DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.    )

Filed by the Registrant  þ

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

¨   Preliminary Proxy Statement

¨  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ  Definitive Proxy Statement

¨  Definitive Additional Materials

¨   Soliciting Material Pursuant to §240.14a-12

Noble Energy, Inc.

 

(Name of Registrant as Specified in its Charter)

Payment of filing fee (check the appropriate box):

 

þ No fee required.

 

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1) Title of each class of securities to which transaction applies:

 

 

 

  (2) Aggregate number of securities to which transaction applies:

 

 

 

  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

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¨ Fee paid previously with preliminary materials.

 

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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  (3) Filing Party:

 

 

 

  (4) Date Filed:

 

 

 


 

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Dear Stockholder:

 

I hope you will join Noble Energy’s Board of Directors, executive management team, employees and alumni at our 2013 Annual Meeting of Stockholders. The attached Notice of Annual Meeting of Stockholders and Proxy Statement will

serve as your guide to the business to be conducted at the meeting.

This year’s Proxy Statement has been redesigned to simplify and more effectively explain the matters to be addressed at our Annual Meeting. You will see several enhancements in how we present information to you about our Board nominees, corporate governance practices and executive compensation program. To begin with, we have included a summary starting on page ii that provides highlights of the detailed information contained elsewhere in the Proxy Statement. My fellow Board members and I feel that it is important to provide you with the information you are looking for about the Company in a way that is easy to access and understand.

We have enhanced the Compensation Discussion and Analysis that begins on page 34 to better show how our executives’ pay is linked to performance and more clearly explain our executive compensation program. You will also find detailed information about the qualifications of our director candidates, and why we believe they are the right people to represent you, starting on page 15.

Your vote is very important to us and our business. Prior to the meeting, I encourage you to sign and return your proxy card, or use telephone or Internet voting, so that your shares will be represented and voted at the meeting. Instructions on how to vote are found beginning on page 2.

I hope to see you at the meeting. Thank you for being a stockholder and for the trust you have shown in Noble Energy.

March 28, 2013

Charles D. Davidson

Chairman of the Board and

Chief Executive Officer


Noble Energy, Inc. 2013 Proxy Statement

 

LOGO

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

Tuesday, April 23, 2013

The Annual Meeting of Stockholders of NOBLE ENERGY, INC. (the “Company”) will be held on Tuesday, April 23, 2013 at 9:30 a.m. local time at The Woodlands Waterway Marriott Hotel & Convention Center, 1601 Lake Robbins Drive, The Woodlands, Texas 77380, for the following purposes:

 

1. To elect the ten nominees as members of the Board of Directors of the Company to serve until the next annual meeting of the Company’s stockholders;

 

2. to ratify the appointment of the independent auditor by the Company’s Audit Committee;

 

3. to approve, in a nonbinding advisory vote, the compensation of the Company’s Named Executive Officers;

 

4. to approve an amendment and restatement of the Company’s 1992 Stock Option and Restricted Stock Plan to increase the number of shares authorized for issuance under the plan from 31,000,000 to 35,800,000;

 

5. to approve an amendment to the Company’s Certificate of Incorporation to establish Delaware as the exclusive forum for resolving derivative and certain other disputes;

 

6. to approve an amendment to the Company’s By-Laws to (a) clarify that broker non-votes and abstentions count toward a quorum but are not considered a vote for or against a proposal, (b) allow the Board of Directors to fix separate record dates for determining stockholders entitled to notice of, and to vote at, meetings and (c) increase the age after which directors will not be eligible to be nominated for election from 70 to 75 years; and

 

7. to transact such other business as may properly come before the meeting and any adjournment or postponement of the meeting.

The Board of Directors has set March 6, 2013 as the record date for the meeting. This means that holders of record of shares of common stock of the Company as of the close of business on that date are entitled to receive this notice of the meeting and vote at the meeting and any adjournment or postponement of the meeting.

A complete list of the stockholders will be available for examination at the offices of the Company in Houston, Texas during ordinary business hours for a period of 10 days prior to the meeting. This list will also be available to stockholders at the meeting.

March 28, 2013

Houston, Texas

 

By Order of the Board of Directors

LOGO

Arnold J. Johnson

Senior Vice President, General Counsel and Secretary

 

 

 

We urge each stockholder to promptly sign and return the enclosed proxy card or to use telephone or Internet voting. See our Questions and Answers about the Meeting and Voting section for information about voting by telephone or Internet, how to revoke a proxy and how to vote shares in person.

 

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Noble Energy, Inc. 2013 Proxy Statement

 

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. It does not include all of the information that you should consider and you should read the entire Proxy Statement before voting. In this Proxy Statement, Noble Energy, Inc. may also be referred to as “we”, “us”, “Noble Energy” or the “Company”.

2013 Annual Meeting of Stockholders

 

·    Date and Time:

   Tuesday, April 23, 2013, 9:30 a.m. local time

·    Place:

  

The Woodlands Waterway Marriott Hotel & Convention Center

1601 Lake Robbins Drive

The Woodlands, Texas 77380

·    Record Date:

   March 6, 2013

Voting Matters and Board Recommendations

 

      Our Board’s Recommendations  

Election of Director Nominees (page 15)

     FOR each Director Nominee   

Ratification of Appointment of Independent Auditor (page 24)

     FOR   

Advisory Vote to Approve Executive Compensation (page 26)

     FOR   

Approval of Amendment and Restatement of 1992 Stock Option

and Restricted Stock Plan (page 27)

     FOR   

Approval of Amendment to Certificate of Incorporation (page 32)

     FOR   

Approval of Amendment to By-Laws (page 33)

     FOR   

2012 Business Highlights

We delivered significant growth in 2012. Expansion of our horizontal Niobrara and Marcellus Shale developments resulted in a 24% increase in Wattenberg (DJ Basin, Colorado) production and a fourfold increase in Marcellus Shale (Pennsylvania and West Virginia) production. We realized further production increase from major new developments at Aseng (offshore Equatorial Guinea) and Galapagos (deepwater Gulf of Mexico), which came on line in 2011 and 2012, respectively. We moved forward on our major development projects, each of which will yield significant new production in future years; discovered new resources at Big Bend in the deepwater Gulf of Mexico and Carla, offshore Equatorial Guinea; and farmed into new opportunities offshore the Falkland Islands and Sierra Leone. Finally, we enhanced our portfolio with selective divestitures of non-core, onshore U.S. and North Sea properties, and maintained our strong balance sheet.

2012 operational and financial highlights include:

 

·  

Net income over $1.0 billion (including $965 million from continuing operations), as compared with $453 million (including $412 million from continuing operations) for 2011;

 

·  

total sales volumes from continuing operations of 239 MBoe/d, a 12% increase as compared with 2011;

 

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Noble Energy, Inc. 2013 Proxy Statement

 

 

·  

year-end proved reserves of 1.2 BBoe, a decrease of 2% from year-end 2011;

 

·  

increased DJ Basin total sales volumes to 77 MBoe/d net, with horizontal production contributing 28 MBoe/d net; and

 

·  

Marcellus Shale production grew to 92 MMcfe/d net, as compared with 19 MMcfe/d net in 2011.

For more complete information regarding the Company’s 2012 performance, please see the Company’s Annual Report on Form 10-K.

Director Nominees (beginning on page 15)

The following table provides summary information about each director nominee. Each director stands for election annually.

 

Name    Age   

Director

Since

   Primary Occupation   

Committee

Memberships

   Other Public
Company Boards
Jeffrey L. Berenson*    62    2005    President and Chief Executive Officer of Berenson & Company    C, CG    Epoch Holding Corporation
Michael A. Cawley*    65    1995    President and Manager of The Cawley Consulting Group, LLC    A, CG    Noble Corporation
Edward F. Cox*    66    1984    Chair of The New York Republican State Committee    C, CG, E    None
Charles D. Davidson    63    2000    Chairman and Chief Executive Officer of Noble Energy, Inc.    E    None
Thomas J. Edelman*    62    2005    Managing partner of White Deer Energy L.P.    C, CG, E   

Emerald Oil, Inc.

 

Postrock Energy Corporation

Eric P. Grubman*

   55    2009    Executive Vice President of the National Football League    A, CG    None

Kirby L. Hedrick*

   60    2002    Former Executive Vice President of Phillips Petroleum Company    C, CG, E    None
Scott D. Urban*    59    2007    Partner in Edgewater Energy LLC    A, CG, E    Pioneer Energy Services Corporation
William T. Van Kleef*    61    2005    Former Executive Vice President and Chief Operating Officer of Tesoro Corporation    A, CG    Oil States International, Inc.
Molly K. Williamson*    67    2013    Scholar, Middle East Institute       None

*Independent Director

 

A Audit Committee
C Compensation, Benefits and Stock Option Committee
CG Corporate Governance and Nominating Committee
E Environment, Health and Safety Committee

 

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Noble Energy, Inc. 2013 Proxy Statement

 

Executive Compensation Highlights (page 26 and beginning on page 34)

Our compensation program is designed to link compensation strongly to performance through financial incentives that are tied to the Company’s operational and financial results. The following illustrates the directional relationship between Company performance, based on several key metrics, and the total direct compensation (including salary, bonus, stock and option awards and non-equity incentive plan compensation) of our Chairman and Chief Executive Officer from 2010 to 2012. These key metrics — production, relative controllable unit costs and discretionary cash flow — were chosen because we believe that they correlate to long-term stockholder value.

 

Production

(MBoe/d)

  

Controllable Unit Costs

(percentage relative

to compensation

peer group)

 

LOGO

  

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Discretionary Cash Flow(1)

(Billions)

 

  

 

Chairman and CEO Total Direct Compensation

(Millions)

 

LOGO    LOGO

The following chart shows how a $100 investment in the Company’s common stock on December 31, 2007 would have grown to $134.52 on December 31, 2012, with dividends reinvested quarterly, for those who wish to consider total stockholder return when evaluating executive compensation. The chart also compares the total stockholder return on the Company’s common stock to the same investment in the S&P 500 Index and the Company’s compensation peer group over the same period, with dividends reinvested quarterly. As illustrated below, the Company’s common stock outperformed both the S&P 500 and the Company’s compensation peer group median during this period.

 

 

(1)

Non-GAAP results. See “Non-GAAP Financial Measures” in Appendix A to this Proxy Statement for reconciliation to GAAP results.

 

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Noble Energy, Inc. 2013 Proxy Statement

 

Comparison of Five-Year Cumulative Total Stockholder Return*

 

LOGO

Enhancements to Compensation Program for 2013

We continue to seek ways to enhance our compensation program to ensure that it remains linked to Company performance, and are implementing a number of changes beginning in 2013:

 

·  

Performance criteria are being applied to a portion of the restricted stock awarded under our Long-Term Incentive Plan, with vesting of that portion based on our total stockholder return relative to our compensation peer group for the three year period following the year of the award. (page 47)

 

·  

Relative stockholder return will also be added as a fourth performance measure under our Short-Term Incentive Plan, with the quantitative nondiscretionary component of the plan increasing from 36% to 60% of the total payout calculation and allocated 15% each to production, discretionary cash flow, relative controllable unit costs and relative total stockholder return. (page 46)

 

·  

Our Code of Business Conduct and Ethics has been amended to allow our Compensation Committee or Board to recoup or “clawback” compensation in cases involving restatement of financials or oil and gas reserves, or material noncompliance with our codes of ethics. (page 10)

 

·  

Adjustments have been made to our compensation peer group to ensure that it continues to be relevant. (beginning on page 41)

Important Date for 2014 Annual Meeting of Stockholders (pages 14 and 15)

 

·  

Stockholder proposals and nominees for director(s) to be submitted for inclusion in our 2014 Proxy Statement pursuant to Rule 14a-8 under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), must be received by us by December 24, 2013.

 

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LOGO

 

100 Glenborough Drive

Suite 100

   PROXY STATEMENT
Houston, Texas 77067-3610    March 28, 2013

The Board of Directors of Noble Energy, Inc. (the “Board”) is providing you this Proxy Statement to solicit proxies on its behalf to be voted at the 2013 Annual Meeting of Stockholders of Noble Energy, Inc. (the “Company”). The meeting will be held at The Woodlands Waterway Marriott Hotel & Convention Center, 1601 Lake Robbins Drive, The Woodlands, Texas 77380 on April 23, 2013, at 9:30 a.m. local time. The proxies may also be voted at any adjournment or postponement of the meeting.

The mailing address of our principal executive offices is Noble Energy, Inc., 100 Glenborough Drive, Suite 100, Houston, Texas 77067-3610. We are first mailing this Proxy Statement to our stockholders on or about April 1, 2013.

All properly executed written proxies, and all properly completed proxies submitted by telephone or Internet, that are delivered pursuant to this solicitation will be voted at the meeting in accordance with the directions given in the proxy unless the proxy is revoked prior to completion of voting at the meeting.

Only owners of record of shares of common stock of the Company as of the close of business on March 6, 2013, the record date, are entitled to notice of, and to vote at, the meeting and at any adjournment or postponement of the meeting. Each owner of record on the record date is entitled to one vote for each share of common stock held. On March 6, 2013 there were 178,773,698 shares of common stock issued and outstanding.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR

THE 2013 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 23, 2013.

The Company’s Proxy Statement for the 2013 Annual Meeting of Stockholders, Annual Report to Stockholders for the fiscal year ended December 31, 2012 and Annual Report on Form 10-K for the fiscal year ended December 31, 2012 are available at https://materials.proxyvote.com/655044.

 

Noble Energy, Inc. 2013 Proxy Statement

 

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Questions and Answers about the Meeting and Voting

 

1. What is a Proxy Statement and what is a proxy?

 

 

A Proxy Statement is a document that the regulations of the Securities and Exchange Commission (“SEC”) require us to give you when we ask you to sign a proxy designating individuals to vote on your behalf. A proxy is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as your proxy in a written

document, that document is also called a proxy or a proxy card. We have designated two of our officers as proxies for the 2013 Annual Meeting of Stockholders. These officers are Charles D. Davidson and Kenneth M. Fisher.

 

 

2. What is the difference between holding shares as a stockholder of record and as a beneficial stockholder?

 

If your shares are registered directly in your name with the Company’s registrar and transfer agent, Wells Fargo Shareowner Services, you are considered a stockholder of record with respect to those shares. If your shares are held in a brokerage account or bank, you are considered the “beneficial owner” of those shares.

 

3. What different methods can I use to vote?

 

 

By Written Proxy. All stockholders of record can vote by written proxy card. If you are a beneficial owner, you may request a written proxy card or a vote instruction form from your bank or broker.

By Telephone or Internet. All stockholders of record can also vote by touchtone telephone from the U. S. using the toll-free telephone number on the proxy card, or through the Internet, using the procedures and instructions described on the proxy card. Beneficial owners may vote by telephone or Internet if their bank or broker makes those methods available, in which case the bank or broker will include the instructions with the

proxy materials. The telephone and Internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to vote their shares and to confirm that their instructions have been recorded properly.

In Person. All stockholders of record may vote in person at the meeting. Beneficial owners may vote in person at the meeting if they have a legal proxy, as described in the response to question 6.

 

 

4. What shares are included on the proxy card?

 

 

If you are a stockholder of record, you will receive only one proxy card for all the shares of common stock you hold in certificate form, in book-entry form and in any Company benefit plan.

If you hold shares of common stock in any Company benefit plan and do not vote your shares or specify your voting instructions on your proxy card, the administrators of the benefit plans will not vote your benefit plan shares.

 

 

5. How do I attend the meeting in person? What do I need to bring?

 

 

You need to bring documentation showing that you owned common stock on the record date, March 6, 2013. You also need to bring a photo ID to gain admission. Please note that the use of cameras, recording equipment, cellular telephones, smartphones or other similar equipment or packages will not be allowed in the meeting room. If you are a beneficial owner, bring the notice or voting instruction form you

received from your bank, brokerage firm or other nominee for admission to the meeting. You may also bring your brokerage statement reflecting your ownership of common stock as of March 6, 2013 with you to the meeting. Please note that you will not be able to vote your shares at the meeting without a legal proxy, as described in the response to question 6.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

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                       Questions  and Answers 

 

 

6. How can I vote at the meeting if I am a beneficial owner?

 

 

You will need to ask your broker, bank or other intermediary to furnish you with a legal proxy. You will need to bring the legal proxy with you to the meeting and hand it in with a signed ballot that will be provided to you at the meeting. You will not be able to vote your shares at the meeting without a legal proxy. In time, you can follow the procedures described in the response to question 5 to gain admission to the meeting. However, you will not be able to vote your shares at the meeting.

Accordingly, we encourage you to vote your shares in advance, even if you intend to attend the meeting.

Please note that if you request a legal proxy, any previously executed proxy will be revoked and your vote will not be counted unless you appear at the meeting and vote in person or legally appoint another proxy to vote on your behalf.

 

 

7. What are my voting choices for each of the proposals to be voted on at the 2013 Annual Meeting of Stockholders?

 

 

Proposal    Voting choices and Board recommendations

Item 1:      Election of Director Nominees

  

         Vote in favor of all nominees;

        vote in favor of specific nominees;

        vote against all nominees;

         vote against specific nominees;

        abstain from voting with respect to all nominees; or

        abstain from voting with respect to specific nominees.

The Board recommends a vote FOR all nominees.

Item 2:      Ratification of Appointment of Independent Auditor

  

         Vote in favor of the ratification;

        vote against the ratification; or

        abstain from voting on the ratification.

The Board recommends a vote FOR the ratification.

Item 3:      Advisory Proposal to Approve Executive Compensation

  

         Vote in favor of the advisory proposal;

        vote against the advisory proposal; or

        abstain from voting on the advisory proposal.

The Board recommends a vote FOR the advisory

proposal to approve executive compensation.

Item 4:      Approval of Amendment and Restatement of 1992 Stock Option and Restricted Stock Plan (“1992 Plan”)

  

         Vote in favor of the amendment and restatement;

        vote against the amendment and restatement; or

        abstain from voting on the amendment and restatement.

The Board recommends a vote FOR the amendment

and restatement.

Item 5:      Approval of Amendment to Certificate of Incorporation

  

         Vote in favor of amendment;

        vote against the amendment; or

        abstain from voting on the amendment.

The Board recommends a vote FOR the amendment.

Item 6:      Approval of Amendment to By-Laws

  

         Vote in favor of amendment;

        vote against the amendment; or

        abstain from voting on the amendment.

The Board recommends a vote FOR the amendment.

 

Noble Energy, Inc. 2013 Proxy Statement

 

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                       Questions  and Answers 

 

 

Directors in uncontested elections will be elected by a majority of the votes cast by the holders of the shares of our common stock voting in person or by proxy at the meeting. A majority of the votes cast means that the number of votes cast “for” a director nominee must exceed the number of votes cast “against” that director nominee. The proposals to ratify the appointment of the independent auditor and to approve executive compensation each require approval by holders of a majority of shares of our common stock represented in person or by proxy at the meeting. We also are requiring approval from holders of a majority of shares of our common stock represented at the meeting in person or by proxy for approval of the proposal to amend our By-Laws. The proposal to approve the amendment and restatement

of the 1992 Plan requires the affirmative vote of the majority of votes cast for such proposal, provided that the total votes cast (whether “for,” “against” or “abstain”) represent a majority of our outstanding shares of common stock. The proposal to amend our Certificate of Incorporation requires the approval of the holders of a majority of our outstanding shares of common stock.

As an advisory vote, the proposal to approve executive compensation is not binding upon the Company. However, the Compensation Committee, which is responsible for overseeing the Company’s executive compensation program, values the opinions expressed by stockholders and will consider the outcome of the vote when making future compensation decisions.

 

 

8. What if I am a stockholder of record and do not specify a choice for a matter when returning a proxy?

 

 

Stockholders should specify their choice for each matter on the proxy card. If no specific instructions are given, proxies which are signed and returned will be voted:

 

   

FOR the election of all director nominees as set forth in this Proxy Statement;

 

   

FOR the proposal to ratify the appointment of the independent auditor;

   

FOR the advisory proposal to approve executive compensation;

 

   

FOR the amendment and restatement of the 1992 Plan;

 

   

FOR the amendment to the Certificate of Incorporation; and

 

   

FOR the amendment to the By-Laws.

 

 

9. What if I am a beneficial owner and do not give voting instructions to my broker?

 

 

As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other nominee by the deadline provided in the materials you receive from your bank, broker or other nominee. If you do not provide voting instructions to your bank, broker or other nominee, whether your shares can be voted by such person depends on the type of item being considered for vote.

Non-Discretionary Items. The election of directors, advisory proposal to approve executive compensation, amendment and restatement of the 1992 Stock Option

Plan, amendment of the Certificate of Incorporation and amendment of the By-Laws, are non-discretionary items and may not be voted on by brokers, banks or other nominees who have not received specific voting instructions from beneficial owners.

