0001486159-19-000012.txt : 20190321 0001486159-19-000012.hdr.sgml : 20190321 20190321172306 ACCESSION NUMBER: 0001486159-19-000012 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 20190430 FILED AS OF DATE: 20190321 DATE AS OF CHANGE: 20190321 EFFECTIVENESS DATE: 20190321 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Oasis Petroleum Inc. CENTRAL INDEX KEY: 0001486159 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-34776 FILM NUMBER: 19697805 BUSINESS ADDRESS: STREET 1: 1001 FANNIN STREET STREET 2: SUITE 1500 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 281-404-9500 MAIL ADDRESS: STREET 1: 1001 FANNIN STREET STREET 2: SUITE 1500 CITY: HOUSTON STATE: TX ZIP: 77002 DEF 14A 1 a2019def14a.htm DEF 14A Document




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.  )
Filed by the Registrant  þ                            Filed by a Party other than the Registrant  ¨
Check the appropriate box:
¨
 
Preliminary Proxy Statement
¨
 
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ
 
Definitive Proxy Statement
¨
 
Definitive Additional Materials
¨
 
Soliciting Material Pursuant to § 240.14a-12
Oasis Petroleum Inc.
(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):
þ
 
No fee required.
¨
 
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
 
(1
)
 
Title of each class of securities to which transaction applies:
 
 
 
 
(2
)
 
Aggregate number of securities to which transaction applies:
 
 
 
 
(3
)
 
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
 
 
 
(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.:
 
 
 
 
(3
)
 
Filing Party:
 
 
 
 
(4
)
 
Date Filed:
 
 







image2a12.jpg

BE THE BUFFALO


Dear Fellow Oasis Petroleum Shareholders,

At one of our town hall meetings a few years ago as we were navigating the downturn in our sector, I communicated to our Oasis organization that, when facing an oncoming storm, buffalo will gather together and charge into the storm to get past it, while cattle will tend to run away from the storm. I asked our employees which they’d rather be. Their thundering reply came without hesitation: Be the Buffalo.
This has been our rallying cry ever since. Not only are we willing to charge the storm, but we prepare ourselves for the inevitable storm that we know is coming at some point. So, the phrase for us is more than just words, it is how we manage the business and associated risks. For example:
When commodity prices dropped in 2009, others ran away from the storm. We opportunistically added acreage to our large, consolidated blocks in the Williston Basin.
In 2010, reliable and cost-effective services in the Williston Basin were scarce, so we created Oasis Well Services to ensure that we could get our work done and minimize potential contract termination exposure.
Anticipating a potential downturn in commodity price, but not knowing when it might occur, we positioned ourselves to be able to power down our capital activity in an orderly manner, maintain our volume profile, live within cash flow and get to the other side. We did just that and were one of the first, if not the first, Exploration and Production ("E&P") companies to get to cash flow neutral in 2015.
As our drilling activity consolidated and became more concentrated during the downturn of 2015, we expanded our midstream operations beyond handling produced water to include crude oil gathering, natural gas gathering, natural gas processing, and freshwater sourcing and distribution. These assets became the backbone of Oasis Midstream Partners (“OMP").
In 2017, we anticipated the need for more gas processing capacity across the Williston Basin than existed at the time, so we embarked on the construction of a new 200 million cubic feet per day ("mmcfd") gas processing plant within OMP so that we could service our production as well as production from adjacent operators. We are now one of the largest processors in the basin, with 280 mmcfd of processing plant capacity, minimizing gas flaring and providing flow assurance.

These proactive and innovative moves not only support our core operations, they provide us with market intelligence and expertise to operate in a financially and environmentally sustainable manner. In a highly cyclical sector, being the buffalo in ways like these position us to do well across the commodity price cycles. While we may still be in the storm now, we are charging through it with the acreage, the expertise, and the infrastructure to do so.
It is our people, however, who are our most important differentiator. Employees know when they are valued and they can see it in how we operate. We establish a defined set of values and our culture reflects those values in action every day. We strive to make each of our employees better each day than they were the day before through development of their technical skills, their interpersonal skills, and their leadership capabilities. Our benefit programs and practices provide proof that we truly believe that we are only as good as our people, and that support, development, and integrity are better motivators than fear.






I invite you to read in this proxy statement the long list of ways we work to recruit, retain, and get the best out of the finest people in the business. I ask you to consider how many other companies you know that can brag about even a fraction of these programs.
And is it working? Look at the facts. Despite the extreme downturn in commodity prices since we became public, our employee turnover rate is less than half the national average – the herd is sticking together. I am humbled and honored that our employees have given me a 100% approval rating on Glassdoor and I work to keep their trust-and yours.
If this is the kind of company you want to see do well, we invite you to invest further, provide us your voting support on the issues described in this proxy statement, and even come work with us if you can add to our exceptionally talented team.
Sincerely,

