DEF 14A of Permian Resources Corp
Filed Apr 9, 2024 · FY20230001308179-24-000490
TABLE OF CONTENTS
| EXECUTIVE COMPENSATION | 46 | | 2023 SUMMARY COMPENSATION TABLE | 46 | | 2023 GRANTS OF PLAN-BASED AWARDS | 47 | | OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END | 48 | | OPTION EXERCISES AND STOCK VESTED IN 2023 | 49 | | SEVERANCE PLAN | 50 | | POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL | 51 | | CEO PAY RATIO | 53 | | PAY VERSUS PERFORMANCE | 53 | | COMPENSATION RISK ASSESSMENT | 56 | | DIRECTOR COMPENSATION | 56 | | EQUITY COMPENSATION PLAN INFORMATION | 58 | | EXECUTIVE OFFICERS | 59 | | CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS | 61 | | REVIEW AND APPROVAL OF RELATED PERSON TRANSACTIONS | 61 | | RELATED PERSON TRANSACTIONS | 62 | | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 63 | | PROPOSAL 3: ELECTION OF THREE CLASS II DIRECTORS, IF PROPOSAL 1 IS NOT APPROVED | 66 | | VOTE REQUIRED AND BOARD RECOMMENDATION | 66 | | PROPOSAL 4: APPROVAL OF AMENDMENT TO THE COMPANY’S CHARTER TO REFLECT THE LATEST DELAWARE LAW PROVISIONS REGARDING OFFICER EXCULPATION | 67 | | RATIONALE FOR APPROVAL | 68 | | VOTE REQUIRED AND BOARD RECOMMENDATION | 68 | | PROPOSAL 5: APPROVAL ON AN ADVISORY BASIS OF OUR NAMED EXECUTIVE OFFICER COMPENSATION | 69 | | VOTE REQUIRED AND BOARD RECOMMENDATION | 69 | | PROPOSAL 6: RECOMMENDATION ON THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE OUR NAMED EXECUTIVE OFFICER COMPENSATION | 70 | | VOTE REQUIRED AND BOARD RECOMMENDATION | 70 | | PROPOSAL 7: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 71 | | PRINCIPAL ACCOUNTING FIRM FEES | 71 | | AUDIT COMMITTEE APPROVAL | 71 | | VOTE REQUIRED AND BOARD RECOMMENDATION | 71 | | GENERAL INFORMATION | 72 | | ANNUAL REPORT | 72 | | OTHER BUSINESS | 72 | | SHAREHOLDER PROPOSALS | 72 | | AVAILABILITY OF CERTAIN DOCUMENTS | 72 | | QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING | 73 | | APPENDIX A – NON-GAAP FINANCIAL MEASURES | 77 | | APPENDIX B – FIFTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF PERMIAN RESOURCES CORPORATION | 78 |
2023 Executive Compensation
2023 Executive Compensation Our Co-CEOs’ compensation consists entirely of long-term equity based compensation. They do not receive a base salary, annual bonus or any other form of cash compensation. Instead, 100% of their compensation is provided through performance stock units (PSUs). The PSUs are restricted stock unit awards subject to performance-based vesting, and the ultimate number of shares earned depends on the total shareholder returns (TSR) of PR on both an absolute basis and a relative basis to PR’s peer group. In September 2022, on the closing date of the PR Merger, the Compensation Committee awarded PSUs to our Co-CEOs in an amount that was designed to represent the value of a three year-grant. These PSUs were divided into three equal tranches, with the performance periods for each tranche lasting approximately three, four and five years from the closing date of the PR Merger. The Compensation Committee took this approach to incentivize long-term value creation by our Co-CEOs. As a result, 100% of our Co-CEOs’ expected realized pay over their first three, four and five years as Co-CEOs of PR will depend entirely on PR’s TSR over the same time periods. Because the Co-CEOs’ PSU grants were designed to represent a three-year grant, the Compensation Committee does not intend to make any additional grants to our Co-CEOs until the end of the three year period.
DIRECTOR NOMINEES
DIRECTOR NOMINEES There are currently eleven directors on our Board, divided into three substantially equal classes. If the shareholders approve the Declassification Amendment (as defined in Proposal 1 below), the table below identifies the eleven director nominees named in this Proxy Statement, each of whom currently serves on our Board.
DIRECTOR NOMINEES
| DIRECTOR NOMINEES | AGE | DIRECTOR SINCE | | Robert J. Anderson | 62 | 2023 | | Maire A. Baldwin | 58 | 2016 | | Frost W. Cochran | 59 | 2023 | | Karan E. Eves | 42 | 2022 | | Steven D. Gray (Board Chair) | 64 | 2022 | | William M. Hickey III | 37 | 2022 | | Aron Marquez | 41 | 2022 | | William J. Quinn | 53 | 2022 | | Jeffrey H. Tepper | 58 | 2016 | | Robert M. Tichio | 46 | 2016 | | James H. Walter | 36 | 2022 |
DIRECTOR NOMINEES
If the shareholders do not approve the Declassification Amendment, the current terms of office of the Class II directors will expire at this Annual Meeting. The table below identifies the three Class II director nominees named in this Proxy Statement, each of whom currently serves on our Board.
DIRECTOR NOMINEES
| DIRECTOR NOMINEES | AGE | DIRECTOR SINCE | | Karan E. Eves | 42 | 2022 | | William J. Quinn | 53 | 2022 | | Jeffrey H. Tepper | 58 | 2016 |
DIRECTOR NOMINEES
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 9 |
DIRECTOR NOMINEES
| Approval of Amendment to the Company’s Charter to Declassify the Board and Provide for the Annual Election of Directors |
DIRECTOR NOMINEES
We are asking our shareholders to vote to approve a proposal to amend (the Declassification Amendment) the Company’s Fourth Amended and Restated Certificate of Incorporation (the Charter) to provide for the elimination of the classified structure of the Board and for the annual election of the directors. Declassifying the Board will allow the Company’s shareholders to vote on the election of our entire Board each year, rather than the three-year staggered basis that our current classified board structure requires. The description of the Declassification Amendment is qualified in its entirety by reference to the text of the proposed revisions, which are set forth under Article V in the form of Fifth Amended and Restated Certificate of Incorporation of the Company (the Amended and Restated Charter) attached as Appendix B and incorporated into this Proxy Statement by reference. Additions are indicated by underlining, and deletions are indicated by strike-outs. If Proposal 1 is approved by our shareholders, the Charter will be amended and restated to reflect the revisions contemplated by the Declassification Amendment (as well as certain non-substantive administrative updates and the other revisions contemplated by Proposal 4 below, if Proposal 4 is also approved by our shareholders) and the Amended and Restated Charter will become effective upon its filing with the Secretary of State of the State of Delaware, which is anticipated to occur as soon as practicable following voting by the shareholders at the Annual Meeting. If Proposal 1 is approved by our shareholders, the amendments will provide for the immediate annual election of all directors and for all eleven nominees for director to be proposed for re-election at the Annual Meeting (see Proposal 2 below). If the shareholders approve Proposal 1, but not Proposal 4, the Amended and Restated Charter will only reflect the revisions contemplated by the Declassification Amendment. As of the date of distribution of this Proxy Statement, the Company’s directors whose terms do not expire at the Annual Meeting have acknowledged and agreed that if the Declassification Amendment is approved, their current terms shall end at the 2024 annual meeting of shareholders, and they will no longer be Class I or Class III directors, as applicable. If the Company’s shareholders do not approve the Declassification Amendment, the Board will remain classified, and the Company’s shareholders will instead be asked to elect only those three Class II directors proposed for election and discussed under Proposal 3 below. If our shareholders do not approve this Proposal 1, the changes described in this section will not be made, and the Declassification Amendment described in this section will not take effect. The approval of this Proposal 1 is not conditioned upon approval of any of the other proposals, including the Exculpation Amendment proposal (Proposal 4).
DIRECTOR NOMINEES
DIRECTOR NOMINEES
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| ROBERT J. ANDERSON | | | AGE: 62 DIRECTOR SINCE: November 2023 Independent COMMITTEES: • Compensation Committee • Environmental, Social and Governance Committee | Mr. Anderson served as President and Chief Executive Officer of Earthstone between April 2020 and November 2023, having previously served as President since April 2018. He also served on the board of directors of Earthstone between April 2022 and November 2023. From December 2014 through April 2018, he served as Earthstone’s Executive Vice President, Corporate Development and Engineering. Previously, he served in a similar capacity with Oak Valley Resources LLC (Oak Valley) from March 2013 until the closing of its strategic combination with Earthstone in December 2014. Prior to joining Oak Valley, he served from August 2012 to February 2013 as Executive Vice President and Chief Operating Officer of Halcón Resources Corporation (Halcón). Mr. Anderson was employed by GeoResources, Inc. from April 2007 until its merger with Halcón in August 2012, ultimately serving as a director and Executive Vice President, Chief Operating Officer - Northern Region. He was involved in the formation of Southern Bay Energy in September 2004 as Vice President, Acquisitions until its merger with GeoResources in April 2007. From March 2004 to August 2004, Mr. Anderson was employed by AROC, a predecessor company to Southern Bay Energy, as Vice President, Acquisitions and Divestitures. Prior to March 2004, he was employed in technical and supervisory roles with Anadarko Petroleum Corporation, major oil companies including ARCO International/Vastar Resources, and independent oil companies, including Hugoton Energy, Hunt Oil and Pacific Enterprises Oil Company. His professional experience of over 30 years includes acquisition evaluation, reservoir and production engineering, field development, project economics, budgeting and planning, and capital markets. He is currently an At-Large Director of the Independent Petroleum Association of America (IPAA). Mr. Anderson holds a Master in Business Administration degree from the University of Denver and a Bachelor of Science degree in Petroleum Engineering from the University of Wyoming. We believe Mr. Anderson is qualified to serve on our Board due to his leadership experience, intimate knowledge of the oil and gas industry, technical expertise, familiarity with our operations and expertise in acquisitions in our industry. |
DIRECTOR NOMINEES
| MAIRE A. BALDWIN | | | AGE: 58 DIRECTOR SINCE: October 2016 Independent COMMITTEES: • Compensation Committee (Chair) • Audit Committee | Prior to joining the Board, Ms. Baldwin was employed as an Advisor to EOG Resources, Inc., an independent U.S. oil and gas company from March 2015 until April 2016. Prior to that, she served as Vice President, Investor Relations at EOG from 1996 to 2014. Ms. Baldwin has served as a director of the Houston Parks Board since 2011, a non-profit dedicated to developing parks and green space in the greater Houston area where she serves on several committees. She also has served on the board and several board committees of The Rothko Chapel since 2021. Ms. Baldwin is a co-founder of Pursuit, a non-profit dedicated to raising funds and awareness of adults with intellectual and developmental disabilities. Ms. Baldwin holds a Master of Business Administration degree and a Bachelor of Arts degree in Economics from the University of Texas at Austin. We believe Ms. Baldwin is qualified to serve on our Board due to her experience in the energy industry. From her executive experience with EOG, Ms. Baldwin has a deep understanding of the oil and gas industry generally and investor relations issues specifically, which we believe gives her an important insight into best practices relating to shareholder engagement and an understanding of the investment community’s expectations for public companies in our industry. |
DIRECTOR NOMINEES
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 15 |
DIRECTOR NOMINEES