Discretionary Items. The ratification of the appointment of the independent auditor is a discretionary item. Generally, brokers, banks and other nominees that do not receive voting instructions from beneficial owners may vote on this proposal in their discretion.

 

 

10. How are abstentions and broker non-votes counted?

 

Abstentions and broker non-votes are included in determining whether a quorum is present, but will not be included in vote totals and will not affect the outcome of the vote on any matter.

 

11. What can I do if I change my mind after I vote my shares?

 

 

Stockholders can revoke a proxy prior to the completion of voting at the meeting by:

 

   

Giving written notice to the Company’s Secretary;

 

   

delivering a later-dated proxy; or

 

   

voting in person at the meeting (unless you are a beneficial owner without a legal proxy, as described in the response to question 6).

 

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

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                       Questions  and Answers 

 

 

12. Are votes confidential? Who counts the votes?

 

 

We will not disclose the votes of specific stockholders to directors, officers and employees except:

 

   

As necessary to meet applicable legal requirements or to assert or defend claims for or against the Company;

   

in the case of a contested proxy solicitation;

 

   

if a stockholder makes a written comment on the proxy card or otherwise communicates his or her vote to management; or

   

to allow the independent inspector of election to certify the results of the vote.

We will continue to retain an independent inspector of election to tabulate the proxies and certify the results.

 

 

13. When will the Company announce the voting results?

 

We will announce the preliminary voting results at the Annual Meeting of Stockholders. The Company will report the final results on our website and in a Current Report on Form 8-K filed with the SEC.

 

14. Does the Company have a policy about Directors’ attendance at the Annual Meeting of Stockholders?

 

All of our directors are expected to attend each annual meeting of our stockholders. Attendance at our annual meeting will be considered by our Governance Committee in assessing each director’s performance. Last year, all of our directors attended our Annual Meeting of Stockholders.

 

15. Can I access the Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K on the Internet?

 

The Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2012 (the “Form 10-K”) are available at https://materials.proxyvote.com/655044.

 

16. How are proxies solicited and what is the cost?

 

 

We bear all expenses incurred in connection with the solicitation of proxies. We have engaged Okapi Partners LLC to assist with the solicitation of proxies for an estimated fee of $11,500 plus expenses. We will bear the reasonable expenses incurred by banks, brokerage

firms, custodians, nominees and fiduciaries in forwarding proxy material to beneficial owners. Our directors, officers and employees may also solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities.

 

 

17. How can I contact the Company Secretary?

 

This Proxy Statement directs certain inquiries to the Company Secretary. The Company Secretary may be contacted at the address appearing on page 1 of this Proxy Statement or by calling (281) 872-3100.

 

18. How can I communicate with the Board of Directors?

 

 

You may contact any member of our Board, any Board committee or any chair of any such committee by mail, electronically or by calling our independent, toll-free compliance line. To communicate by mail with our Board, any individual director, or any group or committee of directors, correspondence should be addressed to our Board or any individual director or group or committee of

directors by either name or title. All correspondence should be sent to the Company Secretary at the address shown in this Proxy Statement. To communicate with any of our directors electronically, stockholders should go to our website. Under the heading “About Us — Corporate Governance” you will find a link “Contact the Board” that may be used for writing an electronic

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

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                       Questions  and Answers 

 

message to our Board, any individual director, or any group or committee of directors. In addition, stockholders may call our independent, toll-free compliance line listed on our website under the same link.

All stockholder communications properly received will be reviewed by the office of our General Counsel to

determine whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the appropriate director or directors.

 

 

19. Where can I find definitions for capitalized terms, abbreviations and acronyms used in this Proxy Statement?

 

 

 

We have attempted to include definitions for capitalized terms, abbreviations and acronyms at the place in this Proxy Statement where they are first used. We have

also included a quick reference glossary beginning on page 76.

 

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

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                            Corporate Governance 

 

Corporate Governance

 

Our website contains a number of documents helpful to your understanding of our corporate governance practices:

 

   

Corporate Governance Guidelines, which include information regarding the Board’s mission and director responsibilities, director qualifications and determination of director independence;

   

Certificate of Incorporation;

   

By-Laws;

   

charters for each Board committee; and

   

Code of Business Conduct and Ethics and Code of Ethics for our Chief Financial Officer, and

 

information about how to report concerns about the Company.

You may also obtain copies of these corporate governance documents by contacting the Company Secretary. Instructions on how to communicate with the Company’s directors are included in response to question 18 in the Questions and Answers section. (page 5)

The Board regularly reviews developments in corporate governance and updates its corporate governance documents and practices as it deems necessary and appropriate.

 

 

Board Leadership Structure

 

 

Chairman and Chief Executive Officer

Our Board currently combines the role of chairman of the board with the role of chief executive officer (“CEO”), and maintains a separate empowered lead independent director position to strengthen our governance structure. Our Board believes this provides an efficient and effective leadership model for the Company. Combining the two roles fosters clear accountability, effective decision-making and alignment on corporate strategy. We have not experienced any problematic governance or management issues resulting from our combining of the two roles and, in this combined role, Mr. Davidson has provided strategic, operational and technical expertise, vision and a proven ability to lead the Company.

Our Board recognizes that no single leadership structure is right for all companies and at all times and that, depending on the circumstances, other leadership models, such as a separate independent chairman of the board, might be appropriate.

 

 

Board Leadership Structure

 

       Chairman of the Board and CEO: Charles D. Davidson

 

       Lead Independent Director: Michael A. Cawley

 

        Active engagement by all Directors, including 9 independent Directors

 

Lead Independent Director

Our Lead Independent Director, currently Michael A. Cawley, is elected annually by our Board and has authority described in our Corporate Governance Guidelines that generally includes:

 

   

Approving the scheduling of regular and, where feasible, special meetings of the Board to ensure that there is sufficient time for discussion of all agenda items;

 

   

consulting with the Chairman to establish, and approve, the agenda and scope of materials for each Board meeting;

 

   

presiding at all executive sessions of the independent or non-management directors and Board meetings at which the Chairman is not present;

 

   

serving as a liaison between the Chairman and the independent or non-management directors and coordinating the activities of such directors;

 

   

coordinating the agenda for, and moderating, sessions of the Board’s independent directors and other non-management directors;

 

   

facilitating communications among the other members of the Board; and

 

   

consulting with the chairs of the Board committees and soliciting their participation to avoid diluting their authority or responsibilities.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

7


                            Corporate Governance 

 

Board and Committees

 

 

In 2012, our Board held 12 meetings and committees of the Board held 20 meetings. Each director attended 75% or more of the aggregate of all meetings of the Board and the committees on which the director served during 2012.

Our Board has the following four committees, each with a written charter adopted by the Board and available on our website:

   

Audit Committee;

   

Corporate Governance and Nominating Committee (“Governance Committee”);

   

Compensation, Benefits and Stock Option Committee (“Compensation Committee”); and

   

Environment, Health and Safety Committee (“EH&S Committee”).

The following table summarizes the primary purposes of each committee.

 

 

Committee

   Primary Purpose

Audit

  

       Assist the Board in fulfilling its responsibility to oversee the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence, and the performance of the Company’s internal audit function and independent auditors; and

        prepare a Committee report as required by the SEC to be included in the Company’s annual Proxy Statement.

Governance

  

       Take a leadership role in providing a focus on corporate governance to enable and enhance the Company’s short and long-term performance;

       engage in appropriate identification, selection, retention and development of qualified directors consistent with criteria approved by the Board;

       develop, and recommend to the Board, a set of corporate governance principles or guidelines applicable to the Company;

        advise the Board with respect to the Board’s composition, procedures and committees;

       oversee the evaluation of the Board and management; and

       oversee the Company’s political activity.

Compensation

  

       Review and approve corporate goals and objectives in the areas of salary and bonus compensation, benefits, and equity-based compensation, as these areas relate to the CEO, evaluating the CEO’s performance based on those goals and objectives and, either as a committee or together with the other independent directors (as directed by the Board) determine and approve the CEO’s compensation level based on that evaluation;

       make recommendations to the Board with respect to non-CEO executive officer compensation, incentive compensation plans and equity-based plans that are subject to Board approval;

       produce an annual report on executive compensation as required by the SEC to be included in or incorporated by reference into the Company’s Proxy Statement or other applicable SEC filings; and

       under delegation from our Board, determine and approve our compensation philosophy, the compensation of our non-CEO executive officers and equity-based compensation applicable to non-executive officer employees.

EH&S

  

        Assist the Board in determining whether the Company has appropriate policies and management systems in place with respect to environment, health and safety and related matters;

       monitor and review compliance with applicable EH&S laws, rules and regulations; and

        serve as a forum for the review of Company strategy and initiatives in the area of corporate social responsibility.

 

Noble Energy, Inc. 2013 Proxy Statement

 

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                            Corporate Governance 

 

The following table describes the current members of each committee and the number of meetings held during 2012.

 

Name

   Audit(1)    Compensation(2)    Governance(3)    EH&S

Jeffrey L. Berenson*

      x    x   

Michael A. Cawley*

   x       Chair   

Edward F. Cox*

      x    x    Chair

Charles D. Davidson

            x

Thomas J. Edelman*

      x    x    x

Eric P. Grubman*

   x       x   

Kirby L. Hedrick*

      Chair    x    x

Scott D. Urban*

   x       x    x

William T. Van Kleef*

   Chair       x   

Number of Meetings

   6    6    5    3

 

   * Independent directors

 

  (1) All members of our Audit Committee have been determined to meet the standards of independence required of audit committee members by the NYSE and applicable SEC rules and to be financially literate. Mr. Van Kleef has been determined to be a financial expert.

 

  (2) All members of our Compensation Committee have been determined to meet the NYSE standards for independence, with each a “Non-Employee Director” as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), and an “outside director” as defined for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (“Internal Revenue Code”).

 

  (3) All members of our Governance Committee have been determined to meet the NYSE standards for independence.

Oversight of Risk Management

 

 

Our risk management program is overseen by our Board and its committees, with support from our management and external consultants.

Our Board

 

   

Includes enterprise risk management as an agenda item for regular Board meetings, with our Chairman consulting with our Lead Independent Director to define the topic and scope of each discussion; and

 

   

maintains other processes in support of our risk management effort, such as those by which our Board reviews and approves our capital budget and certain capital projects, hedging policy, new country entry, significant acquisitions and divestitures, equity and debt offerings and the delegation of authority to our management.

Our Audit Committee

 

   

Assists our Board in fulfilling its responsibility to oversee the integrity of our financial statements and our compliance with legal and regulatory requirements;

   

retains, and interacts directly with, our independent auditors of financial statements and oil and gas reserves; and

 

   

holds periodic reviews with our management to address financial and related disclosures, key legal and regulatory developments and possible enhancements to our Code of Business Conduct and Ethics.

Our Governance Committee

 

   

Annually reviews developments in the area of corporate governance and our Corporate Governance Guidelines in order to recommend appropriate actions to our Board;

 

   

reviews director independence, Board membership and committee assignments and makes adjustments in order to ensure that we have the appropriate director expertise to oversee the Company’s evolving business operations; and

 

   

oversees the Company’s political activity.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

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                            Corporate Governance 

 

Our EH&S Committee

 

   

Assists our Board in determining whether we have appropriate policies and management systems in place with respect to EH&S matters and monitoring and reviewing compliance with applicable EH&S laws, rules and regulations;

 

   

periodically reviews EH&S performance, our annual EH&S audit schedule, key EH&S legal and regulatory developments and trends such as climate change; and

 

   

reviews and advises the Board on Company initiatives in the area of corporate social responsibility.

Our Compensation Committee

 

   

Reviews our Proxy Statement Compensation Discussion and Analysis and discusses its disclosures with our management;

 

   

evaluates our CEO’s performance, considering input from our other independent directors on Company risk management efforts and other criteria;

 

   

reviews our compensation program in an effort to ensure that it remains aligned with our compensation objectives and to address any potential risks that are reasonably likely to have a material adverse effect on the Company; and

 

   

monitors executive officer compliance with the Company’s stock ownership guidelines.

Our management

 

   

Maintains committees responsible for enterprise risk management, compliance and ethics, and disclosures;

 

   

includes a dedicated Chief Compliance Officer; and

 

   

regularly reports to the Board or its committees on the Company’s risk management practices.

Our external consultants

 

   

Audit our financials and oil and gas reserves;

 

   

help evaluate the adequacy of our risk management program;

 

   

assist in the implementation of program enhancements; and

 

   

help us prepare the risk disclosures in our public filings.

 

 

Oversight of Risk Management

 

       The Board oversees risk management.

 

       Board committees, which meet regularly and report back to the full Board, play significant roles in carrying out the risk oversight function.

 

       Company management is charged with managing risk through robust internal processes and controls.

 

       External consultants provide independent perspectives on our risk management program and assist in the implementation of enhancements.

 

Succession planning

A key responsibility of our CEO and Board in the area of risk management is ensuring that an effective process is in place to provide continuity of Company leadership over the long-term. Each year, a review of senior leadership succession is conducted by our Board. During this review, the CEO and the independent directors discuss candidates for senior leadership positions, succession timing for those positions and development plans for the highest-potential candidates. This process ensures continuity of leadership over the long-term and forms the basis upon which the Company makes ongoing leadership assignments.

 

 

Codes of Business Conduct and Ethics

 

 

We have adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees and sets out our policy regarding laws and business conduct, contains other policies relevant to business conduct and sets out a process for reporting violations thereof. On January 28, 2013, our Board approved an amendment to our code to include a compensation recoupment or

“clawback” provision, by which our Compensation Committee may recover incentive-based compensation from our current or former executive officers and other employees in cases involving restatements of financials or oil and gas reserves, or material noncompliance with our codes of ethics.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

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                            Corporate Governance 

 

 

We have also adopted a Code of Ethics for Chief Executive and Senior Financial Officers, violations of which are to be reported to our Audit Committee.

A copy of these codes can be obtained free of charge from our website, or by written request to the attention of the Company Secretary. Amendments to these codes will be promptly posted on our website.

 

Independence and Related Person Transactions

 

 

Director Independence

The standards applied by our Board in affirmatively determining whether a director is “independent” in compliance with the listing standards of the NYSE generally provide that a director is not independent if:

 

1. the director is, or has been within the last three years, an employee of the Company, or an immediate family member (defined as including a person’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, and anyone, other than domestic employees, who shares such person’s home) is, or has been within the last three years, an executive officer, of the Company;

 

2. the director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 per year in direct compensation from us, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);

 

3. (a) the director is a current partner or employee of our internal or external auditor; (b) the director has an immediate family member who is a current partner of that firm; (c) the director has an immediate family member who is a current employee of that firm and personally works on our audit; or (d) the director or an immediate family member was, within the last three years, a partner or employee of that firm and personally worked on our audit during that time;

 

4. the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or served on that company’s compensation committee; or

 

5. the director is a current employee, or an immediate family member is a current executive officer, of a
  company that has made payments to, or received payments from, us for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues.

In addition to these objective standards, our Board has adopted a general standard, also in compliance with the NYSE listing standards, to the effect that no director qualifies as “independent” unless the Board affirmatively determines that the director has no material relationship with the Company that could interfere with the director’s ability to exercise independent judgment. Our Board exercises appropriate discretion in identifying and evaluating the materiality of any relationships directors may have with us or with parties that conduct business with us.

On February 4, 2013, and again on March 14, 2013, our Board reviewed our directors’ relationships with the Company (and those of their immediate family members), including information related to transactions, relationships or arrangements between the Company and our directors or parties related to our directors. The following table contains a description of relations and arrangements considered by our Board in confirming its determination that these directors are independent.

After reviewing these categories or types of transactions, relationships and arrangements, and after applying the NYSE independence standards described above, our Board affirmatively determined that no material relationship existed that would interfere with the ability of Messrs. Berenson, Cawley, Cox, Edelman, Grubman, Hedrick, Urban or Van Kleef to exercise independent judgment and that each is independent for Board membership purposes. On March 14, 2013, our Board conducted a similar review as to Ms. Williamson, likewise finding her to be independent for Board membership purposes. Our Board has also determined that all members of our Audit Committee, Compensation Committee and Governance Committee are independent under the NYSE independence standards and applicable SEC rules.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

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                            Corporate Governance 

 

 

Director    Description of Relationship

Jeffrey L. Berenson

   President and CEO of Berenson & Company, as well as a director and chair of the Compensation Committee of Epoch Holding Corporation, a holding company that provides investment management and advisory services. Mr. Berenson is a former director of Patina Oil & Gas Corporation, which we acquired by merger in May 2005.

Michael A. Cawley

   Former President, CEO and Trustee of The Samuel Roberts Noble Foundation, Inc. Mr. Cawley received payments totaling approximately $32,913 in 2012 attributable to his interests in certain oil and gas royalties that he purchased from the Company in the 1990s. Mr. Cawley is also a director and member of the Compensation Committee of Noble Corporation, a publicly-traded drilling company with which the Company conducted business in 2012.

Edward F. Cox

   Received payments in 2012 totaling approximately $459,915 attributable to his interests in certain oil and gas royalties and interests in two general partnerships that hold royalties and are managed by the Company. Mr. Cox purchased these interests from the Company in the 1980s and 1990s. Mr. Cox also holds the position of chair of the New York Republican State Committee.

Thomas J. Edelman

   Director of Berenson & Company, as well as managing partner of White Deer Energy LP, an energy private equity fund that owns oil service companies with which the Company has conducted business. Mr. Edelman is also a director of Emerald Oil, Inc. and Postrock Energy Corporation and is the former Chairman and CEO of Patina, which we acquired by merger in May 2005.

Eric P. Grubman

   Executive Vice President of the National Football League.

Kirby L. Hedrick

   Former Executive Vice President of Phillips Petroleum Company.

Scott D. Urban

   Former Group Vice President, Upstream, for several profit centers at BP. As a partner in Edgewater Energy LLC, an exploration and production consulting and private investment firm, he serves as a lead partner in a private equity company working in the Delaware Basin. Mr. Urban is also a director and chair of the Compensation Committee, and member of the Nominating and Corporate Governance Committee, of Pioneer Energy Services Corporation.
William T. Van Kleef    Director and chair of the Audit Committee of Oil States International, Inc., a publicly-traded
company that provides specialty products and services to oil and gas drilling and production
companies worldwide and with which the Company conducted business in 2012.

 

Related Person Transactions

We review all relationships and transactions in which the Company and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. We have developed and implemented processes and controls to obtain information from our directors and executive officers with respect to related person transactions and for then determining, based on the facts and circumstances, whether the Company or a related person has a direct or indirect material interest in the transaction.

As required under SEC rules, transactions that are determined to be directly or indirectly material to the Company or a related person are disclosed in our annual Proxy Statement. In addition, our Governance Committee or Board (if appropriate) reviews and approves or ratifies any related person transaction that is required to be disclosed. In the course of its review and approval or ratification of a disclosable related person transaction, consideration is given to:

   

The nature of the related person’s interest in the transaction;

 

   

the material terms of the transaction, including, without limitation, the amount and type of transaction;

 

   

the importance of the transaction to the related person;

 

   

the importance of the transaction to the Company;

 

   

whether the transaction would impair the judgment or ability of a director or executive officer to act in the best interest of the Company; and

 

   

any other matters deemed appropriate.

Any director who is a related person with respect to a transaction under review may not participate in the deliberations or vote respecting approval or ratification of the transaction; but that director may be counted in determining the presence of a quorum at the meeting where the transaction is considered.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

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                            Corporate Governance 

 

 

Since the beginning of fiscal year 2012, there have been no transactions in excess of $120,000 between the

Company and a related person in which the related person had a direct or indirect material interest.

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who beneficially own more than 10% of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Directors, executive officers and more than 10% stockholders are required by SEC regulations to provide us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of the reports furnished to us and written representations that no other reports were required, all Section 16(a) filing requirements applicable to our directors, officers and more than 10% beneficial owners were complied with during the year ended December 31, 2012.

Ownership of Equity Securities of the Company

Directors and Named Executive Officers

 

The following table sets forth, as of March 6, 2013, the shares of common stock beneficially owned by each director, each Named Executive Officer listed in the Summary Compensation Table included in this Proxy Statement, and all directors and Named Executive Officers as a group.

 

     Common Stock Beneficially Owned(1)
Name    Number of
Shares (2)(3)
      

Percent of Class

Director

       

Jeffrey L. Berenson

     55,031         *

Michael A. Cawley

     63,648(4)          *

Edward F. Cox

     47,707(5)          *

Charles D. Davidson

     1,372,274(6)          *

Thomas J. Edelman

     2,024,148(7)          1.1%

Eric P. Grubman

     27,006         *

Kirby L. Hedrick

     81,237         *

Scott D. Urban

     37,965         *

William T. Van Kleef

     90,207         *

Molly K. Williamson

            

Named Executive Officer (excluding
any director named above)

       

Rodney D. Cook

     135,954         *

Susan M. Cunningham

     303,602         *

Kenneth M. Fisher

     153,365         *

David L. Stover

     472,525         *
All directors and Named Executive
Officers as a group (13 persons)
   4,864,669        2.7%

 

   * Represents less than one percent of outstanding shares of common stock.

