Document
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
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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NOBLE ENERGY, INC.
(Exact name of Registrant as specified in its charter)
Payment of filing fee (check the appropriate box):
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No fee required.
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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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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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Notice of 2019 Annual Meeting of Shareholders and Proxy Statement
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Tuesday, April 23, 2019
9:30 a.m. Central time
The St. Regis Houston
1919 Briar Oaks Lane
Houston, Texas 77027




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Dear Shareholder:
Please join Noble Energy’s Board of Directors, executive management team, employees and alumni at our 2019 Annual Meeting of Shareholders. The attached Notice of Annual Meeting of Shareholders and Proxy Statement will serve as your guide to the business to be conducted at the meeting.

In 2018, we made significant progress on our portfolio transformation and maintained our focus on delivering long-term shareholder value despite market and commodity price volatility. We grew our U.S. onshore business and entered 2019 focused on capital efficiency and returns. Offshore, our world class Leviathan project is on track for start-up by the end of 2019, which will be transformational for Noble Energy. Financially, we paid down $609 million in debt and accelerated the return of capital to shareholders, including $295 million in share repurchases and $208 million in dividends. As a result, we believe we are well positioned for the future.

I, along with our Board of Directors and executive team, am committed to providing you information about the Company in a manner that is easy to access and understand. Our Proxy Statement summarizes our business and executive compensation program with charts and graphics we believe aid in assessing our programs and progress. Also, we have continued to eliminate redundancy within the Proxy Statement to make it more reader-friendly.

The Compensation Discussion and Analysis that begins on page 29 describes our executive compensation program and shows the direct link between performance and executive compensation. Beginning on page 13, we provide the qualifications of our directors and why they are the right people to represent you.

Your vote is important to us and our business. I encourage you to sign and return your proxy card, or use telephone or Internet voting prior to the meeting to ensure your shares are represented and voted at the meeting. Instructions on how to vote begin on page 58.

I look forward to seeing you at the meeting. We appreciate your ongoing support as a shareholder of Noble Energy.

February 28, 2019
Houston, Texas
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David L. Stover
Chairman of the Board
and Chief Executive Officer




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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, April 23, 2019
The Annual Meeting of Shareholders of NOBLE ENERGY, INC. (the “Company”) will be held on Tuesday, April 23, 2019 at 9:30 a.m. Central time at The St. Regis Houston, 1919 Briar Oaks Lane, Houston, Texas 77027, for the following purposes:

1.
to elect the nine nominees as members of the Board of Directors of the Company;
2.
to ratify the appointment of the independent auditor by the Company’s Audit Committee;
3.
to approve, in an advisory vote, executive compensation;
4.
to approve an amendment and restatement of the Company's 2017 Long-Term Incentive Plan to increase the number of shares of common stock authorized for issuance under the plan from 29,000,000 to 44,000,000 shares; and
5.
to transact such other business as may properly come before the meeting and any adjournment or postponement thereof.

The Board of Directors set February 22, 2019 as the record date for the meeting. This means that holders of record of shares of the Company’s common stock as of the close of business on that date are entitled to receive this notice of, and vote at the meeting and any adjournment or postponement thereof.

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

February 28, 2019
Houston, Texas
By Order of the Board of Directors


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Rachel G. Clingman
Senior Vice President, General Counsel
and Corporate Secretary

 
We urge each shareholder to promptly sign and return the enclosed proxy card or to use telephone or Internet voting, even if planning to attend the meeting in person. 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.
 





Table of Contents
 
 
 
Proxy Statement Summary
i
 
 
Executive Summary
iii
 
 
Corporate Governance
2
 
 
Ownership of Equity Securities of the Company
10
 
 
Election of Directors (Proposal 1)
12
 
 
2018 Director Compensation
17
 
 
Ratification of Appointment of Independent Auditor (Proposal 2)
19
 
 
Report of the Audit Committee
20
 
 
Advisory Vote to Approve Executive Compensation (Proposal 3)
21
 
 
Approval of Amendment and Restatement of the 2017 Long-Term Incentive Plan to Authorize Additional Shares (Proposal 4)
22
 
 
Compensation Discussion and Analysis
29
 
 
Report of the Compensation, Benefits and Stock Option Committee
46
 
 
Compensation Tables
47
 
 
Questions and Answers about the Meeting and Voting
58
 
 
Glossary
63
 
 
Appendix A — Non-GAAP Financial Measures
A-1
 
 
Appendix B — Executive Officers
B-1
 
 
Appendix C — 2017 Long-Term Incentive Plan
C-1







PROXY STATEMENT SUMMARY

This summary highlights some of the information contained in the 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”, “Noble”, “NBL” or the “Company”. Please also see Glossary for defined terms.

2019 Annual Meeting of Shareholders
 Date and Time:
Tuesday, April 23, 2019, 9:30 a.m. Central time
 
 
 Place:
The St. Regis Houston
1919 Briar Oaks Lane
Houston, Texas 77027
 
 
 Record Date:
February 22, 2019

Voting Matters and Board Recommendations
 
Our Board’s Recommendations
Election of Directors
FOR each
Director Nominee
Ratification of Appointment of Independent Auditor
FOR
Advisory Vote to Approve Executive Compensation
FOR
Approval of Amendment and Restatement of the Company's 2017 Long-Term Incentive Plan to Increase the Number of Shares of Common Stock Authorized for Issuance under the Plan from 29,000,000 to 44,000,000
FOR
Director Nominees

The following table provides summary information about each director nominee. Our Board is not classified and each director stands for election annually.
Name
Age
 
Director
Since
 
Primary Occupation
 
Committee
Memberships
 
Other Public
Company Boards
Jeffrey L. Berenson*
68
 
2005
 
Chairman and Chief Executive
Officer of Berenson Holdings LLC
 
C, CG
 
None
Michael A. Cawley*
71
 
1995
 
President and Manager of The Cawley Consulting Group, LLC
 
A, CG
 
None
James E. Craddock*
60
 
2015
 
Former Chairman and Chief Executive Officer of Rosetta Resources Inc.
 
C, CG, S
 
None
Barbara J. Duganier*
60
 
2018
 
Former Managing Director at Accenture
 
A, CG
 
Buckeye Partners, L.P.; MRC Global Inc.
Thomas J. Edelman*
68
 
2005
 
A managing partner of White Deer Energy
 
C, CG, S
 
None
Holli C. Ladhani
48
 
2017
 
President and Chief Executive Officer of Select Energy Services, Inc.
 
S
 
Select Energy Services, Inc.
David L. Stover
61
 
2014
 
Chairman and Chief Executive Officer of Noble Energy, Inc.
 
S
 
None
Scott D. Urban*
65
 
2007
 
Partner in Edgewater Energy LLC
 
C, CG, S
 
Pioneer Energy
Services Corporation
William T. Van Kleef*
67
 
2005
 
Former Executive Vice President
and Chief Operating Officer of Tesoro Corporation
 
A, CG
 
Oil States
International, Inc.
* Independent director    A - Audit Committee    C - Compensation, Benefits and Stock Option Committee
CG - Corporate Governance and Nominating Committee     S - Safety, Sustainability and Corporate Responsibility Committee

i




Skills and Diversity Matrix

The following table provides relevant skills and diversity attributes for our director nominees.

Director Skills and Attributes
 Current or Past Public Company Executive Experience (C-Suite)
 Financial Accountability Experience
 Energy Industry Experience
  Other Public Company Board Experience
  Operations Experience
 International E&P Experience
 *Diverse Attributes
(as self-reported)
 Risk Assessment and Management Experience
Environmental Health, Safety, Sustainability and Corporate Responsibility
Civic or Charitable Experience
Jeffrey L. Berenson
 
l
 
l
l
 
 
l
 
l
Michael A. Cawley
l
l
l
l
 
 
 
l
 
l
James E. Craddock
l
l
l
l
l
 
 
l
l
l
Barbara J. Duganier
 
l
l
l
 
 
l
l
 
l
Thomas J. Edelman
l
l
l
l
l
l
 
l
 
l
Holli C. Ladhani
l
l
l
l
l
 
l
l
l
l
David L. Stover
l
l
l
 
l
l
 
l
l
l
Scott D. Urban
l
l
l
l
l
l
 
l
l
l
William T. Van Kleef
l
l
l
l
l
 
 
l
 
l
* Diverse attributes - self identified as being part of a group that is historically underrepresented on boards, whether through gender, ethnicity or race.

Average Director Tenure

The following graphic provides the average director tenure as of each of the last three Annual Meetings of Shareholders.

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ii



EXECUTIVE SUMMARY

2018 Business Highlights

During 2018, we continued to enhance our portfolio, achieved a number of strategic objectives, focused on operational execution and capital efficiency and delivered on shareholder return initiatives. In 2018, we accomplished the following:

Portfolio enhancements, including:
generated $2B in proceeds through sale of 7.5% working interest in Tamar, sale of our 50% interest in CONE Gathering LLC, sale of our 34.1% limited partner interest in CNX Midstream Partners LP, Gulf of Mexico exit and non-core onshore U.S. divestments;
acquired > 100,000 acres in unconventional new U.S. onshore opportunities and reached agreement on a 40% operated interest in 2 million acres in a new country offshore play;
acquisition of the Saddle Butte system by our midstream segment; and
executed acreage swap to solidify Mustang and Wells Ranch position in the DJ Basin.
Operational accomplishments, including:
demonstrated peer leading safety and environmental performance with low days away from work and recordable incident rate;
focused capital and resources on our highest margin assets within U.S. onshore liquids plays and Leviathan development;
negotiated a heads-of-agreement for Alen gas monetization in Equatorial Guinea, first step in future monetization of up to 3 TCF gross discovered in the area;
achieved record U.S. oil liquids volumes led by Delaware and DJ Basin growth 15% year-over-year growth;
delivered year-over-year volume increase of approximately 11% (adjusted for divestitures);
progressed natural gas marketing activities to fill Leviathan Phase 1 capacity, including executed agreements to support delivery of natural gas into Egypt;
progressed the Leviathan project to 75% complete;
secured near-term flow assurance and long-term out-of-basin takeaway capacity from the Delaware Basin to the Gulf Coast, with access to export markets;
executed Mustang row development in the DJ Basin and received approval for the first Colorado Comprehensive Drilling Plan of its size for the Mustang area (100 square miles); and
increased proved reserves by 5% from 2017 (excluding the impact of the Gulf of Mexico and Tamar sales).
Shareholder return initiatives, including:
executed share repurchase of approximately 10 million shares of Noble Energy stock for $295MM during the year; and
increased dividend to 11 cents per share per quarter for Noble Energy common shares for second, third and fourth quarters.
Financial initiatives, including:
achieved $2.3B net cash provided from operating activities (consolidated) and $1.1B of free cash flow(1) (excluding impact of NBLX) through portfolio optimization and reduced expenses;
strengthened Company's balance sheet by paying down $609MM of NBL debt;
enhanced strong liquidity position by increasing cash on hand and maintaining unused borrowing capacity; and
credit rating outlook upgraded from 2 of 3 rating agencies.
Our Compensation Committee believes that the Company made substantial progress toward positioning the Company for continued and sustainable long-term success, through our strengthened financial position, strong operational performance, advancements on critical strategic outcomes and shareholder value creation. Our 2018 shareholder return did not reflect these accomplishments to the degree we anticipated; we ended the year with a total shareholder return (“TSR”) of negative 35% and 9th out of 14 in our 2018 peer group (as measured from January 1, 2018 - December 31, 2018).
(1) Non-GAAP measure, see reconciliation at Appendix A

iii



2018 Performance Charts
For additional information about our 2018 performance, please see our Annual Report on Form 10-K.


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*Organic NBL funded capital expenditures and excludes acquisition capital

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*© 2018 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

 
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*Non-GAAP measure (see reconciliation in Appendix A) calculated herein as an STIP metric
(1) 2017 and 2018 data excludes impact of NBLX free cash flow and is adjusted for price


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*Excludes impact of NBLX distributions, includes only upstream NBL


iv



Leadership Transition

Our CEO, the Board of Directors and the management team also successfully led the Company through the transition of key executive leadership positions in 2018. Noble Energy attracted top talent such as Brent Smolik, President & COO, and Rachel Clingman, Senior Vice President, General Counsel & Secretary. In addition, we have added two new directors to the Board in the last 18 months, Holli C. Ladhani and Barbara J. Duganier, both with extensive financial expertise and leadership experience.

2018 Executive Compensation Highlights

Increased Focus on Pay for Performance

Our executive compensation program is described in our Compensation Discussion and Analysis and is designed to align executive pay with performance and to create long-term shareholder value through significant “at-risk” compensation. In 2018, we continued to emphasize performance-based compensation, with 64% of our CEO’s target compensation being performance-based as shown in the following chart.

To further connect executive pay to Company performance, the performance awards component of our long-term incentive program was increased from 33% to 50% of the total long-term award. In addition, the vesting period of the restricted stock component of the long-term incentive award was increased from two to three years to further align the vesting period with longer-term Company performance.

Components of Compensation - CEO Mix

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v



Short-term Incentive Plan

As previously disclosed, for the 2018 Plan year, the Compensation Committee increased our focus on financial performance metrics by adding in our Short-Term Incentive Plan (“STIP”) cash flow per debt adjusted share growth and two new returns-based metrics, return on average capital employed (“ROACE”) and cash return on capital invested (“CROCI”). These metrics reinforce our objective of aligning our compensation program with our capital strategy and focus on long term shareholder value creation.

Company performance for the 2018 Plan year focused on continued progress on our strategic outcomes against a backdrop of commodity price and cost volatility and market uncertainty. We strengthened our financial position with free cash flow significantly ahead of target and material debt reduction. We also continued to demonstrate top tier safety performance and advanced our portfolio development to deliver sustained value. In determining the 2018 STIP award, the Compensation Committee considered the accomplishment of having a majority of Coloradans support oil and gas instead of a setback initiative, establishment of the Mustang Comprehensive Development Plan, and delivery on critical strategic outcomes such as the Gulf of Mexico exit and progress on the Leviathan project.  However, the shortfalls in reaching our cost and volume targets, as well as absolute and relative share price performance, were significant contributors to the discretionary component of the plan. Although the quantitative results were slightly above target, the Compensation Committee exercised its discretion and approved a Short-Term Incentive Plan payout of 85% of target.

Target versus Realizable Compensation

The chart below reflects again the alignment we seek to achieve between executive compensation and Company performance in our total compensation program. Our executives do not achieve target value unless:
the stock price appreciates on an absolute basis;
the Company meets or exceeds median peer stock performance; and
the Company meets or exceeds important financial and operational goals.
As depicted in the chart below and based on the Company’s stock price at December 31, 2018, the realizable value of Mr. Stover’s total compensation has averaged 48% across the past three years.

We believe our compensation program is operating as designed as our below target shareholder return results in below target compensation for our Named Executive Officers (“NEOs”), demonstrating that our compensation program appropriately aligns pay with performance.
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TSR Performance
 
2016-2018
2017-2018*
2018*
TSR (As defined in LTIP, one month trailing average on each end of performance period)
(34.0)%
(45.0)%
(22.0)%
Relative Ranking to Peers
11th of 14
9th of 14
9th of 14
*Performance period in progress. TSR and relative ranking shown are estimates as of December 31, 2018.

vi



2019 Key Executive Compensation Actions

Performance and Compensation Benchmarking Peer Group Refinements

To enhance our benchmarking of competitive performance and executive compensation, the Compensation Committee identified two peer groups: one for compensation benchmarking purposes and one for performance evaluation purposes. 