tbnsig2.jpg
Thomas B. (Tommy) Nusz
Chairman/CEO







image0.jpg

1001 Fannin Street
Suite 1500
Houston, Texas 77002
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders of Oasis Petroleum Inc. (“Oasis” or the “Company”) will be held at the Four Seasons Hotel, 1300 Lamar Street, Houston, Texas 77010, on Tuesday, April 30, 2019, at 9:00 a.m. Central Time (the “Annual Meeting”). The Annual Meeting is being held for the following purposes:
1.
To elect two Class III directors, each for a term of three years. The board recommends voting FOR this proposal and needs a plurality of shares cast with Director Resignation Policy.
2.
To ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2019. The board recommends voting FOR this proposal and needs a majority of shares present.
3.
To approve, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K promulgated by the Securities and Exchange Commission. The board recommends voting FOR this proposal and needs a majority of shares present.
4.
To approve the First Amendment to the Amended and Restated 2010 Long-Term Incentive Plan (the "LTIP") to increase the maximum number of shares that may be issued under the LTIP by 1,300,000 shares (the "Additional Shares"). The board recommends voting FOR this proposal and needs a majority of shares present.
5.
To transact such other business as may properly come before the Annual Meeting.
These proposals are described in the accompanying proxy materials. You will be able to vote at the Annual Meeting only if you were a shareholder of record at the close of business on March 5, 2019.
YOUR VOTE IS IMPORTANT
Please vote over the Internet at www.proxyvote.com or by phone at 1-800-690-6903 promptly so that your shares may be voted in accordance with your wishes and so that we may have a quorum at the Annual Meeting. Alternatively, if you did not receive a paper copy of the proxy materials (which includes the proxy card), you may request a paper proxy card, which you may complete, sign and return by mail.
 
 
By Order of the Board of Directors,
 
image1.jpg
 
 
 
Nickolas J. Lorentzatos
 
Corporate Secretary
Houston, Texas
March 21, 2019






image2a12.jpg

ELECTRONIC AVAILABILITY OF PROXY STATEMENT AND ANNUAL REPORT
As permitted under the rules of the Securities and Exchange Commission (the “SEC”), the Company is making this proxy statement and its Annual Report on Form 10-K for the year ended December 31, 2018 (the “Annual Report”) available to its shareholders electronically via the internet. Beginning on March 21, 2019, the Company is sending a Notice Regarding the Availability of Proxy Materials (the “Notice”) to its shareholders of record as of the close of business on March 5, 2019, which Notice will include (i) instructions on how to access the Company’s proxy materials electronically, (ii) the date, time and location of the Annual Meeting, (iii) a description of the matters intended to be acted upon at the Annual Meeting, (iv) a list of the materials being made available electronically, (v) instructions on how a shareholder can request to receive paper or e-mail copies of the Company’s proxy materials, (vi) any control/identification numbers that a shareholder needs to access his or her proxy card and instructions on how to access the proxy card, and (vii) information about attending the Annual Meeting and voting in person.

CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. All statements, other than statements of historical fact included in this proxy statement, regarding our strategic tactics, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this proxy statement, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this proxy statement. We disclaim any obligation to update or revise these statements unless required by securities law, and you should not place undue reliance on these forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements we make in this proxy statement are reasonable, we can give no assurance that these plans, intentions or expectations will be achieved. We disclose important factors that could cause our actual results to differ materially from our expectations under “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2019. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.







image2a12.jpg

WHAT IS OASIS PETROLEUM?
We are a resourceful company
Oasis was founded in 2007 by Tommy Nusz and Taylor Reid. What began as a start-up with a small team of talented entrepreneurs and no assets is now a premier natural resources company with over 700 professionals.
Our parent company Oasis Petroleum Inc. (“Oasis”) acquires and develops unconventional oil and natural gas resources, historically in North Dakota and Montana, but now in West Texas as well. Our wholly owned Oasis Well Services LLC (“OWS”) provides completion services and our Oasis Midstream Services LLC (“OMS”) provides a collection of services including gas gathering and processing, saltwater gathering and disposal services, fresh water services, and crude oil gathering and transport services, among others.
We created OWS and OMS because, as a leading operator in our regions, we needed top-tier services that are available, reliable, and cost effective. We also wanted the expertise and positioning to develop our prime acreage profitably and sustainably: OWS and OMS enable us to reduce flaring and operate state-of-the-art water management systems. We aim to remain ahead of steadily rising regulatory gas-capture mandates and increase margins by commercializing captured gas-we already capture roughly 10% more gas than the average for operators in North Dakota.
We operate in the U.S. heartland where regulations, work ethic, education, and community support are strong, and where exposure to risks such as bribery and corruption, global geo-political shifts, currency fluctuations, expropriations, and cultural challenges are nearly non-existent.
We are a company of highly qualified professionals
We operate in a highly cyclical sector in which there is constant guerilla warfare to poach the short supply of top talent. We believe there is a big difference between having good employees and the best employees. We also believe there is a difference between merely recruiting top people and working constantly to make sure they can – and want – to function at their best. We recruit leaders others want to follow-but we also think all employees can be leaders and we structure all of our programs to reflect this. The results show in our exceptionally low employee turnover rates.
We are a company of shareholders AND stakeholders
We are honored that many sophisticated, sector-savvy investors own our shares. We show our respect for our shareholders by our continuing governance evolution since going public nine years ago:
We recently added majority voting and proxy access to our governance foundation
Our board is young, short tenured, diverse, and comprised not only of industry-leading experts but of members who worked for major shareholders and investors
Our executive compensation and performance are well aligned, and our CEO not accepting a salary increase since 2014 reflects his belief that financial conservatism is warranted when commodity prices are low and shareholder returns are held back.






image2a12.jpg


HOW DID WE DO IN 2018?