 

  (1) Unless otherwise indicated, all shares are directly held with sole voting and investment power.

 

  (2) Includes shares not outstanding but subject to options that are currently exercisable (or that will become exercisable on or before May 6, 2013), as follows: Mr. Berenson — 26,726 shares; Mr. Cawley — 43,526 shares; Mr. Cox — 23,526 shares; Mr. Davidson — 877,112 shares; Mr. Edelman — 34,726 shares; Mr. Grubman — 18,650 shares; Mr. Hedrick — 43,526 shares; Mr. Urban — 26,043 shares; Mr. Van Kleef — 34,726 shares; Mr. Cook — 66,476 shares; Ms. Cunningham — 235,160 shares; Mr. Fisher — 87,535 shares; and Mr. Stover — 333,792 shares.

 

Noble Energy, Inc. 2013 Proxy Statement

 

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                            Corporate Governance 

 

 

  (3) Includes restricted stock awards not currently vested, as follows: 916 shares held by each of Messrs. Berenson, Cawley, Cox, Edelman, Grubman, Hedrick, Urban and Van Kleef; Mr. Cook — 27,614 shares; Ms. Cunningham — 27,956 shares; Mr. Davidson — 99,306 shares; Mr. Fisher — 29,678 shares; and Mr. Stover — 55,108 shares.

 

  (4) Prior to his retirement on January 14, 2012, Mr. Cawley was one of 12 trustees of The Samuel Roberts Noble Foundation, Inc. The Foundation holds of record 947,166 shares of our common stock. As with other corporate action, the voting of the shares held by the Foundation requires a majority vote of its trustees at a meeting at which a quorum of trustees is present. Where there are more than three trustees of a company and a majority vote is required for corporate action, no individual trustee is deemed to have beneficial ownership of securities held by such company. Accordingly, the shares held of record by the Foundation are not reflected in Mr. Cawley’s beneficial ownership of common stock.

 

  (5) Includes 12,000 shares held by spouse.

 

  (6) Includes 3,318 shares indirectly held in a qualified 401(k) Plan.

 

  (7) Includes 787,300 shares held under deferred compensation plans.

Security Ownership of Certain Beneficial Owners

 

Set forth in the table below is information about the number of shares held by persons we know to be the beneficial owners of more than 5% of the issued and outstanding common stock.

 

Name and
Address of Beneficial Owner
     Number of Shares
of Common Stock
Beneficially Owned
    Percent of Class  

FMR LLC

82 Devonshire Street

Boston, MA 02109

       26,672,667 (1)      15.0%   

Capital World Investors

333 South Hope Street

Los Angeles, CA 90071

       15,236,000 (2)      8.6%   
Blackrock, Inc.
40 East 52nd Street
New York, NY 10022
     11,693,316(3)     6.6%  

 

  (1) Based upon its Schedule 13G/A filed with the SEC on February 14, 2013 with respect to its beneficial ownership of our common stock. FMR LLC has sole voting power with respect to 59,465 shares and sole dispositive power with respect to 26,672,667 shares.

 

  (2) Based upon its Schedule 13G/A filed with the SEC on February 13, 2013 with respect to its beneficial ownership of our common stock. Capital World Investors has sole voting power and sole dispositive power with respect to 15,236,000 shares.

 

  (3) Based upon its Schedule 13G/A filed with the SEC on February 5, 2013 with respect to its beneficial ownership of our common stock. Blackrock, Inc. has sole voting power and sole dispositive power with respect to 11,693,316 shares.

Stockholder Proposals and Other Matters

Stockholder proposals intended to be brought before the annual meeting of stockholders as an agenda item or to be included in our proxy statement relating to our 2014 annual meeting of stockholders, which is currently scheduled to be held on April 22, 2014, must be received by us at our office in Houston, Texas, addressed to our Secretary, no later than December 24, 2013.

Our Board does not intend to present any other matter at the annual meeting of stockholders and knows of no other matters that will be presented. However, if any other matter comes before the meeting, the persons named in the enclosed proxy intend to vote thereon in accordance with their best judgment.

 

Noble Energy, Inc. 2013 Proxy Statement

 

14


       Election of Directors (Proposal 1) 

 

Election of Directors (Proposal 1)

 

As of the date of this Proxy Statement, our Board consists of ten directors, nine of whom are independent. The business experience of each nominee as well as the qualifications that led our Board to select each nominee

for election to the Board is discussed below. All directors are elected annually to serve until the next annual meeting and until their successors are elected.

 

 

Election Process

 

 

Our By-Laws provide that the number of directors shall be determined by the Board, which has set the number at ten; and that in an election where the number of nominees does not exceed the number of directors to be elected, each director must receive the majority of the votes cast with respect to that director.

Our Board will nominate candidates for election or re-election who agree to tender, promptly following the annual meeting, irrevocable resignations that will be effective upon (a) the failure to receive the required vote at the next annual meeting and (b) acceptance by the Board. In addition, our Board will fill director vacancies and new directorships only with candidates who agree to

tender the same form of resignation promptly following their appointment to the Board.

If an incumbent director fails to receive the required vote for re-election, then, within 90 days following certification of the stockholder vote, our Governance Committee will act to determine whether to accept the director’s resignation and will submit its recommendation for prompt consideration by our Board. The Board will promptly act on the resignation, taking into account the recommendation of the Governance Committee, and publicly disclose its decision and rationale.

 

 

 

Director Nominations

 

 

Our Governance Committee is responsible for identifying and evaluating nominees for director and for recommending to the Board a slate of nominees for election at each Annual Meeting of Stockholders. Nominees may be suggested by directors, members of management, stockholders or, in some cases, by a third-party firm.

Stockholders who wish the Governance Committee to consider their recommendations for nominees for the position of director should submit a recommendation in

writing to the Governance Committee, in care of the Company Secretary, at least 120 calendar days before the anniversary date of the immediately previous year’s annual meeting. Stockholder nominees for directors to be submitted for inclusion in our 2014 Proxy Statement must be received by us by December 24, 2013. Our Corporate Governance Guidelines specify the processes for evaluating nominees for director and the requirements for a stockholder recommendation for a director nominee.

 

 

Director Qualifications

 

 

Our Governance Committee believes that the minimum qualifications for serving as a director of the Company are that a nominee demonstrate, by significant accomplishment in his or her field, an ability to make a meaningful contribution to our Board’s oversight of the business and affairs of the Company and have an impeccable record and reputation for honest and ethical conduct in both his or her professional and personal activities. Nominees for director shall be those people who, after taking into account their skills, expertise, integrity, diversity, character, judgment, age, independence, corporate experience, length of service, potential conflicts of interest and commitments (including, among other things, service on the boards or comparable governing bodies of other public companies,

private business companies, charities, civic bodies or similar organizations) and other qualities, are believed to enhance our Board’s ability to manage and direct, in an effective manner, the affairs and business of the Company, including, when applicable, to enhance the ability of the committees of our Board to fulfill their duties and to satisfy any independence requirements imposed by law, regulation or listing standards of the NYSE.

In general, nominees for director should have an understanding of the workings of large business organizations such as the Company and senior level executive experience, as well as the ability to make independent, analytical judgments, the ability to be an effective communicator and the ability and willingness to

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

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       Election of Directors (Proposal 1) 

 

devote the time and effort to be an effective and contributing member of our Board. In addition, our Governance Committee will examine a candidate’s specific experiences and skills, time availability in light of other commitments, potential conflicts of interest and independence from management and the Company. Our Governance Committee will also seek to have our Board represent a diversity of backgrounds, experience, gender and race.

Our Governance Committee annually reviews its long-term plan for Board composition, giving consideration to the foregoing factors. Based on this review and subsequent discussions, the committee concluded that the Board would benefit by the addition of a director with broad experience in foreign policy, in particular with respect to the Company’s Eastern Mediterranean operations. As a result, on March 14, 2013, Molly K. Williamson was elected to the Board.

 

 

2013 Nominees for Director

 

 

Upon recommendation of the Governance Committee, the Board has nominated Jeffrey L. Berenson, Michael A. Cawley, Edward F. Cox, Charles D. Davidson, Thomas J. Edelman, Eric P. Grubman, Kirby L. Hedrick, Scott D. Urban, William T. Van Kleef and Molly K. Williamson for election as director. All of the nominees are independent under NYSE corporate governance rules, except Charles D. Davidson.

Each of the director nominees currently serves on the Board and, with the exception of Ms. Williamson, was elected by the stockholders at the 2012 Annual Meeting of Stockholders. If elected, each nominee will hold office until the 2014 Annual Meeting of Stockholders and until his or her successor is elected and qualified.

We have no reason to believe that any of the nominees will be unable or unwilling to serve if elected. However, if any nominee should be unable for any reason or unwilling for good cause to serve, proxies may be voted for another person nominated as a substitute by the Board, or the Board may reduce the number of Directors.

The Board believes that the combination of the various qualifications, skills and experiences of the 2013 director nominees would contribute to an effective and well-functioning Board. The Board and the Governance Committee believe that, individually and as a whole, the Board possesses the necessary qualifications to provide effective oversight of the business and quality advice and counsel to the Company’s management.

 

 

Qualifications of 2013 Nominees for Director

 

In furtherance of the Director Qualifications discussed above, the following biographies highlight some categories of qualifications, attributes, skills and experience of each director nominee that led the Board to conclude that the director is qualified to serve on our Board.

Our Board recommends a vote FOR the election of each of the director nominees.

 

Noble Energy, Inc. 2013 Proxy Statement

 

16


           Director Nominee Biographies

 

LOGO  

 Jeffrey L. Berenson

 

Director since 2005

Age 62

 

Mr. Berenson is President and Chief Executive Officer of Berenson & Company, a private investment banking firm in New York City that he co-founded

   LOGO  

 Michael A. Cawley

 

Director since 1995

Age 65

 

Mr. Cawley has served as President and Manager of The Cawley Consulting Group, LLC since January 14, 2012. He previously served as President and Chief

in 1990. From 1978 until co-founding Berenson & Company, he was with Merrill Lynch’s Mergers and Acquisitions department, becoming head of that department in 1986 and then co-head of its Merchant Banking unit in 1988. Mr. Berenson was appointed to the Board of Directors of Patina Oil & Gas Corporation (“Patina”) in December 2002 and joined our Board upon completion of our merger with Patina on May 16, 2005. He is also a member of the Board of Directors of Epoch Holding Corporation.

 

Specific Qualifications, Attributes, Skills and Experience

 

       High Level of Financial Literacy — has spent more than 35 years in the investment banking business.

 

       Relevant Chief Executive Officer/President Experience — serves as President and CEO of the private investment banking firm that he co-founded in 1990.

 

       Extensive Knowledge of Our Industry and Business — has historical knowledge of the Company’s Rocky Mountain assets through his service as a director of Patina and since that time has had broad exposure to the Company’s industry and business through over seven years of service on our Board.

  

Executive Officer of The Samuel Roberts Noble Foundation, Inc. (“Foundation”) from February 1, 1992 until his retirement on January 14, 2012, after serving as Executive Vice President of the Foundation since January 1, 1991. Prior to 1991, Mr. Cawley was the President of Thompson, Cawley, Veazey & Burns, a professional corporation, attorneys at law. Mr. Cawley also served as a trustee of the Foundation from 1988 until his retirement and is a director of Noble Corporation. He has served on our Board since 1995 and has been our Lead Independent Director since 2001.

 

Specific Qualifications, Attributes, Skills and Experience

 

        Relevant Chief Executive Officer/President Experience — served as President and CEO of the Foundation for nearly 20 years and as President of Thompson, Cawley, Veazey & Burns, a professional corporation, attorneys at law.

 

       Extensive Knowledge of Our Industry and Business — has historical knowledge of, and broad exposure to, the Company’s industry and business through over 17 years of service on our Board.

 

        Strong Governance Experience — worked as an attorney, and law firm partner, and for over 12 years has served as our Lead Independent director and chair of our Governance Committee.

 

Noble Energy, Inc. 2013 Proxy Statement

 

17


           Director Nominee Biographies

 

 

LOGO    

 Edward F. Cox

 

Director since 1984

Age 66

 

Mr. Cox is chair of the New York Republican State Committee (“NYRSC”) and was previously for more than five years a partner in the law firm of

   LOGO  

 Charles D. Davidson

 

Director since 2000

Age 63

 

Mr. Davidson has served as our Chief Executive Officer since October 2000 and as Chairman of our Board since April 2001. In addition, he served as

Patterson Belknap Webb & Tyler LLP, New York, New York, serving as the chair of the firm’s corporate department and as a member of its management committee. For more than five years he has been chair of the New York League of Conservation Voters Education Fund and, for more than five years prior to his election as NYRSC chair in 2009, was chair of the finance, community college and charter school committees of the Trustees of The State University of New York and of the State University Construction Fund, and was a member of New York’s merit selection constitutional Commission on Judicial Nomination. During the two years leading up to his 2009 election as NYRSC chair, Mr. Cox served as the New York State Chair of Senator John McCain’s presidential campaign. He has served Presidents Nixon, Reagan and H. W. Bush in the international arena, has been a member of the Council on Foreign Relations since 1993 and serves on the boards of the Foreign Policy Association, the Levin Institute (The State University of New York) and the American Ditchley Foundation. He has served on our Board since 1984.

 

Specific Qualifications, Attributes, Skills and Experience:

 

        Broad International Exposure — has served three U.S. presidents in the international arena.

 

        Extensive Knowledge of Our Industry and Business — has historical knowledge of, and broad exposure to, the Company’s industry and business through over 28 years of service on our Board.

 

       Governmental or Geopolitical Expertise — serves as chair of the NYRSC and has served in a presidential campaign leadership role.

 

        Strong Governance Experience — worked as an attorney in private practice, chairing his firm’s corporate department.

  

our President from October 2000 through April 2009. Prior to October 2000, he served as President and CEO of Vastar Resources, Inc. (“Vastar”) from March 1997 to September 2000 (Chairman from April 2000) and was a Vastar director from March 1994 to September 2000. From September 1993 to March 1997, he served as a Senior Vice President of Vastar. From 1972 to October 1993, he held various positions with ARCO.

 

Specific Qualifications, Attributes, Skills and Experience:

 

        High Level of Financial Literacy — has extensive exposure to the financial aspects of our business through his leadership of large independent oil and gas companies.

 

        Relevant Chief Executive Officer/President Experience — has served in President and CEO roles with Vastar and the Company.

 

        Broad International Exposure — has led the Company’s exploration and development in the Eastern Mediterranean and West Africa, as well as other international locations.

 

        Extensive Knowledge of Our Industry and Business — has devoted a career to the oil and gas industry and overseen the Company’s business since 2000.

 

        Governmental or Geopolitical Expertise — has government relations experience while at ARCO and through ongoing interaction with the U.S. government and host country governments in connection with the Company’s operations.

 

       Strong Governance Experience — has served in Chairman of the Board and CEO roles with Vastar and the Company.

 

Noble Energy, Inc. 2013 Proxy Statement

 

18


           Director Nominee Biographies

 

 

LOGO  

 Thomas J. Edelman

 

Director since 2005

Age 62

 

Mr. Edelman founded Patina and served as its Chairman and CEO from its formation in 1996 through its merger with the Company in 2005. He co-founded

   LOGO  

 Eric P. Grubman

 

Director since 2009

Age 55

 

Mr. Grubman has served as Executive Vice President of the National Football League since 2004. He was responsible for Finance and Strategic Transactions

Snyder Oil Corporation and was its President from 1981 through 1997. He served as Chairman and CEO and later as Chairman of Range Resources Corporation from 1988 through 2003. From 1980 to 1981, he was with The First Boston Corporation and from 1975 through 1980 with Lehman Brothers Kuhn Loeb Incorporated. Mr. Edelman is currently Managing Partner of White Deer Energy LP, an energy private equity fund, and serves on the Board of Directors of Emerald Oil, Inc. and Postrock Energy Corporation. He is also President of Lenox Hill Neighborhood House, a Trustee and Chair of the Investment Committee of The Hotchkiss School, a member of the Board of Directors of Georgetown University and a director of Berenson & Company. He joined our Board upon completion of our merger with Patina on May 16, 2005.

 

Specific Qualifications, Attributes, Skills and Experience:

 

        High Level of Financial Literacy — has extensive experience with investment banking and private equity funds, as well as the financial aspects of our business through leadership of large independent oil and gas companies.

 

       Relevant Chief Executive Officer/President Experience — has served as President and CEO of several independent oil and gas companies.

 

        Extensive Knowledge of Our Industry and Business — has historical knowledge of the Company’s Rocky Mountain assets through his service as founder, Chairman and CEO of Patina and since that time has had broad exposure to the Company’s industry and business through over seven years of service on our Board.

  

from 2004 to 2006 and has served as the League’s President of Business Ventures from 2006 to the present. Mr. Grubman served as Co-President of Constellation Energy Group, Inc. from 2000 to 2001 and partner and co-head of the Energy Group at Goldman Sachs from 1996 to 2000. He serves on the Board of Directors of the U.S. Naval Academy Foundation. He joined our Board on January 27, 2009.

 

Specific Qualifications, Attributes, Skills and Experience:

 

        High Level of Financial Literacy — has overseen finance and strategic transactions for the National Football League and previously served as co-head of the Energy Group at Goldman Sachs.

 

       Relevant Chief Executive Officer/President Experience — serves as Executive Vice President of the National Football League and previously served as Co-President of Constellation Energy Group, Inc.

 

       Extensive Knowledge of Our Industry and Business — has worked with the oil and gas industry while with Constellation Energy Group, Inc. and as partner and co-head of the energy group at Goldman Sachs, and has had broad exposure to the Company’s business through over four years of service on our Board.

 

Noble Energy, Inc. 2013 Proxy Statement

 

19


           Director Nominee Biographies

 

 

LOGO  

 Kirby L. Hedrick

 

Director since 2002

Age 60

 

Mr. Hedrick served as Executive Vice President over upstream operations for Phillips Petroleum Company from 1997 until his retirement in 2000. In that role,

   LOGO  

 Scott D. Urban

 

Director since 2007

Age 59

 

Mr. Urban served in executive management positions at Amoco and its successor, BP, from 1977 to 2005. At the time of his retirement from BP in

he was responsible for worldwide exploration and production and midstream gas gathering, processing and marketing, including activities in 22 countries. He had a varied 25-year career with Phillips, including serving as petroleum engineer from 1975 to 1984 on various onshore and offshore projects in the U.S., the North Sea, Indonesia and the west coast of Africa; Manager of Offshore Operations from 1985 to 1987, responsible for all greater Ekofisk offshore operations for Phillips Pct. Co. Norway; Manager, Corporate Planning from 1987 to 1989; Managing Director from 1990 to 1992, Phillips Pot. Co. UK with upstream and downstream responsibilities, including gas marketing; President and Chief Executive Officer at GPM Gas Co. from 1993 to 1994, responsible for Phillips’ gas gathering, processing and marketing in Texas, Oklahoma and New Mexico; and Senior Vice President, Refining, Marketing and Transportation from 1995 to 1997. He joined our Board on August 1, 2002.

 

Specific Qualifications, Attributes, Skills and Experience:

 

       Relevant Chief Executive Officer/President Experience — has served as Executive Vice President of a major international oil and gas company.

 

       Broad International Exposure — has led various onshore and offshore projects in the North Sea, Indonesia, the west coast of Africa, Norway and the UK.

 

       Extensive Knowledge of Our Industry and Business — has devoted a career to the oil and gas industry and has had broad exposure to the Company’s business through over 10 years of service on our Board.

  

2005, he was Group Vice President, Upstream for several profit centers including North America Gas, Alaska, Egypt and Middle East and, before that, Group Vice President, Upstream North Sea. He held various positions at Amoco including, at the time of its merger with BP, Group Vice President, Worldwide Exploration. Mr. Urban is also a partner in Edgewater Energy LLC, an investment consulting firm, and a member of the Board of Directors of Pioneer Energy Services Corporation. He joined our Board on October 23, 2007.

 

Specific Qualifications, Attributes, Skills and Experience:

 

       Relevant Chief Executive Officer/President Experience — has served as Group Vice President of a major international oil and gas company.

 

       Broad International Exposure — has led various onshore and offshore projects in Egypt, the Middle East and North Sea, with an emphasis on exploration.

 

       Extensive Knowledge of Our Industry and Business — has devoted a career to the oil and gas industry and has had broad exposure to the Company’s business through over five years of service on our Board.