| FROST W. COCHRAN | | | AGE: 59 DIRECTOR SINCE: November 2023 Independent COMMITTEES: • Audit Committee • Environmental, Social and Governance Committee | Mr. Cochran served on the board of directors of Earthstone between April 2022 and November 2023. Since 2006, he has been a Managing Director and founding partner of Post Oak Energy Capital, LP (Post Oak), a Houston based investor in oil & gas operating and minerals holding companies, and related midstream infrastructure and services companies. Prior to founding Post Oak in 2006, Mr. Cochran served from 2004 to 2006 as the President of the holding company of Belden & Blake, which held operating interests in oil and gas properties and related infrastructure in the Appalachian Basin. In 2002, he co-founded and served as President of Signal Hill Power, a merchant power owner operator in the Texas ERCOT market. Mr. Cochran served as a Managing Director of Torch Energy from 1998 until March 2002, Managing Director and Partner at Energy Asset Management LLC from 1996 through 1998, Vice President of Enron Development Corporation from 1993 until 1996, as Project Finance Manager at Destec Energy Inc., a subsidiary of The Dow Chemical Company, from 1991 until 1993 and with Kemper Securities Group from 1989 until 1991. Mr. Cochran serves on the boards of several Post Oak portfolio companies in the upstream, midstream and services sectors of the energy industry and is a member of Post Oak’s investment committee. Mr. Cochran is a member of the Independent Petroleum Association of America and the Texas Independent Producers and Royalty Owners. Mr. Cochran holds a Master in Business Administration degree from the University of Texas at Austin and a Bachelor in Business Administration degree from the University of Mississippi. We believe Mr. Cochran is qualified to serve on our Board due to his extensive experience in investing in the oil and gas industry, including serving on the boards of private oil and gas exploration and production companies. Also, based on his experience and as a Managing Director of Post Oak, Mr. Cochran is able to provide the Board with insights regarding financial matters and strategic planning. |
DIRECTOR NOMINEES
| KARAN E. EVES | | | AGE: 42 DIRECTOR SINCE: September 2022 Independent COMMITTEES: • Audit Committee • Nominating and Corporate Governance Committee | Ms. Eves is the Chief Operating Officer of Boaz Energy II, LLC, which she co-founded in 2013. In 2011, she founded Boaz Energy, LLC and served as the company’s Chief Executive Officer. In 2010, Ms. Eves founded Markar Energy Company, an independent engineering consulting firm, and served as its Chief Executive Officer until 2011. Ms. Eves began her career at Merit Energy Company in 2004 and held various roles over her six years with the company, including serving as the Interim Division Manager for Merit’s East Rockies Division. She has served in numerous volunteer roles in her community including Trinity School TCA President, Sustainer of the Junior League of Midland and Sunday School Teacher, and she sits on the finance committee for several nonprofit organizations in Midland. Ms. Eves holds a Bachelor of Science in Petroleum Engineering degree from Texas Tech University. We believe Ms. Eves is qualified to serve on our Board due to her executive experience operating an upstream oil and gas operator in the Permian Basin. |
DIRECTOR NOMINEES
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 16 |
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| STEVEN D. GRAY | | | AGE: 64 DIRECTOR SINCE: September 2022 Independent Board Chair COMMITTEES: • Compensation Committee • Nominating and Corporate Governance Committee (Chair) | Mr. Gray served as the co-founder, director and Chief Executive Officer of RSP Permian Inc. from its inception in 2010 until its merger with Concho Resources in 2018. After the merger with Concho, he joined Concho’s Board of Directors and served until Concho was acquired by ConocoPhillips in 2021. Prior to forming RSP Permian, Mr. Gray founded several successful oil and gas ventures spanning nearly 20 years in partnerships with Natural Gas Partners, an Irving, Texas based private equity company. Before that, Mr. Gray spent 11 years employed in the oil and gas industry in various capacities as a petroleum engineer. Mr. Gray currently serves on the Board of Directors of Range Resources Corporation and the Texas Tech Foundation Advisory Board. In addition, he is a member of the Petroleum Engineering Academy, serves on the Dean’s Advisory Council for the College of Engineering at Texas Tech University and is a member of the Executive Advisory Council of the George W. Bush Presidential Center in Dallas, Texas. Mr. Gray holds a Bachelor of Science in Petroleum Engineering degree from Texas Tech University. We believe Mr. Gray’s prior executive roles for numerous upstream oil and gas companies, including as CEO, as well as experience serving on the boards of multiple public oil and gas companies, qualify him to serve as a member of the Board. |
DIRECTOR NOMINEES
| ARON MARQUEZ | | | AGE: 41 DIRECTOR SINCE: September 2022 Independent COMMITTEES: • Nominating and Corporate Governance Committee • Environmental, Social and Governance Committee | Mr. Marquez is the Executive Chairman of Wildcat Oil Tools, LLC, an international oil field services and technology company. Mr. Marquez founded Wildcat Oil Tools in 2012 and served as its Chief Executive Officer until becoming the company’s Executive Chairman in January 2023. In 2009, Mr. Marquez founded St. Andrews Royalties LLC, an oil and gas royalty company, for which he serves as President. Prior to founding these companies, Mr. Marquez held various roles from 2004 to 2009 at Nabors Industries, including District Manager overseeing the company’s well servicing operations in West Texas and New Mexico. In 2019, Mr. Marquez founded Flecha Azul Tequila LLC, a premium tequila company, and continues to be active in the company’s management following its expansion through a joint venture with industry professionals in 2021. Mr. Marquez also serves as Chief Executive Officer of Black Quail Apparel LLC, a company that manufactures and sells premium golfing and leisure apparel, and co-founder of Ombré Men, an innovative men’s skincare company. He serves on the Board of Directors for the First Tee of West Texas and previously served on the Midland Community Hospital Advisors Board, the Midland YMCA Board and the United Way of Odessa Board. Mr. Marquez holds a Bachelor of Arts in Organizational Leadership degree from the University of Oklahoma. We believe Mr. Marquez is qualified to serve on our Board due to his entrepreneurial history and leadership experience in the oilfield services industry, including in the Permian Basin. |
DIRECTOR NOMINEES
| WILLIAM J. QUINN | | | AGE: 53 DIRECTOR SINCE: September 2022 | Mr. Quinn is a Founder and Managing Partner of Pearl Energy Investments (Pearl). Prior to founding Pearl in 2015, Mr. Quinn served as Managing Partner of Natural Gas Partners (NGP). In his capacity as Managing Partner, he co-managed NGP’s investment portfolio and played an active role in the full range of NGP’s investment process. Mr. Quinn serves on the boards of directors of a number of Pearl companies and their affiliates. From September 2021 until May 2022, he served as a director and Chairman of the Board for Spring Valley Acquisition Corporation, which is now called NuScale Power Corporation following the company’s business combination in May 2022. Mr. Quinn holds a Master of Business Administration degree from the Stanford University Graduate School of Business and a Bachelor of Science in Economics degree, with honors, from the Wharton School of the University of Pennsylvania with a concentration in finance. We believe that Mr. Quinn’s deep industry and investing experience and intimate knowledge of Pearl and PR’s assets make him well suited to serve as a member of our Board. |
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| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 17 |
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| JEFFREY H. TEPPER | | | AGE: 58 DIRECTOR SINCE: February 2016 Independent COMMITTEES: • Audit Committee (Chair) • Nominating and Corporate Governance Committee | Mr. Tepper is Founder of JHT Advisors LLC, an M&A advisory and investment firm. From 1990 to 2013, Mr. Tepper served in a variety of senior management and operating roles at the investment bank Gleacher & Company, Inc. and its predecessors and affiliates, where he was Head of Investment Banking and a member of the Firm’s Management Committee. As Gleacher’s former Chief Operating Officer, he also oversaw operations, compliance, technology and financial reporting. In 2001, Mr. Tepper co-founded Gleacher’s asset management activities and served as President. Gleacher managed over $1 billion of institutional capital in the mezzanine capital and hedge fund areas. Mr. Tepper served on the Investment Committees of Gleacher Mezzanine and Gleacher Fund Advisors. Between 1987 and 1990, Mr. Tepper was employed by Morgan Stanley & Co. as a financial analyst in the mergers & acquisitions and merchant banking departments. In addition, Mr. Tepper serves, or has served, as a director of the following companies: • Decarbonization Plus Acquisition Corporation IV (2021-February 2023) • Decarbonization Plus Acquisition Corporation III (2021) • Decarbonization Plus Acquisition Corp (2020 – July 2021) • Decarbonization Plus Acquisition Corporation II (2020 – 2022) Mr. Tepper holds a Master of Business Administration degree from Columbia Business School and a Bachelor of Science in Economics degree from The Wharton School of the University of Pennsylvania with concentrations in finance and accounting. We believe Mr. Tepper is qualified to serve on our Board due to his significant investment and financial experience, particularly as it relates to mergers and acquisitions, corporate finance, leveraged finance and asset management. |
DIRECTOR NOMINEES
| ROBERT M. TICHIO | | | AGE: 46 DIRECTOR SINCE: October 2016 Independent COMMITTEES: • Compensation Committee • Environmental, Social and Governance Committee (Chair) | Mr. Tichio serves as the Chief Executive Officer and Managing Partner of Fortescue Capital, a green energy investment accelerator platform, which he helped launch in November 2023. Mr. Tichio served as a Partner of Riverstone from 2006 through 2023. Prior to joining Riverstone, Mr. Tichio was in the Principal Investment Area of Goldman Sachs, which manages the firm’s private corporate equity investments. Mr. Tichio began his career at J.P. Morgan in the Mergers & Acquisitions group where he concentrated on assignments that included public company combinations, asset sales, takeover defenses and leveraged buyouts. Mr. Tichio serves on the boards of directors of a number of Riverstone portfolio companies and their affiliates. Mr. Tichio serves, or has served, as a director of the following companies: • Pipestone Energy Corp. (since 2019) • Talos Energy Inc. (2012-February 2023) • Solid Power, Inc. (2021-May 2022) • Tritium DCFC Limited (Chairman) (since 2022) • Hammerhead Resources Inc. (Chairman) (2021-December 2023) Mr. Tichio holds a Master of Business Administration degree from Harvard University and a Bachelor of Arts degree from Dartmouth College. We believe Mr. Tichio is qualified to serve on our Board due to his capital markets and mergers and acquisitions experience. Mr. Tichio also serves as a director on the boards of other traditional energy and renewable energy companies, which we believe further enhances his understanding of the industry and perspective on best practices relating to ESG matters, corporate governance, management and capital markets transactions. |
DIRECTOR NOMINEES
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 18 |
DIRECTOR NOMINEES
| WILLIAM M. HICKEY III | | | AGE: 37 DIRECTOR SINCE: September 2022 | Mr. Hickey has served as our Co-Chief Executive Officer and a director since the PR Merger closed on September 1, 2022. Prior to that, he co-founded Colgate Energy Partners with Mr. Walter in 2015 and served as Colgate’s Co-Chief Executive Officer and as a member of Colgate’s Board of Managers from 2015 until the PR Merger closed in 2022. Prior to co-founding Colgate, Mr. Hickey worked for the energy private equity firm EnCap Investments where he evaluated and monitored investments across the oil and gas space with a focus on the Permian Basin. Prior to joining EnCap Investments, Mr. Hickey worked for Pioneer Natural Resources, where he rotated through numerous engineering positions and worked directly for the Chief Operating Officer. Mr. Hickey holds a Master of Business Administration degree from Southern Methodist University and a Bachelor of Science in Petroleum Engineering degree from the University of Texas at Austin. We believe Mr. Hickey’s role as our Co-Chief Executive Officer as well as his substantial experience with and understanding of the energy industry gathered from his experience as an investment professional and from co-founding and co-leading Colgate qualify him to serve as a member of the Board. |
DIRECTOR NOMINEES