2018 was a tough year. The NYMEX West Texas Intermediate crude oil price index (“WTI”) declined by 40% in the fourth quarter alone and 25% from the start of the year, and as a result, our stock price suffered. However, as one of the first E&P companies to live within cash flow in this recent industry downturn, we used the year to power through the storm:

We successfully entered a second basin through our February 2018 acquisition from Forge Energy LLC of 22,000 net core acres in the over-pressured oil window of the Delaware Basin.
We added additional acreage at attractive pricing, bringing our total position in the over-pressured oil window of the Delaware Basin to over 23,000 net acres. 
Oasis Midstream Partners LP (“OMP”) completed the construction and startup of a second natural gas plant in Wild Basin, making Oasis the second largest natural gas processor in North Dakota. 
We executed a “Dropdown” of additional interests in midstream subsidiaries to OMP for $251.4M, which increased our holdings of OMP common units and reduced debt.
Sales of non-core assets yielded total proceeds of ~$360 million, reducing our financial leverage. 
We grew production ~25% year-over-year to 82,525 barrels of oil equivalent per day ("Boepd").
We lowered lease operating expenses ("LOE") per barrels of oil equivalent ("Boe") by over 12% year over year to $6.44 per Boe. 
Net cash provided by operating activities grew 96% year over year to $996.4 million; and we grew Adjusted EBITDA 35% year over year to $958.7 million. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss) including non-controlling interests and net cash provided by operating activities, see "Non-GAAP Financial Measures" in our Annual Report on Form 10-K for the year ended December 31, 2018.
Robust marketing and integration benefits with OMP provided access to coastal markets for our Williston barrels and yielded tight oil differentials for most of 2018
We committed 10,000 barrels a day to the Gray Oak pipeline, which ensures coastal pricing for a large portion of our Delaware Basin crude oil volume.





SELECTED TABLE OF CONTENTS

Proxy Statement 2019 Annual Meeting of Shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




OUR BOARD OF DIRECTORS


OUR BOARD OF DIRECTORS
Dear Fellow Shareholders,
Before we ask for your voting support, we, the independent directors of Oasis Petroleum, want to share some highlights of how we are acting as fiduciaries for the company in which you and we have invested.
Board refreshment and diversity
We continued our steady board refreshment, reflecting Oasis’s evolving needs. Following the resignation of Doug Swanson in December 2017 and the passing of Ted Collins in January 2018, both independent directors, Paula Polito joined us in late 2018. Paula’s experience working for major shareholders in Boston, the cradle of the U.S. mutual fund sector, her global financial expertise, and her relationships with constituencies outside of – but important to – our sector reflect our belief in the value of diversity in its many forms.
Shareholder outreach and compensation
We also continued outreach to shareholders to help inform our governance and executive compensation decisions and are grateful for the 94% say-on-pay support we received in 2018. During 2018, we reached out to shareholders representing over 50% of our outstanding shares, and input from them is reflected in our decisions to:
Adopt a proxy access bylaw;
Add a total shareholder return ("TSR") cap so that, beginning with performance share units ("PSUs") granted in 2019, Named Executive Officers cannot earn more than 100% of PSUs eligible to vest if the Company’s absolute TSR is negative over the performance cycle;
Provide that no PSUs will be earned for performance cycles in which the Company’s TSR rank is in the bottom three of the PSU group beginning with PSUs granted in 2019; and
Cap the number of PSUs that may be earned for 2019 PSUs if the Company’s stock price is at least $25 at the end of the performance cycle.
Further, in keeping with our Company’s conservative compensation structure, we:
Kept Mr. Nusz’s salary unchanged in 2018, as it has remained since 2014; and
Set a floor share price of $9 for Named Executive Officers long-term incentive awards granted in 2018. This floor was ~$0.70 higher than the stock price at that time. This reduced the number of shares Named Executive Officers would have received if the stock price on the grant date did not exceed this threshold.
Prudent risk management and operations
It is easy to be heroes in our sector when commodity prices are strong. We are proud to be overseeing a company managed to be sustainable in tough times and positioned to do well over full market cycles. As one of the first E&P companies to live within cash flow during the recent commodity price downturn, we have prudently grown production, improved capital efficiency, materially reduced overall operating cash costs, and made several strategic moves that strengthen and complement our cornerstone Williston position and significantly improve our Company’s outlook for the future.
Having the right people
Finally, good capital allocation, corporate governance, compensation, and risk management will fail to achieve optimal results without the right people. We hope you will take note of the information in our CEO’s letter that opened this proxy statement and the information in the pages that follow to see why we believe we have the right team to earn your continued support.
William J. Cassidy
 
Paula D. Polito
John E. Hagale
 
Bobby S. Shackouls
Michael McShane
 
 

1



OUR BOARD OF DIRECTORS


WHO WE ARE
ITEM 1: ELECTION OF OUR DIRECTOR NOMINEES                                
The Board of Directors has nominated the following two individuals for election as Class III directors of the Company to serve for a three year term to expire in 2022 and until either they are re-elected or their successors are elected and qualified.
mcshane.jpg
 


Michael McShane served as a director and President and Chief Executive Officer of Grant Prideco, Inc., a manufacturer and supplier of oilfield drill pipe and other drill stem products, from June 2002 until the completion of the merger of Grant Prideco with National Oilwell Varco, Inc. in April 2008, and Chairman of the Board of Grant Prideco from May 2003 through April 2008.

Currently, Mr. McShane also serves on the board of directors of Superior Energy Services, Inc., Forum Energy Technologies Inc., and NCS Multistage.