Compensation Benchmarking

The Committee determined that one singular peer group does not meet the needs of our compensation benchmarking and performance evaluation processes.  The Committee and management believe utilizing a peer group comprised of companies of similar size and scope reduces volatility in the benchmarking process.  This new peer group is balanced with companies both larger and smaller than Noble in an attempt to have a benchmarking process less likely to be distorted by significantly smaller and larger companies with different pay practices. 

Performance Benchmarking

To evaluate relative Company performance, the Committee feels it is important to assess Noble’s performance against companies with similar long-term strategies.  Basin operations, international exposure and commodity mix were considered in defining this performance peer group.  We believe our performance will be appropriately benchmarked against companies with similar commodity exposure, basin specific influences and with whom we compete for investor capital.

2019 Short-Term Incentive Plan Enhancements

Each year the Compensation Committee assesses the performance metrics driving incentive compensation.  The Compensation Committee considers the strategic direction of the organization, the alignment of metrics with shareholder value creation, and feedback received during our spring and fall shareholder engagement processes. With respect to the STIP metrics, we will replace the U.S. onshore drill & complete rate of return metric with a quantitative capital efficiency metric. The new capital efficiency metric will evaluate the organization’s ability to deliver returns by:

optimizing our capital allocation;
executing planned projects timely and efficiently; and
controlling spend to maintain discipline.

We will also add a new qualitative metric to the STIP assessing Noble’s relative performance in each of our operating areas. While the capital efficiency metric focuses on our ability to create value through capital allocation, the Compensation Committee also believes it is important to measure our relative performance in the basins in which we operate.  We strive to differentiate ourselves as industry leading performers in each of our key basins through safe and efficient operations, capital efficiency and returns.


Important Date for 2020 Annual Meeting of Shareholders

Shareholder proposals and nominees for director(s) to be submitted for inclusion in our 2020 Proxy Statement pursuant to our By-Laws or Rule 14a-8 of the Securities and Exchange Act of 1934, as amended (“Exchange Act”), must be received by us no later than October 31, 2019.

vii



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1001 Noble Energy Way
 
PROXY STATEMENT
Houston, Texas 77070
 
February 28, 2019



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 2019 Annual Meeting of Shareholders (the “Annual Meeting”) of Noble Energy, Inc. (the “Company”). The meeting will be held at The St. Regis Houston, 1919 Briar Oaks Lane, Houston, Texas 77027 on April 23, 2019 at 9:30 a.m. Central time. The proxies may also be voted at any adjournment or postponement of the meeting.

The mailing address of our principal executive offices is 1001 Noble Energy Way, Houston, Texas 77070. We are first mailing this Proxy Statement to our shareholders on or about February 28, 2019.

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 the Company’s common stock as of the close of business on February 22, 2019, the record date, are entitled to notice of, and to vote at, the meeting and at any adjournment or postponement thereof. Each owner of record on the record date is entitled to one vote for each share of common stock held. On the record date, February 22, 2019, there were 483,584,388 shares of common stock issued and outstanding.




 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE 2019 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23, 2019.

Our Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2018 are available at www.proxyvote.com.

 

1

 
Corporate Governance


Corporate Governance

Our Website contains a number of documents, available free of charge, that will be helpful to your understanding of our corporate governance practices:
Corporate Governance Guidelines;
Certificate of Incorporation;
By-Laws;
Board committee charters; and
Code of Conduct and Code of Ethics for our Chief Executive and Senior Financial Officers, and information about how to report concerns.
You may also obtain copies of these documents by contacting the Company Secretary.

Our Board regularly reviews developments in corporate governance and updates our corporate governance documents and practices as appropriate. Amendments to these documents will be promptly posted on our Website.
Board Leadership Structure

Chairman and Chief Executive Officer

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

Annual Review of Board Leadership Structure

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

Our Board will review, at least annually, the continued appropriateness of the combined chairman/CEO structure, as opposed to a split role or other structure. All such reviews will occur outside the presence of the Chairman and CEO, at a meeting of the Corporate Governance and Nominating Committee and/or at an executive session of the Board.

Lead Independent Director

Our lead independent director is elected annually by our Board and has authority described in our Corporate Governance Guidelines that 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 directors and Board meetings at which the Chairman is not present;

2

 
Corporate Governance


serving as a liaison between the Chairman and the independent directors and coordinating the activities of such directors;
coordinating the agenda for, and moderating sessions of the Board’s independent directors; and
facilitating communications among the other members of the Board.
Mr. Michael Cawley has served as the lead independent director since 2001. In January 2019, our Nominating and Governance Committee nominated, and our Board approved the appointment of, Mr. Scott Urban to serve as the lead independent director of the Board effective as of the date of our 2019 Annual Meeting of Shareholders. In addition, our Board approved an amendment to our By-Laws to allow the lead independent director to remain eligible for election to the Board one additional year beyond his 72nd birthday, to provide for an orderly transition of duties to the newly appointed lead independent director.
Board and Committees

In 2018, our Board held 12 meetings and its committees held 19 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 2018.

Our Board has the following four standing committees, each with a written charter adopted by the Board and available on our website:
Audit Committee;
Corporate Governance and Nominating (“Governance”) Committee;
Compensation, Benefits and Stock Option (“Compensation”) Committee; and
Safety, Sustainability and Corporate Responsibility (“SSCR”) Committee.
In July 2018, our former Environment, Health and Safety Committee was reorganized into the SSCR Committee, to further align its primary responsibilities with the executive level Sustainability and Corporate Responsibility Committee and refine the focus of the committee as identified below.

Primary Responsibilities
The primary responsibilities of each committee are summarized below. For more detail, see the committee charters on our website at www.nblenergy.com, under the heading “Corporate Governance.”
Committee
 
Key Oversight Responsibilities
Audit
 
Integrity of the Company’s financial statements
Disclosure and internal controls
Compliance with legal and regulatory requirements
Administration of the Company’s Code of Conduct
Independent auditor qualifications
Internal audit functions
Risk management
Governance
 
Corporate governance, including the Corporate Governance Guidelines
Director recruitment, retention and development
Board committee structure and membership
Annual Board and committee self-evaluation
Corporate political activities
Compensation
 
CEO and other executive officer compensation structure and amount
Performance evaluations for the CEO and other executive officers
Design and function of incentive compensation programs, including STIP and equity-based plans
Executive officer stock ownership guidelines
Compensation Discussion & Analysis
SSCR
 
Monitor environmental, climate, health, safety, social, public policy and corporate responsibility trends, issues and concerns
Evaluate policies, management systems, strategies and initiatives with respect to SSCR
Compliance with SSCR legal and regulatory requirements

3

 
Corporate Governance



The following table lists the current members of each committee and the number of meetings held during 2018.
Name
 
Audit(1)
 
Compensation
 
Governance
 
SSCR**
Jeffrey L. Berenson*
 
 
 
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Michael A. Cawley*
 
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Chair
 
 
Edward F. Cox*
 
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James E. Craddock*(2)
 
 
 
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Chair
Barbara J. Duganier*
 
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Thomas J. Edelman*
 
 
 
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Holli C. Ladhani
 
 
 
 
 
 
 
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David L. Stover
 
 
 
 
 
 
 
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Scott D. Urban*
 
 
 
Chair
 
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William T. Van Kleef*
 
Chair
 
 
 
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Number of Meetings
 
5
 
6
 
5
 
3
*Independent Directors
**Committee was reorganized in July 2018 from Environment, Health and Safety to Safety, Sustainability and Corporate Responsibility

(1)
Each member of our Audit Committee has been determined by the Board to be financially literate and meets the additional criteria for independence of audit committee members as set forth in Securities and Exchange Commission (“SEC”) rule 10A-3(b)(1). Mr. Van Kleef has been determined by the Board to be an audit committee financial expert as that term is defined in Item 407(d)(5) of Regulation S-K.
(2)
Mr. Craddock was the CEO of Rosetta Resources Inc. (“Rosetta”) prior to its merger with the Company on July 20, 2015. Our Board has reviewed the applicable rules and regulations of the SEC and the standards and guidance of the New York Stock Exchange (“NYSE”) and concluded that Mr. Craddock is independent. As a prior employee of the acquired company, Rosetta, an entity previously unaffiliated with the Company, the NYSE allows a determination of independence since the termination of his employment with Rosetta occurred concurrently with the closing of the merger.

Compensation Committee Interlocks and Insider Participation

During fiscal year 2018, Messrs. Berenson, Craddock, Edelman, Urban and Ms. Williamson served as members of the Compensation Committee, with Ms. Williamson exiting the committee on April 24, 2018. None of the Compensation Committee members was an officer or employee of the Company or former officer of the Company or had any business relationship or conducted any business with the Company other than as described in the Related Person Transactions disclosure in this Proxy Statement. During fiscal year 2018, none of our executive officers served as a director or member of the Compensation Committee (or other committee of the board performing equivalent functions) of another entity where an executive officer of such entity served as a director of the Company or on our Compensation Committee.

Board Development and Succession Planning

Our Board plays a key role in the oversight of the Company’s business. We are committed to ensuring that it represents a diversity of qualifications, attributes, skills and experience necessary for our future. We recognize that our shareholders are interested in board tenure and diversity — areas of consideration in our Board succession planning. We know that the most successful boards, like their executive management team counterparts, have the collective chemistry, strength, agility and strategic perspective to meet the challenges

4

 
Corporate Governance


of the fast-moving global business environment within which we operate. In our view, our current Board possesses these traits, and we have taken a number of steps to position it for our future.

First, we have continued to expand our outreach as part of our shareholder engagement program. In 2018, we requested meetings with 38 shareholders, representing approximately 78% of our outstanding stock. We also solicited feedback from representatives of the proxy advisory firms, Glass, Lewis & Co. (“Glass Lewis”) and Institutional Shareholder Services Inc. (“ISS”). These meetings were invaluable in providing validation of our practices in some areas, while identifying areas for improvement in others. In general, we received positive feedback on our continued efforts to enhance our public disclosures and our progress on Board refreshment. We also received suggestions on improving our efforts and disclosures on Board skills and diversity identification, Board strategy, succession planning and climate reporting.

Second, we continue to focus on the importance of Board refreshment adding Ms. Duganier to the Board in May of 2018, bringing financial expertise along with extensive leadership and cyber security experience. In addition, the Board underwent an evaluation process to identify the skills needed to enhance the strategic direction of the Board. The Company has engaged an independent director search firm to help identify prospective director candidates. The Governance Committee continues discussions to evaluate the skill-sets needed to maximize Board effectiveness and support the strategic direction of the Company.

Third, we have evolved our Board self-evaluation process to a more participative discussion conducted by an independent third-party law firm. In the current environment, this discussion has included Board refreshment, Company strategic plan and alignment with management.

Fourth, in early 2017, we amended our By-Laws to reduce the age at which a director would not stand for election from 75 to 72. We believe that this will facilitate a more orderly succession process that provides for the periodic infusion of new directors and the diversity of their perspectives. In February 2019, we further amended our By-Laws to allow for the lead independent director to remain eligible for election for one additional year, but not serve as the lead, to provide for an orderly transition of duties to the newly appointed lead independent. As of the date of the 2019 Annual Meeting of Shareholders, Mr. Cox will have reached the mandatory retirement age of 72; as a result, after 35 years of experience with our Board, he will not stand for re-election.

Finally, we have revisited our director compensation program to ensure its alignment with our compensation peer group, increasing our annual board member retainer and the SSCR chair retainer. We believe that this change is consistent with overall peer company practices.
Oversight of Risk Management

Our risk management program is overseen by our Board and its committees, with support from our management and external consultants.
 
Oversight of Risk Management
    The Board oversees risk management.
    Board committees, which meet regularly and report back to the Board, play significant roles in carrying out the risk oversight function.
    Our 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.
 

5

 
Corporate Governance


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;
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; and
manages sustainability, corporate responsibility and climate specific risk and opportunities, through our SSCR Committee that meets four times per year and reports regularly to the full Board.
Our Management
maintains committees responsible for enterprise risk management, compliance and ethics, disclosures and monitoring sustainability, corporate responsibility and climate related risk to our business;
includes a dedicated Chief Compliance Officer; and
regularly reports to our Board or its committees on our risk management practices.
Our Independent External Consultants
audit our financial statements, internal control over financial reporting and oil and gas reserves;
help evaluate the adequacy of our risk management program;
assist in the implementation of program enhancements; and
help prepare the risk disclosures in our public filings.

Senior Leadership 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 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 forms the basis for ongoing leadership assignments.

During 2018, our CEO, the Board of Directors and the management team successfully led the Company through the transition of key executive leadership positions. Noble Energy attracted top talent such as Brent Smolik, President & Chief Operating Officer, and Rachel Clingman, Senior Vice President, General Counsel & Secretary.

Codes of Conduct

We have adopted a Code of Conduct 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. 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.
Shareholder Engagement

Our shareholder engagement program provides for management’s annual engagement with some of our key shareholders to obtain feedback on our corporate governance practices. During 2018, we requested meetings with 38 shareholders, representing approximately 78% of our outstanding shares. Key members of senior management also engage annually with ISS and Glass Lewis. We received feedback regarding board skills and diversity, executive compensation metrics and climate reporting disclosures. Specifically, the Company has committed to publish a climate report in 2019 after extensive engagement with our shareholders. The Company has also expanded its disclosures surrounding our Board skills, experiences and diverse attributes. Feedback

6

 
Corporate Governance


was communicated to, and considered by, our Board and the Company continues to respond to shareholder feedback by working to improve its disclosures around governance and decisions in these areas. The below represents the percentage of our outstanding shares for which we have requested engagement during each year:
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Director Independence and Related Person Transactions

Director Independence

Our Governance Committee annually reviews the independence of our non-management directors and reports its findings to our Board. To assist in this review, our Board has adopted standards for director independence consistent with those of the NYSE and SEC. These independence standards are set forth in our Corporate Governance Guidelines, which are available on our Website under the heading “Corporate Governance.”

In making independence determinations, our Board considers relevant facts and circumstances, including transactions, relationships and arrangements between each director or any member of the director’s immediate family and the Company, our subsidiaries and affiliates. Transactions considered by the Board during 2018 through January 31, 2019 included:

Company royalty program payments to Mr. Cox of $277,981 and Mr. Cawley of $8,648;
payments of $2,328,513 to Flogistix LP (“Flogistix”), a portfolio company of White Deer Energy (“White Deer”), of which Mr. Edelman is a managing partner;
payments in the form of charitable contributions totaling $2,061,805 to the Wildlife Conservation Society, of which Mr. Edelman is a member of the board of trustees;
payments of approximate $30,595,754 to MRC Global (US) Inc., of which Ms. Duganier is a director;
payments of approximately $20,874,448 to Oil States International, Inc., of which Mr. Van Kleef is a director;
payments of approximately $927,499 to Pioneer Energy Services Corp. and affiliates, of which Mr. Urban is a director; and
payments of $31,111,098 to Select Energy Services, Inc. (“Select Energy”) and affiliated companies of which Ms. Ladhani is the President and Chief Executive Officer.


7

 
Corporate Governance


Under the NYSE Listing Standards, a director will not be considered independent if he/she is employed by a company that has, within the last three years, made or received payments from the Company, in excess of the greater of $1 million or 2% of such Company’s revenues. Ms. Ladhani was elected as the President and Chief Executive Officer of Select Energy on November 1, 2017, pursuant to the merger of Select Energy with Rockwater Energy Solutions, Inc. (“Rockwater”). During 2018, the Company made payments to Select Energy of approximately $28.2 million, which is less than 2% of Select Energy’s 2018 gross revenues. Effective October 26, 2017, the Board elected Ms. Ladhani as a director and has determined that she is not currently independent under the NYSE Listing Standards. Ms. Ladhani is a valuable member of the Board and adds over 18 years of experience in the broader energy industry, including CEO and CFO leadership, as well as financial expertise to our Board. The Company expects that its payments to Select Energy will be less than 2% of Select Energy’s revenues prospectively. The Board anticipates being able to reconsider her independence in 2021.

