SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant
to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
|Filed by the Registrant||Filed by a Party other than the Registrant|
|Check the appropriate box:|
|Preliminary Proxy Statement|
|Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2))|
|Definitive Proxy Statement|
|Definitive Additional Materials|
|Soliciting Material Pursuant to ss.240.14a-12|
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
|Payment of Filing Fee (Check the appropriate box):|
|No fee required.|
|Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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):|
|(4)||Proposed maximum aggregate value of transaction:|
|(5)||Total fee paid:|
|Fee paid previously with preliminary materials.|
|Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.|
|(1)||Amount Previously Paid:|
|(2)||Form, Schedule or Registration Statement No.:|
|MESSAGE FROM OUR CHAIRMAN|
DAVID L. STOVER
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
MARCH 10, 2020
Noble Energy has celebrated many major milestones in its history, but even by our standards, 2019 was an exceptional year.
After years of investment, planning and execution, we started production from the Leviathan field offshore Israel, a project of great strategic importance for Noble Energy and the Eastern Mediterranean region where Leviathan provides a clean, stable energy source to several countries for decades to come. For Noble Energy, the project provides strong and steady cash flow and capital-efficient expansion potential.
In 2019, we significantly advanced our strategy to be a low-cost, diversified E&P company that delivers moderate growth and sustainable free cash flow to shareholders. We intend to continue to differentiate ourselves through careful use of capital and a thoughtful approach to growth. This discipline stems from our commitment to operational excellence and continuous improvement. In addition to commencing production from Leviathan ahead of schedule and under budget, we increased U.S. onshore volumes 10 percent over 2018 while significantly reducing both capital intensity and operating cost. We sanctioned our next offshore project for development at the Alen gas field offshore Equatorial Guinea. We believe that tremendous success in offshore projects combined with proven capital efficiency and cost improvements have positioned Noble Energy to deliver on our strategy in 2020 and for many years ahead.
Adding to these critical operational accomplishments, I am proud of our 2019 advancements in environmental, social and governance initiatives. Building on the strength of our new governance structure for sustainability-related issues, we published Noble Energy’s first Climate Resilience Report using the framework recommended by the Task Force on Climate-related Financial Disclosures (TCFD). Our annual Sustainability Report shared successes around the world in projects dedicated to health, safety, the environment and the communities in which we operate. Our operational work force achieved record safety performance. We refreshed our corporate values and believe that our commitment to sustainability positions us to generate long-term value for our shareholders.
Along with our Board of Directors and executive team, I am committed to providing you information about the Company in a way that is easy to access and understand. Our Proxy Statement summarizes our business and executive compensation program in order to aid the shareholder in assessing our programs and progress. The Compensation Discussion and Analysis that begins on page 32 describes our executive compensation program and demonstrates the direct connection between performance and pay. Beginning on page 14, we provide the qualifications of our directors and why they are the right people to represent you in guiding the Company.
Your vote is important to us and our business. I encourage to you 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 60.
I look forward to seeing you at the meeting. We appreciate your ongoing support as a shareholder of Noble Energy.
Very truly yours,
TUESDAY, APRIL 28, 2020
9:30 a.m. Central Time
The St. Regis Houston
1919 Briar Oaks Lane
Houston, Texas 77027
The Annual Meeting of Shareholders of NOBLE ENERGY, INC. (the “Company”) will be held on Tuesday, April 28, 2020 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 the 2020 Long-Term Incentive Plan; 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 March 2, 2020 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.
By Order of the Board of Directors
Rachel G. Clingman
Senior Vice President, General
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.|
|MESSAGE FROM OUR CHAIRMAN||i|
|NOTICE OF ANNUAL MEETING OF SHAREHOLDERS||iii|
|PROXY STATEMENT SUMMARY||v|
|DELINQUENT SECTION 16(a) REPORTS||9|
|OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY||10|
|SHAREHOLDER PROPOSALS AND OTHER MATTERS||12|
|ELECTION OF DIRECTORS (PROPOSAL 1)||13|
|2019 DIRECTOR COMPENSATION||18|
|RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR (PROPOSAL 2)||20|
|REPORT OF THE AUDIT COMMITTEE||21|
|ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (PROPOSAL 3)||22|
|APPROVAL OF THE 2020 LONG-TERM INCENTIVE PLAN (PROPOSAL 4)||23|
|COMPENSATION DISCUSSION AND ANALYSIS||32|
|REPORT OF THE COMPENSATION, BENEFITS AND STOCK OPTION COMMITTEE ON EXECUTIVE COMPENSATION||49|
|QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING||60|
|APPENDIX A: NON-GAAP FINANCIAL MEASURES||A-1|
|APPENDIX B: EXECUTIVE OFFICERS||B-1|
|APPENDIX C: NOBLE ENERGY, INC. 2020 LONG-TERM INCENTIVE PLAN||C-1|
NOBLE ENERGY • 2020 PROXY STATEMENT iv
|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 SEE GLOSSARY FOR OTHER DEFINED TERMS.
— 2020 ANNUAL MEETING OF SHAREHOLDERS
Date and Time:
|Tuesday, April 28, 2020
9:30 a.m. Central Time
|The St. Regis Houston
1919 Briar Oaks Lane
Houston, Texas 77027
|March 2, 2020|
— VOTING MATTERS AND BOARD RECOMMENDATIONS
|Election of Directors||FOR each|
|Ratification of Appointment of Independent Auditor||FOR|
|Advisory Vote to Approve Executive Compensation||FOR|
|Approval of the 2020 Long-Term Incentive Plan||FOR|
NOBLE ENERGY • 2020 PROXY STATEMENT v
— OUR PURPOSE
Energizing the World, Bettering People’s Lives®
Noble Energy, Inc. is an independent oil and natural gas exploration and production company committed to meeting the world’s energy needs and delivering leading returns to shareholders. Founded more than 85 years ago, our Company is guided by our values, commitment to safety and respect for stakeholders, communities and the environment.
Energizing the world – We develop critical energy resources safely and responsibly from a diversified global portfolio of investment projects to power life, economies, and communities around the world.
Bettering people’s lives – Our mission goes beyond operating and financial results. Our Board oversees environmental, social and governance strategies to support health and the environment and to provide long-term, sustainable benefits.
Our purpose represents who we are and what drives us as individuals, teams and a company.
— NOBLE’S VALUES
|INTEGRITY||We are committed to doing the right thing in everything we do. We believe acting and operating ethically go hand-in-hand with continuing to earn and keep the trust and respect of our colleagues, partners and other stakeholders. We lead with our strength of character to ensure we live up to our name.|
|CARING||We care about each other, our communities and the environment. We are committed to a culture of respect and inclusion.|
|COLLABORATION||We believe in the power of working together. We trust, support, respect and empower each other to achieve common goals and fulfill our purpose.|
|ACCOUNTABILITY||We believe accountability means more than just doing our job — it includes making things better and answering for our actions. We are responsible for executing our strategy and delivering sustainable value through high performance and safe, efficient operations.|
|AGILITY||We are not satisfied with the status quo — we are resilient and committed to continuous improvement. We assess, respond and innovate to lead in the evolving business environment — finding the right balance between flexibility and stability.|
— OUR STRATEGY
Diversified, Low-cost Producer Delivering Moderate Growth and Sustainable Free Cash Flow
Our strategy to drive long-term value for our shareholders is to pursue a high-return portfolio that provides investment optionality and growth. We believe the combination of top-tier onshore unconventional shale assets and low-decline offshore conventional projects provides a competitive advantage through various commodity and investment cycles. Improving capital and cost efficiency supports the Company’s goals to enhance profitability and the return of capital to investors. We are positioned for long-term, sustainable free cash flow generation while developing our deep inventory of resources reliably and safely.
NOBLE ENERGY • 2020 PROXY STATEMENT vi
— 2019 PERFORMANCE ACCOMPLISHMENTS
— BALANCED AND DIVERSIFIED PORTFOLIO
Noble Energy is committed to meeting the world’s growing energy needs and delivering leading returns to shareholders.
We operate a high-quality portfolio of assets onshore in the United States in the DJ Basin, the Eagle Ford Shale and the Delaware Basin, and offshore in the Eastern Mediterranean and off the West coast of Africa. In addition, we are pursuing high value exploration opportunities in both unconventional plays onshore in the U.S. and offshore conventional assets in multiple countries.
NOBLE ENERGY • 2020 PROXY STATEMENT vii
— CORPORATE SOCIAL RESPONSIBILITY COMMITMENT
Since Noble Energy was founded over 85 years ago, we have been guided by our values, commitment to safety, and respect for stakeholders, communities and the environment. We believe operating effectively means operating safely and responsibly.
Our culture and values drive responsible, sustainable operations. We believe in continually improving our environmental and climate performance to mitigate risk and create shareholder value.
|•||We published our first Climate Resilience Report in 2019 using the TCFD framework and have published eight annual Sustainability Reports on our results in continuously improving performance in environmental, climate, social and governance areas.|
|•||We have reduced our greenhouse gas emissions intensity by approximately 60% since 2010.|
|•||We tested our business against the IEA Sustainable Development Scenario 2° Celsius scenario, confirming that we are well positioned to deliver sustained shareholder returns from our diversified low-cost portfolio under this scenario.|
|•||We are reducing water intensity by eliminating potable water use and reducing water consumption by implementing closed-loop green completions processes.|
It’s all part of our purpose: Energizing the World, Bettering People’s Lives®.
|AREA OF FOCUS||INDICATORS OF COMMITMENT AND CONTINUOUS IMPROVEMENT|
|Employee Engagement||82% of Noble Energy employees provided feedback through our annual employee survey.|
• Total recordable incident rate lowered more than 45% since 2010.
• Record U.S. Onshore safety performance in 2019.
|Climate Change||Issued first Climate Resilience Report using the International Energy Agency’s (“IEA”) World Energy Outlook 2018 Sustainable Development Scenario to assess Noble Energy’s business strategy against a 2°C low-carbon scenario.|
|Sustainable Operations||Within the 2°C low-carbon scenario, we are well positioned with low-cost assets to drive sustained shareholder value.|
|Greenhouse Gas Emissions||
• Reduced greenhouse gas emissions intensity by approximately 60% since 2010.
• In Israel, our projects have reduced coal usage for electricity generation from 50% to 30% and are on track to meet Israel’s goal of being coal-free by 2025.
• Reduced water intensity by eliminating potable water use.
• Increased water recycling in U.S. onshore operations while reducing water consumption.
|Public Policy Engagement and Transparency||Maintained a top ranking and named a trendsetter on 2019 CPA-Zicklin Index published by Center for Political Accountability, which evaluates the transparency policies and practices of the S&P 500.|
|NobleACTS Social Investment||
• 2019 Employee volunteer hours: 5,544
• 2019 Volunteer grants: $42,350
• 2019 Total Match: $1,031,239 to 426 non-profit organizations
|Code of Conduct/Anti-Corruption||Maintained an active global training program with our employees and contractors to combat corruption and promote compliance and our values.|
NOBLE ENERGY • 2020 PROXY STATEMENT viii
|—||ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) SUSTAINABILITY HIGHLIGHTS|
— SCR GOVERNANCE
|•||Our Board’s Safety, Sustainability and Corporate Responsibility (“SSCR”) Committee assists the Board in determining whether the Company has appropriate policies and management systems in place for environmental (including climate), health, safety and corporate and social risks and opportunities. The SSCR Committee oversees implementation of our Corporate Social Responsibility activities; and serves as a forum to review our social investment strategy and environmental, social and governance (“ESG”) initiatives.|
|•||Our executive-level Sustainability and Corporate Responsibility (“SCR”) Committee, supported by an internal working group of subject matter experts, advises the SSCR Committee of the Board of Directors.|
|•||The SSCR Committee regularly reports to the Board of Directors and undertakes self and Board performance evaluations. The Board also conducts an annual review of the Company’s risk management, planning and SCR/ESG disclosures.|
NOBLE ENERGY • 2020 PROXY STATEMENT ix
— 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|
|Jeffrey L. Berenson*||69||2005||Chairman and Chief Executive Officer of Berenson Holdings LLC||C, G||None|
|James E. Craddock*||61||2015||Former Chairman and Chief Executive Officer of Rosetta Resources Inc.||C, G, S||Crescent Point Energy, Inc.|
|Barbara J. Duganier*||61||2018||Former Managing Director at Accenture||A, G||MRC Global Inc.|
|Thomas J. Edelman*||69||2005||A managing partner of White Deer Energy||C, G, S||None|
|Holli C. Ladhani*||49||2017||President and Chief Executive Officer of Select Energy Services, Inc.||G, S||Select Energy Services, Inc.|
|David L. Stover||62||2014||Chairman and Chief Executive Officer of Noble Energy, Inc.||S||None|
|Scott D. Urban*||66||2007||Partner in Edgewater Energy LLC||C, G, S||Pioneer Energy Services Corporation|
|William T. Van Kleef*||68||2005||Former Executive Vice President and Chief Operating Officer of Tesoro Corporation||A, G||Oil States International, Inc.|
|Martha B. Wyrsch*||62||2019||Former Executive Vice President and General Counsel of Sempra Energy||A, G||Spectris plc; First American Financial Corporation; Quanta Services, Inc.|
|* Independent director|
|A - Audit Committee||C - Compensation, Benefits and Stock Option Committee|
|G - Corporate Governance and Nominating Committee||S - Safety, Sustainability and Corporate Responsibility Committee|
— SKILLS AND DIVERSITY MATRIX
The following table provides relevant skills and diversity attributes for our director nominees.
|Director Skills||Experience||ability||Industry||Board||Operations||E&P||(as self-||Management||and Corporate||Charitable|
|Jeffrey L. Berenson||•||•||•||•||•||•|
|James E. Craddock||•||•||•||•||•||•||•||•|
|Barbara J. Duganier||•||•||•||•||•||•||•|
|Thomas J. Edelman||•||•||•||•||•||•||•||•||•|
|Holli C. Ladhani||•||•||•||•||•||•||•||•||•|
|David L. Stover||•||•||•||•||•||•||•||•|
|Scott D. Urban||•||•||•||•||•||•||•||•||•|
|William T. Van Kleef||•||•||•||•||•||•||•||•|
|Martha B. Wyrsch||•||•||•||•||•||•||•||•||•|
|* Diverse attributes - self identified as being part of a group that is historically underrepresented on boards, whether through gender, ethnicity or race.|
NOBLE ENERGY • 2020 PROXY STATEMENT x
— EXECUTIVE COMPENSATION PROGRAM SUMMARY
Our executive compensation program is designed to attract, motivate and retain executive talent and reward Company and individual performance for delivery of business results and creation of shareholder value. Our Compensation Committee focuses on ensuring a clear connection between performance and pay through “at-risk” compensation.