| JAMES H. WALTER | | | AGE: 36 DIRECTOR SINCE: September 2022 | Mr. Walter has served as our Co-Chief Executive Officer and a director since the PR Merger closed on September 1, 2022. Previously, he co-founded Colgate Energy Partners with Mr. Hickey in 2015 and served as Colgate’s Co-Chief Executive Officer and as a member of Colgate’s Board of Managers from 2015 until the PR Merger closed in 2022. Prior to co-founding Colgate, Mr. Walter worked for Denham Capital, an energy private equity firm, where he evaluated and monitored investments across the oil and gas space with a focus on the Permian Basin. Prior to joining Denham Capital, Mr. Walter worked for Boston Consulting Group primarily focusing on evaluating upstream assets for exploration and production companies. Mr. Walter holds a Bachelor of Arts degree in the Plan II Honors Program and a Bachelor of Business Administration degree in Finance from the University of Texas Austin. We believe Mr. Walter’s role as our Co-Chief Executive Officer as well as his substantial experience with and understanding of the energy industry gathered from his experience as an investment professional and from co-founding and co-leading Colgate qualify him to serve as a member of the Board. |
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY This past year was the first full year for PR, which was formed through a merger-of-equals of Centennial and Colgate in September 2022. PR had a very successful 2023, during which it completed the integration of the legacy Centennial and Colgate assets, achieved its corporate goals, met or exceeded all of its public guidance for the year and delivered significant value to shareholders through its shareholder returns program. PR’s year-end 2023 position was also strongly supported by its Earthstone Acquisition, which closed on November 1, 2023 and which enhanced PR’s position as the second largest pure-play exploration and production company in the Permian Basin. In this Compensation Discussion and Analysis (CD&A) section, we will describe our approach to executive compensation, which we first put in place in 2022 in connection with closing the PR Merger. The most noteworthy feature to our program is that our Co-CEOs do not receive any form of cash compensation and instead receive 100% of their compensation in the form of long-term incentive awards structured as performance stock units. Our executive and director compensation programs also reflect an emphasis on performance stock units for our other named executive officers and provide directors with the option to receive 100% of their annual compensation in the form of PR stock rather than through a mix of stock and cash. We believe our compensation programs strongly align compensation with shareholder returns and take a fresh approach to compensation that differentiates us from our peers. In connection with closing the PR Merger, the Compensation Committee also approved “inaugural” equity awards to our officers and employees. While granted in September 2022, we view these awards as forming a part of the 2023 compensation program since they essentially accelerated the issuance of the awards the Compensation Committee would have granted during spring 2023. Therefore, we describe these inaugural awards in this CD&A section for context, even though the awards are treated as 2022 awards under the SEC’s rules in the compensation-related tables included in the Executive Compensation section below. Since the inaugural equity awards that were granted in September 2022 replaced the spring 2023 awards, we did not provide any equity awards to continuing officers and employees in 2023, and the next annual award cycle occurred in February 2024. References in this CD&A section to our company, our executive officers and our Compensation Committee refer, prior to the PR Merger, to Centennial and its executive officers and Compensation Committee. In contrast, when those terms are used in relation to the period on or after the closing date of the PR Merger, they refer to PR and its executive officers and Compensation Committee.
Our Approach to Co-CEO Compensation
Our Approach to Co-CEO Compensation Our Co-CEOs’ compensation consists entirely of long-term equity-based compensation. They do not receive a base salary, annual bonus or any other form of cash compensation. Instead, 100% of their compensation is provided through performance stock units (PSUs). The PSUs are restricted stock unit awards subject to performance-based vesting, and the ultimate number of shares earned depends on the total shareholder return (TSR) of PR on both an absolute basis and a relative basis to PR’s peer group. In September 2022, on the closing date of the PR Merger, the Compensation Committee awarded PSUs to our Co-CEOs in an amount that was designed to represent the value of a three-year grant. These PSUs were divided into three equal tranches, with the performance periods for each tranche lasting approximately three, four and five years from the closing date of the PR Merger. The Compensation Committee took this approach to incentivize long-term value creation by our Co-CEOs. As a result, 100% of our Co-CEOs’ expected realized pay over their first three, four and five years as Co-CEOs of PR will depend entirely on PR’s TSR over the same time periods. Because the Co-CEOs’ PSU grants were designed to represent a three-year grant, the Compensation Committee does not intend to make any additional grants to our Co-CEOs until the end of the three-year period.
2023 Total Shareholder Returns
2023 Total Shareholder Returns We are very pleased with our 2023 TSR. While our industry and the companies in our peer group generally all experienced strong TSRs in 2023 due to supportive commodity prices, among other factors, our 2023 TSR set us apart given the relative outperformance to the peer average and SPY and XOP ETFs. For a list of the companies in our performance peer group, see the “Use of Competitive Market Data” section below.
Compensation Arrangements with Mr. Glyphis
Compensation Arrangements with Mr. Glyphis Mr. Glyphis served as our Chief Financial Officer until March 1, 2023 and then served for a transition period as a Senior Advisor until his departure from the Company on May 4, 2023. This resignation constituted a qualifying termination under the change-in-control Severance Plan that was in place at Centennial when the PR Merger closed (the Centennial Severance Plan) as the PR Merger was deemed to be a “Change in Control” for purposes of the Centennial Severance Plan and he resigned for “Good Reason” by choosing not to relocate from Denver to the Company’s headquarters in Midland, Texas. As a result, Mr. Glyphis received change-in-control severance benefits under the Centennial Severance Plan. In recognition of his service between the closing date of the PR Merger and May 4, 2023, the Compensation Committee also approved a pro rata settlement of the equity awarded to him on the closing date of the PR Merger. Additional information on the cash and equity severance benefits provided to Mr. Glyphis is included in the Potential Payments Upon Termination or a Change in Control section appearing in the Executive Compensation section.
Compensation Arrangements with Mr. Garrison
Compensation Arrangements with Mr. Garrison Mr. Garrison served as our Chief Operating Officer until September 1, 2023 when he resigned for personal reasons. In recognition of his service between the closing date of the PR Merger and September 1, 2023, as well as certain post-employment non-competition, non-solicitation and other customary restrictive covenants, the Compensation Committee approved the payment of a pro rata 2023 target cash bonus and the pro rata settlement of certain equity awards held by Mr. Garrison. Additional information on the cash and equity severance benefits provided to Mr. Garrison is included in the Potential Payments Upon Termination or a Change in Control section appearing in the Executive Compensation section.
Compensation Best Practices
| WHAT WE DO | | WHAT WE DON’T DO | | | | Pay for Performance. Align our executives’ compensation with our financial, operational and stock price performance by having 100% of our Co-CEOs’ (and a majority of our other NEO’s) total compensation consist of variable or Performance-based compensation. | | Hedging or Pledging of Company Securities. We do not allow hedging or pledging of Company securities by directors, NEOs or other officers or employees. | | | Ownership Guidelines. Maintain robust Stock Ownership Guidelines that apply to all of our officers and independent directors. | | Tax Gross-Ups. We do not provide tax gross-ups for severance or change in control payments to our NEOs or other officers or employees. | | | Review Market Data. At least annually, conduct a review of market data of peer group companies to ensure competitive compensation relative to the market. | | Excessive Perquisites. We do not provide significant perquisites to any of our NEOs or other officers or employees. | | | Compensation Consultant. Use an independent compensation consultant retained by, and reporting directly to, the Compensation Committee. | | Employment Agreements. We do not have employment agreements with our NEOs or other officers or employees. | | | Clawback Policy. Maintain a clawback policy that applies to our NEOs. | | Guarantee Bonuses. We do not guarantee bonuses to any of our NEOs or other officers or employees. | | | Double-Trigger Change in Control Benefits. Maintain a Severance Plan where change in control benefits are only provided upon a qualifying termination of employment following a change in control transaction. | | Repricing of Options. We do not permit repricing of underwater stock options without shareholder approval. | | | ESG. Include ESG performance goals in the AIP, including metrics tied specifically to our commitment to reduce flaring and spills and to ensure the safety of our workforce. | | | | | Risk Assessments. Conduct an annual risk assessment of compensation practices to facilitate risk management. | | | | | Relative and Absolute TSR. Determine payout of performance stock units based on both our TSR relative to peer group and our absolute annualized TSR. | | | | | AIP Maximum. Establish maximum AIP payout of 200% of each NEO’s target AIP compensation. | | | | | Evolving Program. Adapt compensation program based on shareholder feedback and evolving market standards. | | |
Elements of 2023 Compensation Program
Elements of 2023 Compensation Program The primary elements of our executive compensation program and the purpose of each component are summarized in the following table. Our Co-CEOs’ compensation consists entirely of PSUs. As mentioned above, the Compensation Committee approved “inaugural” equity awards to the then-serving NEOs on September 1, 2022. While granted in 2022, we view these awards as forming an integral part of the 2023 executive compensation program since they accelerated the issuance of awards the Compensation Committee would have granted during spring 2023. Therefore, these awards are included in this section describing our 2023 compensation program.
Elements of 2023 Compensation Program
| TYPE | ELEMENT | | PURPOSE | CO-CEO COMPENSATION | | Fixed | Base Salary | | • Attract and retain qualified executives • Provide a level of fixed pay based on the executive’s role, skills, experience and performance | | | Variable | Annual Incentive Program (AIP) | | • Incentivize achievement of the Company’s and executive’s short-term financial, operational and strategic goals • Align executives’ interests with those of our shareholders | | | | Long-Term Incentive Plan (LTIP) | Restricted Stock | • Align realized values with shareholder returns • Promote retention of executives • Promote stock ownership by executives | | | | | Performance Stock Units (PSUs) | • Reward absolute shareholder returns • Reward shareholder returns relative to industry peers • Promote retention of executives | |
2023 Compensation Mix
2023 Compensation Mix A significant portion of our executive compensation is performance-based. The graphics below show the mix of compensation elements for our Co-CEOs (on the left) and our other NEOs (on the right). For each graphic, the compensation mix reflects the executive’s base salary and target compensation levels for the AIP and LTIP. The LTIP element includes the “inaugural” equity awards granted to our NEOs in September 2022, which we view as forming a part of the 2023 compensation program. Each graphic also identifies the portion of the compensation that is variable or “at-risk,” which refers to compensation elements that are only earned based on achievement of performance goals or through continued employment through the award’s vesting period. The ultimate realized value of these variable compensation elements, if earned at all, fluctuates or depends on Company performance as determined by the Compensation Committee, as well as our stock price. As shown in the graphics, our executive compensation is heavily weighted towards variable or “at-risk” compensation elements, particularly for our Co-CEOs whose compensation is 100% performance-based.
