the dividend payment date.

Vesting: DSUs vest immediately upon being credited to a director’s account.

Maturity Date for DSUs: A director is not entitled to receive payment of any amount for DSUs credited to his or her account until following that director’s retirement from all positions with Obsidian Energy, or where a director has (except as a result of death) otherwise ceased to hold any positions with Obsidian Energy. Upon a director retiring or ceasing to hold any position with Obsidian Energy, all DSUs credited to the director’s account will be redeemed by Obsidian Energy as of the maturity date, being December 1st of the calendar year immediately following the year in which the retirement or cessation occurred or such earlier date following the retirement or cessation as elected by the director by notice to Obsidian Energy (either such date, the “Maturity Date”). Special rules apply with respect to determination of the maturity date for directors who are United States taxpayers or where the U.S. Internal Revenue Code of 1986, as amended, otherwise applies.

Payment on Maturity: A director is not entitled to receive any amount prior to his or her Maturity Date (as described above). Within ten calendar days following the Maturity Date, Obsidian Energy will make a lump sum cash payment, net of any applicable withholdings, to the director equal to the number of DSUs credited to the director’s account as of the date of retirement or cessation, multiplied by the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the Maturity Date.

Payment on Death: If a director dies while in office or after ceasing to hold all positions with Obsidian Energy but before the Maturity Date, Obsidian Energy will, within 90 days of the date of death, make a lump sum cash payment to the director’s legal representative in an amount equal to the number of DSUs credited to the director’s account as of the date of death multiplied by the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the date of death.

Administration of the DSU Plan: Subject to the HRG&C Committee reporting to the Board on all matters relating to the DSU Plan and obtaining approval of the Board for those matters required by the HRG&C Committee’s mandate, the DSU Plan is administered by the HRG&C Committee.

 

20		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

DIRECTOR EQUITY OWNERSHIP REQUIREMENTS

 

Obsidian Energy’s director and executive equity ownership policy (the “Equity Ownership Policy”), which was amended most recently by the Board on March 6, 2018, provides that: (a) each Non-Management Director, other than the Board Chair, is required to meet and maintain ownership of a minimum value of Shares representing at least three times the Non-Management Director’s total annual retainer within a period expiring at the later of March 6, 2021 and five years from the date they join the Board; and (b) the Board Chair is required to meet and maintain ownership of a minimum value of Shares representing at least three times the Board Chair’s total annual retainer within a period expiring five years from the date of appointment as Board Chair (which was February 20, 2019 for Mr. Ritchie). The table below summarizes the minimum Share ownership requirements applicable to Non-Management Directors.

 

Category of Non-Management Director		Share Ownership Required
Board Chair		Number of Shares having the value of 3 times annual retainer of the Board Chair
Director (other than Board Chair)		Number of Shares having the value of 3 times annual retainer of the Director (other than the Board Chair)

In calculating ownership status, all Shares owned, directly or indirectly, by the director, as reported on SEDI, are included. In addition , any DSUs held by the director, are included in the calculation of Shareholdings, as reported on SEDI.

As at May 4, 2022, each director either: (a) holds, indirectly or directly; or (b) remains within the applicable period to accumulate; the requisite number of Shares as required under the Equity Ownership Policy. For more information regarding the Directors’ equity holdings, see the table under “Director Equity Ownership” below. For information regarding the minimum equity ownership requirements for Obsidian Energy’s executives, see “Compensation Discussion & Analysis – Executive Equity Ownership Requirements”.

Director Equity Ownership

The following table summarizes the Shares beneficially owned or controlled or directed, directly or indirectly, by each Non-Management Director of Obsidian Energy and investment-at-risk statistics for each Non-Management Director of Obsidian Energy as at May 4, 2022 other than Shani Bosman, who joined the Board on May 4, 2022 and will be required to comply with the equity ownership requirements going forward.

 

Director		Shares (#)(1)				DSUs (#)(2)				Total Equity (#)(3)				Value at Risk as multiple of Annual Board retainer(4) (#)				Complies with Director   Equity Ownership Requirement(5)
John Brydson			408,571				483,143				891,714				96				Yes
Raymond Crossley			4,714				267,287				271,999				29				Yes
Michael Faust			56,508				332,813				389,321				42				Yes
Edward H. Kernaghan			100,421				233,994				334,415				36				Yes
Stephen Loukas(6)			4,520,666				118,197				4,638,863				501				Yes
Gordon Ritchie			42,071				333,302				375,373				27				Yes
Average value at risk as multiple of annual retainer:															121.83
Total value at risk as multiple of total annual retainers:															114.67

 

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Notes:

 

(1)	Reflects the total number of Shares beneficially owned, controlled or directed, indirectly or directly, by each Non-Management Director as at May 4, 2022, based on information reported on SEDI.

(2)	Reflects the total number of DSUs held by each director as at December 31, 2021.

(3)	Reflects the sum of the number in the ‘Shares’ column plus the number in the ‘DSUs’ column.

(4)

“Value at Risk” reflects the market value of the Shares and DSUs reflected in the ‘Total Equity’ column, each based on the closing price of $10.80 of the Shares on the TSX on May 4, 2022. “Value at Risk as multiple of Annual Board retainer” reflects the “Value at Risk” for the director divided by: (a) in the case of the Chair of the Board, the Chair’s annual retainer of $150,000; and (b) in the case of all other directors, the Annual Board member retainer of $100,000.

(5)

As at May 4, 2022, the minimum equity ownership requirement was the number of Shares having the value of three times annual retainer of the Non-Management Directors other than the Board Chair and for the Board Chair, the number of Shares having a dollar value equal to three times the Board Chair’s annual retainer. See “Remuneration of Directors – Director Equity Ownership Requirements” for more information regarding these requirements. Mr. Loukas has been included in this number notwithstanding he is now the Interim President and Chief Executive Officer given the interim nature of the role.

(6)

Notwithstanding the fact that Mr. Loukas is technically not a Non-Management Director, given the interim nature of his role as Interim President and Chief Executive Officer, his total director equity has been provided for greater clarity on his current holdings based on a director annual retainer of $100,000. All other compensation provided to Mr. Loukas in the Interim President and Chief Executive Officer role, including the 190,500 RSUs granted in 2021 and the 381,000 stock options, neither of which are accounted for in this table, is discussed in the “Compensation Discussion & Analysis” section of the Circular. Mr. Loukas’ joined the Board at the 2018 AGM in May 2018 through being nominated by one of our largest shareholders, FrontFour Capital Group LLC. Please see SEDI for all the FrontFour Capital Group LLC affiliate holdings in the Corporation.

DIRECTOR REMUNERATION DATA

 

Director Compensation Table

The following table and related notes disclose all amounts and forms of compensation provided to the individuals who served as Non-Management Directors of Obsidian Energy in 2021.

 

Name

Fees earned ($)(1)

Share-based awards(2) ($)

Option-based awards(3) ($)

Non-equity incentive plan compensation(4) ($)

Pension value(5) ($)

All other compensation(6) ($)

Total ($)

John Brydson

0

132,340

N/A

N/A

N/A

Nil

132,340

Raymond Crossley

96,588

47,091

N/A

N/A

N/A

Nil

143,679

Michael Faust

0

123,338

N/A

N/A

N/A

Nil

123,338

William Friley(7)

64,685

32,392

N/A

N/A

N/A

Nil

97,077

Maureen Cormier Jackson(7)

48,538

34,875

N/A

N/A

N/A

Nil

83,413

Edward Kernaghan

82,250

47,091

N/A

N/A

N/A

Nil

129,341

Stephen Loukas(8)

0

0

N/A

N/A

N/A

Nil

0

Gordon Ritchie

87,132

79,632

N/A

N/A

N/A

Nil

166,764

Total

379,193

496,759

875,952

Notes:

 

(1)	Represents the cash payment of directors’ fees paid to the Non-Management Directors in 2021.

(2)	Represents the grant date fair value of the DSUs issued to the Non-Management Directors in 2021 in lieu of cash directors’ fees otherwise payable to the directors, such grant date fair value being equivalent to the amount of the cash directors’ fees the DSUs were issued in lieu of.