2019 Executive Compensation Outcomes
2019 was an exceptional year of delivering on critical strategic outcomes, and our performance on cost, capital efficiency, safety and cash flow generation exceeded targets. These achievements translated into outperformance in the market as our Total Shareholder Return (“TSR”) outperformed the 2019 S&P 500 average and positioned us as second in our performance peer group. The Committee evaluated this performance and approved a Short-Term Incentive Plan payout of 180% of target.
2017 performance share awards vested at 83% of target based on the Company’s three-year relative TSR performance. Although the Company’s TSR for the 2019 performance period was second in the peer group, the overall performance share results for the three-year period reflected lower relative TSR in 2017 and 2018.
2020 Compensation Program Enhancements
In response to shareholder feedback, and to underscore Noble Energy’s multi-year strategy of sustainable, long-term financial strength, top-tier operational execution and advancement of ESG initiatives, the Compensation Committee approved enhancements to our executive compensation framework effective for the 2020 plan year. Significant incentive plan changes are:
|•||Increased quantitative goals by 10% in the 2020 Short-Term Incentive Plan from 60% to 70%;|
|•||Increased emphasis on Free Cash Flow to 30% in the 2020 Short-Term Incentive Plan;|
|•||Introduced Cash Return on Capital Employed (“CROCE”) as a performance condition to the 2020 long-term performance share awards; and|
|•||Incorporated ESG performance measures into both the 2020 Short- and Long-Term Incentive Plan designs.|
The Compensation Committee believes these changes strengthen the link between incentive plan metrics and Noble Energy’s strategy for long-term value creation. To learn more about the 2020 compensation program enhancements, please refer to page 45.
|—||IMPORTANT DATE FOR 2021 ANNUAL MEETING OF SHAREHOLDERS|
Shareholder proposals and nominations for election as director to be submitted as an agenda item at the 2021 Annual Meeting of Shareholders or for inclusion in our 2021 Proxy Statement pursuant to our By-Laws or Rule 14a-8 of the Securities and Exchange Act of 1934, as amended (“Exchange Act”), as applicable, must be received by us at our office in Houston, Texas, addressed to our Corporate Secretary, no later than November 10, 2020.
NOBLE ENERGY • 2020 PROXY STATEMENT xi
Intentionally left blank
— PROXY STATEMENT
1001 Noble Energy Way
Houston, Texas 77070
March 10, 2020
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 2020 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 28, 2020 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 March 10, 2020.
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 March 2, 2020, 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, March 2, 2020, there were 485,039,905 shares of common stock issued and outstanding.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE 2020 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 28, 2020.
Our Notice of Annual Meeting of Shareholders, Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2019 are available at www.proxyvote.com.
NOBLE ENERGY • 2020 PROXY STATEMENT 1
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;|
|•||Board committee charters;|
|•||Code of Conduct;|
|•||Code of Ethics for Chief Executive and Senior Financial Officers; and|
|•||Information about how to report concerns.|
You may also obtain copies of these documents by contacting the Corporate 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 leadership structural needs can change over time and that, depending on the circumstances, other leadership models might be beneficial.
At least annually, our Board reviews our leadership structure including the combined chairman/CEO position. All such reviews 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;|
|•||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.|
NOBLE ENERGY • 2020 PROXY STATEMENT 2
— BOARD AND COMMITTEES
In 2019, our Board held 14 meetings, and its committees held 21 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 2019.
Our Board has the following four standing committees, each with a written charter adopted by the Board and available on our Website:
|•||Compensation, Benefits and Stock Option (“Compensation”) Committee;|
|•||Corporate Governance and Nominating (“Governance”) Committee; and|
|•||Safety, Sustainability and Corporate Responsibility (“SSCR”) Committee.|
The following table lists the current members of each committee and the number of meetings held during 2019.
|Jeffrey L. Berenson*||Chair|
|Michael A. Cawley*(2)|
|James E. Craddock*(3)||Chair|
|Barbara J. Duganier*|
|Thomas J. Edelman*|
|Holli C. Ladhani*|
|David L. Stover|
|Scott D. Urban*||Chair|
|William T. Van Kleef*||Chair|
|Martha B. Wyrsch*|
|Number of Meetings||6||6||5||4|
|(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)||As of the date of the 2020 Annual Meeting of Shareholders, Mr. Cawley, as the former lead independent director, will have served his additional year after the mandatory retirement age of 72; as a result, after 25 years of experience with our Board, he will not stand for re-election at the Annual Meeting.|
|(3)||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 Nasdaq Global Select Market (“Nasdaq”) and concluded that Mr. Craddock is independent. As a prior employee of the acquired company, Rosetta, an entity previously unaffiliated with the Company, Nasdaq allows a determination of independence since the termination of his employment with Rosetta occurred concurrently with the closing of the merger.|
NOBLE ENERGY • 2020 PROXY STATEMENT 3
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|
|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|
|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|
|SSCR||•||Monitor environmental, climate, health, safety, social, public policy and corporate responsibility trends, issues and concerns|
|•||Evaluate corporate SSCR policies, management systems, investments, strategies and initiatives|
|•||Compliance with SSCR legal and regulatory requirements|
Compensation Committee Interlocks and Insider Participation
During fiscal year 2019, Messrs. Berenson, Craddock, Edelman and Urban served as members of the Compensation Committee. 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 2019, 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.
NOBLE ENERGY • 2020 PROXY STATEMENT 4
— BOARD DEVELOPMENT AND SUCCESSION PLANNING
Our Board plays a key role in the oversight of the Company’s business, strategy and risk management. We are committed to including a diverse range of qualifications, attributes, skills, perspectives and experiences in order to deliver sustainable value. We engage with shareholders and incorporate feedback regarding areas of consideration in Board succession planning such as tenure and diversity. We work to have the collective chemistry, strength, agility and strategic perspectives to meet the challenges of the fast-moving global business environment within which we operate. In our view, our current Board possesses these traits and is well-positioned for our future.
|Key areas of focus||Actions taken|
|In 2019, we requested engagement with our top 30 shareholders, representing over 80% of our outstanding stock. We also solicited feedback from representatives of the proxy advisory firms, Institutional Shareholder Services Inc. (“ISS”) and Glass, Lewis & Co. (“Glass Lewis”). These discussions provided valuable insights, validating our practices in some areas and identifying areas for improvement in others. Overall, we received positive feedback on our enhanced climate disclosures, progress on Board refreshment, and disclosures on compensation and Board composition, and we received suggestions on succession planning and ESG performance.|
|We welcomed Martha Wyrsch to the Board in December of 2019, bringing extensive executive management experience and diverse industry perspectives and knowledge. In addition, the Board engaged in an evaluation process to identify the skills needed to enhance the strategic direction of the Board, and the Company works with an independent director search firm to help identify prospective director candidates. The Governance Committee continuously evaluates the skill-sets needed to maximize Board effectiveness and support the strategic direction of the Company. In connection with this objective, the Board has undergone significant refreshment, resulting in a lower average tenure and age and greater diversity of experiences (see “Board Refreshment” below).|
|We continued our practice of conducting our Board self-evaluation process through a participative discussion conducted by an independent third-party law firm. This discussion has included a focus on the evolution of the Board, the Company’s strategic plan and alignment between the Board and management.|
|In early 2017, we reduced the retirement age to 72. We believe that this facilitates an effective succession process that balances experience and continuity with periodic infusion of new directors and 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 to provide for an orderly transition of duties to the newly-appointed lead independent. As of the date of the 2020 Annual Meeting of Shareholders, Mr. Cawley, as the former lead independent director, will have served his additional year after the mandatory retirement age of 72; as a result, after 25 years of experience with our Board, he will not stand for re-election at the Annual Meeting.|
|We have revisited our director compensation program to ensure its alignment with our compensation peer group. We reduced total director compensation by eliminating additional retainers paid for committee service. We believe that this change is consistent with overall peer company practices and in the best interest of our shareholders.|
The following highlights key information for the director nominees as of the applicable Annual Meeting:
NOBLE ENERGY • 2020 PROXY STATEMENT 5
— 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 the Company’s identification and management of risk.|
|•||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.|
|•||addresses 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 multiple processes in support of risk management, 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|
|•||oversees sustainability, corporate and social responsibility and climate specific risk and opportunities, through our SSCR Committee that meets four times per year and reports regularly to the full Board.|
|•||maintains committees responsible for enterprise risk management, compliance and ethics, disclosures and addressing 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 maintaining an effective process to provide continuity of leadership over the long-term. Each year, our Board assesses incumbents and future senior leadership succession. 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.
— CODES OF CONDUCT AND ETHICS
Our Code of Conduct applies to our directors, officers and employees and sets out our policies regarding laws and business conduct, contains other policies relevant to business conduct and provides 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.
NOBLE ENERGY • 2020 PROXY STATEMENT 6
— INVESTOR ENGAGEMENT EFFORTS
We have recurring active engagement with our investors through participation in investor conferences, non-deal roadshows, and various in-office and telephone interactions throughout the year.
In 2019 we met or initiated contact with investors representing How we engaged with investors We attended 11 investor conferences, executed eight non-deal roadshows, and participated in 150 in-office meetings and phone conversations with potential or current investors We invited our top 30 investors to discuss agenda items for the annual meeting and any other topics they desire Our Board’s lead independent director participated in multiple investor calls in 2019 We regularly report our investors’ views on a variety of topics to our Board of Directors Topics discussed with our investors Financial and operational performance of the Company Execution on the Company’s strategy ESG and sustainability matters Executive compensation and other items specific to the Annual Meeting The Company’s initial Climate Resilience Report Board composition, independence and diversity
— DIRECTOR INDEPENDENCE AND RELATED PERSON TRANSACTIONS
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 Nasdaq and the 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 2019 through January 31, 2020 included:
|•||Company royalty program payments to Mr. Cawley of $13,305;|
|•||payments of $3,371,524 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 $1,921,363 to the Wildlife Conservation Society, of which Mr. Edelman is a member of the board of trustees;|
|•||payments of approximate $12,507,697 to MRC Global (US) Inc., of which Ms. Duganier is a director;|
|•||payments of approximately $22,786,101 to Oil States International, Inc., of which Mr. Van Kleef is a director;|
|•||payments of approximately $3,937,574 to Pioneer Energy Services Corp. and affiliates, of which Mr. Urban is a director; and|
|•||payments of $21,315,478 to Select Energy Services, Inc. (“Select Energy”) and affiliated companies, of which Ms. Ladhani is the President and Chief Executive Officer.|
Under Nasdaq listing standards, a director will not be considered independent if he/she is employed by a company that has, in the current fiscal year or any one of the past three fiscal years, made or received payments from the Company, in excess of the greater of $200,000 or 5% 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 2019, the Company made payments to Select Energy of approximately $20.4 million, which is less than 5% of Select Energy’s 2019 gross revenues. Effective October 26, 2017, the Board elected Ms. Ladhani as a director and determined that she was not independent
NOBLE ENERGY • 2020 PROXY STATEMENT 7
under the NYSE Listing Standards, which applied to the Company prior to December 30, 2019. As Select Energy has neither paid nor received payments from the Company in excess of 5% of Select Energy’s revenues in the current fiscal year or any of the past three fiscal years, the Board has determined that Ms. Ladhani meets the eligibility requirements for independence under Nasdaq 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, and financial expertise to our Board.
Under Nasdaq listing standards, a director is not independent if he/she has been within the last three years an employee of the listed company. However, Nasdaq 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 Nasdaq guidance, as well as other relevant facts and circumstances, the Board 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 6, 2020 our Board determined that no material relationship existed that would interfere with the ability of Messrs. Berenson, Cawley, Craddock, Edelman, Urban and Van Kleef or Mss. Duganier, Ladhani and Wyrsch 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 Nasdaq 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.|
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 2019 and through January 31, 2020, the Company made payments totaling $3.4 million to Flogistix for the leasing of gas compression units. White Deer manages funds that own an approximately 92.6% 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 2019 and through January 31, 2020, the Company made payments totaling $21.3 million to Select Energy and affiliated companies. In addition, White Deer owns a less than 2% 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 the Company’s best interest and on terms no less favorable to us than we could have achieved with an unaffiliated party.
During fiscal year 2019 and through January 31, 2020, 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.
NOBLE ENERGY • 2020 PROXY STATEMENT 8
|DELINQUENT SECTION 16(a) REPORTS|
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. To our knowledge, based solely on a review of the reports filed electronically with the SEC during the most recent fiscal year 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, 2019, other than a Form 3 for Mr. Elliot, which was amended to properly state holding information as of the date of his initial Form 3 filing.
NOBLE ENERGY • 2020 PROXY STATEMENT 9
|OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY|
— DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table sets forth, as of February 24, 2020, 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.