Under NYSE Listing Standards, a director is not independent if he/she has been within the last three years an employee of the listed company. However, NYSE guidance clarifies that a former employee of an acquired company may still be considered independent if the employment relationship ended concurrent with a merger. Mr. Craddock’s employment with Rosetta ended concurrently with the Company’s merger with Rosetta on July 20, 2015. Mr. Craddock did not receive additional consideration subsequent to the merger, none of the Rosetta executives were retained by the Company and the acquired assets represent a small portion of the Company’s total asset portfolio. Therefore, after review of relevant NYSE guidance, as well as other relevant facts and circumstances, the Company found, and continues to find, Mr. Craddock to be an independent director. Mr. Craddock brings valuable knowledge of our Delaware and Eagle Ford Shale assets, as well as CEO experience and a high level of financial literacy to our Board.

After reviewing these transactions, relationships and arrangements, on February 8, 2019 our Board determined that no material relationship existed that would interfere with the ability of Messrs. Berenson, Cawley, Cox, Craddock, Edelman, Urban, Van Kleef or Ms. Duganier to exercise independent judgment and that each is independent for Board membership purposes. Our Board has also determined that all members of our Audit, Compensation and Governance Committees are independent under the applicable NYSE independence standards and SEC rules.

Related Person Transactions

We review all relationships and transactions in which the Company and its 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 our 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 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 our best interest; and
any other matters deemed appropriate.

8

 
Corporate Governance


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.

Mr. Edelman is a managing partner of White Deer, a private equity firm that invests in the oil and gas industry. White Deer manages funds that own equity interests in certain companies with which the Company conducts business. During fiscal year 2018 and through January 31, 2019 the Company made payments totaling $2.3 million to Flogistix for the leasing of gas compression units. White Deer manages funds that own an approximately 90% interest in Flogistix. Mr. Edelman has an estimated indirect pecuniary interest of less than 5% in Flogistix.
Ms. Ladhani is the President and CEO of Select Energy, a public company that provides its customers with efficient and environmentally conscious water and chemical solutions to service the full life cycle of the well. During fiscal year 2018 and through January 31, 2019, the Company made payments totaling $31.1 million to Select Energy companies. In addition, White Deer owns a less than 5% interest in Select Energy, and Mr. Edelman has an indirect pecuniary interest of less than 1% in Select Energy, through this investment by White Deer.

Based upon the review and recommendations of our Governance Committee and our Board, we believe these transactions were in our best interest and on terms no less favorable to us than we could have achieved with an unaffiliated party.

During fiscal year 2018 and through January 31, 2019, there were no other transactions in excess of $120,000 between our 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, 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% shareholders 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, 2018.


9

 
Corporate Governance


Ownership of Equity Securities of the Company
Directors and Named Executive Officers

The following table sets forth, as of February 22, 2019, the shares of our common stock and common units of NBLX beneficially owned by each director, each NEO listed in the Summary Compensation Table included in this Proxy Statement, and all directors and executive officers as a group.
 
Noble Energy, Inc. Common Stock Beneficially Owned(1)
Noble Midstream Partners LP(1)
Name
Number of
Shares (2)
Shares Underlying Stock Options (3)
Total
Percent of  Class
Number of Common Units Beneficially Owned
Percentage of Common Units Beneficially Owned
Director
 
 
 
 
 
 
 
Jeffrey L. Berenson
67,209


47,740

114,949

*
Michael A. Cawley
53,793


47,740

101,533

*
Edward F. Cox
81,336

(4) 
47,740

129,076

*
James E. Craddock
102,345


29,391

131,736

*
Barbara J. Duganier
15,783



15,783

*
Thomas J. Edelman
3,528,284

(5) 
47,740

3,576,024

*
Holli C. Ladhani
30,790



30,790

*
David L. Stover
668,453


1,085,333

1,753,786

*
4,500
*
Scott D. Urban
48,118


47,740

95,858

*
William T. Van Kleef
115,236


47,740

162,976

*
Named Executive Officer (excluding any director named above)
 
 
 


 
 
 
Brent J. Smolik
184,833



184,833

*
Kenneth M. Fisher
198,988


511,019

710,007

*
14,500
*
John K. Elliott
99,693


170,066

269,759

*
Rachel G. Clingman
49,241



49,241

*
Gary W. Willingham(6)
179,233


283,705

462,938

*
10,000
*








 
 
 
All directors and executive officers as a group (20 persons)
5,733,872

(7) 
2,995,896

8,729,768

1.81%
77,244
*
*
Represents less than one percent.
(1)
Unless otherwise indicated, all shares and units are directly held with sole voting and investment power.
(2)
Includes restricted stock awards not currently vested, as follows: 8,932 shares held by each of Messrs. Berenson, Cawley, Cox, Craddock, Edelman, Urban, Van Kleef, Ms. Ladhani and 15,783 shares held by Ms. Duganier; Mr. Stover — 282,541 shares; Mr. Smolik  — 184,833 shares; Mr. Fisher — 85,867 shares; Mr. Elliott — 51,574 shares; Ms. Clingman — 49,241 shares; Mr. Willingham — 38,546 shares and other executive officers — 131,265 shares.
(3)
Consists of shares not outstanding but subject to options that are currently exercisable or that will become exercisable on or before April 23, 2019.
(4)
Includes 28,334 shares held by spouse.
(5)
Includes 200,000 shares held under deferred compensation plans; 20,000 shares held by spouse; 40,000 shares held by trusts for daughters; 40,000 shares held by descendants trust and 60,000 shares held by business ventures.
(6)
Includes 11 shares indirectly held in a qualified 401(k) plan and 30,000 shares held indirectly in an IRA. Values obtained from the shares of restricted stock shown in exit Form 4 filed upon Mr. Willingham's resignation, stock option information maintained by the Company, and the last Schedule 13D filed by the Company for holdings in NBLX.
(7)
Includes 15,344 aggregate number of shares indirectly held in a qualified 401(k) plan.


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Corporate Governance


Security Ownership of Certain Beneficial Owners

The following table sets forth, as of February 22, 2019, information about the number of shares held by persons we know to be the beneficial owners of more than 5% of our issued and outstanding common stock.
Name and
Address of Beneficial Owner
Number of Shares
of Common Stock
Beneficially Owned
Percent of Class
Capital Research Global Investors
333 South Hope Street
Los Angeles, CA 90071
58,780,045

(1) 
12.2%
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355
51,735,758

(2) 
10.7%
Capital International Investors
333 South Hope Street
Los Angeles, CA 90071
44,677,803

(3) 
9.2%
BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
33,195,707

(4) 
6.9%
State Street Corporation
One Lincoln Street
Boston, MA 02111
25,238,431

(5) 
5.2%

(1)
Based upon its Schedule 13G/A filed with the SEC on February 14, 2019 with respect to its beneficial ownership of our common stock, Capital Research Global Investors has sole voting and sole dispositive power with respect to 58,780,045 shares. Beneficial ownership of these shares is disclaimed. Capital Research Global Investors is a division of Capital Research and Management Company.
(2)
Based upon its Schedule 13G/A filed with the SEC on February 11, 2019 with respect to its beneficial ownership of our common stock, The Vanguard Group has sole voting power with respect to 559,067 shares, shared voting power with respect to 117,264 shares, sole dispositive power with respect to 51,079,646 shares and shared dispositive power with respect to 656,112 shares.
(3)
Based upon its Schedule 13G filed with the SEC on February 14, 2018 with respect to its beneficial ownership of our common stock, Capital International Investors has sole voting power and sole dispositive power with respect to 44,677,803 shares. Beneficial ownership of these shares is disclaimed. Capital International Investors is a division of Capital Research and Management Company.
(4)
Based upon its Schedule 13G/A filed with the SEC on February 6, 2019 with respect to its beneficial ownership of our common stock, BlackRock, Inc. has sole voting power with respect to 29,234,963 shares and sole dispositive power with respect to 33,195,707 shares.
(5)
Based upon its Schedule 13G filed with the SEC on February 14, 2019 with respect to its beneficial ownership of our common stock, State Street Corporation has sole voting power with respect to 0 shares, shared voting power with respect to 22,836,640 shares, sole dispositive power with respect to 0 shares and shared dispositive power with respect to 25,233,682 shares.


Shareholder Proposals and Other Matters

 
Shareholder proposals intended to be brought before our 2020 Annual Meeting of Shareholders as an agenda item in accordance with our By-Laws or to be included in our Proxy Statement relating to that meeting pursuant to Rule 14a-8 of the Exchange Act, which is currently scheduled to be held on April 28, 2020, must be received by us at our office in Houston, Texas, addressed to our Company Secretary, no later than October 31, 2019.
 


11

 
Election of Directors (Proposal 1)


Election of Directors (Proposal 1)

Our Board recommends voting for the nine director nominees as presented below, seven of whom are independent. The business experience of each nominee, as well as the qualifications that led our Board to select them 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 and qualified.
Election Process

Our By-Laws provide that the number of directors shall be determined by the Board 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 shareholder vote, our Governance Committee will act to determine whether to accept the director’s resignation and will submit its recommendation for 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 our Board a slate of nominees for election at each Annual Meeting of Shareholders. Nominees may be suggested by directors, members of management, shareholders or, in some cases, by a third-party search firm.

Shareholders 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, between 120 and 150 days before the anniversary date of the mailing of the previous year’s proxy materials. Shareholder nominees for directors to be submitted for inclusion in our 2020 Proxy Statement must be received by us by October 31, 2019. Our Corporate Governance Guidelines specify the processes for evaluating nominees for director and the requirements for a shareholder recommendation for a director nominee.

In addition, our By-Laws permit certain qualifying shareholders to include director nominees in our Proxy Statement. This proxy access mechanism allows a shareholder or group of up to 25 shareholders owning at least 3% of the Company’s outstanding common stock continuously for at least three years to submit their own candidate for election to our Board. These nominees may not constitute more than 25% of our Board at any time. Proxy access nominations must be delivered to the Company between 120 and 150 days before the anniversary date of the mailing of the previous year’s proxy materials and satisfy certain other criteria specified in our By-Laws. For inclusion in our 2019 Proxy Statement, proxy access nominations must be received by us no later than October 31, 2019.
Director Qualifications

Our Governance Committee believes that the minimum qualifications for serving as a director 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 our business and affairs 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

12

 
Election of Directors (Proposal 1)


who, after taking into account their skills, expertise, integrity, character, judgment, 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 or private companies, charities, civic bodies or similar organizations) and other diverse attributes and qualities, are believed to enhance our Board’s ability to manage and direct, in an effective manner, our business and affairs, 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 ours and senior level executive experience, as well as the ability to make independent, analytical judgments, the ability to communicate effectively and the ability and willingness to 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 our Company. It will also seek to have our Board represent a diversity of background, experience and other diverse attributes. Our Governance Committee annually reviews its long-term plan for Board composition, giving consideration to the foregoing factors. The above criteria and guidelines, together with the section of the Company’s Corporate Governance Guidelines entitled “Director Qualification Standards,” constitute the policy of the Governance Committee regarding the recommendation of new nominees or the re-election of directors to the Company’s Board of Directors or its committees.
2019 Nominees for Director

Upon recommendation of the Governance Committee, our Board has nominated Jeffrey L. Berenson, Michael A. Cawley, James E. Craddock, Barbara J. Duganier, Thomas J. Edelman, Holli C. Ladhani, David L. Stover, Scott D. Urban and William T. Van Kleef for election as director.

Each of the director nominees currently serves on our Board and was elected by the shareholders at our 2018 Annual Meeting of Shareholders, with the exception of Barbara J. Duganier, who was appointed on May 29, 2018 by our Board. If elected, each nominee will hold office until the 2020 Annual Meeting of Shareholders 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 our Board, or our Board may reduce the number of directors.

Our Board believes that the combination of the various qualifications, skills, experiences and diverse attributes of the 2019 director nominees will contribute to an effective and well-functioning board. Our Board and the Governance Committee believe that, individually and as a whole, these director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to our Company’s management.
Qualifications of 2019 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 our Board to conclude that the director is qualified to serve.

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


13

 
Director Nominee Biographies

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Jeffrey L. Berenson
Sills and Qualifications
 
Director since 2005 Age 68
   High level of financial literacy
   Relevant Chief Executive Officer / President experience
   Extensive knowledge of our industry and business
   Risk assessment and management experience
Mr. Berenson is Chairman and Chief Executive Officer of Berenson Holdings LLC, a private investment banking firm in New York City that he co-founded in 1990. From 1978 until such co-founding, 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 previously served on the boards of directors of Epoch Holding Corporation and Patina Oil and Gas Corp. (“Patina”) and joined our Board upon completion of our merger with Patina in May 2005.

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Michael A. Cawley
Skills and Qualifications
 
Director since 1995 Age 71
 
   Relevant Chief Executive Officer / President experience
   Extensive knowledge of our industry and business
   Strong governance experience
   Risk assessment and management experience

Mr. Cawley has served as President and Manager of The Cawley Consulting Group, LLC since January 2012. He previously served as a director of Noble Corporation Plc (“Noble Corporation”) from 2010 to 2017. Mr. Cawley also previously served as President and Chief Executive Officer of The Samuel Roberts Noble Foundation, Inc. (the “Foundation”) from February 1992 until his retirement in January 2012, after serving as Executive Vice President of the Foundation since January 1991. Prior to 1991, Mr. Cawley was the President of Thompson and Cawley, a professional corporation, attorneys at law. Mr. Cawley served as a trustee of the Foundation from 1988 until his retirement. He has served on our Board since 1995 and served as our Lead Independent Director from 2001 through April of 2019.

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James E. Craddock
Skills and Qualifications
 
Director since 2015 Age 60
   High level of financial literacy
   Relevant Chief Executive Officer / President experience
   Extensive knowledge of our industry and business
   Risk assessment and management experience
Mr. Craddock served as the Chairman and Chief Executive Officer of Rosetta from February 2013 through July 2015, when Rosetta merged with the Company. He joined Rosetta in April 2008 as Vice President, Drilling and Production Operations, and was named a Senior Vice President in January 2011. From April 2006 to March 2008, Mr. Craddock was Chief Operating Officer for BPI Energy, Inc. (“BPI”), an exploration and production start-up company focused on coal bed methane development. Mr. Craddock began his industry career with Superior Oil Company in 1981 and then held a broad range of technical, operational and strategic roles with Burlington Resources Inc. (“Burlington”) and its predecessor companies for more than 20 years. At Burlington, he held a series of positions of increasing responsibility, most recently as Chief Engineer. Mr. Craddock served as a director of Templar Energy LLC from 2017 through January 2019. He joined our Board upon completion of our merger with Rosetta in July 2015.



14

 
Director Nominee Biographies

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Barbara J. Duganier
Skills and Qualifications
 
Director since 2018 Age 60
   High level of financial literacy
   Extensive knowledge of cyber security
   Risk assessment and management experience
Ms. Duganier was a managing director at Accenture from 2004 to 2013 where she held various leadership and management positions in Accenture’s outsourcing business, including as Global Chief Strategy Officer and as Global Growth and Offering Development Lead. Prior to Accenture, she served as an independent consultant to Duke Energy North America; a licensed certified public accountant and equity partner, at Arthur Andersen, including a role as Global Chief Financial Officer. Ms. Duganier is a director of the general partner of Buckeye Partners, L.P., chair of its audit committee and a member of the compensation committee, and a director, governance committee member and audit committee chair of MRC Global Inc. Ms. Duganier also serves on the Board of Managers of West Monroe Partners. Previously, Ms. Duganier served as a director and member of the enterprise and risk oversight and compensation committees of HCC Insurance Holdings. Ms. Duganier is a National Association of Corporate Directors (NACD) Governance Fellow and as the President of the NACD Texas Tricities.