(3)	Obsidian Energy did not grant in 2021, and has not granted since 2007, “option-based awards” to Non-Management Directors.

(4)	No amounts were earned by or paid to the directors in 2021 that were related to awards under non-equity incentive plans.

(5)	Obsidian Energy does not have a defined benefit plan, a defined contribution plan or any other type of plan in place that provides for the payment of pension plan benefits to directors.

 

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(6)

Includes all other compensation paid, payable, awarded, granted, given, or otherwise provided, directly or indirectly, by Obsidian Energy or a subsidiary of Obsidian Energy, to a director in any capacity, under any other arrangement (if any), including all plan and non-plan compensation, direct and indirect pay, remuneration, economic or financial award, reward, benefit, gift or perquisite paid, payable, awarded, granted, given, or otherwise provided to the director for services provided, directly or indirectly, to Obsidian Energy or a subsidiary of Obsidian Energy.

(7)	Mr. Friley and Ms. Cormier Jackson resigned from the Board effective June 14, 2021.

(8)

Mr. Loukas is the Interim President and Chief Executive Officer from December 5, 2019 to the present date and does not receive DSUs in that role. Mr. Loukas was not paid any director’s pay or acquired any DSUs in 2021. All other compensation provided to Mr. Loukas in the President and Chief Executive Officer role in 2021 is discussed in the “Compensation Discussion & Analysis” section of the Circular.

Outstanding Share-Based Awards and Option-Based Awards

Applicable Canadian securities legislation defines a “share-based award” as an award under an equity incentive plan of equity-based instruments that do not have option-like features, including, for greater certainty, common shares, restricted shares, restricted share units, deferred share units, phantom shares, phantom share units, common share equivalent units and stock. As of January 1, 2011, Obsidian Energy adopted the DSU Plan, which allows for the grant of DSUs to Non-Management Directors of Obsidian Energy. DSUs fall within the definition of “share-based award”. For more information regarding the DSU Plan, see “Remuneration of Directors – Deferred Share Unit Plan”. Applicable Canadian securities legislation defines an “option-based award” as an award under an equity incentive plan of options, including, for greater certainty, share options, share appreciation rights and similar instruments that have option-like features. Obsidian Energy has not granted any “option-based awards” to its Non-Management Directors since 2007, but may in the future given the approval of the amended Stock Option Plan in 2020 and the Board commenced using Option grants as a component of compensation for key personnel last year and may use them for Non-Management Directors post 2022, subject to certain limitations.

The following table sets forth information regarding all share-based awards and option-based awards outstanding as at December 31, 2021 that were held by each individual who was serving as a Non-Management Director on such date.

 

Name

Option-based Awards

Share-based Awards

Number of Shares underlying   unexercised   Options (#)(1)

Option   exercise   price ($)

Option   expiration   date

Value of unexercised   in-the-money   Options ($)

Number of share-based   awards that   have not vested (#)

Market or payout value of   share-based   awards that have not vested ($)

Market or   payout value of   vested share- based awards not paid out or distributed ($)(2)

John Brydson

N/A

N/A

N/A

N/A

Nil

N/A

2,517,175

Raymond Crossley

N/A

N/A

N/A

N/A

Nil

N/A

1,392,565

Michael Faust

N/A

N/A

N/A

N/A

Nil

N/A

1,733,956

Edward Kernaghan

N/A

N/A

N/A

N/A

Nil

N/A

1,219,109

Stephen Loukas(3)

N/A

N/A

N/A

N/A

Nil

N/A

615,806

Gordon Ritchie

N/A

N/A

N/A

N/A

Nil

N/A

1,736,503

Notes:

 

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(1)	There were no Non-Management Directors who held “option-based awards” at December 31, 2021.

(2)

These figures represent the estimated aggregate value of outstanding DSUs held by the Non-Management Directors (all of which DSUs immediately vested upon issuance) as at December 31, 2021, calculated based on the closing price of the Shares on the TSX on December 31, 2021 of $5.21. DSUs vest immediately upon being credited to a director’s account; however, DSUs are not settled or paid-out until either the departing Director chooses to cash in the DSU after their departure from the Board or ultimately on December 1 of the calendar year immediately following the year in which a Non-Management Director ceases to be a director of Obsidian Energy (the “Maturity Date”), with the amount of such payment being equal to the number of DSUs held multiplied by the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the Maturity Date.

(3)

Mr. Loukas is the Interim President and Chief Executive Officer from December 5, 2019 to the present date and he does not receive DSUs in that role. Mr. Loukas was granted the DSUs noted above for the pay period Q4 2019 being October 1, 2019 to December 4, 2019 prior to becoming Interim President and Chief Executive Officer, which were issued January 15, 2020. All other compensation provided to Mr. Loukas in the President and Chief Executive Officer role in 2021 (including options) is discussed in the “Compensation Discussion & Analysis” section of the Circular.

Incentive Plan Awards – Value Vested or Earned During the Year

The following table and related notes set forth the value of the DSUs that vested in 2021 under the DSU Plan that were held by each individual who served as a Non-Management Director in 2021. For details regarding the DSU Plan, see “Remuneration of Directors – Deferred Share Unit Plan”. Obsidian Energy did not grant any “option-based awards” or “non-equity incentive plan” compensation to its Non-Management Directors in 2021.

 

Name

Option-based awards – Value vested during the year ($)(1)

Share-based awards – Value vested during the year ($)(2)

Non-equity incentive plan compensation – Value earned during  the year ($)(3)

John Brydson

N/A

132,340

N/A

Raymond Crossley

N/A

47,091

N/A

Michael Faust

N/A

123,338

N/A

William Friley(4)

N/A

32,392

N/A

Maureen Cormier Jackson(4)

N/A

34,875

N/A

Edward Kernaghan

N/A

47,091

N/A

Stephen Loukas(5)

N/A

0

N/A

Gordon Ritchie

N/A

79,632

N/A

Notes:

 

(1)	No Non-Management Director held any option-based awards in 2021.

(2)

Represents the value of DSUs that vested in 2021. DSUs vest immediately upon being credited to a director’s account; however, DSUs are not settled or paid-out until the Maturity Date, with the amount of such payment being equal to the number of DSUs held multiplied by the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the Maturity Date. Further, note that these values will not be equivalent to the grant date fair value of DSUs in the “Director Remuneration Data – Director Compensation Table” as vesting of DSUs occurs upon deposit and is, therefore, subsequent to the earning period, and dividends have accumulated since vesting.

(3)	Obsidian Energy did not in 2021, and does not as at May 4, 2022 have any non-equity incentive plans in which Non-Management Directors are eligible to participate.

(4)	Mr. Friley and Ms. Cormier Jackson resigned from the Board effective June 14, 2021.

(5)

Mr. Loukas is the Interim President and Chief Executive Officer from December 5, 2019 to the present date and he does not receive DSUs in that role. As such, Mr. Loukas did not acquire any DSUs in 2021. All other compensation provided to Mr. Loukas in the President and Chief Executive Officer role in 2021 (including options) is discussed in the “Compensation Discussion & Analysis” section of the Circular.

 

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OTHER BOARD INFORMATION

 

BOARD AND DIRECTOR PERFORMANCE ASSESSMENT

 

The HRG&C Committee annually assesses the performance of the entire Board and each of the directors. To assist in this process, each year the HRG&C Committee makes use of one or more of the following, which are reviewed and, if necessary, revised, on an annual basis:

 

(i)

one on one Board performance discussions with the Chair of the HRG&C and/or Board,

 

(ii)

annual Board performance assessment survey,

 

(iii)

individual director peer feedback surveys, and

 

(iv)

individual director self-assessment skills/expertise matrix.