Common Stock Beneficially Owned(1)
|Noble Midstream Partners LP(1)|
|Jeffrey L. Berenson||77,325||42,140||119,465||*||—||—|
|Michael A. Cawley||63,909||42,140||106,049||*||—||—|
|James E. Craddock||103,461||29,391||132,852||*||—||—|
|Barbara J. Duganier||25,899||—||25,899||*||—||—|
|Thomas J. Edelman||3,338,400||(4)||42,140||3,380,540||*||—||—|
|Holli C. Ladhani||40,906||—||40,906||*||—||—|
|David L. Stover||675,153||1,098,706||1,773,859||*||4,500||*|
|Scott D. Urban||73,234||42,140||115,374||*||—||—|
|William T. Van Kleef||125,352||42,140||167,492||*||—||—|
|Martha B. Wyrsch||21,464||—||21,464||*||—||—|
|Named Executive Officer (excluding any director named above)|
|Brent J. Smolik||237,168||66,112||303,280||*||7,500||*|
|Kenneth M. Fisher||170,864||439,256||610,120||*||15,500||*|
|Rachel G. Clingman||67,664||25,767||93,431||*||—||—|
|John K. Elliott||96,577||197,760||294,337||*||—||—|
|All directors and executive officers as a group (18 persons)||5,315,639||2,341,915||7,657,554||1.58%||39,160||*|
|*||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: 10,116 shares held by each of Messrs. Berenson, Cawley, Craddock, Edelman, Urban, Van Kleef, Ms. Duganier and Ms. Ladhani and 21,464 shares held by Ms. Wyrsch; Mr. Stover — 198,919 shares; Mr. Smolik — 223,426 shares; Mr. Fisher — 57,743 shares; Ms. Clingman — 62,774 shares; Mr. Elliott — 37,900 shares; and other executive officers — 98,416 shares.|
|(3)||Consists of shares not outstanding but subject to options that are currently exercisable or that will become exercisable on or before April 24,2020.|
|(4)||Includes 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.|
NOBLE ENERGY • 2020 PROXY STATEMENT 10
— SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 2, 2020, 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.
Address of Beneficial Owner
|Number of Shares
of Common Stock
|Percent of Class|
|Capital International Investors |
333 South Hope Street
Los Angeles, CA 90071
|The Vanguard Group|
100 Vanguard Blvd.
Malvern, PA 19355
|Capital Research Global Investors|
333 South Hope Street
Los Angeles, CA 90071
|BlackRock, Inc. |
55 East 52nd Street
New York, NY 10055
|State Street Corporation |
One Lincoln Street
Boston, MA 02111
|(1)||Based upon its Schedule 13G/A filed with the SEC on February 14, 2020 with respect to its beneficial ownership of our common stock, Capital International Investors has sole voting power with respect to 55,603,752 shares and sole dispositive power with respect to 55,603,844 shares. Beneficial ownership of these shares is disclaimed. Capital International Investors is a division of Capital Research and Management Company.|
|(2)||Based upon its Schedule 13G/A filed with the SEC on February 12, 2020 with respect to its beneficial ownership of our common stock, The Vanguard Group has sole voting power with respect to 694,426 shares, shared voting power with respect to 133,362 shares, sole dispositive power with respect to 53,528,780 shares and shared dispositive power with respect to 795,297 shares.|
|(3)||Based upon its Schedule 13G/A filed with the SEC on February 14, 2020 with respect to its beneficial ownership of our common stock, Capital Research Global Investors has sole voting power with respect to 44,011,787 shares and sole dispositive power with respect to 44,012,968 shares. Beneficial ownership of these shares is disclaimed. Capital Research Global Investors is a division of Capital Research and Management Company.|
|(4)||Based upon its Schedule 13G/A filed with the SEC on February 5, 2020 with respect to its beneficial ownership of our common stock, BlackRock, Inc. has sole voting power with respect to 28,530,665 shares and sole dispositive power with respect to 32,929,847 shares.|
|(5)||Based upon its Schedule 13G filed with the SEC on February 14, 2020 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 22,847,197 shares, sole dispositive power with respect to 0 shares and shared dispositive power with respect to 24,819,965 shares.|
NOBLE ENERGY • 2020 PROXY STATEMENT 11
|SHAREHOLDER PROPOSALS AND OTHER MATTERS|
|Shareholder proposals intended to be brought before our 2021 Annual Meeting of Shareholders, which is currently scheduled to be held on April 27, 2021, 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 must be received by us at our office in Houston, Texas, addressed to our Corporate Secretary, no later than November 10, 2020. Shareholder proposals under our By-Laws may not be submitted for the 2021 Annual Meeting of Shareholders before October 11, 2020.|
NOBLE ENERGY • 2020 PROXY STATEMENT 12
Our Board recommends voting for the nine director nominees as presented below, eight of whom are independent. The business experience of each nominee, as well as the qualifications that led our Board to select each 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 will 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 director should submit a recommendation in writing to the Governance Committee, in care of the Corporate 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 2021 Proxy Statement must be received by us after October 11, 2020 and by November 10, 2020. 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 2021 Proxy Statement, proxy access nominations must be received by us no later than November 10, 2020.
NOBLE ENERGY • 2020 PROXY STATEMENT 13
— 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 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 Nasdaq.
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.
— 2020 NOMINEES FOR DIRECTOR
Upon recommendation of the Governance Committee, our Board has nominated Jeffrey L. Berenson, James E. Craddock, Barbara J. Duganier, Thomas J. Edelman, Holli C. Ladhani, David L. Stover, Scott D. Urban, William T. Van Kleef and Martha B. Wyrsch for election as director.
Each of the director nominees currently serves on our Board and was elected by the shareholders at our 2019 Annual Meeting of Shareholders, with the exception of Martha B. Wyrsch, who was appointed on December 11, 2019 by our Board. If elected, each nominee will hold office until the 2021 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 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 2020 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 2020 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.|
NOBLE ENERGY • 2020 PROXY STATEMENT 14
|JEFFREY L. BERENSON|
Skills and Qualifications
• 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”). Mr. Berenson also serves as a member of the Board of Trustees for the High Meadows Foundation. Mr. Berenson joined our Board upon completion of our merger with Patina in May 2005.
|JAMES E. CRADDOCK|
Skills and Qualifications
• 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. Mr. Craddock has served as a member of the Board of Directors of Crescent Point Energy, Inc. and as a member of its Audit Committee and Reserves Committee since May 2019. Mr. Craddock also serves as a member of the Advisory Board of the Department of Engineering at Texas A&M University. He joined our Board upon completion of our merger with Rosetta in July 2015.
|BARBARA J. DUGANIER|
Skills and Qualifications
• 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 was a director of the general partner of Buckeye Partners, L.P., chair of its audit committee and a member of the compensation committee until the sale of Buckeye Partners, L.P. in November 2019. Ms. Duganier is a director, governance committee member and audit committee chair of MRC Global Inc. Ms. Duganier also serves on the Board of Directors of West Monroe Partners, where she is the lead independent director and nominating and governance committee chair. Ms. Duganier serves as a member of the Board of Directors of John Carroll University. 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”) Leadership Fellow, has received NACD’s certification in cybersecurity oversight and is the President of the NACD Texas Tricities.
NOBLE ENERGY • 2020 PROXY STATEMENT 15
|THOMAS J. EDELMAN|
Skills and Qualifications
• 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.
|HOLLI C. LADHANI|
Skills and Qualifications
• 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 as a board member of Junior Achievement of Southeast Texas.
|DAVID L. STOVER|
Skills and Qualifications
• 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”). Additionally, Mr. Stover is chairman of the board of directors and serves on the executive committee of Junior Achievement of Southeast Texas and serves on the executive committee of the American Petroleum Institute.
NOBLE ENERGY • 2020 PROXY STATEMENT 16
|SCOTT D. URBAN|
Skills and Qualifications
• 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, has served as a member of the board of directors of Pioneer Energy Services Corp. since 2008, and is the chairman of its Compensation Committee and a member of its Nominating and Governance Committee and Audit Committee.
|WILLIAM T. VAN KLEEF|
Skills and Qualifications
• 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 and is a member of the Board of Directors of SA Heals.
|MARTHA B. WYRSCH|
Skills and Qualifications
• Relevant executive officer experience
• Broad international exposure
• Extensive knowledge of our industry and business
• Risk assessment and management experience
Ms. Wyrsch served as Executive Vice President and General Counsel of Sempra Energy, an energy infrastructure and services company with operations in the United States and internationally, from September 2013 until her retirement in March 2019. Prior to joining Sempra Energy, she served as President – North America of Vestas American Wind Technology, a wind turbine manufacturing and services company, from 2009 until 2012, where she had direct responsibility for the North American sales, construction, services and maintenance businesses. From 2007 until 2008, Ms. Wyrsch served as President and Chief Executive Officer of Spectra Energy Transmission, a natural gas transmission and storage business in the United States and Canada. From 1999 through 2007, she served in various roles of increasing responsibility with Duke Energy Corporation, including as President and Chief Executive Officer, Gas Transmission from 2005 until 2007. Ms. Wyrsch has served as a member of the board of directors of Spectris plc since 2012, and is a member of its Nomination Committee and Audit and Risk Committee. Ms. Wyrsch has served as a member of the board of First American Financial Corporation since 2018, and is a member of its Nominating and Corporate Governance Committee. Ms. Wyrsch has also served as a member of the board of Quanta Services, Inc. since 2019, and is a member of its Governance and Nominating Committee and Investment Committee. In addition, Ms. Wyrsch serves on the Board of Directors for the Cristo Rey Network and the Cristo Rey San Diego High School.
NOBLE ENERGY • 2020 PROXY STATEMENT 17
|2019 DIRECTOR COMPENSATION|
Our 2019 director compensation program consisted of two principal elements: (1) an annual retainer and committee chair and member fees and (2) equity, in the form of restricted stock. In 2019, the Board voted to eliminate committee member fees for 2020. Our Compensation Committee reviews our director compensation program annually, based on information provided by our independent compensation consultant. Our Chairman and Chief Executive Officer does not receive any additional compensation for his service as a director.
— ANNUAL RETAINER AND COMMITTEE FEES
Non-employee directors received the following cash fees for 2019, paid pro rata on a monthly basis, with adjustments for 2020 approved by our Board and noted where applicable:
|•||an annual retainer of $100,000;|
|•||$15,000 as an annual retainer for the Governance Committee chair; $15,000 for the SSCR Committee chair; $25,000 for the Audit Committee chair and $15,000 for the Compensation Committee 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 (eliminated for 2020); 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.
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 our 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. No stock options have been issued under the 2015 Plan since February 2017.
On March 6, 2020, the Board approved the Noble Energy, Inc. 2020 Long-Term Incentive Plan (the “2020 Plan”), which, if approved by shareholders at the Annual Meeting, will replace the 2015 Plan, and no further awards would be granted under the 2015 Plan. See “Proposal 4 – Approval of the 2020 Long-Term Incentive Plan” for additional information.
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 28, 2020, our Board considered the Company’s 2019 positive results in light of the current business environment in making the 2020 awards based on the $200,000 target value, with 100% of the grant in restricted stock, resulting in 10,116 shares of restricted stock being awarded to each non-employee director under the 2015 Plan and the 2017 Plan, effective January 31, 2020.
NOBLE ENERGY • 2020 PROXY STATEMENT 18
— DIRECTOR COMPENSATION SUMMARY FOR 2019
The table below sets forth certain information concerning the compensation paid or earned in 2019 by our non-employee directors.
|Name||Fees Earned or
Paid in Cash
|Change in Pension
Value and Non-
|Jeffrey L. Berenson||132,000||199,987||—||—||—||2,784||331,987|
|Michael A. Cawley||133,333||199,987||—||—||—||2,784||333,320|
|James E. Craddock||144,000||199,987||—||—||—||2,784||343,987|
|Barbara J. Duganier||122,000||199,987||—||—||—||3,083||321,987|
|Thomas J. Edelman||129,000||199,987||—||—||—||2,784||328,987|
|Holli C. Ladhani||108,000||199,987||—||—||—||2,784||307,987|
|Scott D. Urban||160,667||199,987||—||—||—||2,784||360,654|
|William T. Van Kleef||147,000||199,987||—||—||—||2,784||346,987|
|Martha B. Wyrsch||5,645||211,488||—||—||—||—||217,133|
|(1)||Reflects annual retainer, committee retainer, committee chair, lead independent director and meeting fees paid or earned by our non-employee directors in 2019.|
|(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 involuntary termination of Board membership following a change of control. Each non-employee director received an award of 8,932 shares of restricted stock on February 1, 2019 that were unvested as of December 31, 2019. Ms. Wyrsch received an award of 9,600 shares of restricted stock on December 11, 2019 upon her election to the Board.|
|(3)||The following directors have option grants outstanding as of December 31, 2019: Mr. Berenson — 47,740 shares; Mr. Cawley — 47,740 shares; Mr. Craddock — 29,391 shares; Mr. Edelman — 47,740 shares; Mr. Urban — 47,740 shares; and Mr. Van Kleef — 47,740 shares.|
|(4)||Reflects accrued dividends paid upon equity award vesting.|
NOBLE ENERGY • 2020 PROXY STATEMENT 19
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITOR
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 2020. KPMG has been retained as our external auditor continuously since May 2002.
The Audit Committee is responsible for the negotiation of the audit fee associated with our retention of KPMG. In order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a rotation of the independent external audit firm.
In conjunction with the 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 the 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 2019 and 2018
|All Other Fees||—||—||—||—|
|(1)||Services rendered in 2019 and 2018 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 $1,823,000 for 2019 and $1,164,500 for 2018 and are not included in above table. See NBLX Annual Report on Form 10-K filed on February 12, 2020.|
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 2019 set forth in the table above were pre-approved by the Audit Committee Chair or the Audit Committee, as provided above, which in either case determined that such services would not impair the independence of our auditor and are consistent with the SEC’s rules on auditor independence.
NOBLE ENERGY • 2020 PROXY STATEMENT 20
|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, 2019. 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, 2019, as filed with the SEC.