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Thomas J. Edelman
Skills and Qualifications
 
Director since 2005 Age 68
   High level of financial literacy
   Relevant Chief Executive Officer / President experience
   Extensive knowledge of our industry and business
   Risk assessment and management experience
Mr. Edelman is a managing partner of White Deer Energy, an energy private equity fund. He founded Patina and served as its Chairman and Chief Executive Officer from its formation in 1996 through its merger with the Company in 2005. Mr. Edelman co-founded 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. He previously worked for First Boston Corporation and Lehman Brothers Kuhn Loeb Incorporated. Mr. Edelman serves on the boards of Corterra Energy, LLC, Midstream Texas LLC, Global Petro Storage Limited, Quanah Panhandle, LLC and Riverside Energy Company LLC. He is trustee of the Wildlife Conservation Society and The Frick Collection, serves on the Advisory Council of Princeton University’s Department of Politics, is an Emeritus member of the Investment Committee of The Hotchkiss School and is Chairman Emeritus of Lenox Hill Neighborhood House. He joined our Board upon completion of our merger with Patina in May 2005.

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Holli C. Ladhani
Skills and Qualifications
 
Director since 2017 Age 48
   High level of financial literacy
   Relevant Chief Executive Officer / President experience
   Extensive knowledge of our industry and business
   Risk assessment and management experience
Ms. Ladhani is President and Chief Executive Officer of Select Energy. Prior to its merger with Select Energy, Ms. Ladhani served as Chairman, President and Chief Executive Officer of Rockwater since February 2017 and Chief Executive Officer since June 2015. Ms. Ladhani held various positions at Rockwater since 2011, including Executive Vice President, Chemical Technologies and Chief Financial Officer. Prior to joining Rockwater, Ms. Ladhani served as Executive Vice President and Chief Financial Officer of Dynegy Inc. (“Dynegy”) since November 2005. She held various positions     with Dynegy, including Senior Vice President, Treasurer and Controller. In November 2011, subsequent to Ms. Ladhani’s departure from Dynegy, two Dynegy subsidiaries of which Ms. Ladhani had previously been an officer filed for bankruptcy protection. Prior to joining Dynegy, Ms. Ladhani held various positions with PricewaterhouseCoopers LLP from 1992 to 2000. Ms. Ladhani serves on the board of Select Energy, on the board of trustees of Rice University, and is a board member of Junior Achievement of Southeast Texas. She joined our Board in October 2017.

15

 
Director Nominee Biographies

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David L. Stover
Skills and Qualifications
 
Director since 2014 Age 61
   High level of financial literacy
   Broad international exposure
   Extensive knowledge of our industry and business
   Active in Community
   Risk assessment and management experience
Mr. Stover has served as the Chief Executive Officer of Noble Energy since October 2014 and Chairman of the Board since April 2015. He served as President and Chief Executive Officer of Noble Energy from October 2014 to November 2018, served as President and Chief Operating Officer from May 2009 to October 2014, and served as Executive Vice President and Chief Operating Officer from August 2006 to April 2009. He joined the Company in 2002 and has served in various other senior leadership capacities, including Senior Vice President of North America and Business Development and Vice President of Business Development. Prior to joining the Company, he held various positions with BP America, Inc. (“BP”), Vastar Resources, Inc. (“Vastar”), and Atlantic Richfield Company (“ARCO”). He joined our Board in April 2014.
 
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Scott D. Urban
Skills and Qualifications
 
Director since 2007 Age 65
   Relevant executive officer experience
   Broad international exposure
   Extensive knowledge of our industry and business
   Risk assessment and management experience
Mr. Urban served in executive management positions at Amoco Corp. (“Amoco”) and its successor, BP, from 1977 to 2005. At the time of his retirement from BP in 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 has been a partner in Edgewater Energy LLC, an investment consulting firm, since 2010 and has served as a member of the board of directors of Pioneer Energy Services Corporation since 2008. He joined our Board in October 2007.

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William T. Van Kleef
Skills and Qualifications
 
Director since 2005 Age 67
   High level of financial literacy
   Relevant Chief Executive Officer / President experience
   Extensive knowledge of our industry and business
   Risk assessment and management experience
Mr. Van Kleef served in executive management positions at Tesoro Corporation (“Tesoro”) from 1993 to 2005, most recently as Tesoro’s 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 has also served as a member of the board of directors of Oil States International, Inc. since 2006. He joined our Board in November 2005.


  

16

 
2018 Director Compensation

2018 Director Compensation

Our 2018 director compensation program consists of two principal elements: (1) an annual retainer and committee retainer and (2) equity, in the form of 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 2018, paid pro rata on a monthly basis, with adjustments approved by our Board at its October 23, 2018 meeting, effective as of January 1, 2019 and noted where applicable:
an annual retainer of $85,000 (increased to $100,000 for 2019);
$15,000 as an annual retainer for the Governance chair; $10,000 for the SSCR chair (increased to $15,000 for 2019); $25,000 for the Audit chair and $15,000 Compensation chair;
an annual committee member retainer in the amounts of $10,000 for Governance, Audit and Compensation committee members and $6,000 for SSCR committee members; and
$25,000 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 under which all or a portion of their director fees may be deferred for future payment. 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 Board service.
Equity

The 2015 Stock Plan for Non-Employee Directors of Noble Energy, Inc. (“2015 Plan”) provides for grants of stock options and awards of restricted stock to our non-employee directors, and was approved by shareholders on April 28, 2015.

Stock options were issued with an exercise price equal to the fair market value, as defined in the 2015 Plan, of our common stock on the date of grant and may be exercised beginning one year after the date of grant. They expire 10 years from the date of grant. Restricted stock is restricted for a period of one year from the date of award. The vesting of stock options and restricted stock under the 2015 Plan is not contingent upon the satisfaction of any performance criteria and will accelerate upon a termination of Board membership following a change of control, as defined in the 2015 Plan.

Newly elected non-employee directors receive, on the date of initial election to our Board, an award with a total value of $250,000 to be allocated 100% to restricted shares. On October 24, 2017 our Board approved the grant of full value shares for annual equity and new hire grants, to replace the prior practice of granting one-half stock options and one-half restricted shares.

On January 29, 2019 our Board considered the Company’s 2018 results in an adverse business environment in making the 2018 awards based on the $200,000 target value, with 100% of the grant in restricted stock, resulting in 8,932 shares of restricted stock being awarded to each non-employee director, effective February 1, 2019.


17

 
2018 Director Compensation

Director Compensation Summary for 2018

The table below sets forth certain information concerning the compensation paid or earned in 2018 by our non-employee directors.
Name
Fees Earned or Paid in Cash
($)(1)
Stock Awards
($)(2)
Option Awards
($)(3)
Non-Equity Incentive Plan Compensation
($)
Change in Pension Value and Non-qualified Deferred Compensation Earnings
($)
All Other Compensation
($)
Total
($)
Jeffrey L. Berenson
108,335

199,982


308,317
Michael A. Cawley
148,335

199,982


348,317
Edward F. Cox
115,335

199,982


315,317
James E. Craddock
125,335

199,982


325,317
Barbara J. Duganier
59,583

249,993


309,576
Thomas J. Edelman
115,335

199,982


315,317
Holli C. Ladhani
92,000

199,982


291,982
Scott D. Urban
129,335

199,982


329,317
William T. Van Kleef
133,335

199,982


333,317

(1)
Reflects annual retainer, committee chair retainer, committee member retainer and lead independent director fee paid or earned by our non-employee directors in 2018
(2)
Reflects the aggregate grant date fair value for restricted stock awarded to our non-employee directors computed in accordance with FASB ASC Topic 718. Restricted stock awarded will vest on the one-year anniversary of the award date. The vesting of the restricted shares will accelerate in the event of an involuntary termination of Board membership following a change of control. Each non-employee director received an award of 6,474 shares of restricted stock on February 1, 2018 that were unvested as of December 31, 2018. Ms. Duganier received an award of 6,851 shares of restricted stock on May 30, 2018 upon her election to the Board.
(3)
The following directors have option grants outstanding as of December 31, 2018: Mr. Berenson — 55,262 shares; Mr. Cawley — 55,262 shares; Mr. Cox — 55,262 shares; Mr. Craddock — 29,391 shares; Mr. Edelman —55,262 shares; Mr. Urban —55,262 shares; and Mr. Van Kleef — 55,262 shares.

18

 
Ratification of Appointment of Independent Auditor (Proposal 2)


Ratification of Appointment of Independent Auditor (Proposal 2)
The Audit Committee of our Board is directly responsible for the appointment, compensation, retention and oversight of the independent external audit firm retained to audit our financial statements. The Audit Committee has appointed KPMG LLP as our independent external auditor for 2019. KPMG has been retained as our external auditor continuously since May 2002.

The Audit Committee is responsible for the audit fee negotiations associated with our retention of KPMG. In order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent external audit firm.

In conjunction with the mandated rotation of the audit firm’s lead engagement partner, the Audit Committee and its chairperson are directly involved in the selection of KPMG’s new lead engagement partner. The members of the Audit Committee and our Board believe that the continued retention of KPMG to serve as our independent external auditor is in our best interest and the best interest of our shareholders.

Although action by our shareholders on this matter is not required, our Audit Committee believes that it is important to seek shareholder 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 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 shareholders 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 2018 and 2017
 
2018

%
 
2017

%
Audit Fees(1)
$
2,830,000

78.5
 
$
2,805,000

75.9
Audit-Related Fees(2)
776,000

21.5
 
890,000

24.1
Tax Fees

 

All Other Fees

 

Total Fees(3)
$
3,606,000

100.0
 
$
3,695,000

100.0
(1)
Services rendered in 2018 and 2017 include auditing our financial statements included in the Company’s Annual Report filed on Form 10-K and our internal controls over financial reporting and quarterly reviews of our interim financial statements filed on Form 10-Q.
(2)
Includes fees for audits of, and consents related to, comfort letters, foreign statutory audits, employee benefit plans, attest engagements and similar items.
(3)
The amounts of fees paid by NBLX to KPMG LLP, its independent auditor, were $1,164,500 for 2018 and $1,059,500 for 2017 and are not included in above table. See NBLX Annual Report on Form 10-K filed on February 19, 2019.

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 $50,000 rendered by our Independent Auditor. Any pre-approval of services by the Audit Committee Chair shall be reported to the Audit Committee at its next scheduled meeting.

The Audit Committee considers whether KPMG's rendering of non-audit services to the Company is compatible with maintaining its independence. All audit-related services, tax services and other services for 2018 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.

19



 
Report of the Audit Committee
To the Shareholders of
Noble Energy, Inc.:

The Audit Committee (the “Committee”) has reviewed and discussed the Company’s audited financial statements with management for the year ended December 31, 2018. The Committee has also discussed with KPMG, the Company’s Independent Auditor, the matters required to be discussed by Auditing Standard No. 1301, Communication with Audit Committees. 
 
 
The Committee has received from KPMG the written disclosures required by applicable requirements of the Public Company Accounting Oversight Board concerning their independence and discussed the auditors’ independence with them.
Based on the Audit Committee’s discussions with management and KPMG, and its review of the representations of management and the report of KPMG 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, 2018, as filed with the SEC.
 
 
Audit Committee
William T. Van Kleef, Chair
Michael A. Cawley
Edward F. Cox
Barbara J. Duganier

 



20

 
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 shareholders with the opportunity to vote to approve, on an advisory basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement in accordance with the SEC’s compensation disclosure rules.
Our executive compensation program is designed to attract and retain high quality individuals and to link their compensation to performance. We describe this program, including how it links executive compensation to Company performance, in the Compensation Discussion and Analysis portion of this Proxy Statement. We believe that our program continues to be appropriately designed to link compensation to performance.
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 our Company, Board or Compensation Committee. 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 action is necessary to address the concerns of shareholders.
Accordingly, we ask our shareholders to vote on the following resolution at our annual meeting:
RESOLVED, that the Company’s shareholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s Proxy Statement for the 2019 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the 2018 Summary Compensation Table and the other related tables and disclosures.

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




21

 
Approval of Amendment and Restatement of the 2017 LTIP (Proposal 4)

Approval of Amendment and Restatement of the 2017 Long-Term Incentive Plan to Authorize Additional Shares (Proposal 4)
At the 2019 Annual Meeting, our shareholders are being asked to approve an amendment and restatement of the 2017 Plan that will increase the number of shares of common stock authorized for issuance under the plan from 29,000,000 shares to 44,000,000 shares (an increase of 15,000,000 shares) and remove certain provisions no longer applicable due to changes in the federal tax laws. The Tax Cuts and Jobs Act of 2017 eliminated the performance-based compensation exception under Section 162(m) of the Code, and so the amendment and restatement of the 2017 Plan removes provisions designed to allow the Company to provide “performance-based compensation” under the obsolete tax rules. No awards were granted under the 2017 Plan that were intended to be exempt from IRC Section 162(m) as performance-based compensation. Our Board approved this amendment on January 29, 2019, subject to shareholder approval at our annual meeting.
Background and Purpose
Our Board recommends approval of the amendment and restatement of the 2017 Plan. The proposed increase in the number of shares authorized for issuance under the plan would enable the continued use of the 2017 Plan for stock-based grants and awards consistent with the objectives of our compensation program.
The use of stock-based grants and awards under the 2017 Plan continues to be an important part of our compensation program. Of the 29,000,000 shares currently authorized for issuance under the plan, 12,456,066 shares remain available for future grant or award as of February 22, 2019. 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 2017 Plan by 15,000,000 a total of 27,456,066 shares would be available under the 2017 Plan. In addition, as of February 22, 2019, 317,591 shares remain available for future grant or award under the Noble Energy, Inc. 2015 Stock Plan for Non-Employee Directors (the “2015 Plan”) (together, the 2015 Plan with the 2017 Plan would provide for 27,773,657 shares available). This increase would give us the flexibility to continue to responsibly address our future equity compensation needs.
As of the record date of February 22, 2019, there were a total of 483,584,388 shares of our common stock issued and outstanding. We had a total of 13,393,029 stock options outstanding with a weighted average exercise price of $44.52 and a weighted average remaining term of 4.44 years, 4,750,089 shares of restricted stock outstanding, and 2,228,992 performance share awards outstanding as of the record date. On that date the reported closing price per share of our common stock on the NYSE was $23.16.
If the proposed amendment and restatement is not approved by our shareholders, the 2017 Plan will remain in effect in its present form.
Summary
The following description of the 2017 Plan is a summary, does not purport to be a complete description of the 2017 Plan and is qualified in its entirety by the full text of the 2017 Plan. A copy of the 2017 Plan (as amended and restated) is attached to this proxy statement as Appendix C and is incorporated herein by reference.
Purposes. The 2017 Plan allows for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, stock awards and other incentive awards to employees and other service providers of the Company and its affiliates who are in a position to make a positive contribution to the success of the Company and its affiliates. The purposes of the 2017 Plan are to attract and retain highly qualified individuals to perform services for the Company and its affiliates, to further align the interests of those individuals with those of our shareholders and to more closely link compensation with Company performance. The 2017 Plan provides an essential component of the Company’s total compensation package, reflecting the importance that we place on aligning the interests of our service providers with those of our shareholders.