PREVIOUS EXPERIENCE

§ Prior to joining Grant Prideco, Mr. McShane was Senior Vice President - Finance and Chief Financial Officer and director of BJ Services Company, a provider of pressure pumping, cementing, stimulation and coiled tubing services for oil and gas operators, from 1990 to June 2002.

EDUCATION

§ Mr. McShane holds a bachelor's degree from the University of Texas at Austin.

EXPERTISE

§ With decades of experience in the energy services industry, Mr. McShane brings a unique perspective to the Board. He has significant experience with issues, trends and opportunities within the oil and gas industry, providing the Board with valuable independent expertise when evaluating potential acquisition opportunities, capital allocation, and capital markets transactions. Mr. McShane serves as our lead independent director, providing executive guidance and presiding over the Board's executive sessions.

Michael McShane
 

DIRECTOR SINCE 2010

LEAD INDEPENDENT
DIRECTOR

AGE: 65

BOARD COMMITTEES:
§  Audit, Chair
§  Compensation

ALSO:
Mr. McShane serves as an advisor to Advent International, a global private equity firm.




 

2



OUR BOARD OF DIRECTORS


nusz.jpg
 


Thomas B. Nusz serves as our Chairman of the Board and Chief Executive Officer and as Director and Chairman of the Board of OMP GP LLC. He has served as our Director and Chief Executive Officer (or in similar capacities) since our inception in March 2007.

PREVIOUS EXPERIENCE
 
§    Previously, Mr. Nusz was a Vice President with Burlington Resources Inc., a formerly publicly traded oil and gas exploration and production company or, together with its predecessors, Burlington, and served as President of the International Division (North Africa, Northwest Europe, Latin America and China) from January 2004 to March 2006, as Vice President Acquisitions and Divestitures from October 2000 to December 2003, as Vice President Strategic Planning and Engineering from July 1998 to September 2000, and Chief Engineer for substantially all of such period. He was instrumental in Burlington’s expansion into the Western Canadian Sedimentary Basin from 1999 to 2002.

EDUCATION

§    Mr. Nusz holds a Bachelor of Science in Petroleum Engineering from Mississippi State University.

EXPERTISE

§    As a co-founder and the Chief Executive Officer of the Company, Mr. Nusz's knowledge of the Company is unparalleled. Mr. Nusz has served in various executive positions, as well as management and operational roles for publicly traded oil and gas companies, and he has deep knowledge of the strategic, financial, risk and compliance issues facing a publicly traded company. In addition, Mr. Nusz's industry experience spans multiple regions, domestically and internationally, which is especially beneficial to the Company in the current challenging market environment.

CHARITABLE, COMMUNITY AND INDUSTRY INVOLVEMENT

§    Mr. Nusz serves on, and is prior chairman of, the board of OneGoal Houston, a college entry and persistence initiative for under-privileged students in Houston. He is a member of the Mississippi State University Foundation Board and a member of the investment committee. He also serves as the President of the Mississippi State University Bulldog Club Board. He serves on several industry boards including AXPC, IPAA, and the National Petroleum Council, an advisory committee to the United States Secretary of Energy.
Thomas B. Nusz
Chief Executive Officer
 

DIRECTOR SINCE 2007

AGE: 59

ALSO:
As a co-founder of Oasis, Mr. Nusz developed the business plan for Oasis Petroleum LLC and secured the initial funding for the Company.




 
The Board of Directors has no reason to believe that either of its nominees will be unable or unwilling to serve if elected. If a nominee becomes unable or unwilling to accept nomination or election, either the number of the Company’s directors will be reduced or the persons acting under the Proxy will vote for the election of a substitute nominee that the Board of Directors recommends.
The Board unanimously recommends that shareholders vote FOR the election of each of the nominees.



3



OUR BOARD OF DIRECTORS


CONTINUING DIRECTORS
The directors identified below have terms expiring in 2020 (Mr. Hagale and Ms. Polito) and 2021 (Messrs. Cassidy, Reid, and Shackouls). Ms. Polito was elected by the Board on November 1, 2018 following the resignation of Mr. Douglas Swanson Jr. in December 2017 and the passing of Mr. Ted Collins in January 2018, both former directors who had terms expiring in 2020.
cassidy02.jpg
 

William J. Cassidy currently serves as the Chief Financial Officer of Artex Energy Group LLC, a privately owned exploration and production company with operations in the Utica Shale.

PREVIOUS EXPERIENCE

§ Previously, Mr. Cassidy served as Executive Vice President and Chief Financial Officer at Bonanza Creek Energy, Inc. from 2013 to 2016. Mr. Cassidy served as the Global Head of Corporate Finance and Treasury for Puma Energy, a midstream and downstream oil company with operations spanning 37 countries and a subsidiary of the commodity trading multinational Trafigura Beheer BV. From November 2009 until April 2013, Mr. Cassidy was a Principal at RPA Capital, LLC an asset management fund focused on providing mezzanine capital to commodity producers. He served as a non-executive director of GasValpo, SA, a Chilean gas distribution company, from September 2008 until September 2012.

§ Previously, Mr. Cassidy worked at USDCM, LLC, a Greenwich, Connecticut based drilling fund from the end of 2008 until the end of 2009. From 2006 until 2008, Mr. Cassidy served at Barclays Capital as Head of Exploration and Production Investment Banking. From 2002 to 2006, he worked as a senior member of the Energy and Power Investment Banking division at Banc of America Securities.