William T. Van Kleef, Chair
Michael A. Cawley
Barbara J. Duganier
Martha B. Wyrsch
NOBLE ENERGY • 2020 PROXY STATEMENT 21
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
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 2020 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the 2019 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.|
NOBLE ENERGY • 2020 PROXY STATEMENT 22
At the 2020 Annual Meeting, our shareholders are being asked to approve the Noble Energy, Inc. 2020 Long-Term Incentive Plan (the “2020 Plan”). Based upon the recommendation of the Compensation Committee, on March 6, 2020 our Board approved the 2020 Plan. If approved by our shareholders, the 2020 Plan will become effective on April 28, 2020, the date of our Annual Meeting (the “Effective Date”), and our current 2017 Long-Term Incentive Plan (the “2017 Plan”) and our 2015 Stock Plan for Non-Employee Directors (the “2015 Plan”) will be frozen so that no further awards will be granted under these plans.
The 2020 Plan authorizes us to issue up to 14,800,000 shares of our common stock. This represents a decrease of 13,607,839 shares and 4,254,555 shares, over the shares remaining available under the 2017 Plan as of December 31, 2019 and March 2, 2020 (our record date), respectively. The 2017 Plan includes a fungible share formula under which shares subject to “full-value” awards (awards other than stock options and stock appreciation rights) reduce the share reserve by 2.39 shares for every one share underlying a full-value award, while the share reserve is reduced by one share for every share subject to a stock option or stock appreciation right. This fungible share formula is not included in the 2020 Plan, and so the Company will be able to grant more full-value awards under the 2020 Plan than it would be able to grant under the 2017 Plan, with a decrease to the share reserve needed under the 2020 Plan as compared to the shares remaining under the 2017 Plan. Outstanding awards under the 2017 Plan will continue to be governed by the terms of that plan until vested, exercised, expired or otherwise terminated or canceled.
As of December 31, 2019, there were a total of 483,150,040 shares of our common stock issued and outstanding. In addition to 28,407,839 shares remaining available for issuance under the 2017 Plan at December 31, 2019, there were 307,991 shares available for grant or award under the 2015 Plan. As of the record date of March 2, 2020, there were a total of 485,039,905 shares of our common stock issued and outstanding. In addition to 19,054,555 shares remaining available for issuance under the 2017 Plan as of March 2, 2020, there were 221,591 shares available for grant or award under the 2015 Plan. The Company had a total of 11,250,138 stock options outstanding with a weighted average exercise price of $45.13 and a weighted average remaining term of 3.98 years, and 8,581,458 shares of full value awards (restricted stock and performance share awards) outstanding, as of the record date.
If the 2020 Plan is not approved by shareholders, the 2017 Plan and 2015 Plan will continue in effect and we will continue to make grants under the 2017 Plan and 2015 Plan subject to the limits on shares available and the fungible share formula thereunder.
|—||WHY SHOULD OUR SHAREHOLDERS APPROVE THE 2020 PLAN?|
Equity Award Grants are an Essential Component of Our Compensation Program
Our compensation philosophy is based on the belief that we can best create shareholder value if officers, directors, employees, consultants and others performing services for us act and are rewarded as business owners. The 2020 Plan is designed to:
|•||attract and retain highly qualified individuals to perform services for us;|
|•||further align the interests of those individual service providers with those of our shareholders;|
|•||more closely link compensation with our performance; and|
|•||provide a more contemporary plan design that is aligned with our peer group.|
We believe that an equity stake through equity compensation programs effectively aligns service provider and shareholder interests by motivating and rewarding performance that will enhance shareholder value. Approval of the 2020 Plan is critical to our ability to continue our compensation programs that are aligned with shareholders’ interests.
NOBLE ENERGY • 2020 PROXY STATEMENT 23
The 2020 Plan will Allow us to Make Grants with a Decrease to Our Current Share Reserve
As of December 31, 2019, 19,054,555 shares of our common stock remained available for future awards under the 2017 Plan. Under the fungible share formula pursuant to which one full-value award is counted against the 2017 Plan’s share reserve as 2.39 shares, a maximum of 7,972,617 shares could be issued in respect of full-value awards. If our shareholders approve the 2020 Plan, then all 14,800,000 shares authorized for issuance under the 2020 Plan will be available for new awards under the 2020 Plan. The Board and the Compensation Committee believe that approval of the 2020 Plan will give us greater flexibility to structure future incentives and better attract, retain, motivate and reward officers, directors, employees, consultants and other individuals performing services for us.
|—||OUTSTANDING AWARDS AND DETERMINATION OF SHARE RESERVE FOR THE 2020 PLAN|
The table below presents information about the number of shares that were subject to various outstanding equity awards and the shares remaining available for issuance under our existing long-term incentive plans (including the 2017 Plan and 2015 Plan), as of March 2, 2020.
|Number of Shares||As a % of Shares
($ in Millions)(2)
|Weighted average exercise price of outstanding options||$ 45.13||—||—|
|Weighted average remaining term of outstanding options||3.98 years||—||—|
|Restricted stock outstanding||5,313,352||1.1||84.0|
|Shares available for grant||19,276,146||3.97||304.6|
|(1)||Based on 485,039,905 shares of our common stock issued and outstanding as of March 2, 2020.|
|(2)||Based on the closing price of our common stock on March 2, 2020 of $15.80 per share.|
In determining whether to recommend the approval of the 2020 Plan, including the share reserve under the 2020 Plan, our Compensation Committee and Board considered the following:
|•||The shares to be initially reserved for issuance under the 2020 Plan will represent a decrease of 4,254,555 shares from the number of shares reserved for issuance that remain available for future grant under the 2017 Plan as of March 2, 2020. If the 2020 Plan is approved, it will represent the only equity plan under which the Company will be able to grant future equity awards to employees and service providers including non-employee directors, and the Company will no longer grant awards under the 2017 Plan or the 2015 Plan.|
|•||The Company expects the share reserve under the 2020 Plan and the 2020 Plan’s one-for-one share counting provisions to provide the Company with enough shares for awards for approximately three to four years, assuming the Company continues to grant awards consistent with its current practices and historical usage, as reflected in its historical burn rate, and further dependent on the price of Company shares of common stock and hiring activity during the next few years, and noting that future circumstances may require the Company to change its current equity grant practices. The Company cannot predict its future equity grant practices, the future price of its shares of common stock or future hiring activity with any degree of certainty at this time.|
In light of the factors described above, and the fact that the ability to continue to grant equity compensation is vital to our ability to continue to attract and retain highly qualified individuals in the competitive labor markets in which we operate, the Board has determined that the size of the share reserve under the 2020 Plan is reasonable and appropriate at this time.
NOBLE ENERGY • 2020 PROXY STATEMENT 24
|—||EQUITY COMPENSATION BEST PRACTICES REFLECTED IN THE 2020 PLAN|
The 2020 Plan provides the LTIP Committee (as defined below) with the flexibility to effectively use the shares under the 2020 Plan to provide incentives to our personnel. The 2020 Plan contains provisions we believe are consistent with best practices in equity compensation and which we believe further protect our shareholders’ interests, including:
|•||Continued Broad-Based Eligibility for Equity Awards. We grant equity awards to a significant number of our employees. By doing so, we link our interests with shareholder interests throughout the organization and motivate these individuals to act as owners of the business. As of March 2, 2020, 1,060 of our active employees held outstanding equity awards.|
|•||No Discount Stock Options or Stock Appreciation Rights. All newly granted stock options and stock appreciation rights will have an exercise price equal to or greater than the fair market value of our common stock on the date the stock option or stock appreciation right is granted. For purposes of the 2020 Plan, the fair market value of a share of common stock as of any given date generally will be the officially quoted closing selling price of the stock (or if no selling price is quoted, the bid price) on the principal securities exchange on which the common stock is then listed. The closing sale price for a share of our common stock on March 2, 2020 was $15.80.|
|•||No Automatic Single-Trigger Vesting of Awards. The 2020 Plan does not provide for automatic “single-trigger” accelerated vesting upon a change of control. The 2020 Plan does provide for “double-trigger” accelerated vesting 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 (sometimes referred to as constructive termination) within the 12- to 24-month period following the change of control.|
|•||Limitations on Dividend Payments. Dividends and dividend equivalents may not be paid on awards subject to vesting conditions unless and until such conditions are met.|
|•||Limitations on Non-Employee Director Grants. A maximum grant date fair value of $750,000 may be granted as awards under the 2020 Plan to any one non-employee director during a fiscal year. This number may be adjusted to take into account equity restructurings and certain other corporate transactions.|
|•||No Repricing of Awards. Awards may not be repriced, replaced, regranted through cancellation or otherwise modified without shareholder approval if the effect would be to reduce the exercise price for the shares under the award.|
|•||No Cancellation of Underwater Awards. Stock options and stock appreciation rights that are “underwater” may not be canceled in exchange for cash or for the purpose of granting a replacement award.|
|•||Tax Gross-Ups. The 2020 Plan does not provide for any tax gross-ups.|
|—||SUMMARY OF TERMS OF THE 2020 PLAN|
The following description of the 2020 Plan is a summary, does not purport to be a complete description of the 2020 Plan and is qualified in its entirety by the full text of the 2020 Plan. A copy of the 2020 Plan is attached to this proxy statement as Appendix C and is incorporated herein by reference.
The 2020 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 officers, directors, employees, consultants 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 2020 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 2020 Plan will provide 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.
NOBLE ENERGY • 2020 PROXY STATEMENT 25
The 2020 Plan provides for administration by the Board or a committee, which may be the Compensation Committee or such other committee as our Board may designate (the “LTIP Committee”). The LTIP Committee will have the authority to make all determinations under, prescribe all forms for use with and adopt rules for the administration of the 2020 Plan. The LTIP Committee has the right to delegate to one or more officers of the Compensation Committee any right granted to the LTIP Committee under the 2020 Plan, except where such delegation would violate state corporate law.
Officers, directors, employees, consultants and other service providers of the Company and its affiliates who, in the opinion of the LTIP 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 2020 Plan. The LTIP Committee determines the type and size of any awards and sets the terms, conditions, restrictions and limitations applicable to such awards within the confines of the 2020 Plan’s terms. As of the date hereof, we anticipate that approximately 900 current employees, including all of our executive officers, all of our non-employee directors, and no consultants, contractors or other advisors will be eligible to participate in the 2020 Plan.
The maximum number of shares of common stock that are available to be delivered in respect of awards granted under the 2020 Plan is 14,800,000. For purposes of this share limit, shares underlying any awards that are forfeited, canceled, reacquired by the Company prior to vesting, satisfied without the issuance of common stock or otherwise terminated (other than by exercise) under the 2020 Plan will not be deducted from the shares available for issuance under the 2020 Plan. Notwithstanding the foregoing, 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 2020 Plan. The 2020 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 available for delivery under the 2020 Plan, the award limits described below and the number and exercise price per share of outstanding awards.
The maximum number of shares of common stock that may be issued pursuant to incentive stock options under the 2020 Plan is 14,800,000 shares. The maximum grant date fair value that may be granted as awards under the 2020 Plan to any one non-employee director during a fiscal year is $750,000.
No Repricing or Reload Rights
Except adjustment for certain corporate changes in accordance with the provisions of the 2020 Plan, no award may be repriced, replaced, regranted through cancellation or otherwise modified without shareholder 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.
|—||TYPES OF AWARDS|
The 2020 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 LTIP 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 2020 Plan.
Generally, the exercise price of a stock option granted under the 2020 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% shareholder, 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.
NOBLE ENERGY • 2020 PROXY STATEMENT 26
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 LTIP Committee, equal to the amount by which our common stock appreciates in value after the date of the award. The LTIP 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 LTIP 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 is common stock that must be returned to us if certain conditions are not satisfied. The LTIP 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 LTIP 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 (including completion of the vesting period), 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 shareholder 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 (“RSUs”)
Restricted stock units are fictional shares of common stock. The LTIP 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.
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. The LTIP Committee will determine the terms, conditions and restrictions for each performance award as it deems advisable and may prescribe (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 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 2020 Plan.
The performance measure(s) determined by the LTIP 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.
The LTIP Committee has the authority to reduce and 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 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.
NOBLE ENERGY • 2020 PROXY STATEMENT 27
Other Incentive Awards
The LTIP Committee may grant other incentive awards under the 2020 Plan based upon, payable in or otherwise related to shares of common stock if the LTIP Committee determines that the other incentive awards are consistent with the purposes of the 2020 Plan. Other incentive awards will be subject to any terms, conditions, restrictions or limitations established by the LTIP 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 LTIP Committee.
New Plan Benefits
As of the date of this Proxy Statement, no director, executive officer or other employee of the Compensation Company has been granted any awards under the 2020 Plan. The awards, if any, that will be granted to eligible persons under the 2020 Plan are subject to the discretion of the LTIP Committee and, therefore, are not determinable.
|—||ADDITIONAL TERMS OF THE 2020 PLAN|
Change of Control
Upon a change of control where the Company is not the surviving entity (or survives only as a subsidiary of another entity), unless the LTIP Committee determines otherwise, all outstanding stock options and SARs that are not exercised at or before the occurrence of the change of control will be assumed by or replaced with comparable stock 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), and any outstanding performance conditions associated with an award will be deemed achieved as of immediately prior to the change of control and assuming all performance criteria and other conditions to payment of such awards to be achieved at target performance. 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 12- to 24-month period following the change of control, each award outstanding under the 2020 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 with any outstanding performance conditions associated with an award deemed achieved as of the date of such termination at target performance. The LTIP 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 2020 Plan, assuming all performance criteria and other conditions to payment of such awards are achieved at target performance.
All applicable withholding taxes will be deducted from any payment made under the 2020 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 2020 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.
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.
By accepting or exercising any award granted under the 2020 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.
NOBLE ENERGY • 2020 PROXY STATEMENT 28
Amendment and Termination
Our Board may at any time suspend, terminate, amend or modify the 2020 Plan, but may not without shareholder 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 2020 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 2020 Plan, or (ii) to effect any change for which shareholder 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 2020 Plan, the terms and provisions thereof will continue to apply to awards granted before termination. No suspension, termination, amendment or modification of the 2020 Plan will adversely affect in any material way any award previously granted under the 2020 Plan, without the consent of the participant.