 

Noble Energy, Inc. 2013 Proxy Statement

 

20


           Director Nominee Biographies

 

 

LOGO  

 William T. Van Kleef

 

Director since 2005

Age 61

 

Mr. Van Kleef served in executive management positions at Tesoro Corporation (“Tesoro”) from 1993 to 2005, most recently as Tesoro’s

   LOGO  

 Molly K. Williamson

 

Director since 2013

Age 67

 

Ms. Williamson has served in a unique combination of senior executive policy positions in four cabinet departments of the U.S. government. Her postings

Executive Vice President and Chief Operating Officer. During his tenure at Tesoro, he held various positions, including President, Tesoro Refining and Marketing, and Executive Vice President and Chief Financial Officer. Before joining Tesoro, Mr. Van Kleef, a Certified Public Accountant, served in various financial and accounting positions with Damson Oil from 1982 to 1991, most recently as Senior Vice President and Chief Financial Officer. Mr. Van Kleef is also a member of the Board of Directors of Oil States International, Inc. He joined our Board on November 11, 2005.

 

Specific Qualifications, Attributes, Skills and Experience:

 

        High Level of Financial Literacy — is a Certified Public Accountant, serving in various financial and accounting positions throughout his career.

 

        Relevant Chief Executive Officer/President Experience — has served as Executive Vice President and COO of a large refining and marketing company.

 

        Extensive Knowledge of Our Industry and Business — has had broad exposure to the Company’s business and industry through over seven years of service on our Board and extensive experience in downstream operations through his tenure at Tesoro.

  

included senior foreign policy advisor to the U.S. Secretary of Energy; Deputy Assistant Secretary in the Departments of State, Defense, and Commerce; U.S. interim ambassador to Bahrain; and Chief of Mission and Consul General in Jerusalem during the Madrid peace process which culminated in the Oslo Accords.

 

Ms. Williamson is a scholar with the Middle East Institute, a consultant, frequent lecturer at Johns Hopkins University, and a member of the Boards of Directors of the American Foreign Service Association, American Academy of Diplomacy and International Services Corps. She is a former Foreign Service Officer, having served six U.S. presidents, achieving the rank of Career Minister. She joined our Board on March 14, 2013.

 

Specific Qualifications, Attributes, Skills and Experience:

 

       Broad International Exposure — has extensive experience in foreign policy and international affairs, serving six U.S. presidents.

 

       Governmental or Geopolitical Expertise — has a resume of broad government service, with expertise in the geopolitics of the Middle East.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

21


           Director Compensation

 

2012 Director Compensation

Our director compensation program consists of two principal elements: (1) annual retainer and committee fees and (2) equity including stock options and restricted stock. Our Governance Committee reviews our director compensation program annually, based on information provided by our independent compensation consultant.

Annual Retainer and Committee Fees

 

 

Non-employee directors received the following cash fees for 2012, paid pro rata on a monthly basis:

 

   

An annual retainer of $75,000;

   

$2,000 for each Board or committee meeting attended;

   

$7,500 as an annual fee for the chairs of the Governance Committee and EH&S Committee;

   

$15,000 as an annual fee for the chairs of the Audit Committee and Compensation Committee; and

   

$20,000 as an annual fee for the Lead Independent Director.

Non-employee directors are also entitled to participate in our Non-Employee Director Fee Deferral Plan by which all or a portion of their director fees may be deferred for future payment by the Company. None elected to do so in 2012. We also reimburse directors for travel, lodging and related expenses they incur in attending Board and committee meetings and director continuing education programs relevant to their service on our Board.

 

 

Equity

 

 

The 2005 Stock Plan for Non-Employee Directors of Noble Energy, Inc. (the “2005 Plan”) provides for grants of stock options and awards of restricted stock to our non-employee directors.

Options are issued with an exercise price equal to the market price of our common stock on the date of grant and may be exercised beginning one year after the date of grant. The options expire ten years from the date of grant. Restricted stock is restricted for a period of one year from the date of award.

Newly elected non-employee directors receive on the date of initial election to our Board a grant and award

with a total value of $250,000 to be allocated one-half to stock options and one half to restricted stock. On December 5, 2011, our Board agreed to set annual equity grants and awards at a total value of $200,000, to be made effective on February 1 and allocated one-half to stock options and one-half to restricted stock.

Accordingly, our Board approved annual grants and awards to each non-employee director of 2,514 stock options and 982 shares of restricted stock effective February 1, 2012 and 2,355 stock options and 916 shares of restricted stock effective February 1, 2013. Ms. Williamson received a grant of 2,717 stock options and an award of 1,078 shares of restricted stock upon her election to our Board on March 14, 2013.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

22


           Director Compensation

 

Director Compensation Summary

 

The table below sets forth certain information concerning the compensation earned in 2012 by our non-employee directors who served in 2012.

 

Name  

Fees
Earned
or Paid
in Cash

($)(1)

    

Stock
Awards

($)(2)

    

Option
Awards

($)(3)

     Non-Equity
Incentive Plan
Compensation
($)
    

Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings

($)

     All Other
Compensation
($)
    

Total

($)

 

Jeffrey L. Berenson

    119,000         99,987         80,674                                 299,661   

Michael A. Cawley

    146,500         99,987         80,674                                 327,161   

Edward F. Cox

    134,500         99,987         80,674                                 315,161   

Thomas J. Edelman

    125,000         99,987         80,674                                 305,661   

Eric P. Grubman

    119,000         99,987         80,674                                 299,661   

Kirby L. Hedrick

    140,000         99,987         80,674                                 320,661   

Scott D. Urban

    125,000         99,987         80,674                                 305,661   

William T. Van Kleef

    138,750         99,987         80,674                                 319,411   

 

(1) Reflects annual retainer and meeting fees paid or earned by our non-employee directors in 2012. Each non-employee director earned the following: an annual retainer of $75,000 and $2,000 for each Board or committee meeting attended. Mr. Cawley received an additional $20,000 for serving as our Lead Independent Director. Messrs. Van Kleef and Hedrick each received an additional $15,000 for serving as Chair of our Audit Committee and our Compensation Committee, respectively. Messrs. Cox and Cawley each received an additional $7,500 for serving as Chair of our EH&S Committee and our Governance Committee, respectively.

 

(2) Reflects the aggregate grant date fair value for restricted stock awarded to our non-employee directors in 2012 under our 2005 Plan, computed in accordance with FASB ASC Topic 718. Restricted stock awarded to our non-employee directors in 2012 will vest on the one-year anniversary of the award date. The vesting of the restricted shares will accelerate in the event of a change of control of the Company. Each non-employee director received an award of 982 shares of restricted stock on February 1, 2012 that was unvested as of December 31, 2012.

 

(3) Reflects the aggregate grant date fair value for nonqualified stock options granted to our non-employee directors in 2012 under our 2005 Plan, computed in accordance with FASB ASC Topic 718. Options represent the right to purchase shares of common stock at a fixed price per share equal to fair market value on the date of grant. Our 2005 Plan defines “fair market value” as the closing price of our common stock on the NYSE on the date of grant. Options granted to our non-employee directors in 2012 will vest on the one-year anniversary of the grant date. The vesting of the options will accelerate in the event of a change of control of the Company. Vesting of these options is not contingent upon the satisfaction of any performance criteria, although none of the options may be exercised until the first anniversary (absent a change of control of the Company) or after the tenth anniversary of the date of grant. Each non-employee director received 2,514 nonqualified stock options on February 1, 2012 that were unvested as of December 31, 2012. The following directors have option grants outstanding as of December 31, 2012: Mr. Berenson — 26,726; Mr. Cawley — 43,526; Mr. Cox — 23,526; Mr. Edelman — 34,726; Mr. Grubman — 18,650; Mr. Hedrick — 43,526; Mr. Urban — 26,043; and Mr. Van Kleef — 34,726.

 

Noble Energy, Inc. 2013 Proxy Statement

 

23


           Ratification of Appointment of Independent Auditor  (Proposal 2)

 

Ratification of Appointment of Independent Auditor (Proposal 2)

 

The Audit Committee of our Board has appointed the firm of KPMG LLP to serve as our independent auditor for the fiscal year ending December 31, 2013. This firm has audited our accounts since May 2002. Although action by our stockholders on this matter is not required, our Audit Committee believes that it is important to seek stockholder ratification of this appointment in light of the critical role played by our independent auditor in maintaining the integrity of our financial controls and reporting.

One or more representatives of KPMG LLP are expected to be present at our annual meeting and will be able to make a statement if they so desire and respond to appropriate questions.

Our Board recommends that stockholders vote FOR the ratification of the appointment of KPMG LLP as our independent auditor.

 

 

Matters Relating to the Independent Auditor

 

Accounting Fees and Services for Fiscal Years 2012 and 2011

 

       2012     %     2011     %  

Audit Fees(1)

         $ 1,998,332        89.0          $ 2,007,838        73.6   

Audit — Related Fees(2)

       157,050        7.0        501,120        18.4   

Tax Fees(3)

       90,490        4.0        219,510        8.0   

All Other Fees

                              
    

 

 

   

 

 

   

 

 

   

 

 

 
         $ 2,245,872                100.0          $ 2,728,468                100.0   
    

 

 

   

 

 

   

 

 

   

 

 

 

 

  (1) Services rendered in 2012 and 2011 include auditing our consolidated financial statements included in the Company’s annual report filed on Form 10-K and our internal controls over financial reporting. Services also include quarterly reviews of our interim consolidated financial statements filed on Form 10-Q and audit consultation.

 

  (2) Fees for 2011 include amounts paid for comfort letters associated with two debt offerings in 2011. The remainder of the fees for 2011 and all of the 2012 fees are fees associated with foreign statutory, domestic retirement and thrift plan audits and other similar audit-related work.

 

  (3) Includes fees paid for tax consulting through December 31, 2012.

Audit Committee Pre-Approval Policies and Procedures

 

The Audit Committee approves all audit and non-audit services to be provided by our independent auditor prior to the receipt of such services. The Audit Committee Chair has the authority to pre-approve services of up to $25,000 rendered by our independent auditor. Any pre-approval of services by the Audit Committee Chair is reported to the Audit Committee at its next scheduled meeting.

All audit-related services, tax services and other services for 2012 set forth in the table above were pre-approved by the Audit Committee Chair or the Audit Committee, as provided above, which in either case determined that such services would not impair the independence of our auditor and are consistent with the SEC’s rules on auditor independence.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

24


Report of the Audit Committee

To the Stockholders of

Noble Energy, Inc.:

The primary purpose of the Audit Committee of the Company’s Board of Directors is to: (1) assist the Board of Directors in fulfilling its responsibility to oversee the integrity of the Company’s consolidated financial statements, the Company’s compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence, and the performance of the Company’s internal audit function and independent auditors and (2) prepare a committee report as required by the SEC to be included in the Company’s annual Proxy Statement. The Audit Committee’s function is more fully described in its charter, which was adopted by the Audit Committee and the Board of Directors on March 4, 2004 and most recently amended on January 24, 2012 in connection with the Audit Committee’s annual review of its charter. A copy of the charter is available on our website and is also available in print to any stockholder who requests it. The Audit Committee held six meetings during 2012, including regular meetings and special meetings addressing the Form 10-K filing, earnings release and other matters.

Throughout 2012 and continuing to-date, the Audit Committee has been comprised entirely of independent directors, as defined and required by current NYSE listing standards and Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended, and as so determined by our Board of Directors. The Board of Directors also determined that Mr. Van Kleef is an “audit committee financial expert” as that term is defined in Item 401(h) of Regulation S-K.

Review and Discussion

The Audit Committee has reviewed and discussed the Company’s audited financial statements with management. It has also discussed with KPMG LLP, the Company’s independent auditor, the matters required to be discussed by Statement of Auditing Standards No. 61 (Communication with Audit Committees), as amended by SAS No. 90 (Audit Committee Communications). Additionally, KPMG LLP has provided to the Audit Committee the written disclosures required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and the committee discussed the auditors’ independence with management and the auditors.

The Audit Committee also has considered whether KPMG LLP’s rendering of non-audit services to the Company is compatible with maintaining its independence. The Audit Committee has concluded that the rendering of the non-audit services by KPMG LLP has not impaired its independence.

Based on the Audit Committee’s discussions with management and the independent auditor, and its review of the representations of management and the report of KPMG LLP to the Audit Committee, the Audit Committee recommended to the Board of Directors the inclusion of the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC.

January 28, 2013

Audit Committee

William T. Van Kleef, Chair

Michael A. Cawley

Eric P. Grubman

Scott D. Urban

 

Noble Energy, Inc. 2013 Proxy Statement

 

25

 


   Advisory Vote to Approve Executive Compensation (Proposal 3)

 

Advisory Vote to Approve Executive Compensation (Proposal 3)

 

As we do each year, and as required by Section 14A of the Exchange Act, we provide our stockholders with the opportunity to vote to approve, on a nonbinding advisory basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement in accordance with the SEC’s compensation disclosure rules.

As described in our Compensation Discussion and Analysis in this Proxy Statement, we seek to link compensation strongly to performance through financial incentives that are tied to the Company’s operational and financial results. Our compensation programs are designed to reward our Named Executive Officers for the achievement of short- and long-term strategic and operational goals and the achievement of increased total stockholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking.

We believe the Company had a strong year in 2012. The Company’s total stockholder return was 9%, which was the seventh highest total stockholder return among our 15-company compensation peer group for that period, and our cumulative stockholder return for the past three fiscal years was 47%.

Noble Energy delivered significant growth in 2012. Expansion of our horizontal Niobrara and Marcellus Shale developments resulted in a 24% increase in Wattenberg (DJ Basin, Colorado) production and a fourfold increase in Marcellus Shale (Pennsylvania and West Virginia) production. We realized further production increase from major new developments at Aseng (offshore Equatorial Guinea) and Galapagos (deepwater Gulf of Mexico), which came on line in 2011 and 2012, respectively. We moved forward on our major development projects, each of which will yield significant new production in future years; discovered new resources at Big Bend in the deepwater Gulf of Mexico and Carla, offshore Equatorial Guinea; and farmed into new opportunities offshore the Falkland Islands and Sierra Leone. Finally, we enhanced our portfolio with selective divestitures of non-core, onshore U.S. and North Sea properties, and maintained our strong balance sheet.

2012 operational highlights include:

 

   

Net income over $1.0 billion (including $965 million from continuing operations), as compared with $453 million (including $412 million from continuing operations) for 2011;

   

total 2012 sales volumes from continuing operations of 239 MBoe/d, a 12% increase as compared with 2011;

 

   

year-end proved reserves of 1.2 BBoe, a decrease of 2% from year-end 2011;

 

   

increased DJ Basin total sales volumes to 77 MBoe/d net with horizontal production contributing 28 MBoe/d net; and

 

   

Marcellus Shale production grew to 92 MMcfe/d net, as compared with 19 MMcfe/d net in 2011.

The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our Named Executive Officers as disclosed in this Proxy Statement in accordance with the SEC’s compensation disclosure rules. The vote is advisory, which means that it is not binding on the Company, our Board or the Compensation Committee of our Board. To the extent there is any significant vote against our Named Executive Officer compensation as disclosed in this Proxy Statement, our Compensation Committee will evaluate whether any actions are necessary to address the concerns of stockholders.

Accordingly, we ask our stockholders to vote on the following resolution at our annual meeting:

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s Proxy Statement for the 2013 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2012 Summary Compensation Table and the other related tables and disclosure.”

Our Board recommends that stockholders vote FOR the approval of the compensation of our Named Executive Officers as disclosed in this Proxy Statement.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

26


   Approval of Amendment and Restatement of 1992 Plan (Proposal 4)

 

Approval of Amendment and Restatement of 1992 Plan (Proposal 4)

 

At the 2013 annual meeting, our stockholders are being asked to approve an amendment and restatement of the 1992 Plan that will increase the number of shares of common stock authorized for issuance under the plan

from 31,000,000 shares to 35,800,000 shares (an increase of 4,800,000 shares). Our Board approved this amendment on January 28, 2013, subject to stockholder approval at our annual meeting.

 

 

Background and Purpose

 

 

 

Our Board recommends approval of the amendment and restatement of the 1992 Plan. The proposed increase in the number of shares authorized for issuance under the plan would enable the continued use of the 1992 Plan for stock-based grants and awards consistent with the objectives of our compensation program.

We believe that the success of our compensation program, including the responsible use of equity compensation, is well-evidenced by the performance of our common stock over the last several years.

The use of stock-based grants and awards under the 1992 Plan continues to be an important part of our compensation program. Of the 31,000,000 shares currently authorized for issuance under the plan, 4,281,284 shares remain as of March 6, 2013. We do not believe that this leaves sufficient shares available for more than one additional year of grants and awards. By increasing the number of shares authorized for issuance

under the 1992 Plan by 4,800,000, a total of 35,800,000

shares would be available. This increase would give us the flexibility to continue to responsibly address our future equity compensation needs.

As of the record date of March 6, 2013, there were a total of 178,773,698 shares of our common stock issued and outstanding. In addition to the shares remaining available for issuance under the 1992 Plan, there were 450,705 shares available for grant or award under the 2005 Stock Plan for Non-Employee Directors of Noble Energy, Inc. The Company had a total of 7,087,462 stock options outstanding with a weighted average exercise price of $76.99 and a weighted average remaining term of 6.7 years, and 1,225,846 shares of restricted stock outstanding, as of the record date.

The proposed amendment will not be implemented unless approved by our stockholders. If the proposed amendment is not approved by our stockholders, the 1992 Plan will remain in effect in its present form.

 

 

Summary

 

 

The following summary describes briefly the principal features of the 1992 Plan and is qualified in its entirety by reference to the full text of the 1992 Plan (as amended to reflect the proposed plan amendment and restatement), which is provided as Appendix B to this Proxy Statement.

 

General

Our 1992 Plan is an essential component of our compensation program and is designed to attract, retain and motivate high-quality employees by:

 

   

Providing competitive long-term incentive compensation opportunities;

 

   

rewarding outstanding achievement by those who can most directly affect our performance and instill a sense of business ownership; and

   

aligning the interests of our employees with those of our stockholders so as to maximize long-term stockholder value creation.

Cash awards may also be granted under the 1992 Plan, although no such awards have been made.

Shares Available for Issuance

The total number of shares of common stock currently available for issuance under the 1992 Plan is 31,000,000. Of those, no more than 7,000,000 shares

 

 

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   Approval of Amendment and Restatement of 1992 Plan (Proposal 4)

 

may be issued after April 26, 2011 pursuant to incentive options. The maximum number of shares of common stock for which options and stock appreciation rights (“SAR”) may be granted, and which may be awarded as restricted stock, to any one person during any calendar year is 400,000.

When determining the number of shares of common stock available for grants and awards made under the 1992 Plan on or after April 26, 2011, each share subject to an option is counted against the plan share limit as one (1) share, and each share of common stock awarded as restricted stock is counted against the plan share limit

as 2.39 shares. Prior to April 26, 2011, each share of common stock awarded as restricted stock counted against the plan share limit as one (1) share.

Shares of common stock covered by an option that expires or terminates prior to exercise and shares of restricted stock returned to the Company upon forfeiture are again available for grant or award. Shares of common stock tendered or withheld to satisfy an exercise price or tax withholding obligation for an option, SAR or restricted stock will not again be available for issuance under the 1992 Plan.

Our 1992 Plan contains anti-dilution provisions that apply in the event of a stock dividend or a stock split, combination or exchange of our shares that results from a recapitalization, merger or other restructuring in which the Company is the surviving company. In that event,

adjustments will be made in the maximum number of shares subject to the 1992 Plan and the number of shares and option prices under outstanding options.

Administration

Our 1992 Plan is administered by the Compensation Committee, which is and will be composed of independent directors of the Company. Subject to the provisions of the 1992 Plan, the Compensation Committee has the authority to select the participants who will receive the grants and awards, to determine the type and terms of the grants and awards, and to interpret and administer the 1992 Plan. The Compensation Committee may delegate to our CEO the responsibility for the limited non-officer inducement grants to the extent not inconsistent with applicable laws or regulations.

Eligibility

All of our regular salaried executive officers and other employees and those of our affiliates are eligible to participate in the 1992 Plan. As of March 6, 2013, all of our executive officers and approximately 700 other current employees participate in the 1992 Plan.

Market Value

On March 6, 2013, the reported closing price per share of our common stock on the NYSE was $109.92.

 

 

Stock Options and SARs

 

 

 

Options granted under the 1992 Plan may be either incentive options or nonqualified options, or a combination. An option is exercisable at such times and upon such terms as the Compensation Committee determines; provided that no option may be exercisable more than ten years after the date of grant. Upon exercise, a participant may pay the option exercise price of a stock option in cash (or equivalents), in shares of Company common stock that he or she already owns, or such other consideration as the Compensation Committee approves.