When completing the self-assessment skills/expertise matrix, each director is asked to indicate their self-assessment of expertise in the skill/expertise categories using the scale reflected below:

 

Category of Skill/Expertise		Self-Assessment Scale
1.  Oil and Gas Experience (technical oil and gas expertise, with particular focus on exploration and production)   2.  Capital Markets (particularly global debt and equity markets)   3.  Financial acumen or financial expert (including financial accounting and reporting, internal financial controls and taxation)   4.  Commodities Marketing   5.  Risk Management   6.  Compensation and Human Resources   7.  Health, Safety and Environmental   8.  Public Sector Experience (including government, regulatory organizations or non-governmental organizations)   9.  Public/Community Relations   10.  Chief Executive Officer / Senior Officer Experience with significant public or private company   11.  Corporate Governance   12.  ESG experience   13.  Legal		1 – Limited to no experience or expertise in specified area 2 – General experience or expertise in specified area 3 – Advanced degree of experience or expertise in specified area

Typically, every member of the Board completes a Board performance assessment survey, the individual director peer feedback survey and the individual director self-assessment skill/expertise matrix. This approach allows directors to provide feedback regarding the effectiveness and performance of the Board, and to discuss the respective contributions and performance of each Non-Management Director based on a number of factors and characteristics. For 2021, the Board completed each of the surveys.

DIRECTOR ORIENTATION AND EDUCATION

 

Director Orientation Program

The Board provides new directors with director orientation materials consisting of various background documents of Obsidian Energy, and also provides access to all material corporate records, prior Board materials and the Board’s manual. Obsidian Energy’s director orientation program also includes a one-day session of management presentations and meetings providing specific information on various areas of Obsidian Energy’s business and matters relating to the Board. New directors are also

 

25		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

encouraged to attend committee meetings, regardless of membership, as part of their orientation process. The Board’s strategy session also serves as a useful orientation tool.

Director Continuing Education

Obsidian Energy has adopted Governance Guidelines that provide that, among other things, with the approval of the HRG&C Committee or its designee, directors may, at the expense of Obsidian Energy, participate in continuing education programs that are designed to maintain or enhance their skills and abilities as directors or to enhance their knowledge and understanding of Obsidian Energy’s business and operations. In addition to more formal continuing education programs, senior management strives to provide ongoing education and information for the Board, including the following:

 

(a)	one or more strategic planning, update and/or technical overview sessions per year;

 

(b)	occasional site visits;

 

(c)	reports from senior management to the Board providing updates on a variety of matters, including operations, finance and human resources;

 

(d)	management presentations to the Board regarding a variety of matters;

 

(e)	presentations from external consultants; and

 

(f)	attendance at industry and governance related seminars.

In addition, all directors have a standing invitation to attend all committee meetings, regardless of membership, and are encouraged to attend at least one meeting of each committee per year.

BOARD MEMBERSHIP IN 2021

 

A total of six (6) individuals served as directors of Obsidian Energy for the entire 2021 financial year, being Messrs. Brydson, Crossley, Faust, Kernaghan, Loukas and Ritchie. Mr. Friley and Ms. Cormier Jackson also served until their resignation on June 14, 2021.

OTHER DISCLOSURES FOR DIRECTOR NOMINEES

 

To the knowledge of management of Obsidian Energy, no proposed director of Obsidian Energy (nor any personal holding company of any such persons):

 

(a)	is, as at the date of this Information Circular, or has been, within ten years before the date of this Information Circular, a director, chief executive officer or chief financial officer of any company (including Obsidian Energy), that:

 

(i)

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

 

26		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

(ii)

was subject to an Order that was issued after the proposed director ceased to be a director, chief executive officer or chief financial officer 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;

except with respect to those Orders described at the end of this section;

 

(b)

is, as at the date of this Information Circular, or has been, within ten years before the date of this Information Circular, a director or executive officer of any company (including Obsidian Energy) 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

 

(c)

has, within the ten years before the date of this Information 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 the knowledge of management of Obsidian Energy, no proposed director (or personal holding company of any proposed director) has 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 penalties 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.

On July 29, 2014, Obsidian Energy announced that the Audit Committee of the Board was conducting a voluntary, internal review of certain of Obsidian Energy’s accounting practices and that certain of Obsidian Energy’s historical financial statements and related MD&A must be restated, which might result in the release of its second quarter 2014 financial results being delayed (which ultimately proved to be the case). Furthermore, and in conjunction with the announcement, the Corporation advised that its historical financial statements and related audit reports and MD&A should not be relied upon. As a result, the Alberta Securities Commission issued a Management Cease Trade Order on August 5, 2014 (the “ASC MCTO”) against, among others in management and the Board at the time, Mr. Brydson. On September 18, 2014, Obsidian Energy filed restated audited annual financial statements for the years ended December 31, 2013 and 2012, restated unaudited interim financial statements for the three months ended March 31, 2014 and 2013, restated MD&A for the year ended December 31, 2013 and the quarter ended March 31, 2014, and related amended documents. Obsidian Energy also filed its unaudited interim financial statements for the three and six month periods ended June 30, 2014 and 2013 and the related MD&A and management certifications on September 18, 2014. Following such filings, the ASC MCTO was revoked on September 23, 2014.

 

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Mr. Gordon Ritchie was a director of Gemini Corporation (“Gemini”), a reporting issuer listed on the TSX Venture Exchange, from November 2012 to December 2016, and again from May 2017 to April 2018. In April 2018, Gemini’s senior secured creditor ATB Financial applied to the Alberta Court of Queen’s Bench for a receivership order, which was granted on April 19, 2018. FTI Consulting Canada Inc. was appointed as receiver and manager of all the company’s current and future assets, undertakings and properties. The shares of Gemini were officially cease-traded on May 4, 2018 and all of the company’s board of directors and officers resigned concurrently with the appointment of the receiver.

Mr. Michael J. Faust was a Director and President and Chief Executive Officer of SAExploration Holdings, Inc. (“SAEX”), and a number of its subsidiaries, which, at the time a publicly-traded company on the OTC Markets Pink Open Market, and four wholly-owned subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code on August 27, 2020 (the “Restructuring”). SAEX and its subsidiaries continued to operate their businesses and manage their properties as debtors in possession and emerged from bankruptcy on December 18, 2020 further to the December 10, 2020 Confirmation Order entered by United States Bankruptcy Court, Southern District of Texas, Houston Division, approving the Debtors’ Second Amended Chapter 11 Plan of Reorganization. SAEX completed the Restructuring and emerged as a privately held company. Mr. Faust is currently a member of the Board of Directors of SAEX.

 

 

COMPENSATION DISCUSSION & ANALYSIS

 

OBJECTIVE OF EXECUTIVE COMPENSATION DISCLOSURE

 

The following disclosure is intended to provide insight into our executive compensation as a key aspect of the overall stewardship and governance of Obsidian Energy, and to help investors understand how decisions about executive compensation are made at Obsidian Energy particularly in the context of the Corporation’s long-term strategy.

Shareholders have an opportunity to participate in a non-binding ‘say on pay’ advisory vote with respect to Obsidian Energy’s approach to executive compensation, as disclosed in this Information Circular. This is just one way Obsidian Energy engages our Shareholders and seeks input on our compensation practices. Obsidian Energy regularly engages with and welcomes feedback from Shareholders on this and other matters, and considers this feedback in determining appropriate executive compensation and pay for performance metrics going forward.

IDENTIFICATION OF NAMED EXECUTIVE OFFICERS

 

Obsidian Energy’s Named Executive Officers (NEOs) are the individuals who served as Obsidian Energy’s Chief Executive Officer, Chief Financial Officer and the Corporation’s three other most highly compensated executive officers in 2021. The NEOs and the positions held by each of them in 2021 are listed below:

 

Stephen Loukas		Interim President and Chief Executive Officer
Peter Scott		Senior Vice President and Chief Financial Officer
Aaron Smith		Senior Vice President, Development & Operations

 

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Gary Sykes		Senior Vice President, Commercial
Mark Hawkins		Vice President, Legal, General Counsel & Corporate Secretary

Mr. Smith departed the Corporation on January 31, 2022, and the details of his departure will be discussed in the Obsidian Energy 2023 Management Proxy Circular.

Mr. Sykes was appointed to the role of Senior Vice President, Commercial & Development effective January 31, 2022.