EDUCATION

§ Mr. Cassidy earned a Bachelor of Science in Geology and Math from the National University of Ireland, Cork, a Masters of Science in Petroleum Geophysics from the Royal School of Mines, Imperial College, London and a Masters of Business Administration from the Wharton School of the University of Pennsylvania.

EXPERTISE

§ Mr. Cassidy brings a diverse energy-related background to the Board. He has served as a geophysicist and later in management and executive positions at an investment banking firm, an asset management fund, a midstream and downstream energy company, and as CFO of a publicly-traded, independent exploration and production company.

William J. Cassidy
 

DIRECTOR SINCE 2010

INDEPENDENT

AGE: 53

BOARD COMMITTEES:
§  Audit
§  Compensation
§  Nominating & Governance, Chair

ALSO:
Mr. Cassidy began his investment banking career with JPMorgan Chase and spent two years in London, where he focused on the emerging deregulation of the European natural gas industry.




 

4



OUR BOARD OF DIRECTORS


hagale2.jpg
 


John E. Hagale served as Executive Vice President and Chief Financial Officer of Rosetta Resources Inc. from November 2011 until the completion of the merger of Rosetta with Noble Energy, Inc. in July 2015.

PREVIOUS EXPERIENCE

§ Previously, Mr. Hagale was Executive Vice President, Chief Financial Officer and Chief Administrative Officer of The Methodist Hospital System from June 2003 through October 2011. He was also employed with Burlington Resources Inc. and its predecessor Burlington Northern Inc. for 15 years where he held a series of executive financial positions with increasing responsibilities, including Executive Vice President and Chief Financial Officer of Burlington Resources.

§ Mr. Hagale previously served on the Board of Directors of Cobalt International Energy, Inc. as chair of their audit committee.

EDUCATION

§ Mr. Hagale holds a Bachelor of Business Administration degree in Accounting from the University of Notre Dame.

EXPERTISE

§ Mr. Hagale brings significant oil and gas financial expertise to the Board. The combination of Mr. Hagale's industry and financial experience is invaluable to the Board, especially with respect to the current challenging market environment.

John E. Hagale
 

DIRECTOR SINCE 2016

INDEPENDENT

AGE: 62

BOARD COMMITTEES:
§  Audit
§  Nominating & Governance

ALSO:
Mr. Hagale began his career with Deloitte Haskins and Sells and is a certified public accountant.
 
polito2.jpg
 


Paula D. Polito currently serves as Global Client Strategy Officer and a Group Managing Director at UBS Global Wealth Management. She joined UBS in 2009 as the Wealth Management Americas Chief Marketing Officer.

Ms. Polito has served on the Board of Boston College, her alma mater, where she remains a Trustee Associate. She also sits on the board of Harvard Medical School’s Division of Women’s Health at Brigham and Women’s Hospital; and she is a member of the Executive Board of the Wall Street Council, a network of financial professionals who support academic scholarships.

PREVIOUS EXPERIENCE

§ Previously, Ms. Polito served as Senior Vice President and Head of Strategic Marketing and Brand Management at Merrill Lynch & Co., and was a member of the Global Wealth Management Executive Committee. She served as Executive Vice President of Corporate and Retail Marketing at Fidelity Investments Inc. from 1996 to 2000.

EDUCATION

§ Ms. Polito holds a Bachelor of Arts from Boston College.

EXPERTISE

§ Ms. Polito has extensive experience navigating global financial markets through her service in senior executive leadership roles with multiple financial institutions. In addition to her unique insight into the investment community, her ability to think strategically over the long-term, her creativity, and communications experience greatly benefit our board and our management team as we navigate the ever changing macroeconomic and investment environment.

Paula D. Polito
 

DIRECTOR SINCE 2018

INDEPENDENT

AGE: 59

BOARD COMMITTEES:
§  Nominating & Governance

ALSO:
Ms. Polito spent the first ten years of her career as a journalist, working as a Producer, News Editor and Managing Editor for WBZ TV in Boston.
 

5



OUR BOARD OF DIRECTORS


reid.jpg
 

Taylor L. Reid serves as our Director, President and Chief Operating Officer and as Director and Chief Executive Officer of OMP GP LLC ("OMP GP"). He has served as our Director and Chief Operating Officer (or in similar capacities) since our inception in March 2007 and has 34 years of experience in the oil and gas industry.

PREVIOUS EXPERIENCE

§ Previously, Mr. Reid served as Asset Manager Permian and Panhandle Operations with ConocoPhillips from April 2006 to October 2006.

§ Prior to joining ConocoPhillips, he served as General Manager Latin America and Asia Operations with Burlington from March 2004 to March 2006 and as General Manager Corporate Acquisitions and Divestitures from July 1998 to February 2004. From March 1986 to June 1998, Mr. Reid held various operations and managerial positions with Burlington in several regions of the continental United States, including the Permian Basin, the Williston Basin and the Anadarko Basin.

EDUCATION

§ Mr. Reid holds a Bachelor of Science in Petroleum Engineering from Stanford University.

EXPERTISE

§ As co-founder and President of the Company, Mr. Reid has exceptional knowledge of the Company and its strategy, finances, and operations. Mr. Reid's deep knowledge of the Company and the industry resulting from his tenure with the Company and various roles at other oil and gas companies make him a critical member of the Board.