SARs may be granted as part of an option. SARs generally will be subject to the same terms and exercisable to the same extent as the associated option. SARs are a right to receive a payment, in cash or shares of common stock or a combination (as determined by the Compensation Committee), equal to any excess of the fair market value (on the date of exercise) of a stated number of shares of common stock over the exercise price stated in the award agreement.

Option Price

The option exercise price may not be less than the “fair market value” of a share of common stock on the date of grant. The fair market value is the per share closing price of common stock on the applicable date, and if not a trading date, the closing price for the preceding day on which sales of common stock were made.

Restricted Stock

The Compensation Committee may award shares of common stock subject to specific restrictions to eligible individuals. The Compensation Committee will determine the nature and extent of the restrictions on the shares, the duration of the restrictions, and any circumstance of forfeiture. During the period of restriction, recipients will have the right to receive dividends and the right to vote the shares.

 

 

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   Approval of Amendment and Restatement of 1992 Plan (Proposal 4)

 

The Compensation Committee may waive any outstanding restrictions prior to the end of the restricted period. If the terms and conditions for the removal of the restrictions on the restricted stock are not satisfied, the restricted stock is forfeited and returned to the Company.

Cash Awards

Cash awards may be awarded by the committee to eligible recipients. Any cash award would be in addition to any payments or grants under our short-term incentive plan. A cash award provides for the payment of a cash bonus upon the achievement of stated performance goals. The committee determines the terms, restrictions and limitations that apply to a cash award. The maximum amount that may be paid under all cash awards to any one person under the 1992 Plan during any one calendar year may not exceed $4,000,000.

Performance Awards

The Compensation Committee may grant performance awards to eligible individuals that are contingent upon the achievement of one or more performance measures. Performance awards may be settled in cash or stock, as determined by the committee.

The performance criteria that may be used consist of objective tests based on the following:

 

   

An amount or level of earnings or cash flow;

   

earnings or cash flow per share;

   

return on equity or assets;

   

return on capital or invested capital and other related financial measures;

   

cash flow or earnings before interest, taxes, depreciation and amortization (“EBITDA”);

   

revenues;

   

income, net income or operating income;

   

expenses or costs or expense levels or cost levels;

   

proceeds of sale or other disposition;

   

share price;

   

total stockholder return;

   

operating profit;

   

profit margin;

   

capital expenditures;

   

net borrowing, debt leverage levels, credit quality or debt ratings;

   

the accomplishment of mergers, acquisitions, dispositions, or similar business transactions;

   

net asset value per share;

   

economic value added;

   

individual business objectives;

   

growth in reserves or production;

   

finding and development costs; and/or

   

safety results.

Each agreement for a performance award will explain (a) the maximum amount that may be earned in the form of cash or shares of common stock, as applicable, (b) the performance goal or goals and level of achievement that will apply to the award, (c) the performance period over which performance is measured, and (d) other terms that the committee may determine that are not inconsistent with the 1992 Plan.

Prior to the payment of any compensation pursuant to a performance award, the Compensation Committee must determine and then certify in writing that the applicable performance goal or goals and other material terms of the award have been satisfied. The committee also has the authority to reduce, but not to increase, the amount payable in cash and the number of shares of common stock to be issued, retained or vested pursuant to a performance award.

 

 

Amendment and Duration of the 1992 Plan

 

 

The Board may at any time amend, suspend or terminate our 1992 Plan but may not, without the approval of the stockholders of the Company:

 

   

Increase the maximum number of shares subject to the 1992 Plan;

 

   

reduce the exercise price per share covered by options below the price specified in the 1992 Plan; or

   

permit the “re-pricing” of options and any SARs that relate to such new options, or permit the cancellation of “underwater” options and any SARs that relate to such options in return for cash or other consideration.

Additionally, the Board may not, without the consent of the recipient, amend or cancel any outstanding award in a manner that adversely affects the recipient in a material way.

 

 

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   Approval of Amendment and Restatement of 1992 Plan (Proposal 4)

 

United States Federal Income Tax Consequences

 

 

The following is a summary of the U.S. federal income tax consequences arising from grants and awards under the 1992 Plan. The tax consequences vary depending upon particular circumstances, and the income tax laws, regulations and interpretations thereof change frequently. Participants should rely upon their own tax advisors for advice concerning the specific tax consequences applicable to them, including the applicability and effect of state, local, and foreign tax laws. This summary is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding penalties that may be imposed under U.S. federal tax laws.

Nonqualified Options

A participant will not recognize taxable income upon the grant of a non-qualified stock option, but will have taxable income at the time of exercise equal to the excess of the fair market value of the shares on the date of exercise over the exercise price. We are entitled to a tax deduction for the same amount at the same time.

Incentive Options

A participant will not recognize taxable income upon the grant of an incentive stock option and also will not recognize income for federal income tax purposes at the time of exercise, but in some circumstances may be subject to alternative minimum tax as a result of the exercise. If the participant does not dispose of the shares acquired pursuant to an incentive stock option before the later of two years from the date of grant or one year from the date of exercise, any gain or loss realized on a subsequent disposition of the shares will be treated as a long-term capital gain or loss. Under these circumstances, we will not be entitled to any deduction for federal income tax purposes. If the participant fails to hold the shares for that period, the disposition is treated as a disqualifying disposition requiring the participant to recognize taxable income equal to the excess of the fair market value on the exercise date over the exercise price (but in most cases not more than the gain realized on the disposition). Any additional amount realized upon the disposition is taxable as long-term or short-term capital gain. If a disqualifying disposition occurs, we will be entitled to a tax deduction equal to the ordinary income amount the participant recognizes.

SARs

A participant will not recognize taxable income upon the grant of a stock appreciation right. Upon the exercise of

a stock appreciation right the participant must recognize taxable income equal to the amount of cash or the fair market value of the shares received on exercise, and we are entitled to a corresponding tax deduction in the same amount.

Restricted Stock

A participant will not recognize taxable income upon the receipt of an award of restricted stock (unless the participant elects to accelerate the income under Section 83(b) of the Internal Revenue Code). When the restrictions lapse, the participant will recognize taxable income in an amount equal to the excess of the fair market value of the shares at that time over the amount, if any, paid for the shares. We will be entitled to a corresponding tax deduction. Dividends on restricted stock accumulated during the restriction period that are paid to the participant at the end of the restricted period will also be compensation income to the participant and will be deductible as compensation expense by us.

Cash Awards

An individual who receives a cash award will recognize ordinary income subject to withholding for federal income tax purposes at the time the cash is received (or, if earlier, the date the cash is made available to the individual). We will be entitled to a deduction for the amount of the cash award at such time.

Performance Awards

A participant will not recognize taxable income upon the grant of a performance award, but will recognize taxable income at the time the award is paid equal to the amount of cash paid or the value of shares delivered, and we will be entitled to a corresponding tax deduction.

Limitations on the Company’s Compensation Deduction

Section 162(m) of the Internal Revenue Code limits the deduction that the Company may take for compensation payable to certain officers of the Company to the extent that compensation paid to any such officer for the year exceeds $1,000,000, but not counting any compensation that is performance-based. The 1992 Plan has been designed so that awards of nonqualified options and incentive options and SARs may qualify as performance- based compensation for this purpose. In addition, awards

of restricted stock and cash awards that are designed to

 

 

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   Approval of Amendment and Restatement of 1992 Plan (Proposal 4)

 

satisfy the requirements for performance awards are intended to qualify as performance-based compensation for this purpose.

Section 280G of the Internal Revenue Code limits deductions for compensation payable to certain individuals if the compensation constitutes an “excess parachute payment.” Accelerated vesting or payment of awards under the 1992 Plan upon a change in

ownership or control of the Company could result in excess parachute payments. A disqualified individual receiving an excess parachute payment is subject to a 20 percent excise tax on the amount of the payment.

Our Board recommends that stockholders vote FOR the approval of the proposed amendment and restatement of our 1992 Plan.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

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   Approval of Amendment to Certificate of Incorporation (Proposal 5)

 

Approval of Amendment to Certificate of Incorporation (Proposal 5)

 

Our Board has approved, and recommends your approval of, an amendment to the Company’s Certificate of Incorporation to add a new Article which would provide that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or its stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (d) any action asserting a claim governed by the internal affairs doctrine, except for any such action in which the Court of Chancery in the State of Delaware concludes that an indispensable party is not subject to the jurisdiction of the Delaware courts or any such action in which a federal court has assumed exclusive jurisdiction of a proceeding.

The Board is aware that certain proxy advisors, and even some institutional holders, take the view that they will not support an exclusive forum clause until the company requesting it can show it already has suffered material harm as a result of multiple stockholder suits filed in different jurisdictions regarding the same matter. As a Company we have maintained strong governance practices, many of which are described in this Proxy Statement, including a highly independent board that is elected annually, a majority vote standard in uncontested director elections, a separate and empowered Lead Independent Director, the absence of a “poison pill” and a comprehensive risk management program. In light of those practices the Board believes that it is more prudent to take preventive measures before the Company and almost all of its stockholders are harmed by the increasing practice of lawsuits being filed in plaintiff’s favorite jurisdictions, not after.

The Board believes that our stockholders will benefit from having intra-company disputes litigated in the Delaware Chancery Courts. Although some plaintiffs might prefer to litigate matters in a forum outside of Delaware because another court may be more convenient or viewed as being more favorable to them (among other reasons), the Board believes that the benefits to the Company and its non-filing stockholders outweigh these concerns. Delaware offers a system of specialized Chancery Courts to deal with corporate law questions, with streamlined procedures and processes

that help provide relatively quick decisions. This accelerated schedule can limit the time, cost and uncertainty of litigation for all parties. These courts have developed considerable expertise in dealing with corporate law issues, as well as a substantial and influential body of case law construing Delaware’s corporate law and long-standing precedent regarding corporate governance. This provides stockholders and the Company with more predictability regarding the outcome of intra-corporate disputes. In addition, adoption of this amendment would reduce the risk that the Company could be involved in duplicative litigation in more than one forum, as well as the risk that the outcome of cases in multiple forums could be inconsistent, even though each forum purports to follow Delaware law. This amendment gives the Board the flexibility to consent to an alternative forum in the appropriate instances.

Although exclusive jurisdiction provisions such as is proposed here are becoming increasingly common, and we know of no reason a court in another state would not be willing to enforce its terms, we cannot be sure that such a court would enforce the provision and transfer any covered proceeding to the Delaware courts.

The affirmative vote of the holders of a majority of our outstanding shares of common stock is required for approval of the proposed amendment to our Certificate of Incorporation. Abstentions will have the same effect as votes against approval of the proposed amendment. Shares of our common stock represented by executed but unmarked proxies will be voted for the proposed amendment.

If this amendment is approved by our stockholders, it will become effective upon the filing of a certificate of amendment with the Delaware Secretary of State, which we intend to do promptly following action by stockholders at the 2013 annual meeting. If this amendment is not approved by our stockholders, the certificate of amendment will not be filed with the Delaware Secretary of State. A copy of the proposed amendment is attached to this Proxy Statement as Appendix C.

Our Board recommends that stockholders vote FOR the approval of the proposed amendment to the Certificate of Incorporation.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

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   Approval of Amendment to By-Laws (Proposal 6)

 

Approval of Amendment to By-Laws (Proposal 6)

 

Our Board has approved, and recommends your approval of, an amendment to the Company’s By-Laws to (a) clarify that broker non-votes and abstentions count towards a quorum but are not considered a vote for or against a proposal, (b) allow the Board to fix separate record dates for determining stockholders entitled to notice of, and to vote at, meetings, and (c) increase the age after which directors will not be eligible to be nominated for election from 70 to 75 years. A copy of the proposed amendment to our By-Laws is attached to this Proxy Statement as Appendix D.

Our Certificate of Incorporation expressly authorizes our Board to approve and enact amendments to our By-Laws and, consequently, stockholder approval of this proposal to amend our By-Laws is not required. Nevertheless, our Board values the opinions expressed by our stockholders and believes it is appropriate to present the proposed changes to our By-Laws to our stockholders for approval. If the proposed amendment to our By-Laws is not approved by our stockholders, our Board will not proceed with enactment of the amendment and, instead, will consider the outcome of the vote and reassess the proposed changes to our By-Laws at a later date.

Broker Non-Votes and Abstentions

Under the NYSE rules, brokers are prohibited from exercising discretionary authority to vote on “non-routine” items submitted at stockholder meetings when they have not received instructions from beneficial owners of shares of our common stock. In that instance, the beneficial owner of the shares may instruct the broker on how to vote those shares. However, when no instructions are received from beneficial owners with respect to such items (so-called “broker non-votes”), the shares they hold will have no effect on the vote.

The Company’s By-Laws specifically state that “abstentions” and “broker non-votes” will not be counted as a vote cast either “for” or “against” the election of a director of the Company. However, the By-Laws do not specify how abstentions and broker non-votes will affect the vote on other matters. The proposed revision to Article II, Section 9 of our By-Laws will resolve this ambiguity and specifically state that abstentions and broker non-votes will have no effect on the vote, regardless of the matter being considered.

 

Dual Record Dates

Companies typically set a single record date for determining stockholders entitled to receive notice of, and to vote at, a meeting. Because the SEC’s proxy rules generally require proxy materials to be distributed to stockholders several weeks in advance of a meeting, stockholders as of the record date may have sold their shares by the time of the meeting, creating a mismatch between voting rights and economic interest. To address this issue, Delaware law (which governs many public companies) was amended in 2009 to permit separate record dates for notice and voting.

The proposed revision to Article VII, Section 5 of our By-Laws would provide the Board the option of selecting both (a) an initial “notice” record date for the purpose of giving notice of the meeting to those stockholders owning shares on the initial date (which would be a date currently considered the “record date”) and then (b) a later “voting” record date (which could be a later date occurring before the date of the meeting) for the purpose of determining which stockholders would actually be entitled to vote at the meeting. Both dates would be identified to our stockholders in the initial notice of the stockholders meeting.

Director Mandatory Retirement Age

Article III, Section 1(b) of our By-Laws currently provides that a director candidate will not be eligible for election to our Board after his or her 70th birthday. Although the Board continues to believe that a mandatory retirement age for directors is appropriate, it recognizes that people are living longer, more productive lives than ever before, and therefore believes that a five-year increase in the maximum age of eligibility, from 70 years to 75 years, is appropriate. The Board believes that this revision will allow highly qualified and capable directors who have been able to develop, over a period of time, increasing insight into the Company and its operations, to provide ever more valuable advice to the Board as a whole.

We are requiring the affirmative vote of the holders of a majority of shares of common stock represented in person or by proxy and entitled to vote for approval of the proposed amendment to our By-Laws. Shares of our common stock represented by executed but unmarked proxies will be voted for the proposed amendment.

Our Board recommends that stockholders vote FOR the approval of the proposed amendment to the Company’s By-Laws.

 

 

Noble Energy, Inc. 2013 Proxy Statement

 

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   Compensation Discussion and Analysis

 

Compensation Discussion and Analysis

Introduction

 

This Compensation Discussion and Analysis provides you with a detailed description of our executive compensation philosophy and program, the compensation decisions our Compensation Committee has made under that program and the factors considered in making those decisions. It focuses on the compensation of our Named Executive Officers for 2012, who were:

 

Name    Title

Charles D. Davidson

   Chairman and Chief Executive Officer

Kenneth M. Fisher

   Senior Vice President and Chief Financial Officer

David L. Stover

   President and Chief Operating Officer

Rodney D. Cook

   Senior Vice President — International

Susan M. Cunningham

   Senior Vice President — Exploration

How Pay is Tied to Company Performance

 

 

Our goal continues to be to link compensation strongly to performance through financial incentives that are tied to the Company’s operational and financial results. 2012 was another strong year for the Company. The Company’s total stockholder return for 2012 was 9%, which was the seventh highest total stockholder return among our 15-company compensation peer group for that period. Our cumulative stockholder return for the past three fiscal years was 47%.

We delivered significant growth in 2012. Expansion of our horizontal Niobrara and Marcellus Shale developments resulted in a 24% increase in Wattenberg (DJ Basin, Colorado) production and a fourfold increase in Marcellus Shale (Pennsylvania and West Virginia) production. We realized further production increase from major new developments at Aseng (offshore Equatorial Guinea) and Galapagos (deepwater Gulf of Mexico), which came on line in 2011 and 2012, respectively. We moved forward on our major development projects, each of which will yield significant new production in future years; discovered new resources at Big Bend in the deepwater Gulf of Mexico and Carla, offshore Equatorial Guinea; and farmed into new opportunities offshore the Falkland Islands and Sierra Leone. Finally, we enhanced our portfolio with selective divestitures of non-core, onshore U.S. and North Sea properties, and maintained our strong balance sheet.

2012 operational and financial highlights include:

 

   

Net income over $1.0 billion (including $965 million from continuing operations), as compared with $453 million (including $412 million from continuing operations) for 2011;

 

   

total sales volumes from continuing operations of 239 MBoe/d, a 12% increase as compared with 2011;

 

   

year-end proved reserves of 1.2 BBoe, a decrease of 2% from year-end 2011;

 

   

increased DJ Basin total sales volumes to 77 MBoe/d net, with horizontal production contributing 28 MBoe/d net; and

 

   

Marcellus Shale production grew to 92 MMcfe/d, net, as compared with 19 MMcfe/d net in 2011.

Our 2012 operational and financial results, along with the individual performance of our executive officers, served as key factors in determining compensation for 2012, including:

 

   

In 2012 our Compensation Committee decided to increase the base salaries of our Named Executive Officers by an average of 3.7%, taking into account the results of data provided by our compensation consultant and each executive’s scope of responsibilities.

 

   

Production, relative controllable unit costs and discretionary cash flow were the performance-based measures for the quantitative component of our

 

 

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   Compensation Discussion and Analysis

 

   

short-term incentive plan. The Company’s performance with respect to each of these metrics, along with other qualitative performance-based measures described below, resulted in the payment of annual cash incentive awards at above-target levels for our Named Executive Officers.

 

   

Long-term incentive compensation continues to constitute a substantial portion of the compensation for each of our Named Executive Officers, comprised of equity grants of stock options and awards of restricted stock. Grants and awards were made to our Named Executive Officers in 2012,

   

taking into account the Company’s relative three-year performance versus our compensation peer group on measures such as total stockholder return, debt-adjusted per share production growth and reserve replacement.

We encourage you to read this Compensation Discussion and Analysis for a detailed discussion and analysis of our executive compensation program, including information about the 2012 compensation of our Named Executive Officers and the link between compensation and Company performance.

 

 

Enhancements to Compensation Program for 2013

 

 

We continue to seek ways to enhance our executive compensation program to ensure that it remains linked to Company performance, and are implementing a number of changes beginning in 2013:

 

   

Performance criteria are being applied to a portion of the restricted stock awarded under our Long-Term Incentive Plan, with vesting of that portion based on our total stockholder return relative to our compensation peer group for the three year period following the year of the award.

 

   

Relative total stockholder return will also be added as a fourth performance measure under the Company’s Short-Term Incentive Plan, with the

   

quantitative nondiscretionary component of the plan increasing from 36% to 60% of the total payout calculation and allocated 15% each to production, discretionary cash flow, relative controllable unit costs and relative total stockholder return.

 

   

Our Code of Business Conduct and Ethics has been amended to allow our Compensation Committee or Board to recoup or “clawback” compensation in cases involving restatement of financials or oil and gas reserves, or material noncompliance with our codes of ethics.

 

   

Adjustments have been made to our compensation peer group to ensure that it continues to be relevant.

 

 

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   Compensation Discussion and Analysis

 

Relationship between Company Performance and Chairman and Chief Executive Officer Compensation

Our compensation program is designed to link compensation strongly to performance through financial incentives that are tied to the Company’s operational and financial results. The following illustrates the directional relationship between Company performance, based on several key metrics, and the total direct compensation (including salary, bonus, stock and option awards and non-equity incentive plan compensation) of our Chairman and CEO from 2010 to 2012. These key metrics — production, relative controllable unit costs and discretionary cash flow — were chosen because we believe that they correlate to long-term stockholder value.

 

Production

(MBoe/d)

 

Controllable Unit Costs

(percentage/tier relative

to compensation

peer group)

LOGO   LOGO

Discretionary Cash Flow(1)

(Billions)

 

Chairman and CEO Total Direct Compensation

(Millions)

LOGO   LOGO

 

 

 

1 

Non-GAAP results. See “Non-GAAP Financial Measures” in Appendix A to this Proxy Statement for reconciliation to GAAP results.

 

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       Compensation Discussion and Analysis

 

Five-Year Total Stockholder Return

 

The following chart shows how a $100 investment in the Company’s common stock on December 31, 2007 would have grown to $134.52 on December 31, 2012, with dividends invested quarterly, for those who wish to consider total stockholder return when evaluating executive compensation. The chart also compares the total stockholder return on the Company’s common stock

to the same investment in the S&P 500 Index and the Company’s compensation peer group over the same period, with dividends reinvested quarterly. As illustrated below, the Company’s common stock outperformed both the S&P 500 and the Company’s compensation peer group during this period.