22

 
Approval of Amendment and Restatement of the 2017 LTIP (Proposal 4)

Administration. The 2017 Plan provides for administration by the Committee, which may be the Compensation Committee or such other committee as our Board may designate. The Committee has the authority to make all determinations under, prescribe all forms for use with, and adopt rules for the administration of, the 2017 Plan. The Committee has the right to delegate to one or more officers of the Company any right granted to the Committee under the 2017 Plan, except where such delegation would violate state corporate law.
Eligibility. Employees and other service providers of the Company and our affiliates who, in the opinion of the Committee, are in a position to make a positive contribution to the success of the Company and our affiliates are eligible to participate in the 2017 Plan. The Committee determines the type and size of award and sets the terms, conditions, restrictions and limitations applicable to the award within the confines of the 2017 Plan’s terms. All of our executive officers and approximately 898 other current employees participate in the 2017 Plan.
Available Shares. The maximum number of shares of common stock remaining available for grant under the 2017 Plan is 12,456,066. For purposes of this share limit, (i) the grant of stock options reduces the share limit one share for each share subject to such an award, (ii) the grant of stock appreciation rights that may be paid or settled only in common stock, or in either cash or common stock (or a combination thereof), reduces the share limit one share for each share subject to such an award, (iii) the grant of restricted stock or stock awards reduces the share limit 2.39 shares for each share subject to such an award, and (iv) the grant of restricted stock units, performance awards or other incentive awards that may be paid or settled only in common stock, or in either cash or common stock, reduces the share limit 2.39 shares for each share subject to such an award. The grant of stock appreciation rights, restricted stock units, performance awards or other incentive awards that may be paid or settled only for cash does not affect the share limit. If any award other than an award that may be paid or settled only for cash is canceled or forfeited, or terminates, expires or lapses, for any reason, the shares then subject to such award will again be available for grant of awards under the 2017 Plan and will be added back to the number of shares available for grant on the same numerical basis as was used upon grant to reduce the number of shares available for grant of awards. Shares (i) tendered (either actually or by attestation) or withheld to satisfy an exercise price or tax withholding obligation for an award, or (ii) repurchased by the Company using stock option proceeds will not again be available for issuance under the 2017 Plan. The 2017 Plan contains anti-dilution provisions that provide that, in the event of an equity restructuring or certain other corporate transactions, adjustments will be made in the maximum number of shares subject to the 2017 Plan, the award limits described below and the exercise price per share of outstanding awards.
Award Limits. The maximum number of shares of common stock that may be issued pursuant to incentive stock options under the 2017 Plan is 14,000,000 shares. The maximum number of shares of common stock that may be subject to stock options and stock appreciation rights granted under the 2017 Plan to any one person during a fiscal year is 800,000 shares. The maximum number of shares of common stock that may be subject to awards other than stock options and stock appreciation rights granted under the 2017 Plan to any one person during a fiscal year is 800,000 shares.
No Repricing or Reload Rights. Except adjustment for certain corporate changes in accordance with the provisions of the 2017 Plan, no award may be repriced, replaced, regranted through cancellation or otherwise modified without stockholder approval, if the effect would be to reduce the exercise price for the shares underlying such award. Further, no stock option or stock appreciation right that is underwater may be canceled in exchange for a cash payment or for the purpose of granting a replacement award of a different type.


23

 
Approval of Amendment and Restatement of the 2017 LTIP (Proposal 4)

Types of Awards
Stock Options. The 2017 Plan provides for the grant of incentive stock options intended to meet the requirements of Section 422 of the Code and nonqualified stock options that are not intended to meet those requirements. Incentive stock options may be granted only to employees of the Company and its affiliates. All stock options will be subject to terms, conditions, restrictions and limitations established by the Committee, including rules as to exercisability in the event of termination of employment or service, as long as they are consistent with the terms of the 2017 Plan.
Generally, the exercise price of a stock option granted under the 2017 Plan may not be less than the fair market value of the common stock on the date of grant. However, the exercise price may be less if the stock option is granted in connection with a transaction and complies with certain requirements of the Code. Incentive stock options must be granted at 100% of fair market value (or, in the case of an incentive stock option granted to a 10% stockholder, 110% of fair market value). The exercise price of a stock option may be paid in cash (or equivalents), in shares of Company common stock that the participant already owns, or such other consideration as the Compensation Committee approves.
Stock Appreciation Rights (“SARs”). A stock appreciation right entitles the participant to receive an amount in cash and/or shares of common stock, as determined by the Committee, equal to the amount by which our common stock appreciates in value after the date of the award. The Committee will determine when the SAR will vest and become exercisable. Generally, the exercise price of a SAR will not be less than the fair market value of the common stock on the date of grant. However, the exercise price may be less if the stock is granted in connection with a transaction and complies with special rules under Section 409A of the Code. No SAR will be exercisable later than 10 years after the date of the grant. The Committee will set other terms, conditions, restrictions and limitations on SARs, including rules as to exercisability in the event of termination of employment or service.
Restricted Stock and Restricted Stock Units (“RSUs”). Restricted stock is common stock that must be returned to us if certain conditions are not satisfied. The Committee will determine the restriction period and may impose other terms, conditions and restrictions on restricted stock, including vesting upon achievement of performance goals pursuant to a performance award and rules as to vesting in the event of termination of employment or service. The Committee also may require the participant to pay for restricted stock. Subject to the terms and conditions of the award agreement related to restricted stock, a participant holding restricted stock will have the right to receive dividends on the shares of restricted stock during the restriction period, vote the restricted stock and enjoy all other stockholder rights related to the shares of common stock. Restricted stock (and any associated dividends) generally will be held by the Company in escrow for the participant’s benefit until such time as the restricted stock is either forfeited by the participant or the restrictions thereon terminate. Upon expiration of the restriction period, the participant is entitled to receive shares of common stock not subject to restriction.
Restricted stock units are fictional shares of common stock. The Committee will determine the restriction period and may impose other terms, conditions and restrictions on RSUs, including vesting upon achievement of performance goals pursuant to a performance award and rules as to vesting in the event of termination of employment or service. Upon the lapse of restrictions, the participant is entitled to receive one share of common stock or an amount of cash equal to the fair market value of one share of common stock as provided in the award agreement. An award of RSUs may include the grant of a tandem dividend equivalent cash right or dividend equivalent unit right. A dividend equivalent cash right is a contingent right to receive an amount in cash equal to the cash distributions made with respect to a share of common stock during the period the RSU is outstanding. A dividend equivalent unit right is a contingent right to have additional RSUs credited to the participant equal to the number of shares of common stock (at fair market value) that may be purchased with the cash dividends. No dividend equivalent cash right or dividend equivalent unit right will vest or be payable sooner than the date on which the underlying RSU has vested.
Performance Awards. A performance award is an award payable in cash (including an annual bonus award) or common stock (or a combination thereof) upon the achievement of certain performance goals over a performance period. Performance awards may be combined with other awards to impose performance criteria as part of the terms of the other awards. For each performance award, the Committee will determine (i) the amount a participant may earn in the form of cash or shares of common stock or a formula for determining the amount payable to the

24

 
Approval of Amendment and Restatement of the 2017 LTIP (Proposal 4)

participant, (ii) the performance criteria and level of achievement versus such performance criteria that will determine the amount payable or number of shares of common stock to be granted, issued, retained and/or vested, (iii) the performance period over which performance is to be measured, which may not be shorter than one year, (iv) the timing of any payments to be made, (v) restrictions on the transferability of the award and (vi) other terms and conditions that are not inconsistent with the 2017 Plan.
The performance measure(s) determined by the Committee for a performance award may be described in terms of objectives that are related to the individual participant or objectives that are company-wide or related to a subsidiary, division, department, region, function or business unit of the Company or an affiliate in which the participant is employed or with respect to which the participant performs services, and may consist of one or more of any combination of the following criteria as set forth by the Committee in the performance award: 1) an amount or level of earnings or cash flow; 2) earnings or cash flow per share (whether on a pre-tax, after-tax, operational or other basis); 3) return on equity or assets; 4) return on capital or invested capital and other related financial measures; 5) cash flow or EBITDA; 6) revenues; 7) income, net income or operating income; 8) expenses or costs or expense levels or cost levels (absolute or per unit); 9) proceeds of sale or other dispositions; 10) share price; 11) total stockholder return; 12) operating profit; 13) profit margin; 14) capital expenditures; 15) net borrowing, debt leverage levels, credit quality or debt ratings; 16) the accomplishment of mergers, acquisitions, disposition, or similar business transactions; 17) net asset value per share; 18) economic value added; 19) individual business objectives; 20) growth in reserves or production; 21) finding and development costs; and 22) safety results.
The Committee 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 such a performance award.
Stock Awards. Stock awards are shares of common stock awarded to participants that are subject to no restrictions. Stock awards may be issued for cash consideration or for no cash consideration.
Other Incentive Awards. The Committee may grant other incentive awards under the 2017 Plan based upon, payable in or otherwise related to, shares of common stock if the Committee determines that the other incentive awards are consistent with the purposes of the 2017 Plan. Other incentive awards will be subject to any terms, conditions, restrictions or limitations established by the Committee. Payment of other incentive awards will be made at the times and in the forms, which may be cash, shares of common stock or other property, established by the Committee.
Change of Control. In the event of a change of control while a participant is employed by our Company or an affiliate followed by the termination of employment or service without cause or for good reason within the 24-month period following the change of control, each award outstanding under the 2017 Plan to such participant will become immediately vested and fully exercisable upon such termination and any restrictions applicable to the award will lapse on that date, provided that any performance award with performance-based vesting will vest upon such termination according to the performance achieved as measured through the last day of the month immediately preceding the date of such termination of employment or service. Upon a change of control where the Company is not the surviving entity (or survives only as a subsidiary of another entity), unless the Committee determines otherwise, all outstanding stock options and SARs that are not exercised at or before the occurrence of the change of the control will be assumed by or replaced with comparable options and rights in the surviving entity (or a parent of the surviving entity) in accordance with Code requirements, and other outstanding awards will be converted into similar awards of the surviving entity (or a parent of the surviving entity). The Committee also has discretion, no later than the commencement of the change of control, to require any participant holding an award to surrender such award in exchange for appropriate consideration as described in the 2017 Plan.
Withholding Taxes. All applicable withholding taxes will be deducted from any payment made under the 2017 Plan, withheld from other compensation payable to the participant, or be required to be paid by the participant (or be subject to a participant’s election to pay) prior to the making of any payment of cash or common stock under the 2017 Plan. Payment of withholding taxes may be made by withholding shares of common stock from any payment of common stock due or by the delivery by the participant to the Company or the applicable affiliate of previously acquired shares of common stock, in either case having an aggregate fair market value equal to the amount of the required withholding taxes.

25

 
Approval of Amendment and Restatement of the 2017 LTIP (Proposal 4)

Transferability. Generally, no award may be sold, transferred, pledged, exchanged, or disposed of, except by will or the laws of descent and distribution. However, if provided in the award agreement, nonqualified stock options may be transferred by a participant to a permitted transferee.
Clawback Provision. By accepting or exercising any award granted under the 2017 Plan, each participant agrees to abide and be bound by any policies adopted by the Company, including our compensation recoupment policy as contained in our Code of Conduct, as amended from time to time, and any other policies adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or exchange listing standards promulgated thereunder, providing for the repayment and/or forfeiture of any award or payment resulting from an accounting restatement or similar circumstances.
Amendment and Termination. Our Board may at any time suspend, terminate, amend or modify the 2017 Plan, but may not without stockholder approval make any modification or amendment that operates (i) to increase the total number of shares of common stock that may be issued under the 2017 Plan (other than adjustments in connection with certain corporate reorganizations and other events) or to change the designation or class of persons eligible to receive awards under the 2017 Plan, or (ii) to effect any change for which stockholder approval is required by or necessary to comply with applicable law or the listing requirements of an exchange or association on which the common stock is then listed or quoted. Upon termination of the 2017 Plan, the terms and provisions thereof will continue to apply to awards granted before termination. No suspension, termination, amendment or modification of the 2017 Plan will adversely affect in any material way any award previously granted under the 2017 Plan, without the consent of the participant.
Effectiveness. The amendment and restatement of the 2017 Plan will become effective upon approval by the shareholders at the Company’s 2019 Annual Meeting. If so approved, unless terminated earlier, the amended and restated 2017 Plan will terminate on January 28, 2029.
United States Federal Income Tax Consequences
The following summary is based on an analysis of the Code as currently in effect, existing laws, judicial decisions, administrative rulings, regulations and proposed regulations, all of which are subject to change. Moreover, the following is only a summary of United States federal income tax consequences. Actual tax consequences to participants may be either more or less favorable than those described below depending on the participants’ particular circumstances. State and local tax consequences may in some cases differ from the federal tax consequences. The following summary of the income tax consequences in respect of the 2017 Plan is for general information only. Interested parties should consult their own advisors as to specific tax consequences of their awards, including the applicability and effect of state, local and foreign laws.
Incentive Stock Options. No income will be recognized by a participant for federal income tax purposes upon the grant or exercise of an incentive stock option. The basis of shares transferred to a participant upon exercise of an incentive stock option is the price paid for the shares. If the participant holds the shares for at least one year after the transfer of the shares to the participant and two years after the grant of the stock option, the participant will recognize capital gain or loss upon sale of the shares received upon exercise equal to the difference between the amount realized on the sale and the basis of the stock. In these circumstances, we will not be entitled to any deduction for federal income tax purposes. Generally, if the shares are not held for that period, the participant will recognize ordinary income upon disposition in an amount equal to the excess of the fair market value of the shares on the date of exercise over the amount paid for the shares, or if less (and if the disposition is a transaction in which loss, if any, will be recognized), the gain on disposition. Any additional gain realized by the participant upon the disposition will be a capital gain. If this occurs, we will be entitled to a tax deduction equal to the ordinary income amount the participant recognizes. The excess of the fair market value of shares received upon the exercise of an incentive stock option over the option price for the shares is an item of adjustment for the participant for purposes of the alternative minimum tax. Therefore, although no income is recognized upon exercise of an incentive stock option, a participant may be subject to alternative minimum tax as a result of the exercise.
Nonqualified Stock Options. No income is expected to be recognized by a participant for federal income tax purposes upon the grant of a nonqualified stock option. Upon exercise of a nonqualified stock option, the participant will recognize ordinary income in an amount equal to the excess of the fair market value of the shares