Annual Incentive Program (AIP)
Annual Incentive Program (AIP) Our Annual Incentive Program (AIP) is designed to promote the achievement of annual financial, operational and strategic goals that are aligned with the creation of shareholder value. In connection with adopting the 2023 AIP in early 2023, the Compensation Committee set an AIP target for each NEO, expressed as a percentage of the NEO’s year-end base salary. The Compensation Committee set Mr. Oliphint’s target at 90% of his base salary, a target that the Compensation Committee determined to be appropriate for Mr. Oliphint in his initial year as the Company’s Chief Financial Officer. The Compensation Committee evaluated the targets for the other NEOs and determined that they were competitive and appropriate assuming all the Company’s and NEO’s goals were attained at target levels. Accordingly, the targets for the continuing NEOs remained unchanged from 2022 levels. The following table presents the AIP targets as a percent of salary for each NEO at the end of 2022 and 2023. None of the NEOs have a minimum or guaranteed bonus under the AIP, and the maximum payout for each NEO is 200% of the NEO’s target AIP compensation.
Annual Incentive Program (AIP)
| EXECUTIVE | 2022 TARGET | 2023 TARGET | | William M. Hickey | 0% | 0% | | James H. Walter | 0% | 0% | | Guy M. Oliphint | N/A | 90% | | John C. Bell | 80% | 80% | | Brent P. Jensen | 85% | 85% | | George S. Glyphis | 100% | 100% | | Matthew R. Garrison | 95% | 95% |
Annual Incentive Program (AIP)
In early 2023, the Compensation Committee established the program weightings between different components of the AIP and approved the operational and financial metrics used for the scorecard portion of the AIP, as well as the quantitative and qualitative goals used for the ESG and Strategic components of the AIP. In choosing to allocate 40% of the AIP to the Strategic Initiatives and Discretionary portion of the AIP, the Compensation Committee determined that this level of discretion was appropriate for the 2023 AIP. The Compensation Committee also considered the unique ability of the Co-CEOs to provide impartial recommendations to the Committee on the AIP since the Co-CEOs do not participate in our Annual Incentive Program.
Annual Incentive Program (AIP)
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 35 |
Annual Incentive Program (AIP)
| COMPONENT | WEIGHTING | METRIC | GOAL | ASSESSMENT | RESULT | | RETURNS | | All-in Rate of Return (Using $70 Oil/$3 natural gas price deck) | 40% | Exceeded the all-in rate of return goal | Exceeded | | FREE CASH FLOW | | Free Cash Flow/Share | $1.06 | Generated $1.20 Free Cash Flow / Share | Exceeded | | COST STRUCTURE | | Sum of LOE & Cash G&A/Boe | $6.50 | Maintained low cost structure with $6.47 / Boe combined LOE and G&A | Exceeded | | ESG | | Flaring Target | 1.5% | 2.7% | Exceeded on spills and TRIR targets but did not achieve flaring target | | | | Oil Spills Target | 0.004% | 0.0027% | | | | | Water Spills Target | 0.0048% | 0.0008% | | | | | TRIR Target | 0.65 | 0.55 | | | STRATEGIC/ DISCRETIONARY | | Various — see below for goals and assessments | | | Exceeded, see commentary below |
Annual Incentive Program (AIP)
In evaluating the flaring metric, the Compensation Committee noted that the higher than targeted flaring level for 2023 was largely due to the activities of PR’s third party midstream gatherers and processors. When assessing the Company’s performance on the Strategic component of the AIP, the Compensation Committee recognized that the Company’s performance significantly exceeded the majority of its strategic objectives for 2023, which are outlined below.
Annual Incentive Program (AIP)
| COMPONENT | GOALS | ASSESSMENT | | | • Achieve year-over-year growth in Net Asset Value (NAV) and NAV/Share | • Achieved significant NAV/Share growth in 2023 through Earthstone Acquisition, various other portfolio optimization transactions and prudent operations | | | • Efficiently deploy Free Cash Flow within business, transactions and return of capital programs | • Effectively implemented return of capital strategy in 2023 by returning capital through all three prongs of the plan: $0.20 / share of cumulative base dividends; $0.27 / share of cumulative variable dividends and $125mm of share repurchases in 2023 | | | • Achieve average D&C for 2023 Wells of $990/ft | • Achieved average D&C of less than $990/ft for 2023 Wells | | Strategic | • Engage in transactions that optimize PR’s capital structure | • Formalized framework for sponsor offerings and reduced sponsor ownership from ~50% to ~30% through successful equity offerings and direct share repurchases • Raised $1 billion of additional Senior Notes to refinance the Earthstone credit facility and to opportunistically term out additional borrowings on PR’s credit facility | | | • Achieve expected oil production performance for wells turned on production by PR in 2023 | • Achieved oil production performance near top end of guidance range for 2023 PR |
Annual Incentive Program (AIP)
The Compensation Committee overall concluded that the Company had very strong performance during 2023, the inaugural year for PR, and that such performance was especially impressive when considering the extraordinary effort involved in integrating the legacy assets and companies of Colgate and Centennial during 2023. The Committee also strongly considered the strategic decision to pursue and close the Earthstone Acquisition and the significant synergies that the Company had already captured
Annual Incentive Program (AIP)
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 36 |
Annual Incentive Program (AIP)
relating to those assets by year-end 2023. Finally, the Compensation Committee reviewed the Company’s TSR performance for 2023, which was approximately 49% year-over-year, a TSR level that significantly exceeded the average TSR performance of PR’s peer group during 2023. In early 2024, the Compensation Committee evaluated the Company’s and each NEO’s performance during 2023 and approved the following cash amounts for the 2023 AIP.
Annual Incentive Program (AIP)
| EXECUTIVE | AIP CASH AWARD | | William M. Hickey(1) | $N/A | | James H. Walter(1) | $N/A | | Guy M. Oliphint | $607,500 | | John C. Bell | $450,000 | | Brent P. Jensen | $480,675 |
Annual Incentive Program (AIP)
| (1) Messrs. Hickey and Walter do not participate in the Annual Incentive Program. |
Annual Incentive Program (AIP)
Messrs. Glyphis and Garrison were not employed when the AIP cash awards were paid in March 2024, but they each received a pro rata target bonus for 2023 upon their departures.
Long-Term Incentive Program (LTIP)
Long-Term Incentive Program (LTIP) Our Long-Term Incentive Program (LTIP) is designed to encourage long-term shareholder value creation through the program’s alignment with our TSR, both on an absolute basis and relative to industry peers. As shown above in the 2023 Compensation Mix, the LTIP is the most significant component in value of our executive compensation program. In connection with closing the PR Merger in September 2022, the Compensation Committee approved “inaugural” PR LTIP awards to the Company’s officers and employees, including the continuing NEOs. While granted in 2022, we view these awards as forming a part of the 2023 compensation program since they essentially accelerated the issuance of the awards the Compensation Committee would have granted during spring 2023. Therefore, this section describes these inaugural awards even though the awards are treated as 2022 awards under SEC’s rules in the compensation-related tables included in the Executive Compensation section below. Since these inaugural equity awards, granted in September 2022, replaced the spring 2023 awards, the Compensation Committee did not provide any equity awards to continuing officers and employees in 2023, and the next annual award cycle occurred in February 2024. The decision to accelerate the issuance of the inaugural awards to the closing date of the PR Merger was made by the Compensation Committee for several reasons, including:
Long-Term Incentive Program (LTIP)
| • | PSUs represented the majority of value for the NEO grants, and the Committee believed it appropriate for the grant date and performance period commencement date for the PSUs to align with the closing date of the PR Merger so that the PSUs tracked performance back to the origin of PR. | | • | All equity held by legacy Colgate NEOs and employees vested in connection with the PR Merger closing, so granting new awards concurrent with the PR Merger increased retention of key legacy Colgate employees. | | • | These LTIP Awards increased retention of key legacy Centennial employees, many of whom were eligible for severance benefits upon a qualifying termination under the Centennial Severance Plan. |
Long-Term Incentive Program (LTIP)
Consistent with Centennial’s practice in prior years, the inaugural awards consisted of a combination of PSU awards and time-based restricted stock awards. As described above, 100% of our Co-CEOs’ compensation consists of PSUs. The Compensation Committee, with the support of the Co-CEOs, chose this structure to allow for full alignment between the Co-CEOs’ compensation and the TSR experienced by our shareholders. In determining the target LTIP award amount for the Co-CEOs, the Compensation Committee considered the Compensation Peer Group data provided by Meridian on CEO compensation, each Co-CEO’s role and ability to individually and jointly drive shareholder returns, the additional equity cost of having two CEOs and the cash savings of the Co-CEOs not receiving salaries or annual bonuses. Based on these considerations, the Compensation Committee set the target annual LTIP compensation for each Co-CEO at $5 million. For the inaugural awards, the Compensation Committee awarded $15 million in PSUs to each Co-CEO, which was designed to represent the value of a three-year grant for the Co-CEOs, and the Compensation Committee does not intend to make any additional equity grants to either of the Co-CEOs until the end of such three-year period. Please note that the value of these three-year equity awards included in the 2022 Summary Compensation Table significantly increased the “Total Compensation” value for our Co-CEOs above the $5 million target annual LTIP compensation. However, since no additional equity awards were provided to the Co-CEOs in 2023, shareholders will note that the Co-CEOs “Stock Awards” total in 2023 was reduced to $0, and shareholders can expect this approach to continue over the remaining two years in the initial three-year period described above.
Long-Term Incentive Program (LTIP)
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 37 |
Long-Term Incentive Program (LTIP)
In determining the target grant values for the other then-serving NEOs, the Compensation Committee considered the Compensation Peer Group data provided by Meridian, the other compensation received by each NEO, including historical data where applicable, and each NEO’s role and ability to influence and create long-term shareholder value. Based on these considerations, the Compensation Committee set Mr. Bell’s initial annual LTIP target compensation at $1,250,000 and affirmed the historical LTIP targets for Messrs. Glyphis, Garrison and Jensen. The Compensation Committee also increased the inaugural awards provided to these NEOs by a one-time 30% adjustment factor, which offset the longer than normal gap between the grant date of the inaugural awards and the February 2024 grant date for the next award cycle. Mr. Jensen’s award consisted entirely of restricted stock given the expectation, at the time, that he would likely transition out of the organization prior to the end of 2023. When Mr. Oliphint joined the Company in 2023, the Compensation Committee set his initial annual LTIP target compensation at $3,150,000 based on the Compensation Peer Group data provided by Meridian, the Compensation Committee’s consideration of similar factors to those described above and in recognition of compensation he forfeited from his prior employer when he transitioned to PR. The following table outlines the LTIP awards received by Mr. Oliphint in January 2023 and the remaining NEOs in September 2022, including target grant date values that are calculated based on the five-day average closing stock price ending on the day prior to the grant date.
Long-Term Incentive Program (LTIP)
| EXECUTIVE | TARGET NUMBER OF PSUS GRANTED (#) | SHARES OF RESTRICTED STOCK GRANTED (#) | TOTAL GRANT DATE TARGET VALUE ($) | | William M. Hickey | 1,787,843 | — | 15,000,003 | | James H. Walter | 1,787,843 | — | 15,000,003 | | Guy M. Oliphint | 237,097 | 101,613 | 3,150,002 | | John C. Bell | 135,578 | 58,105 | 1,625,000 | | Brent P. Jensen | — | 193,683 | 1,625,000 | | George S. Glyphis | 250,123 | 107,196 | 2,997,906 | | Matthew R. Garrison | 181,892 | 77,954 | 2,180,108 |
Performance Stock Units (PSUs)
Performance Stock Units (PSUs) The PSUs granted to the NEOs (other than Messrs. Hickey and Walter) each have a performance period of approximately three years. As discussed above, the PSUs granted to Messrs. Hickey and Walter were designed to represent a three-year grant. These PSUs were therefore divided into three equal tranches with the performance period applicable to each tranche lasting approximately three, four and five years later. The Compensation Committee determined this approach to the PSUs was appropriate so that each tranche’s performance period ends when the performance period would have otherwise ended if the PSUs had been granted in a normal three-year cycle. The graphic appearing below highlights the performance periods for each of the PSUs granted to the NEOs.