 

 

Comparison of Five-Year Cumulative Total Stockholder Return*

 

LOGO

 

Year Ended December 31,    2007      2008      2009      2010      2011      2012  

Noble Energy, Inc.

   $ 100.00       $ 62.51       $ 91.55       $ 111.73       $ 123.62       $ 134.52   

S&P 500

   $ 100.00       $ 63.00       $ 79.67       $ 91.67       $ 93.61       $ 108.59   

Old Peer Group

   $ 100.00       $ 62.91       $ 93.30       $ 105.49       $ 93.57       $ 93.54   

New Peer Group

   $ 100.00       $ 61.52       $ 88.30       $ 100.19       $ 97.29       $ 99.08   

 

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   Compensation Discussion and Analysis

 

Executive Compensation Practices

 

Below we highlight certain executive compensation practices, both what we do and what we don’t do, to provide a better understanding of our compensation program.

 

What We Do

þ  Pay for Performance - We tie pay to performance through financial incentives that are tied to the Company’s operational and financial results. A substantial portion of executive pay is not guaranteed. We set clear operational and financial goals for corporate and business unit performance and differentiate based on individual achievement.

þ  Review Tally Sheets - We review tally sheets for our executive officers prior to making annual executive compensation decisions.

þ  Mitigate Undue Risk - We mitigate undue risk associated with compensation, including adopting a clawback provision, setting multiple performance measures and targets and maintaining robust Board and management processes to identify risks. We do not believe any of the Company’s compensation programs create risks that are reasonably likely to have a material adverse impact on the Company.

þ   Reasonable Post-Employment/Change in Control Provisions - We believe we have reasonable post-employment and change in control arrangements that are generally structured to apply to executive officers in the same manner as the broader employee population.

þ  Modest Perquisites - We provide only modest perquisites that have a sound benefit to the Company’s business.

þ   Stock Ownership Guidelines - We have adopted stock ownership guidelines, which all Named Executive Officers exceed.

þ  Regular Review of Share Utilization - We evaluate share utilization by reviewing overhang levels (dilutive impact of equity compensation on our stockholders) and annual run rates (the aggregate shares awarded as a percentage of total outstanding shares).

þ  Independent Compensation Consulting Firm - Our Board and its committees benefit from the use of an independent compensation consulting firm that provides no other services to the Company.

 

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   Compensation Discussion and Analysis

 

What We Don’t Do

x  No Employment Contracts - We do not have employment contracts for the Chairman and CEO or other Named Executive Officers.

x   No Inclusion of the Value of Equity Awards in Pension or Severance Calculations

x  No Personal Aircraft Use

x  No Separate Change in Control Agreements for Incoming Executive Officers (although Messrs. Davidson and Stover and Ms. Cunningham have pre-existing separate Change in Control Agreements).

x  No Excise Tax Gross-Ups Upon Change in Control

x  No Repricing Underwater Stock Options

 

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   Compensation Discussion and Analysis

 

Results of 2012 Advisory Vote to Approve Executive Compensation

 

At the 2012 Annual Meeting of Stockholders, we held our second annual advisory vote on executive compensation. Over 90% of the votes cast were in favor of this advisory proposal. The Compensation Committee considered this to be a favorable outcome and believes it conveyed our stockholders’ support of the Compensation Committee’s decisions and the existing executive compensation program. As a result, the Compensation Committee made no material changes in the structure of the program or pay for performance

philosophy for 2012. The committee nonetheless continues to seek ways to enhance our executive compensation program to ensure it remains linked to Company performance and has implemented the changes previously noted for 2013. At the 2013 Annual Meeting of Stockholders, we will again hold an annual advisory vote to approve executive compensation (page 26), and the Compensation Committee will continue to consider the results from this year’s and future advisory votes on executive compensation.

 

 

Determining Executive Compensation

 

 

Our executive compensation program is overseen by our Compensation Committee, with input from our management and outside compensation consultant.

Role of Compensation Committee

Membership

Our Board appoints our Compensation Committee members and Chair, and these appointees continue to be members until their successors are elected and qualified or until their earlier resignation or removal. Any member of our Compensation Committee may be removed, with or without cause, by our Board. Our Governance Committee, after consultation with our Lead Independent Director, makes recommendations to our Board with respect to the appointment of Board members to all of its committees considering, in the case of our Compensation Committee, criteria such as experience in compensation matters, familiarity with our management and other key personnel, understanding of public company compensation issues, time availability necessary to fulfill committee responsibilities and independence and other regulatory requirements. No member of our Compensation Committee participates in any of our employee compensation programs, and our Board has determined that none of our Compensation Committee members has any material business relationship with us.

Independence

We believe that these membership criteria are met by Kirby L. Hedrick, Jeffrey L. Berenson, Edward F. Cox and Thomas J. Edelman, who currently serve on our Compensation Committee and did so throughout 2012. Each has been determined by our Board to meet the NYSE standards for independence, and is a “Non-Employee Director” as defined in Rule 16b-3 under the Exchange Act and an “outside director” as defined for purposes of Section 162(m) of the Internal Revenue Code.

Meetings

Our Compensation Committee’s meeting schedule is set annually and meeting agendas are based on an annual calendar of recurring agenda items approved by the committee. The meeting agendas may include additional items as determined by the committee in its discretion, and the committee may also hold special meetings. Committee meeting agendas are reviewed by our Lead Independent Director and approved by the committee Chair. Our Compensation Committee held 6 meetings during 2012.

Delegation of Authority

In an effort to minimize the need for special meetings of our Compensation Committee to address routine compensation matters involving non-executive-officer employees, the committee has delegated limited authority to our CEO to (a) grant stock options and award restricted stock to new hires for employment inducement purposes, (b) approve cash retention payments, and (3) make adjustments related to change of control severance plan participation resulting from organizational changes affecting employees not participating in the Change of Control Severance Plan for Executives. Actions taken by our CEO under these delegations are required to be reported to our Compensation Committee at its next regularly scheduled meeting and the committee reviews the appropriateness of the delegation on an annual basis.

Role of Management

Our CEO and our Vice President — Human Resources generally attend Compensation Committee meetings and provide input to the committee with respect to executive compensation, key job responsibilities, performance objectives and compensation trends. They also coordinate with the compensation consultant to ensure that committee requests regarding executive compensation matters are addressed. We believe that our CEO and Vice President —

 

 

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Human Resources are best qualified to support the committee in these areas given their understanding of our business and personnel, compensation program and competitive environment. In this supporting role they may provide information and recommendations relevant to establishing performance measures, weightings, targets, and similar items that affect compensation. Our CEO is closely involved in assessing the performance of our executive officers and advising our Compensation Committee in that regard, and may request that our Compensation Committee schedule special meetings to address executive compensation matters. Our CEO and our Vice President — Human Resources may also communicate directly with the compensation consultant in this supporting role. Our Compensation Committee is not obligated to accept our management’s recommendations with respect to executive compensation matters, and meets in executive session to discuss such matters outside of the presence of our management. During 2012, the committee held five executive sessions.

Role of Compensation Consultant

Our Compensation Committee may retain, at our expense, independent compensation consultants it deems advisable to assist it in executive compensation matters. The committee meets with the compensation consultants, within and outside the presence of our management, to review findings based on market research regarding executive compensation and considers those findings in determining and making adjustments to our executive compensation program.

Our Compensation Committee continued to retain Meridian Compensation Partners, LLC (“Meridian”) as its independent consultant on executive compensation for 2012. The committee considered a number of traits in making this decision.

 

Compensation Consultant Traits

 

     

Effective past performance

 

 

     

Provides services only to our Board and its committees

 

 

     

Familiar with our executive compensation program and the programs of our compensation peer group

 

 

     

Offers a comprehensive range of services associated strictly with executive compensation

 

 

     

No conflicts of interest

 

 

     

Maintains policies and procedures designed to avoid conflicts of interest

 

 

In 2012, the compensation consultant was responsible for reviewing our executive compensation program and providing comparative market data and trends on compensation practices and programs based on an analysis of our peer companies and other factors. Representatives of the compensation consultant participated in all scheduled meetings of the committee, including executive session without management, and provided input on prevailing trends. The compensation consultant also provided consulting services to our Governance Committee in 2012 in reviewing our non-employee director total compensation. A breakdown of fees paid to the compensation consultant for fiscal years 2012 and 2011 is set out below.

 

      2012      %      2011      %  

Executive Compensation Fees(1)

   $ 142,512         85       $ 137,557         85   

Director Compensation Fees(2)

     25,149         15         24,275         15   

Total

   $ 167,661         100       $ 161,832         100   

 

(1) Services rendered in 2012 and 2011 include evaluating executive officer total compensation, including base salary, short- and long-term incentive compensation and post-employment compensation, and addressing compensation peer group comparisons and trends.
(2) Services rendered in 2012 and 2011 include reviewing non-employee director total compensation, including annual retainer and meeting fees and equity compensation, and addressing compensation peer group comparisons and trends.

Compensation Considerations

Compensation Benchmarking

When making compensation decisions, we also evaluate the compensation of our CEO and other executive officers relative to that paid to similarly-situated executives at companies that we consider to be our peers — this is often referred to as “benchmarking.” We consider benchmarking data in determining executive officer base salary, our short-term incentive plan target bonus percentage factors, equity grant levels and the overall structure of our compensation program.

Our Compensation Committee maintains a compensation peer group of companies, which consists of larger and smaller publicly-traded oil and gas exploration and production companies that have similar operating and financial characteristics to ours. Our Compensation Committee, with the assistance of our CEO and the compensation consultant, reviews the composition of the peer group annually to ensure that companies remain relevant for comparative purposes.

 

 

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There are a number of factors considered in determining our compensation peer group:

 

   

Base of operations (U.S. versus overseas headquarters);

 

   

similarity of operations;

 

   

relevant market valuation;

 

   

stock exchange membership;

 

   

business profile (including focus on upstream exploration and production activities);

 

   

production and reserves; and

 

   

the identity and operations of companies that consider us to be one of their peers.

Taking these factors into account, our Compensation Committee approved the following compensation peer group for 2012:

 

 

2012 Compensation Peer Group

 

        Anadarko Petroleum

 

       Apache Corp.

 

        Cabot Oil and Gas Corp.

 

       Chesapeake Energy Corp.

 

        Continental Resources, Inc.

 

       Devon Energy Corp.

 

        EOG Resources, Inc.

 

       Marathon Oil Corp.

 

        Murphy Oil Corp.

 

       Newfield Exploration Company

 

        Pioneer Natural Resources Company

 

       Plains Exploration and Production Company

 

        Range Resources Corp.

 

       Southwestern Energy Company

 

Following a review of the compensation peer group on January 29, 2013, for 2013 our Compensation Committee removed Plains Exploration and Production Company from the peers listed above given its pending acquisition by another company, and added Hess Corporation, a U.S. company listed on the NYSE with a balance of projects similar in size and scope to ours.

Tally Sheets

When making executive compensation decisions, our Compensation Committee analyzes the comparative

total compensation of our executive officers. To facilitate this analysis, our CEO and our Vice President — Human Resources work with the compensation consultant to provide the committee with comparative tally sheets for our executive officers that include base salary and short-term incentive plan and long-term incentive plan elements; also providing separate summary information on post-employment compensation trends, benefits and other relevant factors. This information reflects recent publicly available information and other market data. We believe that it provides our Compensation Committee with a sufficient basis to analyze the comparative total compensation of our executive officers. In addition, the committee meets with the compensation consultant for related discussion.

Internal Pay Equity

While comparisons to compensation levels at companies in our compensation peer group are helpful in assessing the overall competitiveness of our executive compensation program, we believe that our program must also be internally consistent and equitable. In its review of total compensation, our Compensation Committee considers the relationship between our CEO’s total compensation and that of our other executive officers. The committee has not adopted a formal policy regarding internal pay equity, but for 2012 concluded that CEO compensation was equitable compared to that of our President and Chief Operating Officer (“COO”) and other Named Executive Officers in recognition of the CEO’s broad responsibility and accountability for the Company’s strategy and operations, compliance and controls, investor and government relations and role as Chairman of our Board. The 2012 total compensation of our COO was likewise found to be equitable compared to that of the next Named Executive Officers in recognition of the COO’s broad responsibility for the Company’s worldwide exploration and production operations, our Compensation Committee’s views on that position relative to the other Named Executive Officer positions and the fact that two of the other Named Executive Officers report directly to the COO. Internal pay equity was also considered by our Compensation Committee with respect to the Company’s Chief Financial Officer (“CFO”) and other Named Executive Officers.

 

 

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What We Pay and Why: Elements of Compensation

 

We have three elements of total direct compensation: base salary, our short-term incentive plan and our long-term incentive plan. The following table summarizes these three components, as well as our post-employment compensation programs.

 

Component   Base Salary   Short-Term Incentive
Plan
  Long-Term Incentive
Plan
  Post-Employment
Compensation
Programs

Type

 

       cash

 

       annual cash bonus

 

       annual stock
option grant and
restricted stock award

 

       qualified and
non-qualified
plans

Purpose

 

       attract and retain high quality individuals

       deliver baseline cash compensation commensurate with experience and expertise in role

 

       motivate
performance and
compensate
employees for
annual  contributions

 

       attract, retain and
motivate high
quality individuals
through long-term
compensation
opportunities

        align long-term
interests of
employees and
stockholders

 

       retain  high
quality
individuals

       provide financial security for unforeseen personal financial risks

       provide tax-efficient means to save for retirement

Structure

 

        market-based,
considering salary
range for job grade
and responsibilities

 

        performance-based
quantitative and
qualitative factors

 

       equity grants of stock options with 10 year terms and restricted stock vesting over
3 years (performance component in 2013 awards)

 

       plans and programs with broad eligibility

Base Salary

 

We pay base salaries to attract and retain high quality individuals and to provide a fixed base of cash compensation. We assign a job grade to each salaried position in the Company, including the Named Executive Officers. The salary range for each job grade is informed by a survey of our compensation peer group and broader industry pay practices for the various jobs within the job grade. These ranges are used as guidelines in determining individual salaries.

Base salaries for the Named Executive Officers are individually determined by the Compensation Committee after consideration of:

 

   

Breadth, scope and complexity of the role;

 

   

fairness (employees with similar responsibilities, experience and historical performance are treated comparably);

 

   

current compensation; and

 

   

individual performance.

We do not set the base salary of any employee, including any Named Executive Officer, at a certain multiple of the salary of another employee. There are two situations that may warrant a change to base salary: annual adjustments and promotions or changes in role.

Annual Adjustments

All employees’ base salaries are reviewed annually for possible adjustments. Increases in base salary are not automatic or guaranteed. Increases for the Named Executive Officers were approved on October 22, 2012 and effective November 1, 2012 and were as follows:

 

   

Mr. Davidson received no increase;

   

Mr. Fisher received a 5.2% increase;

   

Mr. Stover received a 3.6% increase;

   

Ms. Cunningham received a 4.0% increase; and

   

Mr. Cook received a 5.5% increase.

The Compensation Committee believes the increases in the base salaries of the Named Executive Officers were appropriate based on the Company’s strong performance and the considerations in determining base salary discussed above.

 

 

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Promotions or Changes in Role

 

Base salary may also be increased to recognize additional responsibilities resulting from a change in an employee’s role or a promotion to a new position. Increases are not

guaranteed for a promotion or change in role. No such increases were made to Named Executive Officers’ base salaries in 2012.

 

 

Short-Term Incentive Plan

Our short-term incentive plan (“STIP”) is a performance-based annual incentive bonus plan that is payable in cash and available to all of our full-time employees, including our Named Executive Officers. It provides a performance-based incentive, beyond base salary, that is designed to motivate performance and compensate employees for the value of their annual contributions. In addition, given its annual nature and quantitative and qualitative components, the STIP has flexibility to respond to changing market conditions.

The target STIP bonus for an employee is the employee’s base salary at year-end multiplied by the percentage factor assigned to the employee’s salary classification. The target bonus percentage factors for our Named Executive Officers for 2012 were as follows:

 

Mr. Davidson     110
Mr. Stover     100
Mr. Fisher     80
Ms. Cunningham     75
Mr. Cook     75

Payout under the plan may range from 0 to 2.5 times the aggregate target bonus pool for all employees. No Named Executive Officer received a STIP bonus in excess of 2.5 times such officer’s target bonus percentage factor for 2012.

In January of each year, our Compensation Committee approves annual STIP quantitative performance-based measures, including their relative weighting and specific targets. The measures, weighting and targets are communicated to our executive officers at that time. The 2012 quantitative measures weighting, targets and results were as follows:

Quantitative Measures (36% of total)

 

Measure   Weight   Target(1)   Result(1)

Production

  14%   254.2 MBoe/d   250.1 MBoe/d

Relative Controllable Unit

Costs

  14%   50th Percentile of Peers  

4th out of 15

Discretionary Cash Flow

  8%   $2.794 billion   $2.954 billion(2)

 

  (1) The targets for 2012 were not adjusted for discontinued operations and other divestitures that occurred during the year. Consequently, results presented have not been adjusted to reflect the sale of our North Sea properties, sales of certain properties in the Permian Basin, the Mid-Continent area and Kansas, or any other divestitures that occurred during 2012.

 

  (2) Non-GAAP result. The Company defines discretionary cash flow as net cash provided by operating activities before changes in working capital, cash exploration costs, current tax expense of earnings adjustments and certain other adjustments.

 

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Qualitative Measures (64% of total)

The Compensation Committee also considered the Company’s results in the following financial and operational areas:

 

Measure      Result
Additions to proved oil and natural gas reserves      121.3 MMBoe (net) added
Safety and environmental performance      Company record low incident rate (combined Company and contractor)
Financial controls      Balance sheet maintained, record liquidity of $5.4 billion
Regulatory compliance      Continued enhancement of compliance and ethics program
Progress on major projects      Tamar development (Israel) on target for 2013 start-up; Alen (West Africa), Marcellus Shale wet gas and Niobrara projects accelerated
Divestiture program      Over $1 billion proceeds received
Relative total stockholder return      9%, 7th out of 15 among our compensation peer group

 

For 2012, the Compensation Committee decided to continue to exclude reserve additions from the STIP quantitative measures and instead consider them as a qualitative measure. This allows the committee to better evaluate the Company’s performance in light of widely variable reserve bookings that could occur as a result of the Company’s sanction of, or failure to sanction, major projects in the deepwater Gulf of Mexico, Israel and West Africa.

Our Compensation Committee approves the target for each quantitative measure after considering prior year financial and operational results, the Board-approved budget, planned projects and capital spending plans for the upcoming year. Our Compensation Committee also considers that the achievement of those targets can be significantly affected by availability of labor and equipment, acquisitions and sales, weather, product demand and pricing, competition, regulatory changes and other industry conditions that cannot be determined with certainty at the time the targets are set. For example, new and proposed regulations regarding hydraulic fracturing could impact future onshore drilling plans. We believe that our targets are set aggressively in light of these variables and require achievement of significant performance.

The targets for the annual STIP quantitative measures may include certain adjustments that are not normally included in publicly reported results. For instance, the production target is reduced from reported production by discounting gas volumes sold at a lower price in Equatorial Guinea. In addition, the effects of any significant acquisitions or divestitures are excluded when

considering performance against the production and discretionary cash flow targets.

Payout curves were approved for each quantitative measure at the time targets were set, ranging from a factor of 0 to 2.5, with a 1.0 factor at each target. As shown above, the Company’s 2012 performance exceeded the target for discretionary cash flow, met the target for relative controllable unit costs and was slightly below target for production. Our Compensation Committee reviewed information provided by Company management on actual performance for each measure as applied to the measure’s payout curve to determine the bonus factor for that measure. Each bonus factor was then multiplied by the weighting for its respective measure, with the sum of the three bonus factors, as adjusted for weighting, yielding the STIP quantitative performance-based component. Our Compensation Committee likewise considered the Company’s favorable financial and operational results in areas such as those noted above in determining the qualitative component.

The sum of the quantitative and qualitative components was applied to the Company’s aggregate target bonus pool to determine our total bonus amount to be paid. This amount was then allocated between executive officers and other employees. In the case of executive officers, the committee considered the performance of the CEO as measured against operational and financial goals submitted by the CEO earlier in the year, as well as the CEO’s assessment of the performance of the other executive officers as measured against goals each submitted earlier in the year for his or her business unit or organization, and allocated the pool based on that

 

 

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assessment of individual performance and each executive officer’s respective target bonus percentage factor. A cash payout under the plan based on the Company’s 2012 performance occurred in February 2013.