CHARITABLE, COMMUNITY AND INDUSTRY INVOLVEMENT

§    Mr. Reid serves on the advisory board of the Stanford School of Earth, Energy & Environmental Sciences. He is also on the board of trustees at Presbyterian School in Houston and serves as the Chairman of the Strategic Planning Committee for the school. Mr. Reid recently served as a board member and Chairman of the HAY Center which focuses on helping children transitioning out of foster care in the Houston area. He also is a member of the US Oil & Gas Association.
Taylor L. Reid
President and Chief Operating Officer
 

DIRECTOR SINCE 2007

AGE: 56

ALSO:
As co-founder of Oasis, Mr. Reid worked with Mr. Nusz to form the business plan for Oasis Petroleum LLC and secure funding for the Company.
 

6



OUR BOARD OF DIRECTORS


shackoulsa01.jpg
 


Bobby S. Shackouls has served as our Director since March 2012. Until the merger of Burlington Resources Inc. and ConocoPhillips, which became effective in 2006, Mr. Shackouls was Chairman of the Board of Burlington Resources Inc., a natural resources business, since July 1997 and its President and Chief Executive Officer since December 1995.

Currently, Mr. Shackouls serves as a director of The Kroger Co., PAA GP Holdings LLC, and Quintana Energy Services Inc.

PREVIOUS EXPERIENCE

§ Previously, Mr. Shackouls had been a director since 1995 and President and Chief Executive Officer of Burlington Resources Oil and Gas Company (formerly known as Meridian Oil Inc.) since 1994. Subsequent to the merger, Mr. Shackouls served on the ConocoPhillips Board of Directors until 2011.

EDUCATION

§ Mr. Shackouls holds a Bachelor of Science in Chemical Engineering from Mississippi State University.

EXPERTISE

§ Mr. Shackouls provides extensive industry and management experience to the Board and given his experience, he is well positioned to provide key insight into asset management, operations and strategy, and the Board benefits from his experience in managing large organizations.

Bobby S. Shackouls
 

DIRECTOR SINCE 2012

INDEPENDENT

AGE: 68

BOARD COMMITTEES:
§  Compensation, Chair
§  Nominating & Governance

ALSO:
Mr. Shackouls is vice chairman of the Texas Heart Institute; executive board member of the Sam Houston Area Council and National Board of Boy Scouts of America, and Vice President of the Mississippi State University Foundation
 


7



OUR BOARD OF DIRECTORS


HOW WE ARE SELECTED AND ELECTED

Nominees
It is the responsibility of the Nominating and Governance Committee to identify, evaluate and recommend to the Board the Director nominees for election at the annual meeting of shareholders, as well as to fill vacancies or additions on the Board of Directors that may occur between annual meetings.

The Committee endeavors to recommend director candidates who:
possess the highest personal values and integrity;
have experience and have exhibited achievements in one or more of the key professional, business, financial, legal, and other challenges that face a U.S. independent oil and gas company;
exhibit sound judgment, intelligence, personal character, and the ability to make independent analytical inquiries;
demonstrate a willingness to devote adequate time to Board of Director duties; and
are likely to be able to serve for a sustained period if consistent with the Board’s ongoing review of overall board composition.

Term lengths
Our directors are divided into three classes serving staggered three-year terms, with one class standing for re-election each year. In 2019, Class III Messrs. McShane and Nusz are standing for re-election.

Majority voting policy
Our Corporate Governance Guidelines provide that any director who receives more votes “withheld” than “for” in an uncontested election must tender their resignation to the Board of Directors for consideration. In such event the Nominating and Governance Committee will determine whether to accept such resignation, subject to approval by the full Board of Directors. Promptly following such a decision the Board shall disclose its decision and a description of the process by which the decision was reached. This guideline governs Company practice though the Company’s bylaws provide for the election of directors by a plurality of the vote.

Proxy access
The Board amended the Company’s bylaws in February 2019 to implement proxy access. Eligible shareholders, or a group of up to 20 shareholders who have owned an aggregate of at least 3% of the Company’s outstanding common stock continuously for three years may nominate a candidate for election to the Board for inclusion in the Company’s proxy materials in accordance with the proxy access provisions of Section 2.12 of the Company's bylaws.

Skills, experience and diversity
The charter of our Nominating and Governance Committee reflects our commitment to consider diversity in professional experience, skills, background, race and gender when considering director candidates and our Board’s overall composition.

Although we are still a young company-only a decade old-our Board has overseen steady refreshment. Since our initial public offering in 2010, four independent directors have joined the board and three have exited, resulting in both an array of board tenures and an average tenure of ~6.5 years. Our newest director, Paula Polito, joined us in 2018 and brings substantial non-industry, financial and shareholder expertise to the Board.

8



OUR BOARD OF DIRECTORS


The following skills matrix summarizes our Board’s strong, diverse and company-relevant skills and experiences:
 
Nusz
 
Reid
 
Cassidy
 
Hagale
 
McShane
 
Polito
 
Shackouls
Corporate communications
 
 
 
 
 
 
 
 
 
 
ü
 
 
Current or past public company boards
(other than OAS)
ü
 
ü
 
 
 
ü
 
ü
 
 
 
ü
Current or past public company CEO
(other than OAS)
 
 
ü
 
 
 
 
 
ü
 
 
 
ü
Current or past public company CFO
 
 
 
 
ü
 
ü
 
ü
 
 
 
 
Current or past public company executive
ü
 
ü
 
ü
 
ü
 
ü
 
 
 
ü
E&P operations experience
ü
 
ü
 
ü
 
ü
 
 
 
 
 
ü
E&P services experience
ü
 
 
 
 
 
 
 
ü
 
 
 
 
Financial expertise
ü
 
ü
 
ü
 
ü
 
ü
 
ü
 
ü
Strategic marketing
 
 
 
 
 
 
 
 
 
 
ü
 
 
HOW WE GOVERN AND ARE GOVERNED

Under the Company’s Corporate Governance Guidelines, directors are expected to attend regularly scheduled Board of Director meetings and meetings of committees on which they serve, as well as the annual meeting of shareholders. During 2018, each of our directors attended 100% of the meetings of the Board of Directors and of the committees of the Board of Directors on which that director served. The Board of Directors held five meetings during 2018, and its independent directors met in executive session five times. There were a total of 15 Board committee meetings in 2018.