APPROACH TO EXECUTIVE COMPENSATION

 

Obsidian Energy’s executive compensation philosophy is to pay for performance. To that end, Obsidian Energy’s total compensation program for executives is designed toward equity-based compensation, which inherently links a significant portion of each executive’s compensation with Total Shareholder Return. The design also considers individual and organizational performance while striving for market-competitive pay and the ability to attract new and retain existing highly qualified and talented executives. Compensation practices, including the blend of base salary and short- and long-term incentives, are regularly assessed to ensure that they are competitive, reflect appropriate ties to individual, business unit and organizational performance, and support Obsidian Energy’s long-term strategies.

An important element of Obsidian Energy’s compensation philosophy is a belief that employees at more senior levels of the organization have a greater degree of influence on both departmental and overall organizational performance. As a result, Obsidian Energy’s executive officers, including the NEOs, have a greater proportion of their annual incentive awards based on organizational performance and success, while incentive compensation for employees at less senior levels has a more significant weighting on individual performance.

Executive Compensation Objectives

Obsidian Energy’s total compensation program uses fixed and variable compensation, as well as employee group benefits, based on organizational and individual performance and marketplace peer practices.

The objectives of Obsidian Energy’s total compensation program for its NEOs are as follows:

 

•

to align executives’ interests with those of Shareholders;

•

to ensure a performance-driven culture by aligning pay with performance by rewarding organizational success and individual contribution;

•

to attract and retain executives with a total compensation package at the median of the market and above market for superior organizational and individual performance; and

•

to manage the proportion of fixed versus variable compensation.

Executive Compensation Overview

The table below describes the elements of Obsidian Energy’s 2021 executive compensation program:

 

 

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Element		Nature		Description
Base Salary		Fixed		Compensates executives for their level of accountability and skills.   Effective May 1, 2020 through to September 30, 2020, the NEOs’ base salaries were reduced by 20%. Effective October 1, 2020 through to January 31, 2021, the salaries were partially reinstated to a 10% reduction. The salaries were reinstated in full effective February 1, 2021.
Short-Term Incentive Plan (STIP):   Annual Cash Bonus(1)		Variable (“at risk”)		Rewards executives for organizational and individual performance in achieving annual financial and operational objectives.   Awards are determined based on a combination of corporate and individual performance with a payout range of 0% to a maximum payout of 200% of target short-term incentive.
Long-Term Incentive Plan (LTIP):		Variable (“at risk”)		Rewards executives for creating Shareholder value and achieving specific financial and operational results.
Performance Share Units (PSU)(2)				Future payout in either cash or Shares between 0% and 200% contingent upon shareholder returns relative to a peer group of companies over the performance period of three years.
Restricted Share Units (RSU)(3)				Future payments in either cash or Shares based on the value of an Obsidian Energy Share at the time of vesting. Each grant of RSUs vests one-third per year over three years.
Stock Options(4)				Value is realized as the price of Shares exceeds that of the stock option grant price. Awards vest one-quarter per year over four years and expire at five years.
Benefits and Perquisites: Savings Plan(5) (in lieu of any pension plan)		Fixed		Rewards executives for creating long-term Shareholder value while providing a more risk conscious and affordable alternative to a pension plan for Obsidian Energy. NEOs participate in the Savings Plan on the same terms as all other employees.   NEOs contribute up to 10% of salary which is matched 1x by Obsidian Energy and proceeds are used to purchase Obsidian Energy Shares or directed to an interest savings account.   Effective May 1, 2020, the 1x match by Obsidian Energy was suspended for NEOs and all employees. Effective May 2021, the match was partially reinstated to 0.5x and effective August 1, 2021, it was fully reinstated to a 1x match. In order to receive the full 1x match, NEOs are required to contribute at least 5% of their salary towards the purchase of Obsidian Energy Shares.
Other Benefits/Perquisites		Fixed		Group benefits plan for all employees.   Executive health assessments for NEOs and other executives. Paid parking for NEOs and others.

Notes:

 

(1)	For additional details please refer to “Compensation Discussion & Analysis—Executive Compensation Review Process—Executive Compensation Peer Group and Benchmarking”.

(2)	For a more detailed description of the Award Plan, see “Summaries of Equity Compensation Plans—Restricted and Performance Share Unit Plan”.

(3)	For a more detailed description of the Award Plan, see “Summaries of Equity Compensation Plans—Restricted and Performance Share Unit Plan”.

 

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(4)	For a more detailed description of the Stock Option Plan, see “Summaries of Equity Compensation Plans—Stock Option Plan”.

(5)	For additional details please refer to “Compensation Discussion & Analysis—Approach to Executive Compensation – Description of Executive Compensation Elements—Employee Retirement/Savings Plan”.

We continually look at our approach to executive compensation to ensure it is competitive with our industry peers and aligns the interests of management with those of Shareholders.

EXECUTIVE COMPENSATION PEER GROUP AND BENCHMARKING

 

Each year, the total compensation for the NEOs is reviewed by the HRG&C Committee and compared to the total compensation for executives holding similar positions with members of a peer group of comparator organizations (the “Executive Compensation Peer Group”). In identifying the Executive Compensation Peer Group each year, emphasis is placed on Canadian-based organizations, specifically those operating within the exploration and production sector of the energy industry and exhibiting comparable size, operations, corporate ownership structure and business complexity, and with whom we compete for executive talent.

Based mainly on the above criteria, a peer group of entities is identified and compensation data regarding the comparator entities is used as a factor in the review and consideration of appropriate levels and composition of compensation for Obsidian Energy’s executives.

Obsidian Energy targets total compensation for executive officers at the median of the Executive Compensation Peer Group and above for those who achieve superior individual performance and assist Obsidian Energy in achieving superior organizational performance. The HRG&C Committee uses data regarding the Executive Compensation Peer Group as a guideline and applies discretion in making compensation recommendations to the Board in conjunction with other considerations, particularly individual and organizational performance.

Following is the list of entities comprising the Executive Compensation Peer Group selected to assess Obsidian Energy’s 2021 total compensation for executives:

 

1. Athabasca Oil Corp.		8. Kelt Exploration Ltd.
2. Baytex Energy Corp.		9. NuVista Energy Ltd.
3. Bonterra Energy Corp.		10. Spartan Delta Corp.
4. Cardinal Energy Ltd.		11. Surge Energy Inc.
5. Crew Energy Ltd.		12. Tamarack Valley Energy Ltd.
6. InPlay Oil Corp.		13. Whitecap Resources Inc.
7. Journey Energy Inc.		14. Yangarra Resources Ltd.

In addition to the general considerations identified above, Obsidian Energy applied the following key principles when developing our Executive Compensation Peer Group for 2022:

 

•

Canadian energy companies;

 

•

Only exploration and production companies;

 

•

Operations focused primarily in Western Canada; and

 

•

Similar size and complexity.

 

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In reviewing the Executive Compensation Peer Group for 2022, the Board determined that one company was no longer suitable and replaced it with a more comparable organization.

2022 Executive Compensation Peer Group

 

Athabasca Oil Corp.		Companies removed from 2022 Peer Group
Baytex Energy Corp.		Journey Energy Inc.
Bonterra Energy Corp.
Cardinal Energy Ltd.
Crew Energy Inc.
Headwater Exploration Inc.*
InPlay Oil Corp.
Kelt Exploration Ltd.
NuVista Energy Ltd.
Spartan Delta Corp.
Surge Energy Inc.
Tamarack Valley Energy Ltd.
Whitecap Resources Inc.
Yangarra Resources Ltd.

*Companies added to 2022 Executive Compensation Peer Group

EXECUTIVE COMPENSATION DECISIONS FOR 2021

 

Base Salary Decisions for 2021

Base salaries are reviewed annually by the HRG&C Committee, taking into account:

 

•

comparative data for similar positions with respect to the Executive Compensation Peer Group;

 

•

assessments of individual and corporate performance;

 

•

the individual’s experience and skills;

 

•

scope of responsibilities of the particular role;

 

•

internal equity considerations regarding similar positions within the organization;

 

•

retention considerations;

 

•

inflation and other economic factors; and

 

•

recommendations from the President and Chief Executive Officer. Annual base salaries are recommended by the HRG&C Committee and approved by the Board early in each calendar year.