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Approval of Amendment and Restatement of the 2017 LTIP (Proposal 4)

on the date of exercise over the amount paid for the shares. Income recognized upon the exercise of a nonqualified stock option will be considered compensation subject to withholding at the time the income is recognized, and, therefore, the participant’s employer must make the necessary arrangements with the participant to ensure that the amount of the tax required to be withheld is available for payment. Nonqualified stock options are designed to provide the employer with a deduction equal to the amount of ordinary income recognized by the participant at the time of the recognition by the participant, subject to the deduction limitations described below.
Stock Appreciation Rights. There is expected to be no federal income tax consequences to either the participant or the employer upon the grant of SARs. Generally, the participant will recognize ordinary income subject to withholding upon the receipt of payment pursuant to SARs in an amount equal to the aggregate amount of cash and the fair market value of any common stock received. Subject to the deduction limitations described below, the employer generally will be entitled to a corresponding tax deduction equal to the amount includible in the participant’s income.
Restricted Stock. If the restrictions on an award of shares of restricted stock are of a nature that the shares are both subject to a substantial risk of forfeiture and are not freely transferable (within the meaning of Section 83 of the Code), the participant will not recognize income for federal income tax purposes at the time of the award unless the participant affirmatively elects to include the fair market value of the shares of restricted stock on the date of the award, less any amount paid for the shares, in gross income for the year of the award pursuant to Section 83(b) of the Code. In the absence of this election, the participant will be required to include in income for federal income tax purposes on the date the shares either become freely transferable or are no longer subject to a substantial risk of forfeiture (within the meaning of Section 83 of the Code), the fair market value of the shares of restricted stock on such date, less any amount paid for the shares. The employer will be entitled to a deduction at the time of income recognition to the participant in an amount equal to the amount the participant is required to include in income with respect to the shares, subject to the deduction limitations described below. If a Section 83(b) election is made within 30 days after the date the restricted stock is received, the participant will recognize ordinary income at the time of the receipt of the restricted stock, and the employer will be entitled to a corresponding deduction, equal to the fair market value of the shares at the time, less the amount paid, if any, by the participant for the restricted stock. If a Section 83(b) election is made, no additional income will be recognized by the participant upon the lapse of restrictions on the restricted stock, but, if the restricted stock is subsequently forfeited, the participant may not deduct the income that was recognized pursuant to the Section 83(b) election at the time of the receipt of the restricted stock.
Dividends on restricted stock accumulated during the restricted period that are paid to the participant at the end of the restricted period will be additional compensation taxable as ordinary income to the participant subject to withholding, unless the participant made an election under Section 83(b) of the Code. Subject to the deduction limitations described below, the employer generally will be entitled to a corresponding tax deduction equal to the dividends includible in the participant’s income as compensation. If the participant has made a Section 83(b) election, the dividends will be dividend income, rather than additional compensation, to the participant.
If the restrictions on an award of restricted stock are not of a nature that the shares are both subject to a substantial risk of forfeiture and not freely transferable, within the meaning of Section 83 of the Code, the participant will recognize ordinary income for federal income tax purposes at the time of the transfer of the shares in an amount equal to the fair market value of the shares of restricted stock on the date of the transfer, less any amount paid therefor. The employer will be entitled to a deduction at that time in an amount equal to the amount the participant is required to include in income with respect to the shares, subject to the deduction limitations described below.
Restricted Stock Units. There will be no federal income tax consequences to either the participant or the employer upon the grant of restricted stock units. Generally, the participant will recognize ordinary income subject to withholding upon the receipt of cash and/or transfer of shares of common stock in payment of the restricted stock units in an amount equal to the aggregate of the cash received and the fair market value of the common stock so transferred. Subject to the deduction limitations described below, the employer generally will be entitled to a corresponding tax deduction equal to the amount includible in the participant’s income.
Dividend Equivalents. Generally, a participant will recognize ordinary income subject to withholding upon the receipt of cash and/or transfer of shares of common stock in payment of any dividend equivalent cash rights or dividend equivalent unit rights in an amount equal to the cash the participant receives or the fair market value

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Approval of Amendment and Restatement of the 2017 LTIP (Proposal 4)

of the common stock so transferred, as applicable. Subject to the deduction limitations described below, the employer generally will be entitled to a corresponding tax deduction equal to the amount includible in the participant’s income.
Performance Awards. There will be no federal income tax consequences to either the participant or the employer upon the grant of performance awards. Generally, the participant will recognize ordinary income subject to withholding upon the receipt of cash and/or shares of common stock in payment of performance awards in an amount equal to the aggregate of the cash received and the fair market value of the common stock so transferred. Subject to the deduction limitations described below, the employer generally will be entitled to a corresponding tax deduction equal to the amount includible in the participant’s income.
Stock Awards. The participant will recognize income for federal income tax purposes at the time of the stock award and, subject to the deduction limitations described below, the employer will be entitled to a corresponding deduction.
Other Incentive Awards. The tax treatment of other incentive awards will depend on the type of award. In general, the participant will be subject to income tax withholding at the time when the ordinary income is recognized. Subject to the deduction limitations described below, the participant’s employer will be entitled to a tax deduction at the same time and for the same amount.
Limitations on the Employer’s Compensation Deduction. Section 162(m) of the Code limits the deduction certain publicly held employers may claim for otherwise deductible compensation payable to certain current and former executive officers of the employer to the extent the compensation paid to such an officer for the year exceeds $1 million. The 2017 Plan originally was designed to allow certain types of awards to qualify as “performance-based compensation” that would be deductible without regard to the limits of Section 162(m). However, the performance-based compensation exception under Section 162(m) was eliminated by the Tax Cuts and Jobs Act of 2017. None of the awards granted under the 2017 Plan prior to the tax law change were exempt under the “performance-based compensation” exception. Accordingly, all awards granted under the 2017 Plan are subject to the deduction limit under Section 162(m).
Excess Parachute Payments. Section 280G of the Code limits the deduction that the employer may take for otherwise deductible compensation payable to certain individuals if the compensation constitutes an “excess parachute payment.” Excess parachute payments arise from payments made to disqualified individuals that are in the nature of compensation and are contingent on changes in ownership or control of the employer or certain affiliates. Accelerated vesting or payment of awards under the 2017 Plan upon a change in ownership or control of the employer or its affiliates could result in excess parachute payments. In addition to the deduction limitation, a disqualified individual receiving an excess parachute payment is subject to a 20% excise tax on the amount thereof.
Application of Section 409A of the Code. Section 409A of the Code imposes an additional 20% tax and interest on an individual receiving nonqualified deferred compensation under a plan that fails to satisfy certain requirements. For purposes of Section 409A, “nonqualified deferred compensation” includes equity-based incentive programs, including some stock options, stock appreciation rights and restricted stock unit programs. The awards made pursuant to the 2017 Plan will be designed to comply with the requirements of Section 409A of the Code to the extent the awards granted under the 2017 Plan are not exempt from coverage. However, if the 2017 Plan fails to comply with Section 409A in operation, a participant could be subject to the additional taxes and interest.


Our Board recommends that shareholders vote FOR the approval of the proposed amendment and restatement of the Noble Energy, Inc. 2017 Long-Term Incentive plan.




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Compensation Discussion and Analysis

Compensation Discussion and Analysis
Introduction

This Compensation Discussion and Analysis describes our executive compensation program, the 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 2018, who were:
Name
Title
David L. Stover
Chairman and Chief Executive Officer
Brent J. Smolik
President and Chief Operating Officer
Kenneth M. Fisher
Executive Vice President and Chief Financial Officer
John K. Elliott
Senior Vice President, Offshore
Rachel G. Clingman
Senior Vice President, General Counsel and Secretary
Gary W. Willingham (resigned October 26, 2018)*
Former Executive Vice President, Operations

* Upon Mr. Willingham's resignation, he entered into a Separation and Release Agreement with the Company, providing for certain benefits including: continued vesting of all unvested stock options granted in 2016 and 2017, as well as 1/3 of the stock options granted to him in 2018; continued vesting of performance restricted stock awards granted in 2016 and 2017; immediate vesting of his 2017 restricted stock grant and 1/3 of his 2018 restricted stock grant; and a cash severance payment of $2,247,500, subject to compliance with certain customary terms of the agreement, including a non-solicitation covenant that extends through October 19, 2020.

Biographical information for our Named Executive Officers, and other executive officers under the Exchange Act, is included in Appendix B to this Proxy Statement.


Our Compensation Philosophy

Align executive pay with performance and long-term shareholder value creation.
Have the majority of each Named Executive Officer's target compensation opportunity at risk, based on Company and individual performance.
Strongly align the earnings potential from executive at-risk compensation to what shareholders earn over that same period from their investment in Noble Energy.

2018 Overview of Operational & Financial Performance

2018 was a year of continued progress in positioning the Company to create long-term value for shareholders. Through disciplined capital investment in high return opportunities and ongoing portfolio activity, we generated positive free cash flow which strengthens our robust financial capacity. Among other things, we successfully conducted operations in an unpredictable commodity price environment and we executed on critical strategic outcomes including the accomplishment of having a majority of Coloradans support oil and gas instead of a setback initiative and our substantial advancement on the Leviathan development. However, we achieved below target performance on cost and, to a lesser degree, on volumes. Consistent with our pay for performance strategy, our Compensation Committee considered our significant advancement of strategic outcomes, as well as our shortfalls in reaching cost and volume targets and both absolute and relative share price performance, in determining compensation actions.

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Compensation Discussion and Analysis

2018 Performance Charts





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* Excludes impact of NBLX distributions, includes only upstream NBL

 



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*Non-GAAP measure (see reconciliation in Appendix A) calculated herein as an STIP metric
(1) 2017 and 2018 data excludes impact of NBLX free cash flow and is adjusted for price



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Compensation Discussion and Analysis

2018 Executive Compensation Overview

2018 Key Compensation Actions
2018 Short-Term Incentive Plan payout approved at 85% of target.
2016 performance share payouts at zero due to Company’s three-year relative TSR.

2019 Key Compensation Actions - Updated Compensation Benchmarking Peer Group
To enhance the benchmarking process for both our competitive performance and executive compensation, the Compensation Committee identified two peer groups: one for compensation benchmarking purposes and one for Company performance evaluation purposes.  The Committee determined that one singular peer group does not fully meet the needs of our compensation benchmarking and Company performance evaluation process.  The Committee and management believe utilizing a peer group comprised of companies of similar size and scope enhances accuracy in the benchmarking process.  For purposes of compensation benchmarking, the new peer group is balanced with companies both larger and smaller than Noble with the intention to reduce the distortions that smaller and larger companies can create.  As shown below, the following companies were removed from the legacy peer group: EOG Resources Inc., Range Resources Corp., Murphy Oil Corp. and Southwestern Energy. The following companies were added to the compensation peer group: Concho Resources, Inc., EQT Corp., Encana Corp., Diamondback Energy, Parsley Energy and Cimarex Energy.

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    Anadarko Petroleum Corp.
    Apache Corp.
    Cabot Oil & Gas Corp.
    Chesapeake Energy Corp.
    Cimarex Energy
    Concho Resources, Inc.
    Continental Resources, Inc.
    Devon Energy Corp.
    Diamondback Energy
    Encana Corp.
    EQT Corp.
    Hess Corp.
    Marathon Oil Corp.
    Pioneer Natural Resources Co.
    Parsley Energy
 


2019 Key Compensation Actions - New Performance Peer Group
In 2018, the Compensation Committee approved a new Performance Peer Group for the purposes of evaluating relative Company performance.  Criteria used to determine this new group included:

Similarity of long-term business strategy
Multi-basin operations
Commodity mix
International presence

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Compensation Discussion and Analysis


By utilizing these criteria, we identified a 13 company peer group (including Noble) that in the judgment of the Compensation committee accurately reflects companies with which we compete for investment capital and market recognition. 

 
    Anadarko Petroleum Corp.
    Apache Corp.
    Chesapeake Energy Corp.
    Cimarex Energy
    Continental Resources, Inc.
    Devon Energy Corp.
    Encana Corp.
    EOG Resources, Inc.
    Hess Corp.
    Marathon Oil Corp.
    Murphy Oil Corp.
    WPX Energy, Inc.
 

2019 Short-Term Incentive Plan Enhancements
Each year the Compensation Committee assesses the performance metrics driving incentive compensation.  The Compensation Committee considers the strategic direction of the organization, the alignment of metrics with shareholder value creation, and feedback received during our spring and fall shareholder engagement processes. With respect to the STIP metrics, we will replace the U.S. onshore drill & complete rate of return metric with a quantitative capital efficiency metric. The new capital efficiency metric will evaluate the organization’s ability to deliver returns by:

optimizing our capital allocation;
executing planned projects timely and efficiently; and
controlling spend to maintain discipline.

We will also add a new qualitative metric to the STIP assessing Noble’s relative performance in each of our operating areas. While the capital efficiency metric focuses on our ability to create value through capital allocation, the Compensation Committee also believes it is important to measure our relative performance in the basins in which we operate.  We strive to differentiate ourselves as industry leading performers in each of our key basins through safe and efficient operations, capital efficiency and returns.


CEO Target Versus Realizable Compensation
The chart below reflects again the alignment we seek to achieve between executive compensation and Company performance in our total compensation program. Our executives do not achieve target value unless:

the stock price appreciates on an absolute basis;
the Company meets or exceeds median industry stock performance; and
the Company meets or exceeds important financial and operational goals.

As depicted in the chart below and based on the Company’s stock price at December 31, 2018, the realizable value of Mr. Stover’s total compensation has averaged 48% across the past three years.

We believe our compensation program is operating as designed as our below target shareholder return results in below target compensation for our NEOs, demonstrating that our compensation program appropriately aligns pay with performance.


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Compensation Discussion and Analysis

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TSR Performance
 
2016-2018
2017-2018*
2018*
TSR (As defined in LTIP, one month trailing average on each end of performance period)
(34.0)%
(45.0)%
(22.0)%
Relative Ranking to Peers
11th of 14
9th of 14
9th of 14
*Performance period in progress. TSR and relative ranking shown are estimates as of December 31, 2018.


Results of 2018 Say on Pay Vote and Shareholder Engagement

At the 2018 Annual Meeting of Shareholders, we held our annual advisory vote on executive compensation. We believe our “say on pay” shareholder votes for 2016, 2017 and 2018 support our approach to executive compensation, at 95.4%, 97.4% and 97.2% favorability, respectively, of shares voted. Our Compensation Committee believes that these votes convey our shareholders’ strong support of its decisions and our executive compensation program. Consistent with prior years, in 2018 we completed a robust shareholder engagement program, designed to obtain shareholder feedback and respond to shareholder questions regarding our business strategy, executive compensation philosophy, director independence and diversity, and certain environmental, social and governance issues.  We received positive feedback on the structure of our executive compensation program. In response to valuable shareholder feedback, we continue to enhance the design of our incentive compensation plans.


2018 Target Compensation of Named Executive Officers

The Compensation Committee finalized 2018 compensation awards for our Named Executive Officers in January 2018, except for Mr. Smolik which was determined in October 2018 and Ms. Clingman which was determined in May 2018. The following table provides the intended target value of each officer's total direct compensation. The intended value differs somewhat from the required accounting values disclosed in the Summary Compensation Table.

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Compensation Discussion and Analysis

Name
2018 Base Salary
($)
2018 Target STIP Opportunity
($)
2018 Target LTIP Opportunity
($)(1)
2018 Target Total Direct Compensation
($)
David L. Stover
1,000,000
1,300,000
7,750,000
10,050,000
Brent J. Smolik (2)
750,000
825,000
4,500,000
6,075,000
Kenneth M. Fisher
640,000
608,000
2,750,000
3,998,000
John K. Elliott
460,000
345,000
1,550,000
2,355,000
Rachel G. Clingman (2)
540,000
432,000
1,800,000
2,772,000
Gary W. Willingham (3)
580,000
551,000
2,750,000
3,881,000

(1)
Equity values reflect the intended target LTIP opportunity, not the expense valuations shown in the Summary Compensation and Grants of Plan Based Awards tables, for all but Mr. Smolik and Ms. Clingman, whose value represents only the value of their sign-on equity grant.
(2)
Amounts reflect annualized base salary, STIP and LTIP target opportunities.
(3)
Mr. Willingham resigned on October 26, 2018 and entered into a separation and release agreement.

We believe the awarded target total direct compensation is consistent with the objectives of our executive compensation program and provides an appropriate mix of fixed and performance-based compensation.