The 2013 STIP quantitative performance-based measures, relative weighting and specific targets were approved by our Compensation Committee on January 23, 2013 and communicated to our executive officers. Our Compensation Committee elected to retain the three performance-based measures used in 2012 and add a fourth for relative total stockholder return, each with the same weighting but with different targets. Quantitative performance-based measures for 2013 will include production, relative controllable unit costs, discretionary cash flow and relative total stockholder return, each equally weighted at 15%. Proved reserve additions will continue to be considered by the committee in determining the qualitative component which, for 2013, will represent 40% of the STIP formula.

We believe that the approved targets for 2013 will be appropriately difficult to achieve since they will be affected by many of the same challenges and uncertainties as described above. While those targets are disclosed above in the context of historical 2012 performance, we believe that the disclosure of 2013 targets would result in competitive harm to us and are therefore omitted since (a) we are engaged in a highly competitive business, (b) we may pursue opportunities in areas without first publicly disclosing our intention to do so and (c) disclosure of these targets might enable our competitors to determine our strategic areas of interest and priorities throughout the year. We also do not believe that the disclosure of 2013 targets is material to an understanding of our 2012 executive compensation program as covered by this Proxy Statement.

Long-Term Incentive Plan

Our long-term incentive plan (“LTIP”) was approved by our Compensation Committee and adopted by our Board on January 27, 2004 and is designed to attract, motivate and retain individuals of high quality by:

 

   

Providing competitive long-term incentive compensation opportunities;

 

   

rewarding outstanding achievement by those who can most directly affect our performance and instill a sense of business ownership; and

 

   

aligning the interests of our employees with those of our stockholders so as to maximize long-term stockholder value creation.

Our Compensation Committee may make grants or awards of stock options, restricted stock and performance units under our LTIP. Stock options and restricted stock are granted and awarded under our 1992 Plan.

Approval of Grants

In approving grants, our Compensation Committee assesses the Company’s relative three-year performance versus our compensation peer group on measures such as total stockholder return, debt-adjusted per share production growth and reserve replacement. Other considerations include input from the CEO, market data provided by the compensation consultant, executive officer total compensation and internal pay equity. Grants for the CEO and other executive officers are approved by our Compensation Committee and discussed with our Board, outside the presence of the CEO and the other executive officers.

The regular Board and Compensation Committee meeting schedule for the upcoming year is set in April of the prior year, with regular Board meetings held in January, April, July, October and December. Our Compensation Committee meetings are usually held the day before each Board meeting. The timing of these meetings is not determined by executive officers and is usually in advance of the announcement of earnings. We do not time the release of material non-public information for the purpose of affecting the values of executive compensation. Our Compensation Committee may be aware of approximate earnings results at the time of making equity grant decisions, but it does not adjust the size or timing of grants to reflect possible market reaction.

Generally, annual stock option grants and restricted stock awards are approved at a January meeting of our Compensation Committee. Stock options and restricted stock are granted and awarded annually on February 1 (or the preceding business day if February 1 falls on a Saturday, Sunday or holiday). It is our policy to make grants and awards to executive officers and other employees at the same time. However, specific grants of stock options or awards of restricted stock may be approved at other regular or special meetings to recognize the completion of a significant transaction or project, a change in an employee’s responsibility or a specific achievement, or as an inducement to, or for the retention of, employment. No special grants were made to executive officers in 2012. We communicate grants to executive officers and other employees shortly after the date of approval, in accordance with our customary practices.

 

 

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Terms of Grants

Stock option grants represent the right to purchase shares of our common stock over a period of up to ten years at fair market value, as defined in the 1992 Plan, on the date of grant and upon such terms and conditions, consistent with the provisions of the plan, as are specified by our Compensation Committee at the time of grant. The 1992 Plan currently defines “fair market value” for grant purposes as (a) the closing sales price of our common stock on the NYSE on the date of grant with respect to grants and awards made on or after April 26, 2011 and (b) as the average of the reported high and low trading price of our common stock on the NYSE on the date of grant as to grants and awards made before April 26, 2011. If there was no reported sale on such grant date, then the fair market value is based on the last preceding date on which any reported sale occurred.

Stock options vest ratably over a three-year period and awards of restricted stock prior to 2013 vest 20% on the first anniversary of the award date, an additional 30% on the second anniversary of the award date and the remaining 50% on the third anniversary of the award date. Beginning with awards in 2013, performance criteria are being applied to the portion of restricted stock that will vest on the third anniversary of the award date, with the number of shares vesting adjusted for the Company’s relative total stockholder return ranking as a percentile versus our compensation peer group for the period beginning January 1 of the year of award and ending December 31 of the third year thereafter.

The performance vesting restricted stock will vest as shown in the chart below:

 

Company Percentile Rank

   Payout%

50th percentile or higher

   100%

25th percentile

   50%

Below 25th percentile

   0%

Holders of the performance-vesting restricted stock will also vest in additional shares of common stock in the event that the Company achieves a positive total shareholder return that is in excess of the 50th percentile. The number of additional shares that vest will range from 0% to 100% of the number of performance-vesting shares of restricted stock originally awarded, based on the following schedule: 50th percentile or less - 0%, 75th percentile - 50%, 90th percentile or above - 100%. For both performance-vesting restricted stock and

additional shares, if the percentile level of the Company’s total shareholder return falls between two levels indicated above, the amount vested will be determined on the basis of a straight-line interpolation between the two levels. Dividends (to the extent declared) paid on restricted stock will be equal to the amount paid to other stockholders but will be retained by the Company and will only vest and be paid if and when the restricted stock vests.

Stock Ownership Guidelines

Our Board has adopted stock ownership guidelines for our officers and non-employee directors that are set out in our Corporate Governance Guidelines. We believe that our stock ownership guidelines reinforce the alignment of the long-term interests of our executive officers, non-employee directors and stockholders. We also believe that they help discourage the taking of excessive business risks.

Each officer listed below is expected to own a number of our shares with a value that is a multiple of the officer’s current base salary and each non-employee director is expected to own a number of shares with a value that is a multiple of the director’s annual cash retainer, as follows:

 

Position    Multiple

Chief Executive Officer

   6.0X base salary

President

   3.0X base salary

Chief Financial Officer

   3.0X base salary

Other Senior Vice President

   2.5X base salary

Vice President

   2.0X base salary

Non-Employee Director

   5.0X annual cash retainer

Holding Requirement

Individuals not meeting these guidelines within a prescribed timeframe will be required to retain fifty percent (50%) of any net shares they subsequently acquire upon the vesting of restricted stock and/or the exercise of stock options until the required ownership multiple is met.

On December 5, 2012, our Compensation Committee and Governance Committee reviewed the holdings of our officers and non-employee directors, finding that all of our executive officers and non-employee directors were in compliance with the guidelines. This continues to be the case as of the date of this Proxy Statement.

 

 

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2012 Compensation of CEO

 

Our Compensation Committee, with input from our other independent directors, evaluates Mr. Davidson’s performance on an annual basis. This evaluation provides the basis for the determination of Mr. Davidson’s compensation. In addition to the operational and financial results previously discussed and as reported in our Form 10-K for the year ended December 31, 2012, other significant operational highlights for the Company during 2012 under Mr. Davidson’s leadership include:

 

   

Completion of the Noa and Pinnacles wells, offshore Israel, to mitigate the impact of Mari-B production decline;

   

significant increase in exploration drill-worthy inventory;

   

maintenance of the Company’s investment grade credit rating; and

   

issuance of the Company’s first ever Sustainability Report.

Mr. Davidson’s base salary as of January 1, 2012 was $1,125,000. Based on the results of our compensation consultant’s review of 2012 executive compensation, our Compensation Committee made no adjustment to Mr. Davidson’s base salary.

Mr. Davidson received a total STIP payment of $2,165,625 in February 2013, based on our Compensation Committee’s review of overall performance of the Company for 2012, as well as Mr. Davidson’s performance as measured against operational and financial goals for 2012 that he submitted earlier in the year. Mr. Davidson’s STIP payment for 2012 performance increased by 16.7% compared to 2011.

Mr. Davidson received grants and awards under our 1992 Plan of 94,268 stock options and 36,830 shares of restricted stock on February 1, 2012, based in part on market data from the compensation consultant, and considering our relative performance versus our compensation peer group, and Mr. Davidson’s leadership performance.

We believe that Mr. Davidson’s compensation level is consistent with the objectives of our compensation program, provides an appropriate mix of fixed and variable compensation, rewards leadership performance

by Mr. Davidson that produced some key results by the Company in 2012 and provides motivation for the future achievement of short- and long-term goals necessary to stockholder value creation. We also believe that it is internally consistent and equitable compared to our other executive officers in recognition of Mr. Davidson’s broad responsibility and accountability for the Company’s strategy and operations, compliance and controls, investor relations and role as Chairman of our Board.

2012 Compensation of Other Named Executive Officers

In determining the compensation of Messrs. Fisher, Stover and Cook and Ms. Cunningham for 2012, our Compensation Committee considered their respective roles, responsibilities and reporting within the Company; their respective contributions to the overall performance of the Company; the performance of their respective business units or organizations; comparisons to our compensation peer group; and internal pay equity.

Based on the results of the compensation consultant’s review of 2012 executive compensation, each of our other Named Executive Officers received an increase in base salary as our Compensation Committee determined that an increase was appropriate based on the median for their respective positions relative to our compensation peer group giving consideration to the scope of their respective responsibilities. Effective November 1, 2012, Mr. Fisher’s base salary was increased to $570,000, Mr. Stover’s base salary was increased to $710,000, Ms. Cunningham’s base salary was increased to $520,000, and Mr. Cook’s base salary was increased to $480,000.

After reviewing the overall performance of the Company for 2012 and the contributions to that performance of each non-CEO Named Executive Officer and his or her respective business unit or organization, our Compensation Committee approved the following STIP payments: Mr. Fisher — $789,919; Mr. Stover — $1,242,500; Ms. Cunningham — $675,588; and Mr. Cook — $623,620. We believe that these STIP payments are appropriate in light of the Company’s performance in 2012 and reflect the relative contributions of these executive officers, including Mr. Fisher’s leadership within the Company’s financial organization; Mr. Stover’s role in the growth of our domestic and international businesses; Ms. Cunningham’s role in our continued success in developing our exploration program; and Mr. Cook’s role in the progress made in our international development projects.

 

 

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On January 28, 2013, our Compensation Committee approved the following stock option grants and restricted stock awards under our 1992 Plan to our non-CEO Named Executive Officers:

 

Named Executive Officers    Stock Options      Shares of
Restricted Stock

  Kenneth M. Fisher

   25,901      15,111

  David L. Stover

   47,092      27,474

  Susan M. Cunningham

   21,780      12,705

  Rodney D. Cook

   21,191      12,363

In determining the level of these grants and awards, our Compensation Committee considered market data provided by our compensation consultant regarding our compensation program and appropriate long-term incentive grant levels in light of compensation peer group practices and our relative performance versus that group.

Post-Employment Compensation

Our post-employment compensation is provided under qualified and nonqualified defined benefit plans, qualified and nonqualified defined contribution plans, and either individual change of control agreements or, alternatively, a change of control plan. Through its various components, our post-employment compensation facilitates our efforts to retain individuals of high quality and support a long-standing internal culture of loyalty and dedication to our interests.

Qualified Defined Benefit Plan

 

Our qualified defined benefit plan (“Retirement Plan”) provides employees originally hired before May 1, 2006, which includes all of our Named Executive Officers except Mr. Fisher, with retirement income benefits commencing upon retirement after attaining the normal retirement age of 65 or upon early or deferred vested retirement after attaining age 55 and completing 5 years of vesting service. Early retirement reductions apply if retirement benefits are commenced prior to age 65. The

amount of an employee’s monthly Retirement Plan benefit will depend upon the employee’s final average monthly compensation, age and the number of his or her years of credited service (which is limited to a maximum of 30 years). Monthly Retirement Plan benefits commencing upon retirement after attaining the normal retirement age of 65 are calculated using the greater of the following two formulas:

 

 

Formula 1

   Formula 2
1.25% x final average monthly compensation x years of credited service (up to 30) + 0.50% x final average monthly compensation that exceeds Social Security covered compensation x years of credited service (up to 30)    2% x final average monthly compensation x years of credited service (up to 20)

 

Final average monthly compensation generally means the employee’s average monthly compensation from the Company for the 60 consecutive months prior to retirement that results in the highest average monthly compensation for the employee. The compensation taken into account for Retirement Plan purposes includes the employee’s salary and STIP payment. The annual amount of compensation that can be taken into account for Retirement Plan purposes is limited by the Internal Revenue Code. This annual compensation limit

is $250,000 for 2012 and $255,000 for 2013. The maximum annual benefit that may be paid to an employee under our Retirement Plan is also limited by the Internal Revenue Code. This maximum annual benefit beginning at age 65 is $200,000 for 2012 and $205,000 for 2013.

Our Compensation Committee reviewed our Retirement Plan in 2006 and concluded that an enhanced defined contribution plan would be better aligned with our

 

 

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compensation program objectives because it would offer employees more investment choices, be portable and be more cost-effective to the Company. Accordingly, beginning on May 1, 2006, our Retirement Plan was closed to new participants and new employees became eligible to instead receive an enhanced Company contribution in the qualified defined contribution plan described below. Employees originally hired before May 1, 2006, which include all of our Named Executive Officers except Mr. Fisher, continue to accrue benefits under the Retirement Plan.

We amended our Retirement Plan effective January 1, 2008 to allow existing plan participants to elect to receive a lump sum distribution upon separation from service. Lump sums are calculated using Internal Revenue Service mandated rates.

Nonqualified Defined Benefit Plan

Our nonqualified defined benefit plan (“Restoration Plan”) is an unfunded plan that provides the benefits under the Retirement Plan’s benefit formula that cannot be provided by the Retirement Plan because of the annual compensation and annual benefit limitations applicable to the Retirement Plan under the Internal Revenue Code. The amount of an employee’s monthly Restoration Plan benefit will depend upon the employee’s final average monthly compensation, age and the number of his or her years of credited service (which is limited to a maximum of 30 years). Existing plan participants were allowed to make a one-time election prior to January 1, 2008 to receive plan benefits in a lump sum payment upon separation from service, as permitted by the transition relief provisions of Internal Revenue Code Section 409A. Restoration Plan benefits are calculated using the same methodology utilized for our Retirement Plan. Employees originally hired before May 1, 2006, which include all of our Named Executive

Officers except Mr. Fisher, continue to accrue benefits under the Restoration Plan.

Qualified Defined Contribution Plan

Our qualified defined contribution plan (“Thrift Plan”) allows employees to make pre-tax contributions to the plan out of their basic compensation. For the purposes of the Thrift Plan, basic compensation generally means cash compensation, including overtime but excluding incentive payments, bonuses, allowances and other extraordinary remuneration. The amount of an employee’s basic compensation taken into account under the Thrift Plan cannot exceed the Internal Revenue Code limit, which is $250,000 for 2012 and $255,000 for 2013. The annual contribution made by an employee to the Thrift Plan cannot exceed 50% of his or her basic compensation and is limited to a maximum contribution amount specified under the Internal Revenue Code (which is $17,000 for 2012 and $17,500 for 2013, plus a catch-up contribution in each of those years of $5,500 for employees who are at least 50 years of age).

An employee’s pre-tax contributions (other than catch-up contributions) made to the Thrift Plan are matched by the Company on a dollar-for-dollar basis up to 6% of the employee’s basic compensation. In addition, beginning in 2006, the Company makes the following age-weighted contribution to the Thrift Plan for each participant whose initial employment date with the Company is on or after May 1, 2006 (which does not include any of our Named Executive Officers except Mr. Fisher) and who is employed by or on authorized leave of absence from the Company on the last day of the calendar year (or whose retirement, permanent disability or death occurred during such year while employed by or on authorized leave of absence from the Company):

 

 

  Age of Participant

  

Contribution Percentage for Portion of Basic Compensation Below

the FICA Taxable Wage

Base

  

Contribution Percentage for Portion of Basic Compensation Above

the FICA Taxable Wage

Base

Under 35

                   4%    8%

At least 35 but under 48

                   7%    10%

At least 48

                   9%    12%

 

The contributions made to our Thrift Plan by or for a participant are credited to accounts maintained for such participant under the plan. The amounts credited to a participant’s accounts are invested at the direction of the

participant in various investment fund options available under the Thrift Plan, including investment in shares of our common stock. The amounts credited to a participant’s accounts that are attributable to his or her

 

 

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   Compensation Discussion and Analysis

 

pre-tax contributions are immediately 100% vested. Amounts attributable to the Company’s matching contributions become 34% vested upon the completion of one year of service, 67% vested upon the completion of two years of service, and 100% vested upon the completion of three years of service. The amounts attributable to the Company’s age-weighted contributions become vested after three years of service. The amounts credited to a participant’s accounts become distributable upon the participant’s termination of employment with the Company, and certain amounts are available for loans, hardship distributions and in-service withdrawals.

Nonqualified Deferred Compensation Plan

Our nonqualified deferred compensation plan (“Deferred Compensation Plan”) allows executive officers, and certain other employees, to save for retirement in a tax-effective way at minimal cost to us. Under the Deferred Compensation Plan, participants are allowed to defer portions of their salary and bonus and to receive certain matching and age-weighted contributions that would have been made to our Thrift Plan if the Thrift Plan had not been subject to Internal Revenue Code compensation and contribution limitations. Under this unfunded program, amounts deferred by the participant are credited annually with interest at a rate equal to the greater of 125% of the 120-month rolling average of 10-year U.S. Treasury Notes or the 120-month rolling average of the prime rate as published in The Wall Street Journal.

Change of Control Arrangements

We have adopted change of control arrangements for our executive officers and certain other employees. These arrangements are intended to preserve morale and productivity and encourage retention in the face of the disruptive impact of an actual or rumored change of control of the Company. Based on information provided by our compensation consultant, we believe that these arrangements are common practice and align our executive officer interests with those of our stockholders by enabling our executive officers to consider corporate transactions that are in the best interest of stockholders without undue concern over whether the transactions may jeopardize their continued employment.

A change of control will be deemed to have occurred under our change of control arrangements if any of the following events occurs:

 

   

Individuals who constituted our Board on January 1, 2008 (or such other date as may be specified in

   

individual change of control agreements) (“Incumbent Board”) cease to constitute at least 51% of the Board, provided that any individual whose election was approved by a vote of at least a majority of the directors of the Incumbent Board will be considered a member of the Incumbent Board;

 

   

our stockholders approve a reorganization, merger or consolidation whereby the persons who were stockholders immediately prior to the reorganization, merger or consolidation do not immediately thereafter own at least 51% of the voting shares of the new entity;

 

   

our stockholders approve a liquidation or dissolution of the Company or a sale of all or substantially all of our assets to a non-related party; or

 

   

a new person or entity becomes the owner of at least 25% of our outstanding common stock or voting power in the Company.

We believe that these changes of control events are an accurate depiction of circumstances that could reasonably be expected to result in a material change in the leadership and direction of the Company, creating uncertainties among employees and executive officers in such areas as the continuity of management, continued employment opportunities, and our ability to execute existing programs.

All of our change of control arrangements include provisions regarding severance benefits that our executive officers and certain other employees may be entitled to receive if they are terminated within two years following a change of control of the Company. Under these arrangements, if a Named Executive Officer is terminated for any reason (other than for cause, disability or death) within two years after a change of control, we will then pay or provide the following to that Named Executive Officer:

 

   

All unpaid salary and expenses;

 

   

a lump sum equal to a multiple of his or her annual cash compensation (made up of annual salary and bonus) ranging from 2.5 times to 2.99 times;

 

   

an amount equal to his or her pro-rata target bonus for the then-current year;

 

   

life, disability, medical and dental insurance benefits, upon his or her written request, ranging among Named Executive Officers from 30 to 36 months or such shorter period until the executive obtains substantially equivalent coverage from a subsequent employer;

 

 

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   Compensation Discussion and Analysis

 

   

the vesting of his or her stock options and restricted stock; and

 

   

reimbursement for reasonable fees up to $15,000 for out-placement employment services.

If we terminate the Named Executive Officer for cause, no benefit is payable to, or with respect to, that Named Executive Officer under our change of control arrangements. A termination for cause may only be made by the affirmative vote of a majority of the members of our Board.

Our change of control arrangements include a plan or, in the alternative, individual change of control agreements. Specifically, on October 24, 2006, our Board approved a Change of Control Severance Plan for Executives (“Executive Change of Control Plan”), which became effective on that date. The plan covers our executive officers and certain key employees, provided that they are not already party to pre-existing change of control agreements with us. All of our Named Executive Officers, except Messrs. Fisher and Cook, are parties to pre-existing change of control agreements and therefore may not participate in the plan at this time. Messrs. Fisher and Cook currently participate in our Executive Change of Control Plan.