Performance Stock Units (PSUs)
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 38 |
Performance Stock Units (PSUs)
The number of PSUs that vest and become earned is determined based on the level of achievement with respect to both Relative TSR and Absolute TSR performance metrics. The following sections describe the performance multipliers that would apply to the PSU awards at each level of achievement.
Relative TSR
Relative TSR The PSUs vest and become earned at the end of their respective performance period based on our TSR ranking relative to our performance peer group (Relative TSR), with linear interpolation used to determine the vesting level between percentiles listed in the Relative TSR table below. As in prior years, the Compensation Committee also included the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) in the performance peer group for the PSUs so that our Relative TSR is also measured against a broader basket of energy companies against whom we compete for capital. The full makeup of the performance peer group for the PSUs is provided below in the “Use of Competitive Market Data” section.
Absolute TSR
Absolute TSR The number of PSUs that would otherwise vest is further adjusted by our absolute annualized TSR over the performance period (Absolute TSR), which reduces or increases the vesting level of the PSUs depending on the Absolute TSR level. The more rigorous Absolute TSR levels used for the LTIP Awards were chosen by the Compensation Committee as they furthered the heightened pay-for-performance philosophy of the PR compensation program, with more upside for more significant absolute returns and more downside for low or negative absolute returns.
Absolute TSR
| LTIP AWARDS | | | | | Relative TSR(1) | | Absolute TSR(1) | | | Relative Ranking TSR % | Relative Multiplier | Absolute Annualized TSR % | Absolute Multiplier | | ≥ 85% | 200% | > 20% | 150% | | 50% | 100% | 15% | 125% | | 15% | 15% | 10% | 100% | | < 15% | 0% | 5% | 75% | | | | ≤ 0% | 50% |
Vesting of 2020 PSUs
Vesting of 2020 PSUs The PSUs granted in July 2020 to the then-serving NEOs were initially structured as cash-settled awards due to the limited number of remaining shares under the LTIP. In August 2022, the Compensation Committee approved an amendment to the award agreements for the 2020 PSUs that enabled the 2020 PSUs to settle in company stock or cash at the discretion of the Compensation Committee. The updated settlement flexibility was important to the Company to preserve flexibility and improve cash flow and was included in an amended award agreement, which Messrs. Garrison, Glyphis and Jensen signed in August 2022. As an inducement for Mr. Garrison to sign the amended award agreement, the Compensation Committee agreed to settle in cash one-third of his 2020 PSUs, with the remaining two-thirds remaining outstanding and subject to the normal vesting schedule for the 2020 PSUs. The remaining 2020 PSUs held by Messrs. Garrison and Jensen were eligible to vest at the conclusion of the three-year performance period, which ended on June 30, 2023, subject to the achievement of the 2020 PSUs’ Relative TSR performance goals during the performance period and the NEO’s continuous employment through the end of the performance period. The 2020 PSUs were not subject to an Absolute TSR performance measure. Based on the Company’s TSR performance for the performance period compared to the applicable peer group, the payout percentage was 200% of the target PSUs per the terms of the PSU award agreement. Vested PSUs were settled in the form of company stock, as detailed in the table that follows.
Vesting of 2020 PSUs
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 39 |
Vesting of 2020 PSUs
| EXECUTIVE | TARGET NUMBER OF 2020 PSUS HELD (#) | PERCENT OF TARGET 2020 PSUS EARNED | VESTED 2020 PSUS | | Brent P. Jensen | 453,030 | 200% | 906,060 | | Matthew R. Garrison | 384,800 | 200% | 769,600 |
Vesting of 2020 PSUs
In connection with his qualifying termination pursuant to the Centennial Severance Plan, the 2020 PSUs held by Mr. Glyphis were accelerated and vested following his termination date based on the Company’s performance through his May 4, 2023 termination date. Based on that slightly shortened performance period, the 2020 PSUs held by Mr. Glyphis had a payout percentage of 200% and, as a result, he received 2,562,310 vested 2020 PSUs, which was the most significant component of the equity severance benefits he received.
Role of the Compensation Committee
| • | achievement of Company and individual performance goals and expectations relating to the NEO’s position at the Company; | | • | alignment of NEO compensation with short-term and long-term Company performance; | | • | competitiveness with compensation peer group companies, internal pay equity among individuals with similar expertise levels and experience and the unique skill sets of the individual; | | • | market demand for individuals with the NEO’s specific expertise and experience; | | • | advice, data and analysis provided by the Compensation Committee’s independent compensation consultant; | | • | general industry compensation data; | | • | the NEO’s background, experience and circumstances, including prior related work experience and training; and | | • | the recommendations of our Co-CEOs. |
Role of Compensation Consultant in Determining Executive Compensation
Role of Compensation Consultant in Determining Executive Compensation In determining 2023 executive compensation, the Compensation Committee received information and reports from Meridian Compensation Partners, LLC (Meridian), an independent compensation consultant initially retained by the Compensation Committee in 2020 after a fulsome review of several potential consultant candidates. Meridian provided data, analysis and advice to the Compensation Committee, including market information that the Compensation Committee used when determining whether our executive compensation is competitive, commensurate with each executive’s responsibilities and consistent with market trends in executive compensation practices for companies in our industry. Meridian does not provide services to PR, the Compensation Committee or management other than consulting services related to the duties and responsibilities of the Compensation Committee with respect to the compensation and benefits of our directors, officers and employees. The Compensation Committee has considered the adviser independence factors required under SEC rules as they relate to Meridian and does not believe Meridian’s work in 2023 raised a conflict of interest.
Use of Competitive Market Data
Use of Competitive Market Data A key objective of our executive compensation program is to ensure that the total compensation opportunities available to our executives are competitive with those of oil and gas exploration and production companies with whom we compete for executive talent, investment dollars and business opportunities. To assist us in evaluating our executive compensation program against this key objective, we maintain a peer group that we refer to as our “Compensation Peer Group.” We also use a similar group of peer companies, in addition to the SPDR S&P Oil & Gas Exploration and Production ETF (XOP) to determine our TSR relative to our peers for purpose of determining the payout level for the PSUs, and we refer to this separate peer group as our “Performance Peer Group.”
Compensation Peer Group
Compensation Peer Group The Compensation Committee, with input and advice from Meridian, typically reviews the Compensation Peer Group on an annual basis to ensure it remains appropriate year-over-year. The Compensation Peer Group is selected based on multiple factors, including assets, market capitalization, enterprise value, location, revenue, geographic footprint and complexity of operations. In late 2023, the Compensation Committee re-assessed and updated the Compensation Peer Group, which had last been adjusted in September 2022 at the closing of the PR Merger. The Compensation Committee determined that substantial changes to the Compensation Peer Group were needed given the Company’s substantial growth relative to the existing Compensation Peer Group, particularly when considering the Company on a pro forma basis for the Earthstone Acquisition. The legacy and updated Compensation Peer Groups are set forth in the table below.
Performance Peer Group
Performance Peer Group The Performance Peer Group is typically reviewed by the Compensation Committee, with input and advice from Meridian, prior to the Committee awarding PSUs as the Performance Peer Group is used for Relative TSR measures under our PSUs. In connection with awarding the inaugural PSUs described above, the Compensation Committee approved the Performance Peer Group set forth in the table below, which remained the Company’s Performance Peer Group throughout 2023. In early 2024, in connection with awarding PSUs under the Company’s 2024 executive compensation program, the Compensation Committee re-assessed the Performance Peer Group and determined that substantial changes were needed given the Company’s substantial growth relative to the existing Performance Peer Group, particularly when considering the scale of the Company following the Earthstone Acquisition. The legacy and updated Performance Peer Groups are set forth in the table below.
Performance Peer Group
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 41 |
Performance Peer Group
| | COMPENSATION PEER GROUP | | PERFORMANCE PEER GROUP | | | PEER | 2022 | 2023 | INAUGURAL PSUS | 2024 LTIP AWARDS | | APA Corporation | | l | | l | | California Resources Corporation | l | | | | | Callon Petroleum Company | l | | l | | | Chesapeake Energy Corporation | | l | | | | Chord Energy Corporation | l | l | l | l | | Coterra Energy Inc. | | l | | | | Civitas Resources, Inc. | l | l | l | l | | Devon Energy Corporation | | | | l | | Diamondback Energy, Inc. | | l | l | l | | Earthstone Energy, Inc.(1) | | | l | | | EQT Corporation | | l | | | | HighPeak Energy, Inc. | l | | l | | | Magnolia Oil & Gas Corporation | l | | l | l | | Marathon Oil Corporation | | l | | l | | Matador Resources Company | l | l | l | l | | Murphy Oil Corporation | l | l | | | | Ovintiv Inc. | | l | | l | | PDC Energy, Inc.(2) | l | | l | | | Range Resources Corporation | | l | | | | SM Energy Company | l | l | l | l | | Southwestern Energy Company | | l | | | | Vital Energy, Inc. | l | | l | | | Whiting Petroleum Corporation(3) | l | | | | | SPDR S&P Oil & Gas Exploration & Production ETF (XOP) | | | l | l |
Performance Peer Group
| (1) Earthstone Energy, Inc. was acquired by Permian Resources Corporation on November 1, 2023. | | (2) PDC Energy, Inc. was acquired by Chevron Corporation on August 7, 2023. | | (3) Whiting Petroleum Corporation was acquired by Oasis Petroleum Inc. on July 1, 2022, and the combined company changed its name to Chord Energy Corporation. |
Employment, Severance or Change in Control Agreements
Employment, Severance or Change in Control Agreements We have not entered into any employment agreements with our NEOs. However, we consider a strong workforce to be essential to our success. To that end, we recognize that the uncertainty which may exist among employees with respect to their “at-will” employment with us could result in the departure or distraction of personnel to our detriment. Accordingly, to encourage the continued attention and dedication of our employees, and to allow our management team to focus on the value to shareholders of strategic alternatives without concern for the impact on their continued employment, we maintain a Severance Plan under which all of our regular, full-time employees are eligible to receive certain severance payments and benefits upon a qualifying termination of employment. In November 2022, to remain competitive with similar programs at peer companies, and based on advice from Meridian, we updated the plan to provide for severance benefits for certain qualifying terminations unrelated to change in control transactions, including terminations arising from a NEO’s death or disability. For a more detailed description of the Severance Plan, see the “Severance Plan” section below.