The 2020 Plan will become effective upon approval by the shareholders at the Company’s 2020 Annual Meeting. If so approved, unless terminated earlier, the 2020 Plan will terminate on April 27, 2030.
|—||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 the employer and participants may be either more or less favorable than those described below depending on the employer’s or 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 2020 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 stock 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 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.
NOBLE ENERGY • 2020 PROXY STATEMENT 29
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.
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.
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 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.
NOBLE ENERGY • 2020 PROXY STATEMENT 30
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.
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. All awards granted under the 2020 Plan to such current and former executive officers 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 2020 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 2020 Plan will be designed to comply with the requirements of Section 409A of the Code to the extent the awards granted under the 2020 Plan are not exempt from coverage. However, if the 2020 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 NOBLE ENERGY, INC. 2020 LONG-TERM INCENTIVE PLAN.|
NOBLE ENERGY • 2020 PROXY STATEMENT 31
DISCUSSION AND ANALYSIS
TABLE OF CONTENTS
|DELIVERING KEY OUTCOMES FOR 2019||33|
|WHAT WE PAY AND WHY: 2019 COMPENSATION PROGRAM STRUCTURE||37|
|2019 COMPENSATION TARGETS FOR NAMED EXECUTIVE OFFICERS||37|
|2019 NAMED EXECUTIVE OFFICER TOTAL TARGET COMPENSATION MIX||38|
|ELEMENTS OF EXECUTIVE COMPENSATION||39|
|2019 EXECUTIVE COMPENSATION RESULTS||42|
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. This discussion focuses on the compensation of our Named Executive Officers for 2019, who were:
Biographical information for our Named Executive Officers and other key executives appears in Appendix B to this Proxy Statement.
2019 Performance Highlights
2019 was a hallmark year for Noble Energy. We delivered results significantly better than target in free cash flow generation, capital spend and cost control, and we strengthened our Company in many ways in 2019 including:
|•||Delivering on key strategic initiatives, including Leviathan first gas and the Alen Gas Project sanction;|
|•||Completing the midstream strategic review, selling the remaining midstream assets and incentive distribution rights to NBLX;|
|•||Improving corporate returns beyond targets;|
|•||Demonstrating top-quartile economic performance in key onshore basins;|
|•||Developing our inaugural Climate Resilience Report and analysis; and|
|•||Growing our reserve base.|
NOBLE ENERGY • 2020 PROXY STATEMENT 32
We believe these actions were recognized by our shareholders, as Noble shares and our Total Shareholder Return outperformed the S&P 500 and most of our E&P peers in 2019. In summary, our organization executed extremely well in 2019 in each area of our Company. Our strong safety, operational and financial performance would not have been possible without the commitment, skill and determination of all employees. During 2019, we continued our commitment to building a culture of open and direct communications, caring and collaboration and making Noble Energy a great company at which to work.
Executive compensation in 2019 reflects a year of financial, operational, strategic and safety outperformance.
NOBLE ENERGY • 2020 PROXY STATEMENT 33
TOTAL SHAREHOLDER RETURN - 2019*
|*||Total Shareholder Return measured from January 1, 2019 to December 31, 2019.|
2019 Key Compensation Actions
Each year, our Compensation Committee focuses on ensuring a clear connection between performance and pay. The members of the Compensation Committee considered financial and strategic achievements against business goals and plans, and the Committee recognized Noble Energy’s outperformance with its compensation decisions.
|•||2019 Short-Term Incentive Plan payout approved at 180% of target.|
|•||2017 performance shares vested at 83% of target shares based on the Company’s three-year relative TSR performance. Although the Company’s relative TSR for 2019 was second in the peer group, the overall performance share results were impacted by lower relative TSR in 2017 and 2018.|
|•||Effective February 1, 2019, the Compensation Committee approved an increase in the base salary and target award opportunity under the Long-Term Incentive Plan (LTIP) for Mr. Stover to reward his leadership in Company performance and to bring him closer to the median of our compensation benchmarking peer group. Additionally, the Committee approved Mr. Stover’s recommendation for an increase in the base salary for Mr. Elliott to recognize the scope and complexity of his position and his outstanding leadership of, and results in, our Eastern Mediterranean assets.|
NOBLE ENERGY • 2020 PROXY STATEMENT 34
Our Executive Compensation Philosophy and Objectives
Our executive compensation program is designed to achieve the following objectives:
|•||Target a competitive compensation package to attract, motivate and retain executive talent needed to deliver the business;|
|•||Provide a clear and direct relationship between executive pay and our performance on both a short- and long-term basis;|
|•||Reward Company and individual performance for delivery of business results and creation of shareholder value;|
|•||Support our business strategy; and|
|•||Link executive pay to measures that drive shareholder returns.|
Sound Executive Compensation Governance At-A-Glance
|WHAT WE DO||WHAT WE DON’T DO|
|Place a majority of weight on performance-based, at-risk, long-term compensation.||No buyouts or repricing of underwater stock options.|
|Maintain a clawback policy in the event of a material financial restatement or fraud.||No employment contracts.|
|Use a mix of relative and absolute financial performance metrics in our incentive plans.||No excessive perquisites.|
|Include “double-trigger” change of control provisions in our equity compensation plan.||No excise tax reimbursements or gross-ups upon a change of control.|
|Apply stock ownership guidelines to executive officers and non-employee directors.||No permitted pledging or hedging of Company stock.|
|Use an independent, external compensation consultant.|
|Benchmark against a relevant group of peer companies.|
|Engage with institutional investors regarding the executive compensation program.|
|Provide clarity with respect to Company objectives and incentive targets; balance downside outcomes with upside opportunities.|
NOBLE ENERGY • 2020 PROXY STATEMENT 35
Shareholder Engagement and Results of 2019 Say-on-Pay Vote
At the 2019 Annual Meeting of Shareholders, we held our annual advisory vote on executive compensation. Our executive compensation programs have historically received strong shareholder support (averaging over 95% for 2016, 2017 and 2018). Following our late fourth quarter 2018 leadership transition, some shareholders expressed concern about the separation payment made to a departing executive. This concern was reflected in the 81.3% shareholder support for the 2019 Say-on-Pay vote.
In response to the 2019 Say-on-Pay vote, and in line with our commitment to robust shareholder engagement, we sought opportunities to engage with shareholders, obtain feedback and respond to questions. We requested meetings with our top 30 shareholders, representing over 80% of our outstanding stock. The table below shows a summary of the topics our shareholders asked us to consider and upon consideration of their feedback, the changes we implemented.
GENERAL EXECUTIVE COMPENSATION STRUCTURE
|What Shareholders Said||How We Responded|
|Separation payment made to a departing executive exceeded estimated severance benefit in Termination Payments Table for 2018 (2019 Proxy document)||►Noble Energy does not have a separate non-change-of-control severance plan for executives. The severance benefits disclosed in the Termination Payments Table are the minimum benefits payable in the event of an involuntary termination. Our Compensation Committee retains the discretion to evaluate the circumstances of each termination when an executive exits the Company, giving consideration to the terms of the separation and any agreements and protective provisions needed to maintain business continuity during the transition. This executive exit was part of a broader leadership transition, and additional agreements and protective covenants were put in place to protect business continuity during the period of change. Consistent with the advice of the Compensation Committee’s independent consultant and considering market practice, our Compensation Committee exercised discretion and provided consideration to the departing executive in exchange for those protective covenants. Other executives have departed without additional separation payments.|
|Incorporate more returns-based measures into incentive plan design||►We introduced Cash Return on Capital Employed (“CROCE”) as a performance condition to the 2020 long-term performance share awards.|
|Demonstrate linkage between climate and sustainability performance and executive compensation||►We incorporated Environmental, Social and Governance (“ESG”) performance measures into the 2020 Short-Term and Long-Term Incentive Plan designs.|
SHORT-TERM INCENTIVE (“STI”)
|What Shareholders Said||How We Responded|
|Improve disclosures around STI targets, threshold and maximum performance levels||►We increased disclosure around 2019 STI targets, results and payouts.|
|Increase proportion of quantitative goals in STI program|
►We increased quantitative goals by 10% in the 2020 STI Plan from 60% to 70%.
►We increased the emphasis on Free Cash Flow to 30% in the 2020 STI Plan.
|Simplify STI Plan|
►We introduced clarity by simplifying STI metrics to focus on Financial Performance, Operating Excellence and Strategic Execution in alignment with Noble Energy’s strategy of creating value as a diversified, low-cost producer with moderate growth and sustainable free cash flow.
►We focused the Strategic Execution qualitative component of the STI Plan on Balance Sheet Strength (including liquidity and leverage), ESG Performance and Portfolio Optimization.
LONG-TERM INCENTIVE (“LTI”)
|What Shareholders Said||How We Responded|
|Long-term performance awards should be measured with multiple measures, rather than a single metric (relative TSR)||►We introduced two new long-term vesting criteria to the 2020 performance share awards: CROCE and ESG performance.|
NOBLE ENERGY • 2020 PROXY STATEMENT 36
|Compensation Element||Purpose||Form of Compensation|
|FIXED||Base Salary||Provide a fixed level of compensation for performing day-to-day functions based on level of responsibility, experience and individual performance||►CASH|
|VARIABLE||Annual Short-Term Incentive||Reward short-term financial and operational performance over a one-year performance period||►CASH|
|LTI – Performance-based Share Award||Align interests of our NEOs with our long-term shareholders.||►COMMON STOCK|
|LTI – Time-Vested Restricted Shares||Facilitate stock ownership, provide a retention incentive and align with long-term shareholder interests.||►COMMON STOCK AND CASH(1)|
|LTI – Stock Options||Motivate and incentivize sustained performance over the long-term.||►OPTIONS|
|(1)||A portion of the 2019 Time-Vested Restricted Share award was granted as cash-settled phantom shares to minimize the impact of share dilution.|
The Compensation Committee finalized 2019 compensation targets for our Named Executive Officers in January 2019. The following table provides the target value of each officer’s total 2019 target direct compensation.
|2019 STIP Target
(% of Salary)
|2019 STIP Target
|2019 LTIP Target
|2019 Total Direct|
|David L. Stover||1,050,000||130%||1,365,000||8,335,000||10,750,000|
|Brent J. Smolik||750,000||110%||825,000||4,100,000||5,675,000|
|Kenneth M. Fisher||640,000||95%||608,000||2,350,000||3,598,000|
|Rachel G. Clingman||540,000||80%||432,000||1,500,000||2,472,000|
|John K. Elliott||480,000||75%||360,000||1,550,000||2,390,000|
|(1)||Equity values reflect the target LTIP values the Committee approved. These differ from the expense valuations shown in the Summary Compensation Table and Grants of Plan Based Awards Table.|
NOBLE ENERGY • 2020 PROXY STATEMENT 37
The global compensation program at Noble Energy is designed to promote a pay-for-performance culture that motivates continuous improvement of business results, while maintaining a strong sense of teamwork. Our executive compensation program places a substantial portion of the total compensation opportunity at-risk. For 2019, 90% of the total compensation for the CEO and 83% of total compensation for other Named Executive Officers was contingent on Noble Energy achieving financial, operational and strategic outcomes or was linked to stock price performance. We believe the structure of our executive compensation program is consistent with the objectives of our compensation philosophy, provides an appropriate mix of fixed and performance-based compensation, and aligns compensation to the interests of shareholders.
CEO Pay: Target Versus Realizable Compensation
The Company’s performance has had a significant impact on the at-risk portions of compensation opportunities described above. As a result, our CEO’s realized and realizable compensation has trailed the target opportunity when the Company has underperformed.
The target compensation opportunity is defined as: (i) annual base salary, (ii) short-term incentive opportunity as a percent of base salary, and (iii) long-term incentive opportunity on the date of grant. Realizable pay is the combination of the (i) actual annual base salary, (ii) the actual short-term incentive award earned for the performance year, and (iii) estimated value of vested and unvested long-term incentive awards on track to be earned based on the current share price and actual or target relative TSR performance for vested and unvested performance shares, respectively. For any given year, annual performance incentives and long-term incentive compensation actually earned by our Named Executive Officers may differ from the target opportunity due to actual performance relative to the applicable incentive plan performance measures and stock price performance.
By design, the Committee intends that the Company should meet the following criteria for executives to receive their target compensation value:
NOBLE ENERGY • 2020 PROXY STATEMENT 38
In 2017 and 2018, when Noble Energy underperformed the peer group on relative stock performance or fell short on certain financial and operational goals, our executives realized less than 100% of their total target pay opportunity and in certain years, substantially less. This is the intended result of our compensation program’s pay-for-performance design and our Compensation Committee’s use of their discretion in aligning executive pay with Company performance and shareholder return.
As illustrated in the below chart, our pay-for-performance philosophy is set forth by the difference in CEO target pay opportunity and realizable pay over the past three years. Our CEO did not receive payment of any performance share awards in two out of the last three years. In addition, our Compensation Committee exercised negative discretion to reduce the 2018 Short-Term Incentive (STIP) payout to 85% of target.
By design, in years where we achieved below-target results, the CEO’s compensation fell short of the target opportunity. For 2019, reflecting a year of outstanding financial and operational performance, CEO realizable compensation exceeded the target opportunity as of December 31, 2019, thereby in the Committee’s view, continuing the effective linkage between pay and performance. If we considered the impact on our stock price due to macro economic factors and recasted this analysis as of February 28, 2020, CEO realizable compensation is lower, reinforcing the strong tie to stock price performance.
CEO TARGET VERSUS REALIZABLE COMPENSATION HISTORY(1)
(1) All unvested performance share awards are reflected at target.
