Lightstream Boosted Bonuses as Share Price Slid to Pennies

  • CFO and COO both had non-equity incentive increase of 11%
  • Former director Lothian said he resigned over bonus plan

Lightstream Resources Ltd. increased 2015 cash bonuses for three executives months before the Canadian oil producer proposed a debt-for-equity swap to stay afloat as its stock was down to pennies.

Chief Financial Officer Peter Scott and Chief Operating Officer Rene LaPrade saw their non-equity compensation for last year, paid in December, increase about 11 percent from 2014 to C$200,000 ($153,000) each, according to a filing from the Calgary-based company on Friday. The bonus for Peter Hawkes, vice-president for geosciences, surged 32 percent to C$119,763. Share-based awards and total compensation fell for each of the executives as the stock plunged almost 80 percent to end the year at 26 Canadian cents.

The disclosure was part of a report in advance of a Sept. 30 annual meeting, where shareholders and bondholders will vote on a restructuring proposed by Lightstream that would cut debt by $904 million. Unsecured bondholders including Mudrick Capital Management LP have said they’re opposed to the terms of the deal, which would hand control of the company to top-ranked bondholders.

The plan is the latest attempt by Lightstream to stay in business as it struggles to make debt payments with a crude market rout exceeding two years. The producer entered the downturn highly leveraged and has avoided parting with its prized Bakken assets in Saskatchewan even after starting a sales process in December 2014. If the restructuring doesn’t proceed, Lightstream plans to secure a buyer for all or part of the company under Canada’s court-supervised Companies’ Creditors Arrangement Act process, a way to reorganize rather than liquidate through bankruptcy.

Director Resignation

Craig Lothian, a former director of Lightstream who was on the compensation committee in 2015, said he resigned from the board on Dec. 21 during a meeting to approve the bonuses because he was opposed to them and voted against them. Lothian, in an e-mail, said he stepped down verbally from the board during the meeting and followed up with an e-mail immediately after. Lightstream, in a news release that day, indicated Lothian had resigned but didn’t give a reason.

“I opposed granting any bonuses given that the Lightstream share price had dropped over 80 percent, year over year,” Lothian said.

Chief Executive Officer John Wright, 56, saw his cash award fall 6.9 percent to C$186,200. The CEO’s total compensation fell 24 percent to about C$1.6 million. The bonus for Mary Bulmer, vice-president of corporate services, fell 11 percent to C$133,867.

A request for comments from Scott, LaPrade and Hawkes was directed to the office of Wright, who didn’t immediately return the call. Annie Belecki, general counsel for Lightstream, didn’t have any comment from the company when reached by phone on Friday.

In 2015, the bonuses were paid in cash, while prior to that, bonuses were typically paid in cash as well as deferred common shares, according to the filing. Under the restructuring plan, all outstanding deferred common shares will be adjusted in value and be immediately and fully vested and exercisable.

Bonuses for 2015 reflect the executives’ achievement of some, but not all, corporate performance measures, the filing said. The figures reflect a decision by the board’s compensation committee to “substantially reduce the available bonus pool,” recognizing poor share price performance, the erosion of investment value for shareholders and the low oil price operating environment, according to the document.

Bonus Cuts

Other Canadian oil and gas companies have lowered bonuses for executives in the downturn. All six named executives at Canadian Natural Resources Ltd., the nation’s largest heavy oil and natural gas producer, saw their total remuneration and bonuses cut for 2015. Non-equity incentive plan compensation for Executive Chairman Murray Edwards dropped 67 percent to about C$3.57 million.

Lightstream’s executive compensation levels were determined in relation to 12 Canadian domestic producers in its peer group, according to the company’s management information circular. Among those peers, all lowered bonuses for each executive in 2015 except in two cases, according to data compiled by Bloomberg. Crew Energy Inc. didn’t award cash bonuses at all for last year, while Torc Oil & Gas Ltd. lowered bonuses and paid out most in shares, rather than cash.

The compensation committee of the board of Lightstream included directors Martin Hislop and Kenneth McKinnon, the chairman, according to the filing. Lothian was replaced on the committee by Brett Wilson.

In opposing the restructuring, Mudrick has argued that Lightstream is favoring Apollo Global Management LLC and Blackstone Group LP’s GSO Capital, which became the highest-ranked bondholders in a previous debt swap last year.

Previous Deal

Lightstream’s leverage continued to weigh on the company even after last year’s exchange, which pushed unsecured noteholders down the capital structure for claims in the event of a restructuring. Those investors and shareholders are now being asked to take a haircut under a recapitalization the company proposed in July, which would give the highest-ranked bondholders the majority of the shares in a new Lightstream in exchange for their second-lien notes.

If the plan proceeds, unsecured noteholders would together be left with a 2.75 percent stake and warrants equal to 5 percent of the shares of Lightstream. Existing shareholders would get 2.25 percent plus warrants equal to a 7.75 percent stake. Secured noteholders would get a 95 percent equity stake. 

Lightstream’s 8.625 percent unsecured bonds due in 2020 fell 68 percent last year. The company’s debt rose 6.8 percent to about C$1.59 billion from the prior year, according to data compiled by Bloomberg.

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