Tax Implications of NEO Compensation
Tax Implications of NEO Compensation Section 162(m) of the Code imposes an annual deduction limit of $1 million on the amount of compensation paid by a public company to “covered employees.” Prior to the Tax Cuts and Jobs Act of 2017 (TCJA), the deduction limit did not apply to “performance-based compensation” that satisfied the requirements of Section 162(m). Performance stock unit awards and stock options issued under our 2016 Long-Term Incentive Plan prior to November 2, 2017 were generally intended to satisfy the requirements of the Section 162(m) performance-based compensation exemption. The TCJA eliminated the performance-based compensation exemption, although compensation paid pursuant to a written binding contract which was in effect on November 2, 2017, may be “grandfathered” and still qualify for the performance-based compensation exception under certain circumstances. U.S. Department of Treasury regulations passed in 2019 require a corporate partner to include its distributive share of compensation paid by a partnership to covered employees of the corporate partner for purposes of applying the Section 162(m) deduction limit for tax years ending after December 20, 2019. Accordingly, for compensation to covered employees subsequent to the PR Merger, we include our distributive share of compensation paid by our subsidiary, Permian Resources Operating, LLC, which is treated as a partnership for U.S. federal income tax purposes, when determining the effect of 162(m) on the deductibility of compensation paid to our covered employees for 2023 and future tax years. While the Compensation Committee considers the impact of Section 162(m) and other tax rules when developing, structuring and implementing our executive compensation programs, the Compensation Committee also believes that it is important to preserve flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Accordingly, some of our compensation awards are nondeductible. In addition, Section 409A of the Code requires that “nonqualified deferred compensation” be deferred and paid under plans or arrangements that satisfy the requirements of the statute with respect to the timing of deferral elections, timing of payments, and certain other matters. Failure to satisfy these requirements can expose employees and other service providers to accelerated income tax liabilities and penalty taxes and interest on their vested compensation under such plans. Accordingly, as a general matter, it is the Company’s intention to design and administer its compensation and benefits plans and arrangements for all employees and other service providers, including the executive officers, so that they are either exempt from, or satisfy the requirements of, Section 409A of the Code.
2023 SUMMARY COMPENSATION TABLE
2023 SUMMARY COMPENSATION TABLE
2023 SUMMARY COMPENSATION TABLE
| NAME AND PRINCIPAL POSITION | YEAR | SALARY ($) | BONUS ($) | STOCK AWARDS ($)(1)(2) | NON-EQUITY INCENTIVE PLAN COMPENSATION ($)(3) | ALL OTHER COMPENSATION ($)(4) | TOTAL ($) | | William M. Hickey Co-Chief Executive Officer | 2023 | – | – | – | – | – | – | | | 2022 | – | – | 25,512,520 | – | – | 25,512,520 | | James H. Walter Co-Chief Executive Officer | 2023 | – | – | – | – | 4,297 | 4,297 | | | 2022 | – | – | 25,512,520 | | – | 25,512,520 | | Guy M. Oliphint Executive Vice President and Chief Financial Officer | 2023 | 439,904 | – | 4,899,778 | 607,500 | 146,996 | 6,094,178 | | John C. Bell Executive Vice President and General Counsel | 2023 | 375,000 | – | – | 450,000 | 22,560 | 847,560 | | | 2022 | 125,000 | – | 2,292,044 | 109,397 | – | 2,526,441 | | Brent P. Jensen Senior Vice President and Chief Accounting Officer | 2023 | 377,000 | – | – | 480,675 | 26,460 | 884,135 | | | 2022 | 378,642 | – | 4,262,010 | 512,693 | 81,023 | 5,234,368 | | | 2021 | 349,557 | – | 1,645,695 | 463,874 | 25,525 | 2,484,651 | | George S. Glyphis Former Executive Vice President and Chief Financial Officer | 2023 | 187,807 | – | 952,711 | – | 3,265,640 | 4,406,158 | | | 2022 | 479,813 | – | 10,614,260 | 764,428 | 83,110 | 11,941,611 | | | 2021 | 439,838 | – | 3,099,555 | 691,824 | 25,525 | 4,256,742 | | Matthew R. Garrison Former Executive Vice President and Chief Operating Officer | 2023 | 311,091 | – | 3,930,570 | – | 366,443 | 4,608,104 | | | 2022 | 446,260 | – | 6,264,112 | 691,797 | 30,162 | 7,432,331 | | | 2021 | 392,438 | – | 2,096,760 | 589,095 | 21,591 | 3,099,884 |
2023 SUMMARY COMPENSATION TABLE
| (1) Amount for 2023 reflects the aggregate grant date fair value of restricted stock and performance stock units (PSUs) granted to Mr. Oliphint, computed in accordance with FASB’s ASC Topic 718, Stock-based Compensation (ASC Topic 718), excluding the effect of estimated forfeitures. Fair value of the PSUs was determined using Monte Carlo simulations. The assumptions used by the Company in calculating this amount for 2023 are included in Note 7 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (Form 10-K). If the maximum level of achievement of the performance conditions associated with PSUs granted to Mr. Oliphint in 2023 is achieved, the value associated with the PSUs based on the closing price per share of our common stock on the date they were granted ($8.71), would be $6,195,345. Other than Mr. Oliphint, the NEOs did not receive stock awards in 2023. For additional information regarding the stock-based awards granted to Mr. Oliphint in 2023, refer to the 2023 Grants of Plan-Based Awards table. | | (2) Amounts for 2023 include the incremental fair value associated with modifying certain PSUs held by Messrs. Glyphis and Garrison in connection with their departures to allow a pro rata portion of the PSUs to remain outstanding and be eligible to vest in the future based on Company performance through the end of the performance period set forth in the original award agreements for the PSUs. Without the modifications, these PSUs would have been forfeited by Messrs. Glyphis and Garrison in connection with their departures. The incremental fair values were calculated pursuant to FASB ASC Topic 718 as of the modification date and included in this Summary Compensation Table in accordance with SEC rules. For additional information on the modification of these awards, please refer to the Potential Payments Upon Termination or a Change in Control Table. | | (3) Amounts for 2023 represent the Annual Incentive Program (AIP) compensation awarded in recognition of 2023 performance, which was paid to the applicable NEOs in March 2024. As Messrs. Glyphis and Garrison were not employed when the AIP cash awards were paid in March 2024, they were not eligible to receive awards under the AIP. | | (4) Amounts for 2023 reflect cash severance payments received by Messrs. Glyphis and Garrison in connection with their departure from the Company in 2023, matching contributions to the 401(k) Plan made by the Company on the NEO’s behalf, relocation benefits for Mr. Oliphint and the amount of imputed income associated with one instance of personal use of a Company-chartered aircraft. The amount of 401(k) contributions were $15,000 for Mr. Oliphint, $22,500 for Mr. Bell, $26,400 for Mr. Jensen, $13,299 for Mr. Glyphis and $22,500 for Mr. Garrison. The amount for Mr. Oliphint includes $131,996 in relocation benefits provided to him in connection with his relocation from Houston to Midland. The amounts for Mr. Glyphis and Mr. Garrison include an aggregate of $3,230,768 and $336,947 in cash severance payments, respectively, which were paid upon their respective departures from the organization. |
2023 SUMMARY COMPENSATION TABLE
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 46 |
2023 SUMMARY COMPENSATION TABLE
The following table sets forth information regarding grants of plan-based awards made to our NEOs during the year ended December 31, 2023.
2023 GRANTS OF PLAN-BASED AWARDS
2023 GRANTS OF PLAN-BASED AWARDS
2023 GRANTS OF PLAN-BASED AWARDS
| | | ESTIMATED FUTURE PAYOUTS UNDER NON-EQUITY INCENTIVE PLAN AWARDS(1) | | | ESTIMATED FUTURE PAYOUTS UNDER EQUITY INCENTIVE PLAN AWARDS(2) | | | ALL OTHER STOCK AWARDS: NUMBER OF SHARES OF | GRANT DATE FAIR VALUE OF STOCK | | NAME | GRANT DATE | THRESHOLD ($) | TARGET ($) | MAXIMUM ($) | THRESHOLD (#) | TARGET (#) | MAXIMUM (#) | STOCK OR UNITS (#)(3) | AND OPTION AWARDS ($)(4)(5) | | William M. Hickey | | – | – | – | | | | | | | James H. Walter | | – | – | – | | | | | | | Guy M. Oliphint | | – | $405,000 | $810,000 | | | | | | | | 1/3/23 | | | | | | | 101,613 | 885,048 | | | 1/3/23 | | | | 62,238 | 237,097 | 711,291 | | 3,954,778 | | John C. Bell | | – | $300,000 | $600,000 | | | | | | | Brent P. Jensen | | – | $320,450 | $640,900 | | | | | | | George S. Glyphis | | – | $478,000 | $956,000 | | | | | | | | 5/4/23 | | | | | | | | 952,711 | | Matthew R. Garrison | | – | $432,003 | $864,006 | | | | | | | | 9/1/23 | | | | | | | | 3,930,570 |
2023 GRANTS OF PLAN-BASED AWARDS
| (1) Amounts reflect target and maximum cash awards payable under our Annual Incentive Program. Messrs. Hickey and Walter do not participate in the Annual Incentive Program. Although AIP grants are reflected for Messrs. Glyphis and Garrison, they forfeited these amounts upon their departure from the Company in 2023. | | (2) Amounts reflect number of shares that would be delivered to Mr. Oliphint if the PSUs were earned at the threshold, target and maximum levels of performance. If and to the extent earned, the PSUs will vest at the end of the applicable performance period, subject to Mr. Oliphint’s continuous employment through the last day of such period. | | (3) These restricted stock awards will vest in three substantially equal annual installments following the date of grant, subject to Mr. Oliphint’s continued service with us through the applicable vesting date. | | (4) All awards were made pursuant to the LTIP. Amounts in this column reflect the aggregate grant date fair value of awards granted during 2023 computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures. The assumptions used by the Company in calculating these amounts are included in Note 7 to the Form 10-K. | | (5) Amounts include the incremental fair value associated with modifying certain PSUs held by Messrs. Glyphis and Garrison in connection with their departures to allow a pro rata portion of the PSUs to remain outstanding and be eligible to vest in the future based on Company performance through the end of the performance period set forth in the original award agreements for the PSUs. Without the modifications, these PSUs would have been forfeited by Messrs. Glyphis and Garrison in connection with their departures. The incremental fair values were calculated and included in this 2023 Grants of Plan-Based Awards Table in accordance with SEC rules. |
2023 GRANTS OF PLAN-BASED AWARDS
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 47 |
2023 GRANTS OF PLAN-BASED AWARDS
The following table reflects information regarding outstanding equity-based awards held by our NEOs as of December 31, 2023.