Process for Determining Executive Compensation
Role of Compensation Committee
The Compensation Committee oversees and approves our executive compensation program with the aim of reinforcing our financial and operational results, enhancing our culture and establishing a strong connection between pay and performance as well as alignment between executives, employees and shareholders. In its oversight role, the Compensation Committee is responsible for making compensation decisions involving our CEO and other executive officers. During the annual meeting cycle, the Compensation Committee reviews program design, peer groups, performance targets, compensation levels, market practices, benchmark data and ongoing Company and individual performance to inform annual compensation decisions. Compensation decisions reflect input from our senior management and the independent compensation consultant engaged by the Compensation Committee and reflect not only the annual results of the Company, but the longer-term issues surrounding all producers of hydrocarbons. The Compensation Committee puts in place a compensation structure that is perceived by management to be both rigorous and fair.
NOBLE ENERGY • 2020 PROXY STATEMENT 39
January Final Company and CEO performance review Determine CEO and business goals Approve prior year incentive payouts Set new performance year incentive plan design; approve performance measures and targets Establish NEO target compensation opportunity April Spring Shareholder Engagement; feedback shared with Board Annual shareholder meeting and voting Review shareholder advisory reports July Independent compensation consultant review of market trends and proxy data Evaluate compensation and performance peer groups Assess progress on annual goals and priorities October Fall Shareholder Engagement; feedback shared with Board Consultant reviews market data for executive roles Assess progress on annual goals and priorities December Compensation program risk assessment Early full-year performance review Review proposed long-term incentive program Review officer and non-employee director stock ownership holdings
Role of Our CEO
Our Compensation Committee receives an assessment from our CEO on individual performance, leadership and suggested compensation levels of other executive officers. The CEO is not present during the Compensation Committee’s deliberations regarding his own compensation. The Compensation Committee makes all final decisions regarding the compensation of executive officers in executive session with no members of management present.
Role of Compensation Consultant
Our Compensation Committee retains, at the Company’s expense, Meridian Compensation Partners, LLC, an independent compensation consultant (“Meridian”) to assist with executive compensation matters. The Compensation Committee met with Meridian numerous times during 2019, with and without management, to review findings based on market research, and to consider those findings in determining and adjusting our executive compensation program.
Our Compensation Committee continued to retain Meridian for 2019 after confirming Meridian’s independence from our management and members of our Compensation Committee, and based on the following additional considerations:
|•||expertise and comprehensive range of services associated exclusively with executive compensation;|
|•||contemporary, up-to-date insight on executive compensation matters and shareholder perspectives;|
|•||familiarity with our executive compensation program and the programs of our compensation peer group;|
|•||no conflicts of interest; and|
|•||maintenance of policies and procedures that prevent conflicts of interest.|
In 2019, Meridian assisted in reviewing our executive compensation program and provided 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.
The Compensation Committee takes into consideration potential risks associated with the executive compensation program and structures compensation to provide appropriate incentives without encouraging excessive risk-taking. It is the Compensation Committee’s practice to annually assess compensation program risk in consultation with Meridian. The Compensation Committee requested Meridian conduct a risk assessment of Noble Energy’s executive compensation program. Based upon this review, Meridian determined the executive compensation program does not encourage unnecessary risk-taking, and the Compensation Committee and Management agreed with this assessment.
NOBLE ENERGY • 2020 PROXY STATEMENT 40
Compensation Benchmarking and Performance Peer Groups
Our Compensation Committee annually reviews our executive officers’ compensation relative to E&P peers and general industry companies based on information provided by Meridian and its own judgement and analysis. We believe this material provides the Compensation Committee with a strong and sufficient basis to understand and compare the competitive executive compensation landscape.
The Compensation Committee reviews the composition of the peer group annually to ensure that it remains relevant for comparative purposes. In 2018, management recommended, and the Compensation Committee agreed, that we should have two distinct peer groups: one for compensation benchmarking and one for relative Company performance assessment.
The companies in the compensation benchmarking peer group reflect the industry companies within a comparable size range against which we compete for executive talent. Performance peers are those companies in our industry that share a similar long-term business strategy, multi-basin operating presence including a mix of domestic and international presence, and similar production commodity mix risk. By composing two separate peer groups, the Compensation Committee seeks to benchmark the form and magnitude of compensation granted to our Named Executive Officers against the industry in which we compete for talent, while at the same time evaluating our Company’s performance against peers that share our business operations and strategy.
|Pioneer Natural Resources Company||$||27,096||$||25,074|
|Concho Resources Inc.||$||21,907||$||17,467|
|Diamondback Energy, Inc.||$||21,018||$||14,899|
|Continental Resources, Inc.||$||18,527||$||12,619|
|Marathon Oil Corporation||$||15,433||$||10,863|
|Ovintiv Inc. (formerly known as Encana Corporation)||$||14,428||$||6,090|
|Devon Energy Corporation||$||13,158||$||9,975|
|Chesapeake Energy Corporation||$||12,642||$||1,600|
|Parsley Energy, Inc.||$||8,451||$||5,318|
|Cabot Oil & Gas Corporation||$||8,277||$||7,102|
|WPX Energy, Inc.||$||8,005||$||5,726|
|Cimarex Energy Co.||$||7,587||$||5,250|
|Murphy Oil Corporation||$||7,365||$||4,098|
|Noble Energy, Inc.||$||20,390||$||11,881|
|(1)||Market cap and enterprise value data is as of December 31, 2019 and sourced from Standard & Poor’s Capital IQ.|
NOBLE ENERGY • 2020 PROXY STATEMENT 41
To determine base salary, the Compensation Committee considers, among other things, compensation levels, market data provided by Meridian, internal equity, the complexity of the individual’s role at the Company, and an individual’s expertise, experience, and performance. In early 2019, the Committee evaluated these factors and made the following adjustments:
|Named Executive Officer||2018 Base Salary||2019 Base Salary|
|David L. Stover||$||1,000,000||$||1,050,000|
|Brent J. Smolik||$||750,000||$||750,000|
|Kenneth M. Fisher||$||640,000||$||640,000|
|Rachel G. Clingman||$||540,000||$||540,000|
|John K. Elliott||$||460,000||$||480,000|
Short-Term Incentive Plan (“STIP”)
Our STIP is designed to incentivize and reward the annual achievement of Company performance goals and individual performance during the year. The performance measures and targets reflect short-term financial, operational, and strategic goals that we believe drive shareholder value. The Compensation Committee believes that linking short-term incentive pay to operating performance and shareholder value is best achieved by establishing clear metrics that reflect how the Company measures overall business success and how we believe shareholders evaluate total Company performance.
The Company STIP pool can range from 0 – 250% of the target opportunity. At the conclusion of the year, the Compensation Committee reviews the quantitative and qualitative performance results provided by management in order to determine the Company Performance Factor. The Compensation Committee retains discretion to adjust the final Company Performance Factor positively or negatively based on additional considerations such as unforeseen events at the Company, in the industry and/or exceptional operational complexity.
ILLUSTRATION OF SHORT- TERM INCENTIVE PLAN DESIGN
Performance Measure Selection
The Compensation Committee reviews and approves annual performance measures that support our business strategy and contribute to shareholder value. In selecting the performance measures, targets and ranges, the Committee considers the annual business plan and prevailing economic and industry conditions. Each year’s metrics and targets fit that year’s unique circumstances and plan. We set challenging goals with maximum payout ranges that can only be realized through exceptional, industry-leading performance.
NOBLE ENERGY • 2020 PROXY STATEMENT 42
2019 Short-Term Incentive Plan Outcomes
In 2019, actual performance for the STIP metrics compared to targets was as follows:
Performance Levels QUANTITATIVE PERFORMANCE METRICS (60%) 0% Target (100%) 250% Result Factor Free Cash Flow (15%) Measures financial capacity and cost discipline Free Cash Flow(1) ($MM) Divestment Proceeds(2) ($MM) (1,711) 412 Target (1,311) Target 812 Maximum (911) Maximum 1,212 Actual Free Actual Divestment Proceeds: $843 Cash Flow: ($840) 207% 0.31 U.S. Onshore Capital Efficiency (15%) Measures capital discipline and project returns $76.33 Target $54.52 Maximum $38.16 Actual: $51.03 132% 0.20 Relative Cash Costs per Boe(3) (10%) Evaluates cost structure relative to peers 10th Target 6th Maximum 1st Actual: 6th 111% 0.11 Cash Cost per Boe(4) (10%) Measures organization’s focus on cost $13.69 Target $12.44 Maximum $11.51 Actual: $11.75 211% 0.21 Sales Volume (10%) Assesses delivery of budgeted volumes 333 Target 354 MBoepd Maximum 372 Accttuuaall:: 336611 MBooeepd 146% 0.15 FINAL QUANTITATIVE FACTOR AT 60% WEIGHTING 0.98
|(1)||Non-GAAP financial measure, see reconciliation schedule in Appendix A.|
|(2)||Divestment proceeds includes cash received from NBLX purchasing assets from NBL.|
|(3)||Based on publicly reported information. Relative cash costs per Boe includes lease operating expense and general administrative costs.|
|(4)||Cash costs per Boe includes lease operating expense, gathering, transportation and processing expense and general and administrative costs for upstream Noble Energy and excludes NBLX.|
|QUALITATIVE PERFORMANCE METRICS (40%)|
|Total Shareholder Return
(Absolute and Relative)
|Outperformed S&P 500 average for 2019. 2nd in peer group, achieved +35% TSR.|
|Strategic Initiatives||Delivered critical strategic actions to position the Company for long-term success including: (1) Successfully brought Leviathan online under budget and ahead of schedule. (2) Acquired interest in EMG pipeline. (3) Sanctioned Alen Gas Project. (4) Maintained investment grade ratings with all credit agencies; upgraded by Fitch. (5) Concluded Midstream strategic review; executed drop/simplification.|
|Returns-Based Metrics||Demonstrated our commitment to optimizing returns through continuous cost and capital efficiency improvements with above-target 2019 returns-based metrics (including ROACE, CROCI and Debt Adjusted Per Share Cash Flow Growth).|
|Safety Performance||Delivered industry-leading safety performance with record low U.S. Onshore TRIR (Total Recordable Incident Rate). Evaluated risk and published inaugural Climate Resilience Report using TCFD framework.|
|Top Quartile Relative
Performance by Basin
|Achieved significant capital efficiency improvements and delivered top-quartile safety, economic and return performance in our key basins. Established industry-leading new drilling benchmarks.|
|Additions to Proved Reserves/ Exploration Performance||Realized reserve additions of 305 MMBoe,~2.3x greater than production. Executed Colombia Exploration Agreement for 40% WI in 2MM gross acres.|
|FINAL QUALITATIVE FACTOR AT 40% WEIGHTING||0.82|
|OVERALL COMPANY PERFORMANCE FACTOR||1.80|
NOBLE ENERGY • 2020 PROXY STATEMENT 43
In assessing the quantitative and qualitative factors shown above, our Compensation Committee approved the overall Company Performance Factor at 180% of target, the highest Company Performance Factor in a decade.
2019 Short-Term Incentive Awards for Named Executive Officers
|Base salary as of||Actual 2019 STIP|
|Dec. 31, 2019||Target STIP||Target STIP||Award||Actual 2019 STIP|
|Name||($)||(% of salary)||($)||($)(1)||Award as % of Target|
|David L. Stover||1,050,000||130%||1,365,000||2,457,000||180%|
|Brent J. Smolik||750,000||110%||825,000||1,633,500||198%|
|Kenneth M. Fisher||640,000||95%||608,000||1,121,760||185%|
|Rachel G. Clingman||540,000||80%||432,000||855,360||198%|
|John K. Elliott||480,000||75%||360,000||745,200||207%|
|(1)||Actual 2019 STIP award includes adjustments for individual performance.|
The Committee approved individual performance adjustments for certain NEOs in recognition of their leadership in delivering on critical strategic outcomes, producing extraordinary success with the Leviathan project in 2019 and achieving market recognition with industry-leading performance.
Long-Term Incentive Plan (“LTIP”)
Our LTIP is designed to provide incentive compensation linked to relative shareholder value. The Compensation Committee historically awards long-term incentive compensation on or about February 1 of each year. Effective for awards granted in 2018 and thereafter, the Compensation Committee set the performance share component of the annual long-term incentive award to 50% of the total long-term incentive value. The vesting period for the long-term incentive award is three years to ensure these awards incent and reward longer-term Company performance.
2019 Long-Term Incentive Plan
|Type of Award||Percent of 2019
|Vesting Criteria||Vesting Schedule|
|Performance Share Award||50%||• Performance awards earned based on Company’s total shareholder return relative to its performance peers||Percentile Rank
90th or higher
|• Three-year performance period beginning on January 1 of 2019 and ending on December 31 of 2021||75th or higher
50th or higher
25th or higher
|If TSR is between two levels, straight line interpolation is used.|
|If TSR is negative, the maximum payout is 100%.|
|Restricted Shares(1)||35%||• Time-based awards||Vest after three years|
|Stock Options||15%||• Awards that provide the right to purchase common stock at the grant date fair value for a period of up to 10 years||Vest ratably over three years|
|(1)||A portion of the 2019 Time-Vested Restricted Share award was granted as cliff-vested, cash-settled phantom shares to minimize share dilution impact.|
NOBLE ENERGY • 2020 PROXY STATEMENT 44
2019 LTI Awards for Named Executive Officers
|Performance-Based||Time-Based||Stock Options||Target Total Value|
|David L. Stover||4,167,500||2,917,250||1,250,250||8,335,000|
|Brent J. Smolik||2,050,000||1,435,000||615,000||4,100,000|
|Kenneth M. Fisher||1,175,000||822,500||352,500||2,350,000|
|Rachel G. Clingman||750,000||525,000||225,000||1,500,000|
|John K. Elliott||775,000||542,500||232,500||1,550,000|
|(1)||A portion of the 2019 Time-Vested Restricted Share award was granted as cliff-vested, cash-settled phantom shares to minimize share dilution impact.|
Payout of Performance Share Award Granted in 2017
The 2017 Performance Share Award matured at the end of 2019. The graphic below depicts the value as a percent of target that could be earned based on Noble Energy’s relative TSR over that period, as well as the actual achievement for the most recent and historical performance periods. Payout of performance share awards can range from 0-200% of target. Although Noble Energy ranked 2nd overall in our E&P peer group for 2019 shareholder return (as measured based on one-month trailing average on each end of the performance period), we ranked 8th out of 13 peer companies in TSR performance for the three-year period from 2017 to 2019. As a result, the 2017 performance share awards vested at 83% of target.