Our change of control arrangements previously provided for a tax gross-up payment to the Named Executive Officer that would fully offset the effect of (a) any excise tax imposed by Section 4999 of the Internal Revenue Code upon the benefits payable under such arrangements (or under any other Company plan, arrangement or agreement), and (b) any federal, state or local income tax or additional Section 4999 excise tax that is attributable to the tax gross-up payment. Effective February 1, 2011, the tax gross-up provision was eliminated from all of our individual change of control agreements and our Executive Change of Control Plan.

Severance Benefit Plan

Our Severance Benefit Plan (“Severance Benefit Plan”) is an unfunded plan that provides for severance benefits to eligible employees, including our executive officers, in certain instances based upon years of completed service. The severance benefits are comprised of:

 

   

A cash payment of two weeks of base salary pay for every year of completed service, with a minimum of 12 weeks of pay and a maximum of 52 weeks of pay;

   

a pro-rated STIP payment based on the number of months of employment during the calendar year of termination;

 

   

six months of reduced-rate contributions under our medical and dental plans; and

 

   

twelve weeks of coverage under our employee assistance plan.

Perquisites

We do not consider perquisites to be a material component of executive compensation. In 2012, certain of our executive officers received modest personal benefits, such as club membership dues reimbursement, comprehensive physical examinations and a tablet computer.

Other Compensation Matters

Health and Welfare Programs

We offer a number of other benefits to our executive officers pursuant to benefit programs that provide for broad-based employee participation. These benefit programs include medical, dental and vision insurance, long-term disability (“LTD”) and short-term disability insurance, life and accidental death and dismemberment (“AD&D”) insurance, health and dependent care, flexible spending accounts, relocation/expatriate programs and services, educational assistance, employee assistance and certain other benefits.

Indemnification Agreements

We have entered into an indemnification agreement with each of our non-employee directors and our executive officers. These agreements provide for us to indemnify such persons against certain liabilities that may arise by reason of their status or service as directors or executive officers and to advance their expenses incurred as a result of a proceeding as to which they may be indemnified. We also cover such persons under a directors’ and officers’ liability insurance policy that we choose, at our discretion, to maintain. These indemnification agreements are intended to provide indemnification rights to the fullest extent permitted under applicable law and are in addition to any other rights the individual may have under our Certificate of Incorporation, By-Laws and applicable law. We believe these indemnification agreements enhance our ability to attract and retain knowledgeable and experienced executive officers and non-employee directors.

 

 

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   Compensation Discussion and Analysis

 

Tax and Accounting Considerations

 

Under Section 409A of the Internal Revenue Code, amounts deferred for an executive officer under a nonqualified deferred compensation plan may be included in gross income when vested and subject to a 20% or more additional federal tax, unless the plan complies with certain requirements related to the timing of deferral election and distribution decisions.

Section 162(m) of the Internal Revenue Code may limit our ability to deduct annual compensation in excess of $1,000,000 that is paid to our CEO and other Named Executive Officers, unless that compensation is “performance-based compensation” within the meaning of Section 162(m) and the regulations promulgated thereunder. We believe that all of the stock options granted under the 1992 Plan qualify as performance-based compensation and therefore are not subject to the deduction limitation of Section 162(m). However, the salary and STIP payouts paid to our executive officers, the time-vested restricted stock awards, and certain payments provided for under our change of control arrangements with the Named Executive Officers are not exempt from this deduction limit.

Section 280G of the Internal Revenue Code limits our ability to deduct amounts paid to certain disqualified individuals, including our executive officers, that are treated as excess parachute payments. Excess parachute payments are also subject to an excise tax payable by the recipient of such payment. Parachute

payments are payments that are contingent upon a change in the ownership or effective control of the Company or in the ownership of a substantial portion of our assets, and they become excess parachute payments with respect to a disqualified individual in the event that the total amount of the parachute payments made to such individual exceeds a certain threshold amount. Examples of the types of payments that could give rise to parachute payments are the accelerated vesting of stock options and restricted stock upon a change of control and severance payments made upon a termination of employment in connection with a change of control.

Although we consider tax deductibility in the design and administration of our executive compensation plans and program, we believe that there are circumstances where our interests are best served by maintaining flexibility in the way compensation is provided, even if it results in the non-deductibility of certain compensation under the Internal Revenue Code.

Rules under generally accepted accounting principles determine the manner in which we account in our consolidated financial statements for grants of equity-based compensation to our employees. Our accounting policies for equity-based compensation are further discussed in Note 14 to our consolidated financial statements, included in our 2012 Annual Report on Form 10-K.

 

 

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REPORT OF THE COMPENSATION, BENEFITS

AND STOCK OPTION COMMITTEE

ON EXECUTIVE COMPENSATION

The following report of the Compensation, Benefits and Stock Option Committee of the Board of Directors shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to the SEC’s proxy rules, except for the required disclosure in this Proxy Statement, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934 (“Exchange Act”), and the information shall not be deemed to be incorporated by reference into any filing made by the Company under the Securities Act of 1933 or the Exchange Act.

The Compensation, Benefits and Stock Option Committee has reviewed the Compensation Discussion and Analysis contained in this Proxy Statement and discussed this disclosure with management. Based on this review and discussions with management, the Compensation, Benefits and Stock Option Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 for filing with the SEC.

 

March 14, 2013

Compensation, Benefits and

Stock Option Committee

Kirby L. Hedrick, Chair

Jeffrey L. Berenson

Edward F. Cox

Thomas J. Edelman

 

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                                                            Compensation Tables

 

Summary Compensation Table

The following table sets forth summary information concerning the compensation earned by our Named Executive Officers during 2010, 2011 and 2012.

 

Name and

Principal Position

  Year         Salary
($)(1)
    Bonus($)    

Stock  

Awards  
($)(2)  

    Option
Awards
($)(3)
    Non-Equity
Incentive Plan
Compensation
($)(4)
    Change in
Pension Value
and Non-
Qualified
Deferred
Compensation
Earnings($)(5)
    All Other
Compensation
($)(6)
   

Total

($)

 

  Charles D. Davidson

    2012        1,125,000               3,750,031        3,025,060        2,165,625        2,102,110        78,703        12,246,529   

Chairman and Chief

    2011        1,069,719               3,500,030        2,864,040        1,856,250        2,123,823        78,059        11,491,921   

Executive Officer

    2010        1,012,644               3,249,970        2,650,346        1,855,000        1,494,043        70,539        10,332,542   
                                                                         

  Kenneth M. Fisher(7)

    2012        552,817               1,149,955        927,690        789,919        997        111,896        3,533,274   

Senior Vice President and

    2011        528,738               999,970        818,327        763,440        518        104,417        3,215,410   

Chief Financial Officer

    2010        495,192        500,000        826,516        674,014        790,000               83,771        3,369,493   
                                                                         

  David L. Stover

    2012        679,930               2,250,018        1,815,042        1,242,500        866,440        51,615        6,905,545   

President and Chief

    2011        632,476               1,799,964        1,472,953        1,081,363        886,629        54,428        5,927,813   

Operating Officer

    2010        593,461               1,716,032        1,399,375        1,200,000        527,382        24,023        5,460,274   
                                                                         

  Susan M. Cunningham

    2012        502,817               1,324,984        1,068,854        675,588        624,323        250,501        4,447,067   

Senior Vice President —

    2011        478,738               875,030        715,972        614,093        622,657        19,586        3,326,076   

Exploration

    2010        437,769               825,014        672,786        675,000        386,614        16,847        3,014,030   
                                                                         

  Rodney D. Cook

    2012        458,522               1,324,984        1,068,854        623,620        1,107,771        25,052        4,608,803   

Senior Vice President —

    2011        429,486               875,030        715,972        564,370        1,173,636        25,173        3,783,667   

International

    2010        384,490               639,091        521,173        700,000        747,129        23,670        3,015,553   

 

  (1) Certain of our Named Executive Officers deferred a portion of their base salaries under our Deferred Compensation Plan:

 

Name    Year      Percentage of
Salary Deferred
     Amount
Deferred ($)
 
       

Charles D. Davidson

     2012         45      506,250   
       2011         45      481,374   
       2010         45      455,690   
       

Kenneth M. Fisher

     2012         4      22,113   
       2011         3      15,862   
       2010         0        
       

David L. Stover

     2012         6      40,796   
       2011         5      31,264   
       2010         0        
  (2) Reflects the aggregate grant date fair value of restricted stock awarded under our 1992 Plan, which was computed in accordance with FASB ASC Topic 718. Shares awarded will vest according to the following schedule: 20% on the first anniversary of the award date; an additional 30% on the second anniversary of the award date; and the remaining 50% on the third anniversary of the award date. The vesting of these shares is not contingent upon the satisfaction of any performance goals. See the Grants of Plan-Based Awards table for information on restricted stock awarded in 2012.

 

 

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                                                            Compensation Tables

 

  (3) Reflects the aggregate grant date fair value of nonqualified stock options granted under our 1992 Plan. Options represent the right to purchase shares of common stock at a price per share equal to fair market value on the date of grant. Options will vest ratably over three years in equal installments on the first, second and third anniversaries of the date of grant. Vesting of these options is not contingent upon the satisfaction of any performance goals, although none of the options may be exercised before the first anniversary (absent a change of control of the Company) or after the tenth anniversary of the date of grant. See the Grants of Plan-Based Awards table for information on stock options granted in 2012.

 

  (4) Reflects payments under our STIP based on the achievement of certain performance goals during the year indicated. STIP awards earned during the year indicated were paid or deferred in February of the following year, as follows:

 

  Name    Year      STIP
Payout ($)
 

  Charles D. Davidson

     2012         2,165,625   
       2011         1,856,250   
       2010         1,855,000   

  Kenneth M. Fisher

     2012         789,919   
       2011         763,440   
       2010         790,000   

  David L. Stover

     2012         1,242,500   
       2011         1,081,363   
       2010         1,200,000   

  Susan M. Cunningham

     2012         675,588   
       2011         614,093   
       2010         675,000   

  Rodney D. Cook

     2012         623,620   
       2011         564,370   
       2010         700,000   

 

  (5) Reflects during the year indicated: (a) the aggregate increase in actuarial present value of the Named Executive Officer’s benefits under our Retirement Plan and Restoration Plan; and (b) the above-market Deferred Compensation Plan earnings, as follows:

 

  Name    Year      Increase in
Retirement and
Restoration Plans($)(a)
     Deferred
Compensation
Above-Market
Earnings($)(b)
 

  Charles D. Davidson

     2012         1,893,070         209,040   
       2011         1,855,729         268,094   
       2010         1,324,713         169,330   

  Kenneth M. Fisher

     2012                 997   
       2011                 518   
       2010                   

  David L. Stover

     2012         848,025         18,415   
       2011         863,759         22,870   
       2010         513,313         14,069   

  Susan M. Cunningham

     2012         624,323           
       2011         622,657           
       2010         386,614           

  Rodney D. Cook

     2012         1,102,420         5,351   
       2011         1,167,383         6,253   
       2010         743,818         3,311   

 

  (a) Beginning of year values for calculating the aggregate increase in actuarial present value reflect a 4.25% discount rate for the Retirement Plan and Restoration Plan; end of year values reflect a 3.75% discount rate for both plans. Present values are based on the same actuarial assumptions and measurement dates used to determine the pension benefit obligations disclosed in Note 14 to our consolidated financial statements included in our 2012 Annual Report on Form 10-K, except that for purposes of the present value calculations participants are assumed to work until age 65 and commence their benefits at that time.

 

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  (b) Above-market earnings in 2012 are based on the difference between the plan crediting rate of 5.06% and 120% of the annual long-term Applicable Federal Rate as of September 2011 (4.30%); earnings in 2011 are based on the difference between the plan crediting rate of 5.54% and 120% of the annual long-term Applicable Federal Rate as of September 2010 (4.41%); earnings in 2010 are based on the difference between the plan crediting rate of 6.11% and 120% of the annual long-term Applicable Federal Rate as of September 2009 (5.27%).

 

  (6) All other compensation includes:

 

Name   Year     Thrift Plan
Matching
Contributions
($)
    Deferred
Compensation
Plan
Matching
Contributions
($)
    Club
Memberships
($)
    Insurance
Premiums
($)
    Holiday
Bonus
($)
    Physical
Examinations
($)
   

Profit Sharing
Plan
Contributions

($)(a)

   

Temporary
Expatriate
Assignment
Compensation

($)(b)

 

Charles D. Davidson

    2012        15,000        52,500        9,174        1,872        157                        
      2011        14,700        49,483        9,110        1,872        157        2,150                 
      2010        14,700        46,059        7,391        2,232        157                        

Kenneth M. Fisher

    2012        15,000        18,169        11,178        1,872        157        2,485        63,035          
      2011        14,700        17,024        9,832        1,872        157               60,245          
      2010        14,700               10,463        2,232        157               56,219          

David L. Stover

    2012        15,000        25,796        8,790        1,872        157                        
      2011        14,700        23,249        8,728        1,872        157        5,135                 
      2010        14,700               6,934        2,232        157                        

Susan M. Cunningham

    2012        15,000                      1,872        157                      232,885   
      2011        14,700                      1,794        157        2,935                 
      2010        14,700                      1,990        157                        

Rodney D. Cook

    2012        15,000               8,176        1,719        157                        
      2011        14,700               8,119        1,610        157                        
      2010        14,700               7,065        1,748        157                        

 

       Also included in the value of other compensation in 2012 is $587 for the value of a tablet computer furnished to Ms. Cunningham.

 

  (a) Mr. Fisher received Profit Sharing Plan contributions for 2012, 2011 and 2010 as of the last day of each calendar year. A portion of Mr. Fisher’s 2012 Profit Sharing contribution ($18,000) was deposited into Mr. Fisher’s Profit Sharing Plan contribution account in our Thrift Plan. The remaining portion of Mr. Fisher’s 2012 Profit Sharing Plan contribution ($45,035) was credited to Mr. Fisher’s account in our nonqualified Deferred Compensation Plan. A portion of Mr. Fisher’s 2011 Profit Sharing contribution ($17,800) was deposited into Mr. Fisher’s Profit Sharing Plan contribution account in our Thrift Plan. The remaining portion of Mr. Fisher’s 2011 Profit Sharing Plan contribution ($42,445) was credited to Mr. Fisher’s account in our nonqualified Deferred Compensation Plan. A portion of Mr. Fisher’s 2010 Profit Sharing contribution ($17,800) was deposited into Mr. Fisher’s Profit Sharing Plan contribution account in our Thrift Plan. The remaining portion of Mr. Fisher’s 2010 Profit Sharing Plan contribution ($38,419) was credited to Mr. Fisher’s account in our nonqualified Deferred Compensation Plan.

 

  (b) In 2012, Ms. Cunningham began a temporary expatriate assignment in Israel. As part of the Company’s expatriate assignment policy, the amounts in this column include the following compensation uplifts: expatriate assignment premium in the amount of $31,615, expatriate hardship pay in the amount of $42,154 and an expatriate location premium in the amount of $21,077. In addition, this amount also includes imputed income in the amount of $133,318 which represents federal income and FICA taxes paid on behalf of Ms. Cunningham as part of the Company’s expatriate assignment tax equalization policy. Finally, this amount includes a short-term relocation allowance payment of $3,000 which was grossed up for federal income and FICA taxes in the amount of $1,721.

 

Noble Energy, Inc. 2013 Proxy Statement

 

57


                                                            Compensation Tables

 

 

     As reflected in the table above, the salary received by each of our Named Executive Officers as a percentage of their respective total compensation during the year indicated was as follows:

 

Name    Year      Percentage of 
Total 
Compensation
 

Charles D. Davidson

     2012         9.2
       2011         9.3
       2010         9.8

Kenneth M. Fisher

     2012         15.7
       2011         16.4
       2010         14.7

David L. Stover

     2012         9.9
       2011         10.7
       2010         10.9

Susan M. Cunningham

     2012         11.3
       2011         14.4
       2010         14.5

Rodney D. Cook

     2012         10.0
       2011         11.4
       2010         12.8

 

(7) Mr. Fisher was appointed Senior Vice President and CFO of the Company effective November 16, 2009 and received two cash payments in the amount of $500,000 each pursuant to the terms of his compensation arrangement with the Company. The first payment was made on December 16, 2009 and the second payment was made on May 21, 2010.

 

Noble Energy, Inc. 2013 Proxy Statement

 

58


                                                            Compensation Tables

 

Grants of Plan-Based Awards

The table below sets forth information regarding grants of plan-based awards made to our Named Executive Officers during 2012.

 

Name   Approval
Date(1)
    Grant
Date(1)
    Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
    Estimated Future
Payouts
Under Equity
Incentive
Plan Awards
   

All Other
Stock
Awards:
Number of
Shares of
Stock or

Units (#)
(2)

   

All Other
Option
Awards:
Number of
Securities
Underlying

Options (#)
(3)

   

Exercise
or Base
Price of
Option

Awards
($/Sh)(4)

    Grant
Date
Fair
Value
of Stock
and
Option
Awards
($)(5)
 
      Units
Granted
    Thres-
hold
($)
    Target
($)
    Max
($)
    Thres-
hold
(#)
    Target
(#)
    Max
(#)
         

Charles D.
Davidson

    01/24/12        02/01/12                                                         36,830        94,268        101.82        6,775,091   

Kenneth M.
Fisher

    01/24/12        02/01/12                                                         11,294        28,909        101.82        2,077,645   

David L.
Stover

    01/24/12        02/01/12                                                         22,098        56,561        101.82        4,065,060   

Susan M.
Cunningham

    01/24/12        02/01/12                                                         13,013        33,308        101.82        2,393,838   

Rodney
D. Cook

    01/24/12        02/01/12                                                         13,013        33,308        101.82        2,393,838   

 

  (1) All grants were approved by our Compensation Committee, and were effective and priced on the date of grant.

 

  (2) Represents the shares of restricted stock awarded under our 1992 Plan in 2012. The shares will vest according to the following schedule: 20% of the award will vest on the first anniversary of the award date; an additional 30% of the award will vest on the second anniversary of the award date; and the remaining 50% of the award will vest on the third anniversary of the award date. Dividends declared on shares of restricted stock are accrued during the three-year restricted period and will be paid upon vesting of restricted shares.

 

  (3) Represents grants of nonqualified stock options under our 1992 Plan in 2012. Options represent the right to purchase shares of common stock at the price per share (equal to fair market value on the date of grant) indicated in the table. Options will vest ratably over three years in equal installments on the first, second and third anniversaries of the date of grant.

 

  (4) Exercise price at “fair market value” was defined in our 1992 Plan, as amended and restated effective April 26, 2011, as the closing price of our common stock on the NYSE on the date of grant. The closing price of our common stock on February 1, 2012 was $101.82.

 

  (5) Reflects aggregate grant date fair value of restricted stock awarded and nonqualified stock options granted to our Named Executive Officers on February 1, 2012 computed in accordance with FASB ASC Topic 718. Grant date fair value of stock options reported above is as follows: Mr. Davidson — $3,025,060; Mr. Fisher — $927,690; Mr. Stover — $1,815,042; Ms. Cunningham — $1,068,854; and Mr. Cook — $1,068,854. Award date fair value of restricted stock reported above is as follows: Mr. Davidson — $3,750,031; Mr. Fisher — $1,149,955; Mr. Stover — $2,250,018; Ms. Cunningham — $1,324,984; and Mr. Cook — $1,324,984.

 

Noble Energy, Inc. 2013 Proxy Statement

 

59


                                                            Compensation Tables

 

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth certain information with respect to restricted stock and stock options held by our Named Executive Officers as of December 31, 2012.

 

Name   Number of
Securities
Underlying
Unexercised
Options (#
Exercisable)
    Number of
Securities
Underlying
Unexercised
Options (#
Unexercisable)
    Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
   Option
Exercise
Price
($)
    Option
Expiration
Date
    Number of
Shares or
Units of
Stock
Held That
Have Not
Vested (#)
    Market
Value of
Shares
or Units
of Stock
Held
That
Have
Not
Vested
($)(7)
    Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
  Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($)

Charles D. Davidson

    86,580                 22.2325        2/1/2014        21,641 (4)      2,201,755           
    58,852                 29.8700        2/1/2015        30,972 (5)      3,151,091           
    21,550                 32.7925        5/16/2015        36,830 (6)      3,747,084           
    12,000                 41.4650        8/1/2015                   
    77,957                 45.9400        2/1/2016                   
    164,118                 53.4150        2/1/2017                   
    125,200                 72.9400        2/1/2018                   
    130,490                 50.2050        1/30/2019                   
    70,507        35,253 (1)           75.0900        2/01/2020                   
    31,591        63,182 (2)           90.4050        2/01/2021                   
            94,268 (3)           101.8200        2/01/2022                           

Kenneth M. Fisher

    32,949