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
| | | OPTION AWARDS | | | | STOCK AWARDS | | | | | NAME | GRANT DATE | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS EXERCIS- ABLE (#) | NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS UNEXERCIS- ABLE (#) | OPTION EXERCISE PRICE ($) | OPTION EXPIRATION DATE | NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED (#)(1) | MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED ($) | EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED (#)(2) | EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED ($) | | William M. Hickey | 9/1/22 | | | | | | | 1,787,841 | 24,314,638 | | | 9/1/22 | | | | | | | 1,787,844 | 24,314,678 | | | 9/1/22 | | | | | | | 1,787,844 | 24,314,678 | | James H. Walter | 9/1/22 | | | | | | | 1,787,841 | 24,314,638 | | | 9/1/22 | | | | | | | 1,787,844 | 24,314,678 | | | 9/1/22 | | | | | | | 1,787,844 | 24,314,678 | | Guy M. Oliphint | 1/3/23 | | | | | 101,613 | 1,381,937 | 711,291 | 9,673,558 | | John C. Bell | 9/1/22 | | | | | 38,737 | 526,823 | 406,734 | 5,531,582 | | Brent P. Jensen | 3/24/17 | 125,000 | – | 17.17 | 3/24/27 | | | | | | | 7/27/21 | | | | | 36,571 | 497,366 | 274,283 | 3,730,249 | | | 4/27/22 | | | | | 48,530 | 660,008 | 181,985 | 2,474,996 | | | 9/1/22 | | | | | 129,122 | 1,756,059 | – | – | | George S. Glyphis(3) | 9/1/22 | | | | | | | 166,749 | 2,267,782 | | Matthew R. Garrison(3) | 7/27/21 | | | | | | | 252,388 | 3,432,474 | | | 4/27/22 | | | | | | | 117,704 | 1,600,771 | | | 9/1/22 | | | | | | | 163,703 | 2,226,358 |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
| (1) Represents shares of restricted stock, which vest on the vesting dates set forth in the following table (subject generally to continued employment). |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
| | SHARES OF RESTRICTED STOCK BY VESTING DATES | | | | | | | | | NAME | 1/3/24 | 6/1/24 | 9/1/24 | 1/3/25 | 6/1/25 | 1/3/26 | 9/1/25 | TOTAL | | John C. Bell | | – | 19,368 | | – | | 19,369 | 38,737 | | Guy M. Oliphint | 33,871 | | | 33,871 | | 33,871 | | 101,613 | | Brent P. Jensen | | 24,265 | 101,132 | | 24,265 | | 64,561 | 214,223 |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 48 |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
| (2) Represents PSUs, which vest based on the Company’s TSR as compared to the TSR of the performance peer group over a multi-year performance period and the Company’s absolute annualized TSR over the performance period. The number of PSUs reported is based on the number of PSUs granted to each NEO multiplied by the performance multiplier for the maximum level of performance. The awards are reported at maximum because as of December 31, 2023, performance under these awards was trending above the target level of performance. The market or payout value for these PSUs is calculated using the $13.60 per share closing price of our common stock on December 29, 2023. | | (3) All the unvested restricted stock awards held by Messrs. Glyphis and Garrison vested upon the date their respective terminations became effective, as reflected in the Option Exercises and Stock Vested in 2023 table below. The outstanding PSUs reported herein for Messrs. Glyphis and Garrison remain outstanding for the original performance periods underlying the awards. |
OUTSTANDING EQUITY AWARDS AT 2023 FISCAL YEAR-END
The following table provides information regarding the vesting of restricted stock and PSU awards held by our NEOs during 2023. The value realized from the vesting of the restricted stock and PSU awards is equal to the closing price of our common stock on the applicable vesting date, multiplied by the number of shares of stock acquired. The value is calculated before payment of any applicable withholding or other income taxes.
OPTION EXERCISES AND STOCK VESTED IN 2023
OPTION EXERCISES AND STOCK VESTED IN 2023
OPTION EXERCISES AND STOCK VESTED IN 2023
| | STOCK AWARDS | | | NAME | NUMBER OF SHARES ACQUIRED ON VESTING (#) | VALUE REALIZED ON VESTING ($) | | John C. Bell | 19,368 | $279,480 | | Brent P. Jensen | 1,347,535 | $16,506,549 | | George S. Glyphis(1) | 4,040,150 | $39,385,554 | | Matthew R. Garrison(2) | 1,442,927 | $18,122,230 |
OPTION EXERCISES AND STOCK VESTED IN 2023
| (1) Mr. Glyphis’ vested stock amount includes 4,015,512 shares that were accelerated and vested pursuant to the Centennial Severance Plan upon his termination. | | (2) Mr. Garrison’s vested stock amount includes 165,033 shares that were accelerated and vested pursuant to his separation agreement upon his termination. |
OPTION EXERCISES AND STOCK VESTED IN 2023
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 49 |
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL The following table provides estimates of the payments and benefits that would be paid to each NEO under the Severance Plan in connection with certain termination events assuming that such NEO’s employment was terminated on December 31, 2023. In all cases, the amounts were valued as of December 31, 2023, based upon, where applicable, $13.60 per share (the closing price of our common stock on December 29, 2023, the last trading day of the year).
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
| NAME | CATEGORY OF PAYMENT | CHANGE IN CONTROL TERMINATION | CHANGE IN CONTROL | TERMINATION WITHOUT CAUSE OR FOR GOOD REASON(1) | DEATH / DISABILITY | | William M. Hickey | Salary | 2,250,000 | – | – | – | | | Cash Bonus | 3,000,000 | – | – | – | | | Health & Outplacement Benefits | 76,145 | – | 76,145 | 76,145 | | | Accelerated Equity | 72,943,994 | – | 23,285,964 | 72,943,994 | | | Total | 78,270,140 | – | 23,362,109 | 73,020,140 | | James H. Walter | Salary | 2,250,000 | – | – | – | | | Cash Bonus | 3,000,000 | – | – | – | | | Health & Outplacement Benefits | 66,945 | – | 66,945 | 66,945 | | | Accelerated Equity | 72,943,994 | – | 23,285,964 | 72,943,994 | | | Total | 78,260,940 | – | 23,352,909 | 73,010,940 | | Guy M. Oliphint | Salary | 1,237,500 | – | – | – | | | Cash Bonus | 1,518,750 | – | – | – | | | Health & Outplacement Benefits | 66,945 | – | 66,945 | 66,945 | | | Accelerated Equity | 9,673,558 | – | 3,360,154 | 9,673,558 | | | Total | 12,496,753 | – | 3,427,099 | 9,740,503 | | John C. Bell | Salary | 1,031,250 | – | – | – | | | Cash Bonus | 1,125,000 | – | – | – | | | Health & Outplacement Benefits | 66,945 | – | 66,945 | 66,945 | | | Accelerated Equity | 6,058,406 | – | 2,446,777 | 6,058,406 | | | Total | 8,281,601 | – | 2,513,722 | 6,125,351 | | Brent P. Jensen | Salary | 1,036,750 | – | – | – | | | Cash Bonus | 1,460,955 | – | – | – | | | Health & Outplacement Benefits | 66,945 | – | 66,945 | 66,945 | | | Accelerated Equity | 8,581,516 | – | 2,329,164 | 8,581,516 | | | Total | 11,146,166 | – | 2,396,110 | 8,648,461 |
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
| (1) In the case of a without “cause” employment termination that is unrelated to a change-in-control, a pro rata portion of the terminated NEO’s PSUs shall remain outstanding for the duration of the performance period and thereafter pay out to the NEO at the level earned based on the level of performance certified by the Compensation Committee. Values displayed reflect company performance through December 31, 2023, assuming such period had ended on December 31, 2023. The values reported in the table do not include the value of accrued dividends. |
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 51 |
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
Mr. Glyphis is not included in the “Potential Payments Upon Termination or a Change in Control Table” above because he was not employed with the Company as of December 31, 2023. His employment terminated on May 4, 2023, which was a “Qualifying Termination” under the Centennial Severance Plan. Upon his departure, in accordance with the Centennial Severance Plan and his separation agreement, Mr. Glyphis received:
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
| • | a cash severance payment equal to 2.75 times the sum of his base salary and average AIP award for the preceding three years; | | • | a prorated AIP award (paid at target) for 2023; | | • | the health and outplacement benefits set forth in the Centennial Severance Plan, described in more detail above; | | • | an accelerated vesting of the stock awards he was granted prior to the closing date of the PR Merger; and | | • | in recognition for his service between the closing date of the PR Merger and his departure date, a pro rata acceleration of the restricted stock awarded to him on the closing date of the PR Merger. |
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
Mr. Glyphis’ separation agreement also provided for the retention of 55,583 PSUs that had been awarded to him on the closing date of the PR Merger, which was a pro rata portion of the initial grant of 250,123 PSUs, and these retained PSUs remain outstanding and will be eligible to vest based on Company performance through the end of the performance period, which concludes on December 31, 2025. The table below summarizes the payments and benefits provided to Mr. Glyphis upon his termination of employment in 2023.
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
| CATEGORY OF PAYMENT | AMOUNT OF PAYMENT | | Severance Payment | $3,013,503 | | Prorated Bonus | $159,120 | | Health & Outplacement Benefits | $76,145 | | Accelerated Equity | $39,111,087 | | Total | $42,359,855 |
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
Similarly, Mr. Garrison is not included in the “Potential Payments Upon Termination or a Change in Control” table above because he was not employed with the Company as of December 31, 2023. His employment terminated on September 1, 2023 when Mr. Garrison resigned for personal reasons. Pursuant to his separation agreement, and in recognition of his service between the closing date of the PR Merger and September 1, 2023, as well as certain post-employment non-competition, non-solicitation and other customary restrictive covenants, the Compensation Committee approved the following cash and equity severance benefits for Mr. Garrison:
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
| • | a prorated AIP award (paid at target) for 2023; | | • | a cash payment to compensate Mr. Garrison for the COBRA premiums that he would need to pay to continue coverage of his health benefits for two years following his termination date; and | | • | an accelerated vesting of his restricted stock awards. |
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
Mr. Garrison’s separation agreement also provided for the retention of 202,605 PSUs, which represented a pro-rated portion of Mr. Garrison’s then-outstanding PSUs, which will remain outstanding and be eligible to vest in the future based on Company performance through the end of the performance period set forth in the original award agreements for the PSUs.
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
| CATEGORY OF PAYMENT | AMOUNT OF PAYMENT | | Prorated Bonus | $288,002 | | Health Benefits | $48,945 | | Accelerated Equity | $2,259,302 | | Total | $2,596,249 |
POTENTIAL PAYMENTS UPON TERMINATION OR A CHANGE IN CONTROL
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 52 |
CEO PAY RATIO
CEO PAY RATIO As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following information regarding the ratio of the annual total compensation of each of our Co-CEOs to the total annual compensation of our median employee. The SEC’s rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. We identified the median employee from our entire employee population (other than our Co-CEOs), whether employed on a full-time or part-time basis, as of December 31, 2023, which consisted of 459 employees. Within this group of employees, the median employee was identified by using a total target cash compensation measure, which was calculated by annualizing on a straight-line basis the salary of each employee as of December 31, 2023 and adding each employee’s target bonus and the amount of employer-paid benefits received by each employee in 2023. The compensation measure was consistently applied to all employees. Once we identified the median employee, we then calculated that employee’s annual total compensation in the same manner as we used to calculate total compensation of our Co-CEOs, as reported in the Summary Compensation Table. For 2023, the annual total compensation of our median employee was $168,006, and the annual total compensation of Mr. Walter, one of our Co-CEOs, was $4,297. Therefore, in 2023, the ratio of Mr. Walter’s annual total compensation to the annual total compensation of our median employee was approximately 0.026 to 1. In other words, our median employee’s total compensation was approximately 39 times higher than the total compensation of Mr. Walter. As Mr. Hickey, our other Co-CEO, had $0 total compensation in 2023, it is not possible to calculate a ratio between his compensation and the total compensation of our median employee.