2017 PERFORMANCE SHARE AWARDS: ACTUAL OUTCOMES
2020 Compensation Program Enhancements
In 2019, we undertook a series of initiatives to transform the Company, centering on a new multi-year strategy as a diversified, low-cost producer, delivering moderate growth and sustainable free cash flow. Our key strategic objectives are to maintain robust financial capacity, top-tier operational execution, a high-quality investment portfolio and to enhance safety, environmental, social and governance performance. As part of our pay-for-performance culture, our Compensation Committee designed a compensation program that it believes underscores the importance of delivering on these strategic goals. The Committee approved changes to our executive compensation framework effective for the 2020 plan year. Provided below is a summary of certain significant compensation decisions.
Short-Term Incentive Plan
Partly in response to shareholder feedback, the Compensation Committee approved enhancements to our Short-Term Incentive Plan design for the 2020 performance year. These enhancements are intended to simplify the plan design and further strengthen the link between STIP metrics and Noble Energy’s strategy for long-term value creation. The 2020 performance metrics reflect the foundational components of our strategy as described below:
|•||Financial Performance (30%): In line with our objective to deliver significant free cash flow in 2020, the highest-weighted component of the 2020 STIP is Free Cash Flow.|
|•||Operational Excellence (40%): Includes (1) safety and environmental performance, (2) cash cost / BOE, (3) capital efficiency, and (4) sales volume. By utilizing this mix of metrics, the organization is incentivized to deliver on our 2020 business plan but not at the expense of profitability or safety.|
|•||Strategic Execution (30%): Measured by our (1) balance sheet strength, (2) portfolio optimization and (3) ESG performance. These metrics are designed to drive long-term Company and shareholder value and sustainability through delivery of our annual business plan.|
NOBLE ENERGY • 2020 PROXY STATEMENT 45
Long-Term Incentive Plan
The Compensation Committee revised the long-term incentive program in 2020 to link a portion of long-term compensation to Noble Energy’s absolute CROCE over a three-year period and Noble Energy’s continuous improvement in ESG performance. For 2020, performance shares will continue to make up 50% of the total long-term incentive value for our NEOs. The target number of performance shares will be determined at the beginning of the three-year performance period and the number of shares earned at the end of the three-year period will range from 0% to 200% of the target number of shares, depending on Noble Energy’s performance across relative TSR, CROCE and ESG. Effective with the 2020 annual LTIP grant, we discontinued the use of stock options.
2020 Individual Performance Achievements
In January 2020, the Committee granted authority to the CEO to award one-time discretionary bonuses to certain employees in recognition of extraordinary individual contributions. In connection with those awards, Mr. Elliott received a one-time discretionary, project-based bonus of $840,000 in recognition of his outstanding leadership and performance over the past three years delivering the Leviathan project ahead of schedule and more than $200 million under budget.
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, wellbeing programs, 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, and employee assistance. The Company is committed to its employees’ health and wellbeing and by extension, the communities where we operate.
Retirement and Savings Plan
Our 401(k) Plan is a tax-qualified retirement savings plan generally available to our employees, including our Named Executive Officers. Our 401(k) Plan 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. The Company’s matching contributions vest 34% after one year of service, 67% after two years of service, and are fully vested after three years of service.
In addition, we make the following age-weighted contribution to the 401(k) Plan for each participant:
|Percentage (Below||Percentage (Above|
|the FICA Taxable||the FICA Taxable|
|Age of Participant||Wage Base)||Wage Base)|
|At least 35 but under 48||7%||10%|
|At least 48||9%||12%|
These contributions cliff vest in full after three years of service.
Elective Deferred Compensation Plan
Due to the regulatory limitations that restrict the amount of benefits payable under tax-qualified plans, we also sponsor a Non-Qualified Deferred Compensation Plan. 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 regulatory limitations. Amounts deferred, if any, under the 401(k) Plan and the Deferred Compensation Plan by the NEOs are included, respectively, in the “Salary” columns of the Summary Compensation Table. Our matching contributions, age-weighted contributions and transition contributions allocated to the NEOs under the 401(k) Plan and the Deferred Compensation Plan are included in the “All Other Compensation” column of the Summary Compensation Table.
NOBLE ENERGY • 2020 PROXY STATEMENT 46
As described later in the section titled “Potential Payments and Benefits Upon Termination of Employment,” our NEOs are eligible for a variety of benefit payments in association with a termination of employment for reasons of involuntary termination, potential change in control, disability and death.
We have no employment agreements with any of our NEOs. In the instance of an involuntary termination, the only guaranteed severance payments for our NEOs are service-based benefits set forth in our all-employee severance plan. Based on the specific circumstances of each situation, the Committee may extend additional cash and/or equity vesting consideration at its discretion in exchange for certain post-termination restrictions on the executive, including non-solicitation of employees and non-competition restrictions.
Executive Compensation Policies and Practices
Our Compensation Committee has adopted a policy that allows the Compensation Committee, 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.
Stock Ownership Guidelines
We have stock ownership guidelines for our executive officers that apply to all the NEOs. Our CEO is required to own Noble Energy common stock in an amount equal to or in excess of 6 times his annual base salary. Executive Vice Presidents are required to own an amount of common stock equal to or in excess of 3 times their annual base salary and Senior Vice Presidents are required to own 2.5 times their base salary. The Compensation Committee reviews holdings annually, which include restricted shares and all other Noble Energy common stock owned by the officer as of each December meeting. Each executive officer has five years to meet his or her requirements, measured from the date the officer becomes subject to the ownership level for the applicable role. As of December 31, 2019, all NEOs met their requirements.
Our executive officers are prohibited from hedging activities related to Noble Energy or Noble Midstream Partners securities and the pledging of Noble Energy securities.
Impact of Regulatory Requirements on Compensation (Section 162(m))
Pursuant to tax law changes effective in 2018, all taxable compensation paid to our Named Executive Officers in 2020 (other than certain “grandfathered” amounts) will be subject to the annual $1,000,000 per person limit on deductibility contained in Section 162(m) of the Code. “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. No other taxable compensation paid to our Named Executive Officers, including performance-based restricted shares and related cash awards granted under the 1992 Plan, 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, is 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 the Company’s interests are best served by providing competitive levels of compensation to our Named Executive Officers, even if certain amounts of compensation are not tax deductible.
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 16 to our consolidated financial statements, included in our 2019 Annual Report contained in our Form 10-K.
We do not consider perquisites to be a material component of our executive compensation. In 2019, 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. We do not permit personal use of a corporate aircraft by executive officers or directors. Although family members and invited guests are occasionally permitted to accompany executive officers and directors on business flights, the aggregate incremental cost to the Company is de minimis. We do not provide any tax gross-ups on perquisites.
NOBLE ENERGY • 2020 PROXY STATEMENT 47
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 compensation of our CEO. For our 2017 calculation, we calculated our median employee under the final adopted CEO pay ratio rules. The CEO pay ratio disclosure rules permit the use of a median employee for up to three years unless there has been a meaningful change to the employee population. 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 used by other companies.
|Mr. Stover||Mr. Stover||Median Employee||Pay Ratio of CEO|
|Total||Total Realizable||Total||Pay Ratio of CEO||Realizable|
|Compensation||Compensation||Compensation||Compensation to||Compensation to|
|Year||($)||($)||($)||Median Employee||Median Employee|
2019 CEO Pay Ratio Methodology
During 2019, the individual selected in 2017 as our median employee terminated employment with the Company. In light of this employment termination, it was no longer appropriate for the Company to use the 2017 median employee for our 2019 fiscal year and therefore, in order to prepare our 2019 calculation, we selected a new median employee from the employee population calculated in 2017 under the final adopted CEO pay ratio rules. The newly selected 2019 median employee has compensation that is substantially similar to our 2017 median employee based on the compensation measure used to select our original 2017 median employee. The Company believes the change in median employee will not have a significant impact on the CEO pay ratio disclosure presented.
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 an efficient manner.|
|•||Our employee population consisted of 2,219 out of 2,285 employees, including full-time, part-time and temporary employees (summer interns) with 88% of the employees on our U.S. payroll and 12% on other payrolls (Israel, Equatorial Guinea, Cyprus, Cameroon and the United Kingdom). In accordance with the methodology, this population did not include independent contractors engaged by the Company.|
|•||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 Clayton Williams Energy, Inc. acquisition that closed in April 2017.|
|•||We annualized approximately 286 employees who did not work for the full 12-month period.|
|•||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 realizable compensation as disclosed was determined by including CEO annual base salary, actual Short-Term Incentive Plan payout for the year, realizable equity value of the 2019 long-term incentive award based on NBL share price as of December 31, 2019 and all other actual compensation (including non-qualified deferred compensation and other compensation elements as disclosed in the summary compensation).
NOBLE ENERGY • 2020 PROXY STATEMENT 48
|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, 2019 for filing with the SEC.
Compensation, Benefits and
Stock Option Committee
Jeffrey L. Berenson, Chair
James E. Craddock
Thomas J. Edelman
Scott D. Urban
NOBLE ENERGY • 2020 PROXY STATEMENT 49
— SUMMARY COMPENSATION TABLE
The following table sets forth summary compensation information for our Named Executive Officers during 2017, 2018 and 2019.
|David L. Stover||2019||1,043,366||—||7,942,802||1,250,246||2,457,000||—||344,899||13,038,313|
|Brent J. Smolik||2019||750,000||—||3,907,041||614,994||1,633,500||—||228,641||7,134,176|
|Kenneth M. Fisher||2019||640,000||—||2,239,380||352,497||1,121,760||—||150,887||4,504,524|
President and Chief
|Rachel G. Clingman||2019||540,000||—||1,429,397||224,996||855,360||—||106,055||3,155,808|
General Counsel and
|John K. Elliott||2019||477,346||—||1,477,016||232,497||745,200||—||89,807||3,021,866|
|Senior Vice President, Offshore||2018||454,868||—||1,523,972||232,497||315,421||1,149||78,383||2,606,290|
|(1)||Certain of our Named Executive Officers deferred a portion of their base salaries under our Deferred Compensation Plan:|
|David L. Stover||2019||5%||52,168|
|Brent J. Smolik||2019||4%||30,000|
|Kenneth M. Fisher||2019||7%||44,800|
NOBLE ENERGY • 2020 PROXY STATEMENT 50
|(2)||Reflects discretionary project based bonus. In 2017, Mr. Elliott received a $100,000 cash bonus for the completion of the Leviathan sanction.|
|(3)||Reflects the aggregate grant date fair value of stock awards under our 2017 Plan as of February 1, 2019, which was computed in accordance with FASB ASC Topic 718. Restricted shares awarded will vest according to the following schedule: 40% after year one, 40% after year two and 20% after year three for 2019 grants. Phantom unit cash awards granted in 2019 will vest 100% after year three. 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 stock awards in 2019.|
|(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 2019.|
|(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 March of the following year.|
|(6)||Reflects during year indicated the above-market Deferred Compensation Plan earnings. There were no above-market earnings in 2019 as the plan crediting rate was 3.50% and 120% of the annual long-term Applicable Federal Rate as of September 2018 was 3.63%. 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%); and 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%).|
|David L. Stover||2019||—|
|Kenneth M. Fisher||2019||—|
|John K. Elliott||2019||—|
|(7)||All other compensation includes:|
|Physical Exam ($)||Accrued|
|David L. Stover||2019||16,800||20,200||209,421||7,576||2,150||88,752|
|Brent J. Smolik||2019||16,800||20,200||94,013||—||2,150||95,478|
|Kenneth M. Fisher||2019||16,800||20,200||74,213||10,496||2,150||27,028|
|Rachel G. Clingman||2019||16,800||20,200||40,613||—||2,150||26,292|
|John K. Elliott||2019||16,800||20,200||33,095||—||2,150||17,562|
NOBLE ENERGY • 2020 PROXY STATEMENT 51
|(a)||The following amounts were credited to the Named Executive Officer’s Non-Qualified Deferred Compensation Plan Account:|
|David L. Stover||2019||45,802||101,017||62,602||209,421|
|Brent J. Smolik||2019||28,200||65,813||—||94,013|
|Kenneth M. Fisher||2019||21,600||52,613||—||74,213|
|Rachel G. Clingman||2019||—||40,613||—||40,613|
|John K. Elliott||2019||—||33,095||—||33,095|
|(b)||Dividends are credited on unvested restricted awards.|
|(c)||Effective beginning in 2014, an additional transition contribution equal to 6% of a participant’s basic compensation will be made to the accounts of certain eligible employees who were participants in our defined benefit pension plan when it terminated on December 31, 2013. The annual transition contribution will end in 2023.|
— SALARY AS A PERCENTAGE OF TOTAL COMPENSATION
As reflected in the Summary Compensation Table above, the salary received by each of our Named Executive Officers as a percentage of their respective total compensation during the year indicated was as follows:
|Percentage of Total Compensation|
|David L. Stover||8.0%||8.9%||8.8%|
|Brent J. Smolik(++)||10.5%||1.3%||—|
|Kenneth M. Fisher||14.2%||14.5%||15.9%|
|Rachel G. Clingman(++)||17.1%||13.0%||—|
|John K. Elliott(+)||15.8%||17.5%||18.4%|
|(+)||Became a Named Executive Officer for 2017.|
|(++)||Became a Named Executive Officer for 2018.|
NOBLE ENERGY • 2020 PROXY STATEMENT 52
— GRANTS OF PLAN-BASED AWARDS FOR 2019
The table below sets forth information regarding grants of plan-based awards made to our Named Executive Officers during 2019.