The HRG&C Committee reviewed the annual total compensation for each of the NEOs, and based on Executive Compensation Peer Group data, market conditions and internal equity, did not recommend an increase in base salary for any of the NEOs. The Board, including our independent members, approved these recommendations.

The following table reflects the 2021 base salary decisions of the Board with respect to the NEOs. Further information is provided in the “Summary Compensation Table” under “Compensation Discussion & Analysis—Executive Compensation Data”.

 

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Name		2021 Annual Base Salary ($)				% Increase to 2021 Annual Base Salary Compared to 2020 Annual Base Salary				2021 Actual Base Salary Paid ($)
Stephen Loukas			650,000				0	%			644,583
Peter Scott			385,000				0	%			381,792
Aaron Smith			290,000				0	%			287,583
Mark Hawkins			280,000				0	%			277,667
Gary Sykes(1)			290,000				3.57	%			285,583

Notes:

 

(1)

Effective March 16, 2021, Mr. Sykes was promoted to the role of Senior Vice President, Commercial. The 2021 Annual Base Salary reflects his annualized salary for the year ended December 31, 2021, and the percentage increase to his 2020 Annual Base Salary is relative to his pre-promotion salary as Vice President, Commercial. There was no change to Mr. Sykes’ salary in connection with his appointment to the role of Senior Vice President, Commercial & Development, effective January 31, 2022.

Effective May 1, 2020, through to September 30, 2020, the NEOs’ base salaries were reduced by 20% in response to the harsh economic and oil price conditions. Effective October 1, 2020, the salaries were partially reinstated to a 10% reduction. Effective February 1, 2021, the salaries were fully reinstated due to sustained improvement in economic and oil price conditions.

Cash Bonus Decisions for 2021

Each year, executive cash bonuses are independently reviewed and recommended by the HRG&C Committee and determined by the independent members of the Board, considering the following factors:

 

•

annual organizational performance assessment with respect to business goals and objectives and other achievements in the year;

•

Total Shareholder Return for the year, including relative to industry peers;

•

assessment of individual executive performance in the year;

•

market data with respect to anticipated awards by members of the Executive Compensation Peer Group under similar cash bonus plans; and

•

relative performance of Obsidian Energy in prior years and cash bonus awards to Obsidian Energy executives in such years.

The HRG&C Committee and the Board exercise discretion in assessing overall performance to ensure that cash bonus awards are not unduly influenced by an unusual result in any one given area, and to allow for recognition of unanticipated results in areas that might not be reflected by the pre-determined corporate performance measures. Obsidian Energy’s approach to cash bonuses for executives, with our relationship to overall corporate performance, emphasizes a “team” approach to success. Cash bonuses do, however, also reflect a consideration of individual performance.

Obsidian Energy’s annual cash incentive plan rewards NEOs based on actual performance achieved versus the approved annual targets in each of the corporate and individual annual incentive plan components.

For the NEOs, corporate performance at target accounts for 75% of their STIP award and individual performance at target accounts for 25% of the STIP award. The maximum annual bonus potential is capped at 200% of the STIP target. The Board, upon the recommendation of the HRG&C

 

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Committee, can use discretion to increase or decrease the STIP awards in light of Obsidian Energy’s actual performance for the year and any extenuating circumstances.

Measuring Corporate Performance

The HRG&C Committee sets financial and operational goals and measures early in the year based on business objectives, management’s recommendations and market conditions. Each measure has a weighting and minimum (minimum level of performance required to be eligible for cash bonus), target and maximum (level of performance at which incentive award is capped) achievement levels.

Following the conclusion of the year, the HRG&C Committee assesses actual corporate performance based on performance outcomes and assigns a score for each measure. Based on such assessment, corporate component ranges from 0 to 150% of the STIP target.

Measuring Individual Performance

Individual performance is based on how well each NEO performs in their role and achieves goals set at the beginning of the performance year. The individual component ranges from 0 to 50% of the STIP target based on the assessment of individual performance.

Performance Assessment for 2021

In 2021, Obsidian Energy continued to focus on a culture of high performance and continuous improvement. The following table identifies the performance measures the HRG&C Committee and the Board used to evaluate and assess our corporate performance in 2021, and their assessment of how we performed in 2021 relative to these performance measures. The performance measures focused on four key areas – values, delivery, growth and relative share price performance. Each focus area includes key measures relevant to that area.

 

Corporate Goals – Year End Results(1)		Weighting					Minimum Target					Target					Maximum Target					Year End  Results					Score 0-200% of  Weighting					Contribution
Values Total Recordable Injury Frequency Lost Time Injury Frequency Pipeline failures per 1,000 kms of pipe		20% 5% 5% 10%					0.5 0.2 0.81					0.35 0.00 0.58					0.2 0.00 0.35					0.82 0.18 0.47					0% 1% 15%					16%
Delivery Opex ($/boe)(2) G&A ($/boe)(2)		30% 20% 10%					$13.34 $1.87					$12.84 $1.77					$12.34 $1.67					$13.21 $1.71					5% 16%					21%
Sustainability Corporate Production (boe/d, annual average) Reserves Replacement (PDP)(3) Recycle Ratio (Adjusted Netback / Drill Tech 2P F&D) (4)		35% 20% 10% 5%					23,200 100% 1.70					23,750 120% 2.00					24,300 140% 2.30					24,377 125% 2.61					40% 13% 10%					63%
Share Price Relative Shareholder Return (5)		15%					9th out of 15					7th out of 15					2nd out of 15					5th out of 15					21%					21%
Corporate Performance Score																																121%

 

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Notes:

 

(1)

Corporate targets may be adjusted by the Board to give effect to asset acquisitions and divestitures, curtailment or capital adjustments.

(2)

Non-GAAP ratio. See “Non-GAAP and Other Financial Measures”. (3) Oil & gas metrics. See “Oil and Gas Advisory”.

(4)

Oil & gas metrics and non-GAAP ratio. See “Oil and Gas Advisory”.

(5)

Companies included in the relative shareholder return analysis are the same as identified for the 2021 Executive Compensation Peer Group. For additional details please refer to “Compensation Discussion & Analysis – Executive Compensation Peer Group and Benchmarking”.

2021 Cash Bonus Awards

The table below displays the cash bonus awards for the NEOs for 2021 performance as determined by the Board on February 23, 2022.

 

Name		Actual Bonus Award ($)
Stephen Loukas				914,900
Peter Scott				493,800
Aaron Smith				200,100
Mark Hawkins				176,600
Gary Sykes				221,600

PSU, RSU and Stock Option Grant Decisions for 2021

In 2021, pursuant to the Award Plan and the Stock Option Plan, employees, including the NEOs, may be provided with an initial grant of PSUs, RSUs and Options, respectively, upon their commencement of service, as a competitive tool for employee attraction and retention as well as long-term incentive. PSUs, RSUs and Options may also be granted from time to time in connection with the promotion of an employee, including a NEO. Additional PSUs, RSUs and Options are also granted annually to certain employees, including the NEOs, as a long-term incentive and retention tool. These annual grants of PSUs, RSUs and Options are assessed by the HRG&C Committee each year beginning with a review of recommendations from management. In determining long-term incentive grants to NEOs, the HRG&C Committee and the Board consider market data from Mercer regarding anticipated awards by members of the Executive Compensation Peer Group under similar equity-based plans for similar executive positions and responsibilities, as well as overall corporate performance in the prior year and each executive’s individual skills and capabilities. The HRG&C Committee and the Board also consider previous PSU, RSU and Option grants made to NEOs when considering new PSUs, RSUs and Option grants.

The mix of PSUs, RSUs and Options rewards executives for creating Shareholder value and achieving specific financial and operational results. NEOs will only realize value from Options when the share price exceeds the grant price over a sustained period of time. Any payout from the PSUs is dependent on successfully meeting shareholder return metrics relative to a peer group of companies over a three year period. Proceeds from the RSU grant will be directly linked to the share price at the time of vesting.

The PSUs, RSUs and Options granted to each of the NEOs are reflected in the following tables, as well as in the “Summary Compensation Table” under “Compensation Discussion & Analysis – Executive Compensation Data”.