PAY VERSUS PERFORMANCE
PAY VERSUS PERFORMANCE The following table shows the total compensation for our NEOs for the past four years, as set forth in the Summary Compensation Table, and the “compensation actually paid” (computed in the manner required by SEC rules as described below) to our NEOs. The table separately presents the amounts for each Chief Executive Officer serving during the last four years, including each of our current Co-CEOs, and the combined average amounts for our other NEOs. The table also provides our Total Shareholder Returns (TSR), the TSR of the selected peer group, our net income and our Adjusted Free Cash Flow, all presented for the past four years.
PAY VERSUS PERFORMANCE
| | | | | | | | | | AVERAGE SUMMARY COMPEN- SATION TABLE TOTAL FOR NON-CEO NEOs ($)(3) | AVERAGE COMPEN- SATION ACTUALLY PAID TO NON-CEO NEOs ($)(2)(3) | VALUE OF INITIAL FIXED $100 INVESTMENT BASED ON: | | | | | | SUMMARY COMPENSATION TABLE TOTAL FOR CEOs(1) | | | | COMPENSATION ACTUALLY PAID TO CEOs(1)(2) | | | | | | TOTAL SHARE- HOLDER RETURN ($)(4) | PEER GROUP TOTAL SHARE- HOLDER RETURN ($)(4) | NET INCOME ($) | ADJ. FREE CASH FLOW(5) | | YEAR | HICKEY | WALTER | SMITH | PAPA | HICKEY | WALTER | SMITH | PAPA | | | | | | | | 2023 | – | 4,297 | – | – | 27,407,632 | 27,411,929 | – | – | 3,362,313 | 6,940,218 | 305 | 160 | 879,703,000 | 711,384 | | 2022 | 25,512,520 | 25,512,520 | 21,833,431 | – | 33,915,382 | 33,915,382 | 51,416,285 | – | 6,674,297 | 17,124,841 | 204 | 154 | 749,840,000 | 655,164 | | 2021 | – | – | 8,677,260 | – | – | – | 42,802,771 | – | 3,236,810 | 15,878,126 | 129 | 106 | 138,175,000 | 206,671 | | 2020 | – | – | 6,606,273 | 324,805 | – | – | 9,557,071 | 716,865 | 2,542,616 | 3,560,595 | 32 | 64 | (685,199,000) | (64,230) |
PAY VERSUS PERFORMANCE
| (1) Our current Co-CEOs, Messrs. Hickey and Walter, began serving as our Co-CEOs on September 1, 2022 upon the closing of the PR Merger. The former CEOs referenced are Sean R. Smith, who served as our CEO from April 1, 2020 through August 31, 2022, and Mark G. Papa, who served as our CEO from 2016 through March 31, 2020. |
PAY VERSUS PERFORMANCE
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 53 |
PAY VERSUS PERFORMANCE
| (2) The dollar amounts reported in this column represent the amount of Compensation Actually Paid (CAP), as defined and calculated under applicable SEC rules, for each CEO and the average for our other NEOs. The dollar amounts do not reflect the actual amount of compensation earned by or paid to our NEOs. In accordance with the requirements of Item 402(v) of Regulation S-K, CAP is based on the Summary Compensation Table (SCT) pay, as adjusted for the fair market value of equity awards as of December 31, 2020, 2021, 2022 and 2023. Our NEOs do not participate in benefit programs requiring an adjustment for pension benefits calculation. The following table provides the adjustments made between SCT pay and CAP: |
PAY VERSUS PERFORMANCE
| YEAR | CEO / NEO | AVERAGE SUMMARY COMPENSATION TABLE TOTAL ($) | REMOVE VALUE OF GRANTED EQUITY AWARDS ($)(a) | PRIOR YEAR EQUITY AWARD ADJUSTMENTS ($)(b) | COMPENSATION ACTUALLY PAID ($) | | 2023 | Hickey | – | – | 27,407,632 | 27,407,632 | | | Walter | 4,297 | – | 27,407,632 | 27,411,929 | | | Other NEOs | 3,362,313 | (1,956,612) | 5,534,517 | 6,940,218 | | 2022 | Hickey | 25,512,520 | (25,512,520) | 33,915,382 | 33,915,382 | | | Walter | 25,512,520 | (25,512,520) | 33,915,382 | 33,915,382 | | | Smith | 21,833,431 | (14,495,295) | 44,078,149 | 51,416,285 | | | Other NEOs | 6,674,297 | (5,093,653) | 15,544,197 | 17,124,841 | | 2021 | Smith | 8,677,260 | (6,590,088) | 40,715,599 | 42,802,771 | | | Other NEOs | 3,236,810 | (2,240,258) | 14,881,574 | 15,878,126 | | 2020 | Smith | 6,606,273 | (5,242,233) | 8,193,031 | 9,557,071 | | | Papa | 324,805 | – | 392,060 | 716,865 | | | Other NEOs | 2,542,616 | (1,824,259) | 2,842,238 | 3,560,595 |
PAY VERSUS PERFORMANCE
| (a) Represents the grant date fair value and average grant date fair value of the equity awards granted to the CEO and NEOs, respectively, each year, as reported in the Stock Awards column of the Summary Compensation Table for the applicable year, calculated in accordance with FASB ASC Topic 718. We do not sponsor or maintain any defined benefit pension plans and therefore, no deduction was made related to pension value. | | (b) Reflects the fair value/change in fair value of the awards at year end or upon vesting/forfeiture, computed in accordance with FASB’s ASC Topic 718, Stock-based Compensation (ASC Topic 718). |
PAY VERSUS PERFORMANCE
| (3) For 2023, the other NEOs were Messrs. Oliphint, Jensen, Bell, Glyphis and Garrison. For 2022, the other NEOs were Messrs. Glyphis, Garrison, Jensen, Bell and Davis O. O’Connor. For 2021 and 2020, the other NEOs were Messrs. Glyphis, Garrison, Jensen and O’Connor. |
PAY VERSUS PERFORMANCE
| (4) Total Shareholder Return is determined based on the value of an initial fixed investment of $100. The Peer Group Total Shareholder Return represents the total shareholder return of the SPDR S&P Oil & Gas Exploration & Production ETF. | | (5) Adjusted Free Cash Flow is a non-GAAP financial measure. See Appendix A for a reconciliation of this financial measure to our most directly comparable financial measure calculated in accordance with GAAP. |
PAY VERSUS PERFORMANCE
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 54 |
Relationship Between Compensation Actually Paid and Performance Measures
Relationship Between Compensation Actually Paid and Performance Measures The following graphs illustrate the relationship between the pay and performance figures that are included in the pay tables above. As noted above, “compensation actually paid” for purposes of the tabular disclosure and the following graphs were calculated in accordance with SEC rules and do not represent the actual amount of compensation earned by or paid to our NEOs during the applicable years. The graphs separately presents the Compensation Actually Paid (CAP) for each Chief Executive Officer serving during the last four years, with the amount appearing for Messrs. Hickey and Walter representing the approximate amount applicable to each of them individually.
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION Directors who are not also our employees or affiliated with Riverstone Investment Group LLC, Pearl Energy Investments, L.P. or Post Oak Energy Capital, LP receive compensation under our director compensation program, which is reviewed by the Compensation Committee and is approved by the Board. We have historically provided a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on our Board, but our Board determined, following input and advice from Meridian, to allow directors to take 100% of their compensation in the form of stock-based compensation. All of our directors except for one has elected to take 100% of their compensation in the form of stock-based compensation. The following table identifies the annual equity award each non-employee director receives and the retainer amount, which can be paid quarterly in arrears in cash or through an upsized equity award at the outset of the director’s service year. The leadership positions on the Board also receive larger equity awards, as detailed below.
DIRECTOR COMPENSATION
| ROLE | EQUITY AWARDS ($) | CASH / EQUITY RETAINER ($) | | Director | 162,500 | 87,500 | | Independent Board Chair | 125,000 | — | | Chair of Audit Committee | 20,000 | — | | Chair of Compensation Committee | 15,000 | — | | Chair of Nominating and Corporate Governance Committee | 15,000 | — | | Chair of ESG Committee | 15,000 | — |
DIRECTOR COMPENSATION
We also reimburse all directors for travel and other necessary business expenses incurred in the performance of their services for us, including expenses for any relevant director education programs they attend. We extend coverage to all directors under our directors’ and officers’ indemnity insurance policies.
DIRECTOR COMPENSATION
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 56 |
DIRECTOR COMPENSATION
The following table contains information concerning the compensation of our non-employee directors for 2023.
DIRECTOR COMPENSATION
| NAME | FEES EARNED IN CASH ($) | STOCK AWARDS ($)(1) | TOTAL ($) | | Robert J. Anderson(2) | – | 139,034 | 139,034 | | Maire A. Baldwin | 34,375 | 264,992 | 299,367 | | Frost W. Cochran(2)(4) | – | – | – | | Karan E. Eves | – | 249,999 | 249,999 | | Steven D. Gray | – | 374,993 | 374,993 | | Matthew G. Hyde(3) | 87,500 | 177,493 | 264,993 | | Aron Marquez | – | 249,999 | 249,999 | | William J. Quinn(4) | – | – | – | | Jeffrey H. Tepper | 87,500 | 182,499 | 269,999 | | Robert M. Tichio(4) | – | – | – |
DIRECTOR COMPENSATION
| (1) Amounts in this column reflect the aggregate grant date fair value of restricted stock computed in accordance with ASC Topic 718. As of December 31, 2023, the non-employee directors held the following aggregate number of outstanding stock awards, all of which were unvested shares of restricted stock. |
DIRECTOR COMPENSATION
| NAME | OUTSTANDING STOCK AWARDS | | Robert J. Anderson | 9,471 | | Maire A. Baldwin | 28,101 | | Karan E. Eves | 26,511 | | Steven D. Gray | 43,855 | | Aron Marquez | 26,511 | | Jeffrey H. Tepper | 19,353 |
DIRECTOR COMPENSATION
| (1) Includes restricted stock that was issued, at the applicable director’s election, in lieu of cash compensation for 2023. Except for Mr. Tepper, each current director has elected to take 100% of his or her cash retainer in the form of restricted stock. | | (2) Messrs. Anderson and Cochran were each appointed to the Board on November 1, 2023. | | (3) Mr. Hyde resigned from the Board effective immediately prior to the closing date of the Earthstone Acquisition on November 1, 2023. Concurrently with his retirement, the Compensation Committee approved the accelerated vesting of 18,822 shares of restricted stock, which would have otherwise vested in May 2024 in connection with the Company’s 2024 Annual Meeting. | | (4) Messrs. Cochran, Tichio and Quinn did not receive any compensation for serving as our directors in 2023 given their affiliation with Post Oak, Riverstone and Pearl, respectively. |
DIRECTOR COMPENSATION
| PERMIAN RESOURCES | 2024 PROXY STATEMENT | 57 |
REVIEW AND APPROVAL OF RELATED PERSON TRANSACTIONS
| • | reimbursements or payments of business expenses; | | • | executive officer or director compensation in accordance with the disclosure exceptions provided for in Instruction 5 to Item 404(a) of Regulation S-K (or any successor rule); | | • | any charitable contribution, grant, endowment or pledge by us to a charitable organization, foundation or university where the Related Person’s only relationship with that organization is as a director and the aggregate amount involved does not exceed $200,000; | | • | any transaction in which the interest of the Related Person arises solely from the ownership of a class of the Company’s equity securities and all holders of that class receive the same benefit on a pro rata basis (for example, dividends); and | | • | any transaction with an entity at which the Related Person’s only relationship is as a director. |