2018 Named Executive Officer Total Target Compensation Mix

            CEO Mix                                    Other NEO Mix (Average)*
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http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12742343&doc=56 Time-Based Restricted Stock
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12742343&doc=61 Short-Term Incentive
 
* Other NEO Mix (Average) excludes values for one-time sign on grants for Mr. Smolik and Ms. Clingman and excludes value for Mr. Willingham who resigned in 2018.
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12742343&doc=58 Stock Options
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12742343&doc=60 Base Salary
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12742343&doc=42 Performance Share Award
 


What We Pay and Why: Elements of 2018 Executive Compensation

Our compensation program is comprised of three elements: base salary, STIP and LTIP. By design, a very significant portion of the overall compensation for our Named Executive Officers is performance-based, and the opportunity to realize value depends on both Company and individual performance. The following table summarizes these three elements, as well as our post-employment compensation programs:

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Compensation Discussion and Analysis

Compensation Element
 
Form of Compensation
 
Purpose
 
Structure
 
Base Salary
 
   Cash
 
   Deliver competitive cash compensation commensurate with role and expertise
 
   Market-based considering scope of responsibilities
 
Short-Term Incentive Plan (STIP)
 
   Annual cash bonus
 
  At-risk and variable compensation to incentivize achievement of Company performance goals and reward for annual contributions
 
   Performance-based quantitative and qualitative factors
 
Long-Term Incentive Plan (LTIP)
 
   Performance share awards
   Time-based restricted shares
   Stock options
 
   Reward creation of long-term shareholder value
  Encourage retention through time-based vesting of share awards
   Align long-term interests of employees and shareholders
 
  Performance-based share awards earned based on three-year relative total shareholder return
  Restricted shares vest over three years

  Stock options vest over three years with 10-year term
 
Post-Employment Compensation Programs
 
   Qualified and non-qualified plans
 
  Provide a tax-efficient means to build financial security for retirement
 
   Plans and programs with broad applicability
 

Base Salary

In determining base salary, the Compensation Committee considers compensation levels and standards within our peer group, the complexity of the role at the Company, and an individual’s expertise, experience, and performance.

Short-Term Incentive Plan

Our STIP is designed to incentivize and reward the achievement of Company performance goals as well as individual performance during the year. The target for each quantitative measure and objective for each qualitative measure considers short-term financial, operational and strategic goals that we believe drive shareholder value. We attempt to drive and reward achievement of significant performance. Our Compensation Committee reviews information provided by management on actual results for each quantitative measure and qualitative objective. STIP payouts can range from 0% to 250% of the target opportunity.
The Committee believes that linking pay to operating performance and shareholder value is best achieved by establishing metrics that are both a reflection of how the Company measures business success and how shareholders evaluate total Company performance.  For example, our Company is evaluated internally and externally on its ability to operate efficiently and deliver strong financial returns. Over 50% of our STIP is linked to cash flow, cost efficiency and returns based measures to align internal and external evaluation of Company performance. By focusing on metrics that measure our capital allocation and value creation delivery, our incentive plan aligns with shareholder objectives.




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Compensation Discussion and Analysis

2018 Quantitative Measures (60% weighted) Our Compensation Committee compared our 2018 results to the following targets in determining the final quantitative weighted factor for our STIP:
Measure
Business Driver
Type of Measure
Weight
Target
Result
Factor
Free Cash Flow(1)
Measures financial capacity and ability to spend within cashflow. Reconciliation provided in Appendix A.
Financial
15%
$0 million(2)
$647 million(3)
0.375
Onshore drill and complete rate of return
Measures wellhead returns considering well performance, cost and capital efficiency. Based on well economics adjusted to $50 WTI price.
Financial
15%
46.0%
32%(4)
0.084
Sales volume (production)
Assesses delivery of budgeted volumes in line with long-term development plans. As reported in our consolidated financial statements.
Operational
10%
357.7 MBoe/d
352.7 MBoe/d
0.084
Cash cost per Boe
Measures organization's focus on cost. As reported in our consolidated financial statements.
Financial
10%
$6.99 per Boe
$7.38 per Boe(5)
0.044
Relative cash costs/revenue
Evaluates NBL relative to 2018 peers. Based on publicly reported revenue and costs.
Financial
10%
50th percentile of peers
10th out of 14
0.045
Final quantitative factor at 60% weighting
 
 
0.63
 
(1)
Non-GAAP financial measure, see reconciliation schedule in Appendix A.
(2)
Excludes impact of NBLX.
(3)
2018 free cash flow of $1,127 million, excluding the impact of NBLX and normalized for price impact.
(4)
Normalized for price impact of $50 WTI oil.
(5)
Includes only lease operating expense and general and administrative costs for upstream Noble Energy and excludes NBLX.
2018 Qualitative Measures (40% weighted) The Compensation Committee also compared our 2018 results to objectives in the following areas in arriving at the qualitative performance assessment for our STIP:
Measure
Business Driver
Type of Measure
Result
Safety Performance
Evaluates our enterprise focus on safety, social responsibility and the communities in which we operate. Measures:
     Safety performance
  Environmental compliance
   Care for employees / contractors
Operational
Continued demonstrating industry leading safety performance. Total recordable incident rate and days without incident rate up slightly from 2017.
Returns on Cash Flow Growth (ROACE, CROCI and DAPS Cash Flow Growth)
Measures Company's ability to achieve optimal returns and enhance our financial position.
Financial
Unadjusted for commodity price, financial metrics exceeded targets.
Total shareholder return
Measures shareholder return during the performance period.
Financial
Absolute shareholder return of negative 35% which is a relative rank of 9 out of 14 peer companies (TSR performance period of January 1, 2018 - December 31, 2018).
Additions to proved reserves/ exploration performance
Measures exploration success, including capture of new opportunities, and reserve replacement.
Operational
Replaced approximately 171% of production, excluding divestitures. Acquired >100,000 acres in unconventional new U.S. onshore opportunity; reached agreement on 40% operated interest in 2MM acres in new offshore play.
Strategic Initiatives
Considers strategic actions taken to position the Company for long-term success.
Operational / Financial
Setback ballot defeated by Coloradans; Received approval for first Colorado Comprehensive Drilling Plan for Mustang area (100 square miles); Leviathan project 75% complete, on schedule and under budget; reduced debt of $609 MM and enhanced strong liquidity position.
Final qualitative factor at 40% weighting
 
         0.22
Overall Company Performance Factor
 
          85%

36

 
Compensation Discussion and Analysis

In considering the quantitative and qualitative factors shown above, our Compensation Committee considered:
cash flow generation in unpredictable market;
execution on strategic initiatives;
Company and relative safety performance;
underperformance on cost and volume targets; and
absolute and relative shareholder performance
and approved the overall Company performance factor at 85% of target.

2018 STIP Payout for Named Executive Officers
A cash payout under the STIP based on the foregoing assessment was made in February 2019, with the breakdown by Named Executive Officer as follows:
 
Base Salary as of Dec. 31, 2018 ($)
Target STIP
(% of Salary)
Target STIP ($)
Actual STIP Paid for 2018 Performance ($)
Mr. Stover
1,000,000
 
130%
1,300,000
 
1,105,000
 
Mr. Smolik
750,000
 
110%
825,000
 
86,580
(1) 
Mr. Fisher
640,000
 
95%
608,000
 
493,899
 
Mr. Elliott
460,000
 
75%
345,000
 
315,421
 
Ms. Clingman
540,000
 
80%
432,000
 
221,754
(1) 
Mr. Willingham(2)
580,000
 
95%
551,000
 

 
(1)Mr. Smolik and Ms. Clingman's actual bonus is prorated based on their time with the Company during 2018.
(2)Mr. Willingham resigned on October 26, 2018 and entered into a separation and release agreement.

Long-Term Incentive Compensation

Our LTIP is designed to provide incentive compensation linked to shareholder value. The Committee historically awards long-term incentive compensation effective on or about February 1 of each year. To further enhance the linkage of executive pay to Company performance, the Compensation Committee increased the performance award component of the LTIP to 50% of the total long-term incentive award. In addition, the vesting period of the restricted stock component of the long-term incentive award was increased from two to three years to align the vesting period with longer-term Company performance.
Terms of 2018 Awards
Type of Award
Percent of 2018 Award Value
Vesting Criteria
Vesting Schedule
Performance Share Award
50%
•   Performance awards earned based on Company’s total shareholder return relative to its current year performance benchmarking peers
   Three-year performance period beginning on January 1 of year awarded and ending on December 31 of third year
Percentile Rank
90th or higher
75th or higher
50th or higher
25th or higher
Below 25th 
Payout
200%
150%
100%
50%
0%
   if TSR between two levels, straight line interpolation used
   if TSR is negative max payout is 100%
Restricted Shares
35%
   Time-based awards
   Vest ratably over three years
Stock Option
15%
•   Awards that provide right to purchase common stock at grant date fair value for period of up to 10 years
   Vest ratably over three years

37

 
Compensation Discussion and Analysis


2018 Awards for Named Executive Officers
Our Compensation Committee considered scope of responsibilities, internal equity between Named Executive Officers and market comparisons in determining award values. The following table shows the target equity award values for each Named Executive Officer:
 
 
Target Value
 
Target Value of Stock Options
($)
Target Total Value
($)(1)
Performance-based
($)
 
Restricted Stock Time-based
($)
Mr. Stover
 
3,875,000
 
2,712,500
 
1,162,500
7,750,000
 
Mr. Smolik(2)
 
 
3,500,000
 
1,000,000
4,500,000
 
Mr. Fisher
 
1,375,000
 
962,500
 
412,500
2,750,000
 
Mr. Elliott
 
775,000
 
542,500
 
232,500
1,550,000
 
Ms. Clingman(2)
 
 
1,200,000
 
600,000
1,800,000
 
Mr. Willingham(3)
 
1,375,000
 
962,500
 
412,500
2,750,000
 
(1)
Equity values reflect the intended target LTIP opportunity, not the expense valuations shown in the Summary Compensation and Grants of Plan Based Awards tables.
(2)
Target value of stock options and target value of restricted stock time-based represent the sign on value of equity received by Mr. Smolik and Ms. Clingman.
(3)
Mr. Willingham resigned on October 26, 2018 and entered into a separation and release agreement.

Payout of 2016 Performance Award
Based on the Company’s formula for calculating TSR relative to peers, determined at time of grant (one month trailing average on each end of the performance period), none of the 2016 performance shares vested.  The Company ranked 11th out of 14 industry peer companies in TSR performance.

Determining Executive Compensation

Role of Compensation Committee
Our executive compensation program and policies are overseen by the independent directors of the Compensation Committee. In its oversight role, the Compensation Committee is responsible for making compensation decisions involving our CEO and other executive officers.

Role of Management
Given our CEO’s direct knowledge of each executive officer’s performance and contributions, our Compensation Committee receives an assessment from our CEO on individual performance and suggested compensation levels of other executive officers. The CEO is not present during deliberations by the Compensation Committee regarding his own compensation. All final compensation decisions regarding the compensation of executive officers are made in executive session by the Compensation Committee.

Role of Compensation Consultants
Our Compensation Committee retains, at Company expense, independent consultants to assist it in executive compensation matters. The Compensation Committee met with its consultant numerous times during 2018 in and out of the presence of management, to review findings based on market research and considers those findings in determining and adjusting our executive compensation program.
Our Compensation Committee continued to retain Meridian Compensation Partners, LLC (“Meridian”) as its independent consultant on executive compensation for 2018, after considering Meridian’s independence from our management and members of our Compensation Committee and the following compensation consultant traits:

38

 
Compensation Discussion and Analysis

    effective past performance;
    familiarity with our executive compensation program and the programs of our compensation peer group;
    a comprehensive range of services associated strictly with executive compensation;
    no conflicts of interest; and
    maintenance of policies and procedures that prevent conflicts of interest.

In 2018, Meridian assisted in 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. Representatives of Meridian participated in all regular meetings of the Compensation Committee, including executive sessions without management. Meridian also provided consulting services to our Governance Committee in 2018 with respect to our non-employee director total compensation.

2018 Compensation and Performance Benchmarking Process
Our Compensation Committee annually reviews our executive officers’ compensation relative to peers based on information provided by its independent compensation consultant. This information reflects both publicly available information and recently collected market data through Meridian’s North America Oil and Gas E&P Compensation Survey. We believe this information provides the Compensation Committee with a strong and sufficient basis to understand the competitive executive compensation landscape.
We believe that our executive compensation program should 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 Named Executive Officers, as well as the consistency and equity among those Named Executive Officers.
The 2018 benchmarking peer group, utilized for 2018 compensation and performance decisions, is captured below.
 
    Anadarko Petroleum Corp.
    Apache Corp.
    Cabot Oil & Gas Corp.
    Chesapeake Energy Corp.
    Continental Resources, Inc.
    Devon Energy Corp.
    EOG Resources, Inc.
    Hess Corp.
    Marathon Oil Corp.
    Murphy Oil Corp.
    Pioneer Natural Resources Co.
    Range Resources Corp.
    Southwestern Energy Co.
 

The Compensation Committee reviews the composition of the peer group annually to ensure that it remains relevant for comparative purposes. As discussed above in 2019 Key Compensation Actions, the Compensation Committee determined that two separate peer groups are appropriate for compensation benchmarking and performance benchmarking.



39

 
Compensation Discussion and Analysis

Executive Compensation Practices

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

 
What We Do
 
 
What We Don't Do
 
 
þ Pay for Performance, through having a majority of pay at risk, clear performance targets and individual differentiation.
þ Diversified Performance Metrics, including free cash flow, relative cash costs, absolute cash costs per Boe, safety and absolute and relative shareholder return.
þ Review Comparative Compensation Data, prior to making executive compensation decisions.
þ Reasonable Post-Employment/Change of Control Provisions, generally structured to apply to executive officers in the same manner as the broader employee population.
þ Mitigate Undue Risk, through robust Board oversight, audits of financial and operational outcomes prior to incentive plan payouts, and maintenance of clawback policy.
þ Minimal Perquisites.
þ Stock Ownership Guidelines, which all Named Executive Officers meet.
þ Regular Review of Share Utilization, including overhang levels (dilutive impact of equity compensation on our shareholders) and annual burn rates (the aggregate shares awarded each year as a percentage of total outstanding shares).
þ Independent Compensation Consulting Firm.
þ Double-Trigger Equity Vesting Acceleration.
 
 
ý No Employment Contracts.
ý No Inclusion of the Value of Equity Awards in Pension or Severance Calculations.
ý No Personal Aircraft Use.
ý No Separate Change of Control Agreements for Incoming Executive Officers.
ý No Excise Tax Gross-Ups Upon Change of Control.
ý No Repricing of Underwater Stock Options.
ý No Liberal Recycling of Shares.
ý No Pledging Shares of Company Stock Received as Compensation as Collateral for a Loan, or Hedging such Shares.

 

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 these guidelines reinforce the alignment of executive officers and non-employee directors with our shareholders in creating and increasing shareholder value. Each officer listed below is expected to own shares with a value that is a multiple of the officer’s current base salary and each non-employee director is expected to own 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
Chief Operating Officer
3.0X base salary
Chief Financial Officer
3.0X base salary
Executive Vice President
3.0X base salary
Senior Vice President
2.5X base salary
Vice President
2.0X base salary
Non-Employee Director
5.0X annual cash retainer

40

 
Compensation Discussion and Analysis

Holding Requirement
Individuals not meeting these guidelines within five years will be required to retain 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 3, 2018, our Compensation Committee and Governance Committee reviewed the holdings of our officers and non-employee directors, finding that all of our officers and non-employee directors were in compliance with the guidelines (or, in the case of recently elected officers or non-employee directors, were within the permitted time frame to come into compliance with the guidelines).

Compensation Clawback
Our Compensation Committee has adopted a policy that allows the Company, under certain circumstances (such as a restatement of financial information or reserves or material noncompliance with federal securities laws or the Company’s code of conduct), to recoup incentive-based compensation from current or former executive officers. Our policy will be revised, if appropriate, to conform to any final listing standards that may be adopted by the NYSE under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Policy on Stock Hedging and Pledging
Our Board has adopted a policy that prohibits our executive officers and directors from pledging shares of Company stock awarded as compensation for service as an employee or director (including shares owned as a result of the exercise of compensatory stock options) as collateral for a loan or hedging such shares through a covered call, collar or other derivative transaction. On December 18, 2018, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC approved final rules requiring companies to disclose in their proxy statements any practices or policies regarding the ability of employees or directors to engage in certain hedging transactions with respect to company equity securities. Compliance with new Item 407(i) of Regulation S-K is required in proxy and information statements for the election of directors during fiscal years beginning on or after July 1, 2019. We are currently evaluating the provisions of the new rules.