 

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Mr. Loukas has not been awarded any PSUs during his interim assignment.

PSUs

 

Name

Number of PSUs Granted in 2021

Grant Date Fair Value of PSUs Granted(1)

Grant Date

Vesting Date

Peter Scott

77,900

$155,021

May 17, 2021

December 31, 2023

Aaron Smith

151,900

$302,281

May 17, 2021

December 31, 2023(2)

Mark Hawkins

120,000

$238,800

May 17, 2021

December 31, 2023

Gary Sykes

151,900

$302,281

May 17, 2021

December 31, 2023

Notes:

(1)	Represents the grant date fair value based on the volume weighted average trading price of the Shares on the TSX for the five trading days preceding the date of grant.

(2)

In connection with Mr. Smith’s departure, 63,292 of the 2021 PSUs held by Mr. Smith vested on the date of his departure, and the remainder were cancelled. No other PSUs were granted to Mr. Smith after this 2021 grant of PSUs. Details of Mr. Smith’s departure will be discussed in the Obsidian Energy 2023 Management Proxy Circular.

RSUs

 

Name		Number of   RSUs Granted   in 2021		Grant Date Fair   Value of RSUs   Granted(1)		Grant Date		Vesting Date
Stephen Loukas(2)		190,500		$379,095		May 17, 2021		Conditional(2)

Notes:

 

(1)	Represents the grant date fair value based on the volume weighted average trading price of the Shares on the TSX for the five trading days preceding the date of grant.

(2)

Subject to the exercise of Board discretion under the Awards Plan, the RSUs granted to Mr. Loukas would vest as follows: (i) if Mr. Loukas’ last day of employment as Interim President and CEO of Obsidian were to be September 30, 2021, three quarters of the RSUs would have vested on that date and the remaining quarter of the RSUs would have terminated on that date; and (ii) if Mr. Loukas’ employment were to be extended past September 30, 2021, on a month to month basis to no later than March 31, 2022, on Mr. Loukas’ last day of employment as Interim President and CEO of Obsidian, the RSUs would vest on a pro rata basis for the calendar year 2021 on that date. Due to Mr. Loukas remaining as Interim President and CEO through December 31, 2021, all of the RSUs vested as of that date.

 

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Stock Options

 

Name		Number of Options Granted in 2021					Grant Date Fair Value of Options Granted(1)(4)					Grant Date					Grant Price					Expiry Date
Stephen Loukas		381,000					$289,560					May 17, 2021					1.99					Conditional(2)
Peter Scott		155,800					$185,402					May 17, 2021					1.99					May 16, 2026
Aaron Smith		303,800					$361,522					May 17, 2021					1.99					May 16, 2026(3)
Mark Hawkins		240,000					$285,600					May 17, 2021					1.99					May 16, 2026
Gary Sykes		303,800					$361,522					May 17, 2021					1.99					May 16, 2026

Notes:

 

1.

Represents the grant date fair value of the Options awarded to the NEO in 2021 using Black-Scholes option-pricing model, as determined in accordance with IFRS 2 Share-Based Payment (accounting fair value). See Note 8 for Mr. Loukas and Note 9 for the other NEOs in the Summary Compensation Table under “Compensation Discussion & Analysis – Executive Compensation Data”.

2.

Subject to the exercise of Board discretion under the Stock Option Plan, the Options granted to Mr. Loukas would vest as follows: (i) if Mr. Loukas’ last day of employment as Interim President and CEO of Obsidian were to be September 30, 2021, three quarters of the Options would have vested on that date and the remaining quarter of the Options would have terminated on that date; and (ii) if Mr. Loukas’ employment were to be extended past September 30, 2021, on a month to month basis to no later than March 31, 2022, on Mr. Loukas’ last day of employment as Interim President and CEO of Obsidian, the Options would vest on a pro rata basis for the calendar year 2021 on that date. Due to Mr. Loukas remaining as Interim President and CEO through December 31, 2021, all of the Options vested as of that date. The Options will expire on the earlier of: (i) the 18-month anniversary of the data Mr. Loukas ceases to serve as the Interim President and CEO of Obsidian Energy; and (ii) July 10, 2025.

3.

In connection with Mr. Smith’s departure, all of the 2021 Options held by Mr. Smith vested on the date of his departure, and such Options expired 90 days after his departure. No other Options were granted to Mr. Smith after this 2021 grant of Options. Details of Mr. Smith’s departure will be discussed in the Obsidian Energy 2023 Management Proxy Circular.

4.	Named Executive Officers will not receive any value from an Option unless the Option is exercised and the Common Share acquired is subsequently sold at a price that exceeds the exercise price of the Option.

2021 PSUs

The table below identifies the current corporate performance measures, payout multipliers, payout multiplier weightings and method of calculating the RPF for the PSUs granted in 2021 (the “2021 PSUs”), which vest on December 31, 2023 and for which the performance period is the three year period ended December 31, 2023. These metrics were originally determined by the Board in July 2020.

 

Corporate Performance Measures		Payout Multipliers (“PM”)		Weighting		Weighted PM
Relative Total Shareholder Return(1) for the three year period ended December 31, 2023		Performance ranking below 25th percentile = 0.0		1.0		PM X 1.0 = A
		Performance ranking equal to or greater than 25th percentile and below 50th percentile = straight line index to Relative Total Shareholder Return (0.25 to 0.99)
		Performance ranking equal to or greater than 50th percentile and

 

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		below 90th percentile = straight line index to Relative Total Shareholder Return (1.0 to 1.99)
		Performance ranking at or above 90th percentile = 2.0
				1.0		RPF = A

Notes:

 

(1)

“Relative Total Shareholder Return” or “RTSR” means the percentile rank of Obsidian Energy’s TSR relative to returns calculated on a similar basis on equity securities of members of Obsidian Energy’s performance group during the applicable performance period. The performance group for the purposes of calculating the RTSR for the 2021 PSUs is comprised of the following companies (subject to adjustment by the Board):

 

1.  Athabasca Oil Corp. 2.  Baytex Energy Corp. 3.  Bonterra Energy Corp. 4.  Cardinal Energy Ltd. 5.  Crew Energy Ltd. 6.  InPlay Oil Corp. 7.  Journey Energy Inc.		8.  Kelt Exploration Ltd. 9.  NuVista Energy Ltd. 10.  Spartan Delta Corp. 11.  Surge Energy Inc. 12.  Tamarack Valley Energy Ltd. 13.  Whitecap Resources Inc. 14.  Yangarra Resources Ltd.

Breakdown of Executive Benefits and Perquisites in 2021

All of our employees, including the NEOs, participate in a market competitive benefits program, which includes forms of insurance, extended health and dental coverage, short and long term disability coverage, health spending account and emergency travel assistance.

The NEOs are offered a limited number of perquisites to maintain market competitiveness and to assist them in carrying out their responsibilities. These perquisites include parking and access to executive health medical services.

The table below reflects the breakdown of benefits and perquisites provided to the NEOs in 2021:

 

Named Executive Officer		Perquisites															Other Compensation															Total All Other Compensation ($)
																	Generally Available to Employees
		Parking     ($)(1)					Other     Perquisites     ($)(2)					Total     ($)					Life/Health     Insurance Premiums ($)					Savings Plan     Contributions     ($)					Total     ($)
Stephen Loukas		Nil					Nil					Nil					1,729					35,208					36,937					36,937
Peter Scott		Nil					Nil					Nil					1,770					20,854					22,624					22,624
Aaron Smith		Nil					3,465					3,465					1,770					15,708					17,478					20,943
Mark Hawkins		Nil					1,595					1,595					1,770					15,167					16,937					18,532
Gary Sykes		Nil					4,345					4,345					1,770					15,708					17,478					21,823

Notes:

 

(1)	Due to COVID-19 work-from-home mandates, the parking benefit was not required in 2021.

(2)	In the case of all NEOs, reflects amounts paid for and resulting from executive health assessments, if elected.