|Estimated Future Payouts|
Under Non-Equity Incentive
Under Equity Incentive Plan
|David L. Stover||1/28/2019||2/1/2019||—||1,365,000||—||—||—||—||—||—||—||—|
|Brent J. Smolik||1/28/2019||2/1/2019||—||825,000||—||—||—||—||—||—||—||—|
|Kenneth M. Fisher||1/28/2019||2/1/2019||—||608,000||—||—||—||—||—||—||—||—|
|Rachel G. Clingman||1/28/2019||2/1/2019||—||432,000||—||—||—||—||—||—||—||—|
|John K. Elliott||1/28/2019||2/1/2019||—||360,000||—||—||—||—||—||—||—||—|
|(1)||All grants were approved by our Compensation Committee and were effective and priced on the date of grant.|
|(2)||Represents the performance share awards granted under our 2017 Plan as of February 1, 2019. The awards will vest on February 1, 2022 if specified performance goals are satisfied. Performance goals for determining vesting are described in the CD&A under the heading “Long-Term Incentive Compensation.” Dividend equivalents with respect to the performance share awards are accrued during the three-year restricted period and will be paid upon vesting of the awards.|
|(3)||Represents the shares of restricted stock awarded under our 2017 Plan in 2019. The shares will vest according to the following schedule: 40% of the award will vest on the first anniversary, 40% of the award will vest on the second anniversary and 20% of the award will vest on the third anniversary of the award date. Dividends declared on shares of restricted stock are accrued during the three-year restricted period and will be paid upon vesting of restricted shares.|
|(4)||Represents phantom units which are the economic equivalent of one share of Company stock. The award will vest 100% on the third anniversary date of the grant and will settle in cash. Dividends declared on shares of phantom units are accrued during the three-year restricted period and will be paid upon vesting of such phantom units.|
|(5)||Represents grants of non-qualified stock options under our 2017 Plan in 2019. Options represent the right to purchase shares of common stock at the price per share (equal to fair market value on the date of grant) indicated in the table. Options will vest ratably over three years in equal installments on the first, second and third anniversaries of the award date.|
|(6)||Exercise price at “fair market value” was defined in our 2017 Plan as the closing price of our common stock on the NYSE on the date of grant. The closing price of our common stock on February 1, 2019 was $22.39.|
|(7)||Reflects aggregate grant date fair value of restricted stock; performance share awards awarded and non-qualified stock options granted to our Named Executive Officers on February 1, 2019 computed in accordance with FASB ASC Topic 718.|
NOBLE ENERGY • 2020 PROXY STATEMENT 53
— OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2019
The following table sets forth certain information with respect to restricted stock and stock options held by our Named Executive Officers as of December 31, 2019.
|Option Awards||Stock Awards|
or Units of
|David L. Stover||111,682||—||—||37.55||2/1/2020||58,541||(6)||1,454,158||54,337||(13)||1,349,731|
|Brent J. Smolik||39,032||78,064||(4)||—||25.17||11/16/2028||139,054||(9)||3,454,101||183,116||(15)||4,548,601|
|Kenneth M. Fisher||53,792||—||—||37.55||2/1/2020||20,272||(6)||503,556||16,125||(13)||400,545|
|Rachel G. Clingman||15,860||31,721||(5)||—||36.93||5/21/2028||32,493||(11)||807,126||66,994||(15)||1,664,131|
|John K. Elliott||14,990||—||—||45.20||2/1/2021||1,430||(10)||35,521||8,412||(13)||208,954|
NOBLE ENERGY • 2020 PROXY STATEMENT 54
|(1)||Stock options vested February 1, 2020.|
|(2)||50% of stock options vested February 1, 2020; and 50% of stock options vest February 1, 2021.|
|(3)||33 1/3% of stock options vested February 1, 2020; 33 1/3% of stock options vest February 1, 2021; and 33 1/3% of stock options vest February 1, 2022.|
|(4)||50% of stock options vest November 16, 2020; and 50% of stock options vest November 16, 2021.|
|(5)||50% of stock options vest May 21, 2020; and 50% of stock options vest May 21, 2021.|
|(6)||50% of restricted stock vested February 1, 2020; and 50% of restricted stock vests February 1, 2021.|
|(7)||40% of restricted stock vested February 1, 2020; 40% of restricted stock vests February 1, 2021; and 20% of restricted stock vests February 1, 2022.|
|(8)||100% of phantom units will settle in cash and vest on February 1, 2022.|
|(9)||100% of restricted stock vests November 16, 2021.|
|(10)||100% of restricted stock vests March 24, 2020.|
|(11)||100% of restricted stock vests May 21, 2021.|
|(12)||Market value based on December 31, 2019 (last business day of the year) closing price of $24.84.|
|(13)||Based on the Company’s formula for calculating TSR relative to peers, 83% of the performance restricted stock vested on February 1, 2020 and these shares reflect the number of shares earned based on that percentage. Performance goals for determining vesting are described in the CD&A under the heading “Long-Term Incentive Compensation.”|
|(14)||These shares of performance based restricted stock will vest February 1, 2021, subject to achievement of total stockholder return levels relative to a pre-determined industry peer group. Because performance as of December 31, 2019 was trending at target, these shares reflect the number of shares that would be earned based on maximum achievement of the applicable performance metrics. The actual number of shares that vest at the end of the performance period may differ substantially from the number of shares reported herein. Performance goals for determining vesting are described in the CD&A under the heading “Long-Term Incentive Compensation.”|
|(15)||These shares of performance based restricted stock will vest February 1, 2022, subject to achievement of total stockholder return levels relative to a pre-determined industry peer group. Because performance as of December 31, 2019 was trending at maximum, these shares reflect the number of shares that would be earned based on maximum achievement of the applicable performance metrics. The actual number of shares that vest at the end of the performance period may differ substantially from the number of shares reported herein. Performance goals for determining vesting are described in the CD&A under the heading “Long-Term Incentive Compensation.”|
— STOCK OPTION EXERCISES AND STOCK VESTING FOR 2019
The table below sets forth certain information with respect to vesting of restricted stock and the exercise of stock options held by our Named Executive Officers during fiscal year 2019.
|Option Awards||Stock Awards|
|David L. Stover||—||—||68,551||1,534,857|
|Kenneth M. Fisher||—||—||22,043||493,543|
|John K. Elliott||—||—||12,794||287,813|
|(1)||Shares of restricted stock awarded to our Named Executive Officers on February 1, 2017 and February 1, 2018 vested on February 1, 2019. Mr. Elliott had an additional grant on March 24, 2017 that vested on March 24, 2019. Income was recognized on vesting based on the closing trading price of our common stock of $22.39 on February 1, 2019 and $23.97 on March 24, 2019. Dividends that accrued on shares of restricted stock that vested were paid in 2019 as follows: Mr. Stover — $45,189; Mr. Fisher — $14,141; and Mr. Elliott— $8,515.|
NOBLE ENERGY • 2020 PROXY STATEMENT 55
— EQUITY PLAN COMPENSATION INFORMATION FOR 2019
The following table summarizes information regarding the number of shares of our common stock that are available for issuance under all of our existing equity compensation plans as of December 31, 2019.
|Plan Category||Number of Securities
to be Issued Upon
Warrants and Rights
|Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
Reflected in Column (a)) (c)
|Equity Compensation Plans Approved by Security Holders||12,575,753||(1)||$44.62||28,715,830||(2)|
|Equity Compensation Plans Not Approved by Security Holders||—||—||—|
|(1)||1992 Plan – 11,190,521 shares; 2005 Plan – 257,187 shares 2015 Plan – 178,819 shares; and 2017 Plan – 949,226 shares.|
|(2)||2017 Plan – 28,407,839 shares and 2015 Plan – 307,991 shares.|
— NON-QUALIFIED DEFERRED COMPENSATION TABLE FOR 2019
The following table sets forth certain information with respect to contributions made to our Deferred Compensation Plan by our Named Executive Officers during fiscal year 2019.
Earnings in Last
Balance at Last
|David L. Stover||129,518||209,421||(2)||2,137,214||—||14,178,133|
|Brent J. Smolik||30,000||94,013||(3)||2,641||—||126,654|
|Kenneth M. Fisher||44,800||74,213||(3)||153,798||—||1,247,727|
|Rachel G. Clingman||—||40,613||(4)||320||—||51,865|
|John K. Elliott||—||33,095||(4)||9,007||—||300,821|
|(1)||Mr. Stover deferred 7% ($77,350) of the STIP payment he earned in 2018 (otherwise paid in 2019) and 5% ($52,168) of base salary in 2019. Mr. Smolik deferred 4% ($30,000) of base salary in 2019. Mr. Fisher deferred 7% ($44,800) of base salary in 2019.|
|(2)||Represents matching contributions, retirement savings contributions and transition contributions that could not be made to the Noble Energy, Inc. 401(k) Plan as a result of Code limitations.|
|(3)||Represents matching contributions and retirement savings contributions that could not be made to the Noble Energy, Inc. 401(k) Plan as a result of Code limitations.|
|(4)||Represents retirement savings contributions that could not be made to the Noble Energy, Inc. 401(k) Plan as a result of Code limitations.|
|(5)||Earnings are credited in accordance with the Named Executive Officer’s investment direction.|
|(6)||All Named Executive Officers are 100% vested in these balances, except for Mr. Smolik who will be vested on November 16, 2021 and Ms. Clingman who will be vested on May 21, 2021.|
The Company’s Matching Contributions, Retirement Savings Contributions, Transition Contributions and a portion of the interest earnings credited to the Deferred Compensation Plan accounts of our Named Executive Officers are reflected in the “All Other Compensation” and the “Change in Pension Value” columns of the Summary Compensation Table above, respectively.
NOBLE ENERGY • 2020 PROXY STATEMENT 56
|—||POTENTIAL PAYMENTS AND BENEFITS UPON TERMINATION OF EMPLOYMENT|
The tables below estimate the amount of compensation payable to each of our Named Executive Officers upon involuntary termination of employment, termination following a change of control and in the event of disability or death, in each case effective as of December 31, 2019. The actual amount of compensation payable to each of our Named Executive Officers can only be determined at the time of his or her separation from the Company. For purposes of this discussion, with respect to the payment of compensation that is deferred compensation subject to Section 409A of the Code, an individual’s termination of employment should be interpreted to mean the date as of which the individual has a “separation from service” for the purposes of Section 409A. No additional payments to our Named Executive Officers will be triggered upon a voluntary termination event.
Payments Made Upon Termination
Upon termination of employment for reasons other than disability, death or in connection with a change of control, each Named Executive Officer is entitled to receive amounts earned during his or her term of employment. Such amounts include:
|•||amounts credited under our Deferred Compensation Plan;|
|•||unused vacation pay; and|
|•||amounts accrued and vested under our 401(k) Plan.|
Payments Made Upon Retirement
In the event of the retirement of a Named Executive Officer, in addition to the items identified above, the Named Executive Officer will have until the earlier of (1) the fifth anniversary of his or her retirement date or (2) the expiration of the remainder of the outstanding 10-year option term, to exercise all stock options that are vested as of his or her retirement date.
Payments Made Upon Death or Disability
In the event of the death or disability of a Named Executive Officer, in addition to the benefits listed under the headings “Payments Made Upon Termination” and “Payments Made Upon Retirement” above, the Named Executive Officer or his or her named beneficiary will receive benefits under our disability plan or payments under our life insurance plan, as appropriate.
Payments Made Upon a Change of Control
We have adopted change of control arrangements for our Named Executive Officers. If a Named Executive Officer’s employment is terminated within two years after a change of control, he or she may be entitled to receive certain severance benefits pursuant to the terms of his or her change of control arrangement. These benefits are described more fully under the heading “Change of Control Arrangements” in our CD&A section.
Payments of Vested Benefits
In addition to the payments our Named Executive Officers may receive upon the termination of their employment, they will continue to hold stock options that were vested immediately prior to their termination. Our Named Executive Officers will also be entitled to receive the vested balance of their contributions to our Deferred Compensation Plan and the 401(k) Plan.
Other Payment Information
Up to 40 hours of unused vacation carries over from year to year. We have assumed for purposes of the following table that all Named Executive Officers used all of their vacation during 2019 and would therefore not be entitled to payment for any unused vacation in the event of their termination on December 31, 2019. In the event of termination during the year, all amounts of unused vacation would be paid based on their respective salary.
Our executive change of control arrangement provides for reimbursement for up to $15,000 of reasonable fees related to out-placement employment services. We have assumed for purposes of the following table that all Named Executive Officers utilized this benefit.
Our long-term disability benefits are fully insured through Prudential. Eligibility for benefits is determined by Prudential only after the employee’s termination of employment because of a medical condition. Benefits pay at 66.67% of monthly income, capped at $15,000 per month. For purposes of the following table, this benefit has been excluded.
NOBLE ENERGY • 2020 PROXY STATEMENT 57
|—||TERMINATION PAYMENTS TABLE FOR 2019|
|Name||Type of Payment or Benefit||Involuntary
Cause or Involuntary
Termination following a
Change of Control on
|David L. Stover||Severance||2,055,577||8,244,427||(7)||—||—|
|Restricted Stock Units(4)||—||942,190||942,190||942,190|
|Health, Welfare & Other||8,294||56,388||(8)||—||—|
|Brent J. Smolik||Severance||998,077||4,025,100||(7)||—||—|
|Restricted Stock Units(4)||—||463,451||463,451||463,451|
|Health, Welfare & Other||8,294||41,469||(8)||—||—|
|Kenneth M. Fisher||Severance||856,615||1,233,479||(7)||—||—|
|Restricted Stock Units(4)||—||265,629||265,629||265,629|
|Health, Welfare & Other||13,029||70,664||(8)||—||—|
|Rachel G. Clingman||Severance||556,615||2,696,393||(7)||—||—|
|Restricted Stock Units(4)||—||169,552||169,552||169,552|
|Health, Welfare & Other||6,556||38,301||(8)||—||—|
|John K. Elliott||Severance||548,308||2,392,813||(7)||—||—|
|Restricted Stock Units(4)||—||175,195||175,195||175,195|