Board Leadership Structure
Chairman. Mr. Nusz has served as a Director and our Chief Executive Officer since our inception in March 2007. He also served as our President until January 1, 2014. At the time of our initial public offering, Mr. Nusz was named Chairman of the Board of Directors. The independent members of the Board believe the combined role of Chairman and CEO promotes unified leadership and direction for the Company, which allows for a single, clear focus for management to execute the Company’s strategy and business plans. As CEO, the Chairman is best suited to ensure that critical business issues are brought before the Board, which enhances the Board’s ability to develop and implement business strategies.

To ensure a strong and independent board, all directors of the Company, other than Mr. Nusz and Mr. Reid, are independent. In addition, the Company’s Corporate Governance Guidelines provide that the Board will designate one of its members as the Lead Director to preside over the meetings of the non-management directors and to provide, in conjunction with the Chairman and CEO, leadership and guidance to the Board.

Lead Director. Mr. McShane has served as Lead Director of the Board since August 9, 2010. In this capacity, Mr. McShane provides, in conjunction with the Chairman, leadership and guidance to the Board of Directors. The Lead Director's responsibilities and authority generally include:
serving as chairman of the executive sessions of the independent directors and all other Board meetings at which the Chairman is not present;
establishing the agenda for each meeting of the non-management directors;
serving as the Board’s contact for employee and shareholder communications with the Board of Directors;
calling special meetings of the independent directors when necessary and appropriate;
serving as a liaison between the Chairman and independent directors;

9



OUR BOARD OF DIRECTORS


consulting with the Chairman to include and provide at meetings of the directors specific agenda items and additional materials suggested by independent directors;
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;
facilitating communications among the other members of the Board; and
performing other duties as the Board may from time to time delegate.

In addition, all directors are encouraged to suggest the inclusion of agenda items or revisions to meeting materials, and any director is free to raise at any Board meeting items that are not on the agenda for that meeting.

The Board also regularly meets in executive session without the presence of the CEO or other members of management. The Lead Director presides at these meetings and provides the Board’s guidance and feedback to the Chairman and the Company’s management team. Further, the Board has complete access to the Company’s management team. In consideration of the responsibilities of the Lead Director and the competitive market for qualified directors, an annual cash retainer fee for the Lead Director was established beginning in 2017.

The diversity and strength of the Board members' professional and leadership experience allows for open and robust dialog and decision making ability. The Board reviews annually the leadership structure of the Board and considers the combined role of Chairman and Chief Executive Officer. Given the strong leadership of the Company’s Chairman and CEO, the effective counterbalancing role of the Lead Director and a Board comprised of strong, experienced and independent directors, the Board believes that, at the present time, the combined role of Chairman and CEO, with strong and independent oversight by the Lead Director and the other independent directors, best serves the interests of the Company and its shareholders.

Director Independence
The Company’s standards for determining director independence require the assessment of directors’ independence each year. A director cannot be considered independent unless the Board of Directors affirmatively determines that he or she does not have any relationship with management or the Company that may interfere with the exercise of his or her independent judgment.

The Board of Directors has assessed the independence of each non-employee director and each nominee for director under the Company’s guidelines and the independence standards of the NYSE. The Board of Directors affirmatively determined that all five non-employee directors (Messrs. Cassidy, Hagale, McShane, Polito, and Shackouls) are independent. In addition, Mr. Collins was determined to be independent prior to his passing in January 2018.

Oversight of Risk Management
The Board as a whole oversees the Company’s assessment of major risks and the measures taken to manage such risks. For example:
the Board oversees management of the Company’s commodity price risk through regular review with executive management of the Company’s derivatives strategy, and, through the Audit Committee, the oversight of the Company’s policy that limits the Company’s authority to enter into derivative commodity price instruments to a specified level of production, above which management must seek Board approval;
the Board has established specific dollar limits on the commitment authority of members of senior management and requires Board approval of expenditures exceeding that authority and of other material contracts and transactions;
the Board reviews management’s capital spending plans, approves the Company’s capital budget and requires that management present for Board review significant departures from those plans; and
the Board reviews quarterly the Company’s performance with respect to environmental, health and safety targets and ethical standards.

The Company’s Audit Committee, which is composed entirely of independent directors, is responsible for overseeing the Company’s assessment and management of financial reporting and internal control risks, as well as other financial risks, such as the credit risks associated with counterparty exposure. Management and the

10



OUR BOARD OF DIRECTORS


Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP ("PwC") report regularly to the Audit Committee on those subjects. Further, the Audit Committee regularly meets in executive session, without management, with representatives from PwC; Protiviti, the Company's internal auditor; and DeGolyer and MacNaughton, the Company's independent reserve engineers. Except as described, the administration of the Board's oversight function does not have an effect on the Board's leadership structure.