 

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Pension Plan Benefits

Obsidian Energy does not have a pension plan in which NEOs participate that provides for payments or benefits at, following, or in connection with retirement, such as a defined benefit plan or a defined contribution plan. Instead, Obsidian Energy offers contributions to the Savings Plan as described in the “Executive Compensation Overview”. In addition, Obsidian Energy does not have any deferred compensation plans in which NEOs are eligible to participate.

EXECUTIVE COMPENSATION REVIEW PROCESS

 

Role of the Human Resources, Governance and Compensation Committee

The HRG&C Committee is responsible for assisting the Board in fulfilling its duties regarding employee and executive compensation matters. More specific responsibilities in the HRG&C Committee’s mandate relating to compensation include the annual review and provision of recommendations to the independent members of the Board with respect to the following:

 

(a)

the overall compensation philosophy, guidelines and plans for Obsidian Energy employees and executives, including in respect of base salaries, short- and long-term incentive plans, benefit plans and perquisites, as well as short- and long-term corporate goals and objectives and other performance measures;

 

(b)	the annual budgets for salaries, cash bonuses, any other short-term incentive compensation, and any equity-based or long-term incentive compensation and other terms of employment of the executive officers and Chief Executive Officer; and

 

(c)	corporate goals and objectives relevant to Chief Executive Officer compensation and the evaluation of the Chief Executive Officer’s performance in light of such goals and objectives.

Composition and Independence of the Human Resources, Governance and Compensation Committee

The current members of the HRG&C Committee as at May 4, 2022 are Messrs. Brydson, Crossley, Kernaghan and Faust.

The HRG&C Committee mandate requires that each member of the committee be independent in accordance with the definition of “independent” director in NI 58-101. All members of the HRG&C Committee in 2021 and as at May 4, 2022 have been determined by the Board to be independent directors within the meaning of NI 58-101. None of the members of the HRG&C Committee in 2021 and as at May 4, 2022 is an officer, employee or former officer of Obsidian Energy or of any subsidiaries of Obsidian Energy.

Consistent with best practices, all of the committee members have experience in executive compensation by virtue of their experience as directors, former directors, senior officers or former senior officers of large public and private companies. The Board believes that the HRG&C Committee collectively has the knowledge, experience and background required to fulfill its mandate.

The HRG&C Committee formally met four times in 2021, held “in-camera” sessions with external advisors as required, and held “in-camera” sessions without the presence of management at the start and/or end of each meeting.

 

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Role of Human Resources Management

In fulfilling its mandate, the HRG&C Committee receives information from Obsidian Energy’s human resources management team (“HR Management”). HR Management prepares materials for the HRG&C Committee regarding the compensation of Obsidian Energy’s executive officers. In addition, HR Management works closely with members of our senior executive team in developing compensation recommendations for executives, including the Named Executive Officers, and works with the HRG&C Committee Chair and the Corporate Secretary to plan HRG&C Committee meetings.

External Compensation Consultant

Since 2001, Obsidian Energy has retained Mercer (Canada) Limited (“Mercer”), a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (“MMC”), as an external consulting company to provide advice and information in relation to the compensation of Obsidian Energy’s executives and other employees, including peer compensation data. In 2020 and 2021, Mercer provided support to the HRG&C Committee to formulate compensation recommendations to the Board for Obsidian Energy’s executives, including the NEOs, through the provision of benchmark market data, and attendance at a number of HRG&C Committee meetings as well as other discussions to review market trends and issues, including certain “in-camera” portions of meetings, as invited by the HRG&C Committee.

Neither the Board nor the HRG&C Committee is required to pre-approve other services that Mercer or its affiliates provide to the Corporation at the request of Obsidian Energy management. However, based on all of the factors relevant to Mercer’s and the individual executive compensation consultant’s independence from management as discussed above, the Board and the HRG&C Committee are satisfied that the advice received from Mercer and the individual executive compensation consultant is objective and not influenced by Mercer’s or its affiliates’ relationship with Obsidian Energy.

Fees Paid to Mercer and its Affiliates in 2020 and 2021

 

Description		Fees Paid
		2021		2020
Mercer (Executive-Compensation Related Fees)		$12,032		$11,959
All Other Fees:
Mercer (all other fees)		$11,300		$0
Marsh Canada (mainly insurance brokerage and claims advocacy related services)		$91,902		$182,057
Total Paid to Mercer and its affiliates		$115,234		$194,016

MANAGING COMPENSATION RISK

 

The Board has overall responsibility for risk oversight for Obsidian Energy, with a focus on the most significant risks facing Obsidian Energy, including strategic, operational and reputational risks. The Board conducts one or more strategic planning and review meetings with management per year, and a large component of each of these meetings is devoted to risk assessment and management. The Board’s risk oversight process includes oversight of management’s risk assessment and mitigation processes and is assisted by the work of the committees of the Board in carrying out their mandates.

The HRG&C Committee reviews strategic, operational and reputational risks in connection with compensation matters and considers the implications of each on our compensation program in making

 

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recommendations to the Board. These risks are managed by employing specific strategies aimed towards balancing and reducing compensation-related risks.

The main risk management strategies employed by the Board to manage executive compensation related risk are the design of the executive compensation program itself, which includes a balanced pay mix, incentives tied to the short, medium and long term, a long term incentive program with a sizable stock component, quantitative and qualitative performance goals, the use of minimum Share ownership requirements for executives, and the adoption in March 2015, which was amended in March 2016 and March 2018, of an Executive Incentive Compensation Recoupment Policy (the “Recoupment Policy”).

At-Risk Compensation

The significant portion of Obsidian Energy’s executive compensation being “at-risk” helps to discourage executives from taking inappropriate or excessive risks. In particular, the inherent alignment between executive interests and the interests of Shareholders offered by the equity-based compensation component of Obsidian Energy’s compensation program limits circumstances in which executives might take inappropriate or excessive risks that would benefit their compensation at the expense of Obsidian Energy or our Shareholders. The vesting of Option, PSU and RSU awards over time further encourages executives to focus on Total Shareholder Return over the longer term.

In establishing compensation programs, one of the HRG&C Committee’s objectives is to design programs that reward performance relative to industry peers and align the interests of Management with those of Shareholders. The HRG&C Committee seeks to achieve this objective by, among other things:

 

•

Assessing corporate performance based on Total Shareholder Return;Giving the Board discretion to adjust overall compensation depending on various circumstances;

 

•

Ensuring that there is a mix of equity vehicles that are subject to both time and performance-vesting conditions across different time horizons;

 

•

Granting PSUs with overlapping cycles to reduce risk of manipulation of any one-year performance;

 

•

Determining cash bonuses based on achievement against a balanced, diversified mix of performance measures. The performance measures include a focus on health and safety, operational, sustainability and financial targets. As the value of both components of executives’ “at-risk” compensation is strongly linked to Total Shareholder Return, we believe that the significant weighting of executive compensation toward these “at-risk” components serves as an effective risk management tool;

 

•

Incorporating absolute caps on cash bonuses to reduce the chances of unnecessary risk taking; and

 

•

Discouraging inappropriate or excessive risk-taking behaviours through minimum share ownership requirements and a compensation recoupment policy for executives that further align executive and Shareholder interests.

Executive Incentive Compensation Recoupment Policy

In March 2015, we augmented our compensation risk management strategy with the adoption of the Recoupment Policy, which was amended in March 2016 and March 2018. The Recoupment Policy

 

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applies to the President and Chief Executive Officer and all officers reporting directly to him or her (each an “Executive” for the purposes of this section only), and provides that in the event that:

 

(a)

Obsidian Energy makes a restatement of our financial statements due to its material noncompliance with any applicable financial reporting requirement under securities laws;

 

(b)

an Executive of Obsidian Energy engaged in willful misconduct or fraud which caused or significantly contributed to the restatement; and

 

(c)

the Executive received an “Overcompensation Amount” (being the portion of the executive officer’s incentive compensation relating to the year(s) subject to the restatement which is in excess of the incentive compensation that the Executive would have received for such year(s) if the incentive compensation had been computed in accordance with the results as restated under the restatement, calculated on an after-tax basis to the Executive);

then the Board may, on the recommendation of the HRG&C Committee, determine and recover the Overcompensation Amount from the Executive. The full text of the Recoupment Policy is available on the Corporation’s website at www.obsidianenergy.com.