Post-Employment Compensation
Our post-employment compensation is provided under qualified and non-qualified savings and retirement plans, a severance plan, and either individual change of control agreements or, alternatively, a change of control plan.

Qualified Defined Contribution Plan
Our qualified defined contribution plan (“401(k) Plan”) is a tax-qualified retirement savings plan generally available to our employees, including our Named Executive Officers. It allows participants to contribute the lesser of up to 50% of their basic compensation or the limit prescribed by the Code. We match such contributions dollar-for-dollar up to 100% of the first six percent of a participant’s eligible compensation. Participants are 100% vested in the Company’s matching contributions after three years of service, vesting 34%, 67% and 100% following years one, two and three.
In addition, we make the following age-weighted contribution to the 401(k) Plan for each participant:
Age of Participant
Contribution Percentage (Below the FICA Taxable Wage Base)
Contribution Percentage (Above the FICA Taxable Wage Base)
Under 35
4%
8%
At least 35 but under 48
7%
10%
At least 48
9%
12%


41

 
Compensation Discussion and Analysis

These contributions are cliff vested at 100% after three years of service. The contributions made to our 401(k) Plan by or for a participant are credited to accounts maintained for such participant under the plan. The amounts credited to a participant’s account are invested at the direction of the participant in various investment fund options available under the 401(k) Plan, including investment in shares of our common stock.

Non-qualified Deferred Compensation Plan
Our non-qualified deferred compensation plan (“Deferred Compensation Plan”) allows executive officers, and certain other employees, to save for retirement in a tax-effective manner. Under the Deferred Compensation Plan, participants are allowed to defer portions of their salary and bonus and to receive certain matching, age-weighted and transition contributions that would have been made to our 401(k) Plan if the 401(k) Plan had not been subject to the Code, compensation and contribution limitations. The Deferred Compensation Plan also provides account balances for those participants who elected to have the lump sum present value of their Restoration Plan benefits converted into an account balance under the Deferred Compensation Plan.
Under this unfunded program, a participant may elect to have his or her accounts 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 or to have their accounts adjusted to reflect the results of an array of notional investment options.
Change of Control Arrangements
We have adopted change of control arrangements for our executive officers and certain other employees. A change of control could result in a material change in the leadership and direction of our 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. 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. 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 shareholders by enabling our executive officers to consider corporate transactions that are in the best interest of shareholders without undue concern over whether the transactions may jeopardize their continued employment.
The 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. Under these arrangements, if a Named Executive Officer is terminated, including a constructive termination, for any reason (other than for cause, disability or death) within two years after a change of control, then we will 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 such compensation;
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;
reimbursement for reasonable fees up to $15,000 for out-placement employment services; and
in some cases, continued vesting and exercise of stock options.
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.
In addition, stock options and restricted stock granted pursuant to our 1992 Plan prior to 2016 generally provide for accelerated vesting of all or a portion of the award upon a change of control of the Company. Stock options, restricted stock and cash awards granted under the 1992 Plan after 2015, and granted under the 2017 Plan generally provide for accelerated vesting of all or a portion of the award if the participant is terminated for reasons other than cause or resigns for good reason within two years following a change of control.

42

 
Compensation Discussion and Analysis

Severance Benefit Plan
Our 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 (including partial years), with a minimum of 12 weeks of pay and a maximum of 52 weeks of pay;
a prorated STIP payment based on period of employment during the calendar year of termination;
six months of reduced-rate contributions under our medical and dental plans; and
12 weeks of coverage under our employee assistance plan.

Perquisites
We do not consider perquisites to be a material component of our executive compensation. In 2018, certain of our executive officers received minimal personal benefits that have a sound value to our business, such as club membership dues reimbursement and comprehensive physical examinations.

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- and short-term disability insurance, life and accidental death and dismemberment insurance, health and dependent care flexible spending accounts, relocation/expatriate programs and services, educational assistance, employee assistance and certain other benefits.
In late 2014, we discontinued retiree healthcare benefits and implemented a buyout of eligible pre-age 65 active employees. Employees who retired prior to that time and were participating in retiree medical benefits were transitioned to a defined contribution model effective as of January 1, 2016.

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, in 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 and are generally consistent with practices in our industry.

Tax and Accounting Considerations
Section 162(m) of the 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. Pursuant to tax law changes effective in 2018, the CFO is included in the executives whose compensation is subject to the limit imposed by Section 162(m), and the exception to Section 162(m)’s $1,000,000 limit for “performance-based compensation” has been eliminated, with the result that, except for “grandfathered” amounts, all taxable compensation paid to our CEO, CFO and other Named Executive Officers in 2019 will be subject to the annual $1,000,000 per person limit on deductibility. “Grandfathered” amounts that satisfy the “performance-based compensation” exception under prior law include stock options granted under the 1992 Plan that satisfied the performance-based compensation exemption requirements when granted, so long as not materially modified in the future. All other taxable compensation paid to our Named Executive Officers, including performance-based restricted shares and related cash awards granted

43

 
Compensation Discussion and Analysis

under the 1992 Plan, all awards granted under the 2017 Plan, all salary and STIP payouts, time-vested restricted stock awards and time-vested cash awards, and certain payments provided for under our change of control arrangements are not exempt from the Section 162(m) deduction limit.
Although we consider tax deductibility in the design and administration of our executive compensation plans and program, we believe that our interests are best served by providing competitive levels of compensation to our Named Executive Officers even if it results in the non-deductibility of certain amounts of compensation under the Code.
Rules under GAAP 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 12 to our consolidated financial statements, included in our 2018 Annual Report on Form 10-K.

CEO Pay Ratio
As required by Section 953(b) the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO. For our 2017 calculation, we calculated our median employee under the final adopted CEO pay ratio rules.
The pay ratio calculated by the Company is a reasonable estimate calculated in accordance with SEC rules and methods for disclosure. Due to estimates, assumptions, adjustments and statistical sampling permitted under the rules, pay ratio disclosures may involve a degree of imprecision and may not be consistent with the methodologies incorporated by other companies.
Year
Mr. Stover Total Compensation ($)
Mr. Stover Total Realized Compensation ($)
Median Employee Total Compensation ($)
Pay Ratio of CEO Compensation to Median Employee
Pay Ratio of CEO Realized Compensation to Median Employee
2018
11,213,168

5,866,662

124,842
90:1
47:1
2017
11,262,048

6,010,732

127,488
88:1
47:1

2018 CEO Pay Ratio Methodology
The Company did not have any major changes in employee compensation or work force population through acquisitions, divestitures, mergers or attrition that we believe would significantly impact the pay ratio. The Company also analyzed the 66 employees, excluded from the calculation in 2017 to determine if including them would have an impact on the CEO pay ratio. The Company determined that including the 66 employees in the calculation would not result in a material change to the salary of the median employee. As such, we utilized the same median employee for the analysis for 2018. The median employee is located in Houston in the accounting and finance function.

2017 CEO Pay Ratio Methodology
To identify the median of the total annual compensation of all our employees, we took the following steps:
We utilized a determination date of October 1, 2017, a date within the last three months of the 2017 fiscal year, to enable us to make an identification in a reasonably efficient and economical manner.
Our employee population consisted of 2,219 out of 2,285 employees, including full-time, part-time and temporary employees (summer interns).
Part-time and temporary employees represent less than 2% of our total employee population.
We excluded 66 employees from our employee population that were added in the CWEI acquisition that closed in April 2017.
We annualized approximately 286 employees who did not work for the full 12-month period.

44

 
Compensation Discussion and Analysis

Foreign salaries were converted to U.S. dollars at the average exchange rate over the 12-month period.
No cost of living adjustments were utilized in the compensation calculation.
To identify the median employee, we compared the amount of annualized base salary and cash incentive bonus for each employee as reflected in our internal records.
Once the median employee was identified, the total compensation per the chart above was calculated under the same methodology as required by the summary compensation table disclosed elsewhere in this Proxy Statement. Mr. Stover’s total compensation was calculated under the same methodology.
Once the median employee was identified, the total realized compensation as disclosed was determined by including CEO actual base pay, actual short-term incentive plan payout for the year, realizable equity value based on NBL share price as of 12/31/17 and all other actual compensation (including non-qualified deferred compensation and other compensation elements as disclosed in the summary compensation table).

Gender Pay Equity and Gender Pay Gap
Noble Energy conducts an annual analysis to evaluate base pay equity and the gender pay gap across specific disciplines within the U.S. organization.  The results of the 2018 analysis are described below.

Gender Pay Equity - Equal pay for equal work
The analysis revealed that employees are paid equitably based on their role, organization and experience.

Gender Pay Gap - Difference in average pay of all men and women across an organization
Noble has actively developed our female talent pool and increased the percentage of women in leadership and technical positions over the past 10 years.
Men and women are promoted with equal frequency within the disciplines reviewed.
Leaders are leveraging talent reviews, workforce planning and developmental work assignments to develop the workforce and further increase the percentage of women in leadership and technical positions.

45




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, 2018 for filing with the SEC.



Compensation, Benefits and
Stock Option Committee

Scott D. Urban, Chair
Jeffrey L. Berenson
James E. Craddock
Thomas J. Edelman




46

 
Compensation Tables

Compensation Tables
Summary Compensation Table

The following table sets forth summary information concerning the compensation for our Named Executive Officers during 2016, 2017 and 2018.

Name and
Principal Position
Year    
Salary
($)(1)
Bonus ($)(2)
Stock Awards  
($)(3)  
Option Awards
($)(4)
Non-Equity Incentive Plan Compensation
($)(5)
Change in Pension Value and Non-Qualified Deferred Compensation Earnings
($)(6)
All Other Compensation
($)(7)
Total
($)
David L. Stover
Chairman and Chief Executive Officer
2018
1,000,000


7,619,890

1,162,495

1,105,000

23,701

302,082

11,213,168

2017
994,231


5,758,478

2,583,326

1,560,000

78,105

287,908

11,262,048

2016
950,000


5,104,499

2,295,831

1,463,000

53,634

270,718

10,137,682

Brent J. Smolik, President and Chief Operating Officer
2018
59,135


3,499,989

1,000,000

86,580


8,870

4,654,574

 
 
 
 
 
 
 
 
 
Kenneth M. Fisher
Executive Vice President and Chief Financial Officer
2018
636,921


2,703,780

412,497

493,899

2,114

140,907

4,390,118

2017
623,269


1,708,887

766,653

666,663

7,016

136,053

3,908,541

2016
610,000


1,689,725

759,995

728,642

4,899

124,997

3,918,258

John K. Elliott
Senior Vice President, Eastern Mediterranean
2018
454,868


1,523,972

232,497

315,421

1,149

78,383

2,606,290

2017
433,846

100,000

985,428

399,988

370,755

3,294

70,085

2,363,396

Rachel G. Clingman, Senior Vice President, General Counsel and Secretary
2018
311,539


1,199,967

599,996

221,754


57,181

2,390,437

 
 
 
 
 
 
 
 
 
Gary W. Willingham
Former, Executive Vice President, Operations(8)
2018
497,817


2,703,780

412,497


48

2,330,923

5,945,065

2017
553,077


1,708,887

766,653

609,618

159

137,575

3,775,969

2016
500,000


1,548,883

696,658

613,409

111

122,450

3,481,511


(1)
Certain of our Named Executive Officers deferred a portion of their base salaries under our Deferred Compensation Plan:
 
Year
Percentage of Salary Deferred
Amount Deferred ($)
David L. Stover
2018
5%
50,000

2017
5%
49,712

2016
5%
47,500

Kenneth M. Fisher
2018
7%
44,585

2017
6%
37,396

2016
6%
36,600

Gary W. Willingham
2018
5%
28,237

2017
5%
27,654

2016
5%
25,000


(2)
Reflects discretionary project based bonus. Mr. Elliott received a $100,000 cash bonus for the completion of the Leviathan sanction.

47

 
Compensation Tables

(3)
Reflects the aggregate grant date fair value of restricted stock awarded under our 2017 Plan in 2018, which was computed in accordance with FASB ASC Topic 718. Restricted shares awarded will vest according to the following schedule: 1/3 after year one, 1/3 after year two and 1/3 after year three for Mr. Stover, Mr. Fisher and Mr. Elliott;100% after year three for Mr. Smolik and Ms. Clingman for 2018 grants; and for Mr. Willingham 1/3 vested on November 9, 2018, upon entering into a Separation and Release agreement with the Company with the rest of his 2018 restricted share grant being forfeited. Performance share awards awarded will vest three years after the date of grant upon, and subject to a formula related to, our achievement of certain levels of total shareholder return relative to a pre-determined compensation peer group. See the Grants of Plan-Based Awards table for information on restricted stock awarded in 2018.
(4)
Reflects the aggregate grant date fair value of non-qualified stock options granted under our 2017 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) 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 2018.
(5)
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.
(6)
Reflects during year indicated the above-market Deferred Compensation Plan earnings. The above-market earnings in 2018 are based on the difference between the plan crediting rate of 3.64% and 120% of the annual long-term Applicable Federal Rate as of September 2017 (3.12%); earnings in 2017 are based on the difference between the plan crediting rate of 4.07% and 120% of the annual long-term Applicable Federal Rate as of September 2016 (2.28%); and earnings in 2016 are based on the difference between the plan crediting rate of 4.49% and 120% of the annual long-term Applicable Federal Rate as of September 2015 (3.16%).
 
Year
Deferred Compensation Above-Market Earnings ($)
David L. Stover
2018
23,701

2017
78,105

2016
53,634

Kenneth M. Fisher
2018
2,114

2017
7,016

2016
4,899

John K. Elliott
2018
1,149

2017
3,294

Gary W. Willingham
2018
48

2017
159

2016
111


(7)    All other compensation includes:
 
Year
401(k) Matching Contrib.
($)
401(k) Retirement Savings Contrib.
($)
Deferred Comp. Plan Registrant Contrib.
($)(a)
401(k) Transition Contrib.
($)
Club Dues
($)
Physical Exam
($)
Separation Pay
($)(b)
Vacation Payout
($)(c)
Accrued Dividends
($)(d)
David L. Stover
2018
16,500

20,000

199,648


9,134

2,150



54,650

2017
16,200

19,800

198,800


9,512




43,596

2016
15,900

19,100

189,445


9,512

2,090



34,671

Brent J. Smolik
2018
3,548

5,322








 
 
 
 
 
 
 
 
 
 
Kenneth M. Fisher
2018
16,500

20,000

74,294


11,703




18,410

2017
16,200

19,800

72,372


16,799

2,150



8,732

2016
15,900

19,100

71,245


11,923




6,829

John K. Elliott
2018
16,500

20,000

30,732






11,151

2017
16,200

19,800

28,446






5,639

Rachel G. Clingman
2018
16,500

22,600

10,933






7,148

 
 
 
 
 
 
 
 
 
 
Gary W. Willingham
2018
16,500






2,247,500

66,923


2017
16,200

19,800

92,923






8,652

2016
15,900

19,100

81,445






6,005



48

 
Compensation Tables

(a)
The following amounts were credited to the NEO’s Non-Qualified Deferred Compensation Plan Account:
 
Year
Matching Contribution
($)
Retirement Savings Contribution
($)
Transition Contribution
($)
Total Deferred Compensation Plan Registrant Contributions
($)
David L. Stover
2018
43,500

96,148

60,000

199,648

2017
43,454