Anti-Hedging

Obsidian Energy directors, officers and employees may not knowingly, directly or indirectly: (a) sell a security of Obsidian Energy if they do not own or have not fully paid for the security; (b) buy or sell a call or put in respect of a Obsidian Energy security; or (c) purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, or units of exchange funds) that are designed to hedge or offset a decrease in market value of Obsidian Energy equity securities granted as compensation or held, directly or indirectly, by the director, officer or employee. However, Obsidian Energy directors, officers and employees may sell a Share which they do not own if they own another security convertible into Shares or an option or right to acquire Shares sold and, within 10 days after the sale, they: (i) exercise the conversion privilege, option or right and deliver the Share to the purchaser; or (ii) transfer the convertible security, option or right, if transferable to the purchaser.

Executive Equity Ownership Requirements

Under the Director and Executive Share Ownership Policy, each executive of Obsidian Energy (including each NEO) is required to meet and maintain ownership of the applicable minimum value of Shares. On March 6, 2018, the Board decided to increase the shareholder requirements of the non-Chief Executive Officer NEOs to 2.0 times salary from 1.0 time. The NEOs will have five years from their appointment to their executive position to satisfy this requirement.

In calculating the value of Shares owned, all Shares owned, directly or indirectly, by the executive are included, including any Shares acquired pursuant to the exercise of Options and not subsequently sold. Options held, but which have not been exercised, are excluded for the purpose of calculating the value of Shares owned. PSUs held by the executives are also excluded from the calculation. However, unvested RSUs (the total of which is less the anticipated tax withholdings based on using RSU vested shares to remit tax obligations) held by the executives under the Awards Plan are included in the calculation.

 

42		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

The following table summarizes the Shares beneficially owned or controlled or directed, directly or indirectly, by each of the NEOs who were employees of Obsidian Energy as at May 4, 2022 (excluding any Shares purchased by the NEOs pursuant to the Savings Plan since December 31, 2021) and value-at-risk statistics for the applicable NEOs of Obsidian Energy as at May 4, 2022 (excluding the impact of any Shares purchased by the NEOs pursuant to the Savings Plan since December 31, 2021). For equity holdings for Mr. Stephen Loukas, please see “Information Concerning the Board and Director Nominees – Director Equity Ownership Requirements – Director Equity Ownership”.

 

Name

Shares(1)    (#)

Unvested     RSUs held     under the     Awards Plan(2)      (#)

Value at Risk     Amount(3)       ($)

Value at Risk as     multiple of base     salary(4)      (#)

Share Ownership     Required     (minimum value at      risk as a multiple of     base salary)

Complies with Applicable Executive     Equity Ownership     Requirement

Peter Scott

97,240

8,874

1,146,031

2.98

2.0 times

Yes

Mark Hawkins

47,354

11,925

640,213

2.28

2.0 times

Yes

Gary Sykes

30,565

13,589

476,863

1.64

2.0 times

Yes(5)

Average value at risk as multiple of base salary:

2.30 times

Total value at risk as multiple of total base salaries:

2.37 times

Notes:

 

(1)

Reflects the total number of Shares beneficially owned, controlled or directed, indirectly or directly, by each NEO as at May 4, 2022, based on information reported on SEDI, and excluding any Shares that may have been acquired by the NEO, directly or indirectly, under the Savings Plan since December 31, 2021.

(2)	Total unvested RSUs held under the Awards Plan, the total of which is less the anticipated tax withholdings based on using RSU vested shares to remit tax obligations.

(3)	“Value at Risk Amount” reflects the market value of the Shares plus the value of the unvested RSUs, each based on the closing price of $10.80 of the Shares on the TSX on May 4, 2022.

(4)	“Value at Risk as multiple of base salary” reflects the “Value at Risk Amount” for the NEO divided by the 2021 annual base salary for the NEO.

(5)	Mr. Sykes has until November 20, 2024 to meet his applicable executive equity ownership requirement.

EXECUTIVE COMPENSATION DATA

 

Summary Compensation Table for 2019-2021

The following table provides a summary of all direct and indirect compensation provided to our NEOs for, or in connection with, services they have provided to Obsidian Energy and our subsidiaries in the three most recently completed financial years.

 

Name and principal position		Year					Salary(1) ($)					Share- based awards(6) ($)					Option-based awards (7) ($)					Non-equity incentive plan compensation ($)										Pension value(12) ($)					All other compensation ($)(13)					Total compensation ($)(17)
																						Annual incentive plans(10)					Long-term incentive plans(11)
Stephen Loukas Interim President and Chief Executive Officer(10)				2021					644,583					379,095					289,560	(8)				914,900					N/A					N/A					36,937					2,265,075
				2020					579,583					330,000					52,000					877,500					N/A					N/A					549,748	(14)(15)				2,388,831
				2019					44,583	(2)				Nil					Nil					Nil					N/A					N/A					4,458					49,041

 

43		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR

Name and principal position		Year					Salary(1) ($)					Share- based awards(6) ($)					Option-based awards (7) ($)					Non-equity incentive plan compensation ($)										Pension value(12) ($)					All other compensation ($)(13)					Total compensation ($)(17)
																						Annual incentive plans(10)					Long-term incentive plans(11)
Peter Scott Senior Vice President and Chief Financial Officer				2021					381,792					155,021					185,402	(9)				493,800					N/A					N/A					22,624					1,238,639
				2020					343,292					46,365					25,290					519,800					N/A					N/A					366,375	(14)				1,301,122
				2019					32,083	(3)				Nil					Nil					41,000	(3)				N/A					N/A					3,681					76,764
Aaron Smith Senior Vice President, Development & Operations				2021					287,583					302,281					361,522	(9)				200,100					N/A					N/A					20,943					1,172,429
				2020					258,583					69,795					38,070					213,200					N/A					N/A					366,936	(14)				946,584
				2019					284,545					158,498					Nil					239,400					N/A					N/A					41,662					724,105
Mark Hawkins Vice President, Legal, General Counsel & Corporate Secretary				2021					277,667					238,800					285,600	(9)				179,600					N/A					N/A					18,532					1,000,199
				2020					249,667					55,110					30,090					189,000					N/A					N/A					360,512	(14)				884,379
				2019					249,466	(4)				69,956					Nil					174,900	(4)				N/A					N/A					26,084					520,406
Gary Sykes Senior Vice President, Commercial				2021					285,583					302,281					361,522	(9)				221,600					N/A					N/A					21,823					1,192,809
				2020					249,667					55,110					30,090					215,000					N/A					N/A					247,220	(14)				797,087
				2019					102,146	(5)				Nil					Nil					20,400	(5)				N/A					N/A					10,203	(16)				132,749

Notes:

 

(1)	Represents the dollar value of cash base salary each NEO earned during the respective year.

(2)	Mr. Loukas was appointed Interim President and Chief Executive Officer effective December 5, 2019. His annual salary was prorated based on his length of service in 2019.

(3)	Mr. Scott was appointed Senior Vice President and Chief Financial Officer effective December 2, 2019. His annual salary and cash bonus amounts were prorated based on his length of service in 2019.

(4)	Mr. Hawkins was promoted to Vice President, Legal, General Counsel and Corporate Secretary on November 20, 2019. His 2019 annual salary and cash bonus amounts reflect this in-year promotion.

(5)

Mr. Sykes was appointed to Vice President, Commercial on November 20, 2019. His 2019 annual salary and cash bonus amounts were prorated based on his length of service in 2019. His salary also includes wages paid to him as an hourly-paid Commercial Advisor commencing on September 27, 2019, prior to his appointment.

(6)

Reflects the estimated grant date fair value of the applicable PSUs assuming target performance (RPF of 1.0) and based on the volume weighted average trading price of the Shares on the TSX for the five days preceding the date of grant, plus the estimated grant date fair value of the applicable RSUs based on the volume weighted average trading price of the Shares on the TSX for the five days preceding the date of grant.

 

44		OBSIDIAN ENERGY 2022 MANAGEMENT PROXY CIRCULAR