11



OUR BOARD OF DIRECTORS


Committees of the Board of Directors
The Board of Directors has three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Governance Committee. Each of these committees is composed entirely of independent directors. For each of our committees, the following table sets forth the current membership, a brief summary of the principal functions, and the number of meetings held in 2018. Each of our standing committees has a charter that is publicly available on the Company's website at www.oasispetroleum.com/investors/corporate-governance/
Names, Members, and Meetings
 
Principal Functions
 
 
 
Audit Committee
William J. Cassidy
John E. Hagale
Michael McShane, Chair

Meetings in 2018: 5
 
Ÿ Approves appointment and compensation and reviews performance and independence and pre-approves services of Company's independent auditor
Ÿ Approves appointment and compensation and reviews performance of internal auditor
Ÿ Meets with management, independent auditor, and internal auditor in connection with annual audit, review of annual and quarterly financial statements, and in executive sessions
Ÿ Discusses with management the Company's guidelines and policies with respect to risk assessment and risk management, including with respect to significant financial risk exposures
Ÿ Establishes and maintains procedures for the submission, receipt, retention and treatment of complaints and concerns received by the Company regarding accounting, internal controls or auditing matters
Ÿ Monitors compliance with legal and regulatory requirements and the business practices and ethical standards of the Company
Ÿ Discusses the integrity of the Company's accounting policies, internal controls, financial reporting practices and financial statements with management, internal auditor, and independent auditor
Ÿ Reviews and approves related-person transactions in accordance with the Board’s procedures
Ÿ Prepares the Audit Committee report, which is on page 22
 
 
 
Compensation Committee
William J. Cassidy
Michael McShane
Bobby Shackouls, Chair

Meetings in 2018: 6
 
Ÿ Approves and evaluates the Company’s director and officer compensation plans, policies and programs
Ÿ Conducts an annual review and evaluation of the CEO’s performance in light of the Company’s goals and objectives
Ÿ Retains, and is directly responsible for the oversight of, compensation or other consultants to assist in the evaluation of director or executive compensation and otherwise to aid the Compensation Committee in meeting its responsibilities. For additional information on the role of compensation consultants, please see Compensation Discussion and Analysis beginning on page 26
Ÿ Annually reviews the Company’s compensation-related risk profile to confirm that compensation-related risks are not reasonably likely to have a material adverse effect on the Company
Ÿ Periodically reviews and discusses with its independent compensation consultants and senior management the Company’s policy on executive severance arrangements, and recommends any proposed changes to the Board to the extent required by the Compensation Committee charter
Ÿ Reviews the Compensation Discussion and Analysis, disclosures for advisory votes by shareholders on executive compensation, including frequency of such votes, and other relevant disclosures made in the proxy statement
Ÿ Prepares the Compensation Committee report, which is on page 25
 
 
 
Nominating & Governance Committee
William J. Cassidy, Chair
John E. Hagale
Paula D. Polito
Bobby S. Shackouls

Meetings in 2018: 4
 
Ÿ Recommends nominees for director, including existing Board members, to the Board and ensures such nominees possess the director qualifications set forth in the Committee's Charter
Ÿ Recommends members of the Board for committee membership
Ÿ Proposes Corporate Governance Guidelines for the Company and reviews them annually
Ÿ Develops and oversees an evaluation process for the Board and its committees
Ÿ Assesses the need for stock ownership guidelines
Ÿ Reviews and recommends changes to the Company's Certificate of Incorporation and Bylaws
Ÿ Determines whether each director serving a Board committee is independent under the standards applicable to the committee
Ÿ Reviews and recommends changes to the Board and committee structure and composition
Ÿ Discusses succession planning for CEO and senior management

12



OUR BOARD OF DIRECTORS


Financial Literacy of Audit Committee and Designation of Financial Experts
The Board of Directors evaluated each of the members of the Audit Committee for financial literacy and the attributes of a financial expert in July 2018. The Board of Directors determined that each of the Audit Committee members is financially literate and that the Chairman of the Audit Committee, Michael McShane, and committee member John Hagale are Audit Committee financial experts as defined by the SEC.

Compensation Committee Interlocks and Insider Participation
Messrs. Cassidy, McShane, and Shackouls served on the Compensation Committee during 2018. None of the directors who served on the Compensation Committee during 2018 has ever served as one of the Company’s officers or employees. During 2018, none of the Company’s executive officers served as a director or member of the compensation committee (or other committee performing similar functions) of any other entity of which an executive officer served on the Board or the Compensation Committee.

Corporate Governance Guidelines
The Board of Directors believes that sound governance practices and policies provide an important framework to assist it in fulfilling its duty to shareholders. The Company’s Corporate Governance Guidelines cover the following principal subjects:
Role and functions of the Board of Directors and its Lead Director
Qualifications and independence of directors
Size of the Board of Directors and director selection process
Committee functions and independence of committee members
Meetings of non-employee directors
Self-evaluation
Ethics and conflicts of interest
Compensation of the Board of Directors
Succession planning
Access to senior management and to independent advisors
New director orientation
Continuing education

The “Corporate Governance Guidelines” are posted on the Company’s website at www.oasispetroleum.com/investors/corporate-governance/. The Corporate Governance Guidelines are reviewed periodically and as necessary by the Company’s Nominating and Governance Committee, and any proposed additions to or amendments of the Corporate Governance Guidelines will be presented to the Board of Directors for its approval.

Stock Ownership Guidelines
Our Board of Directors has adopted Stock Ownership Guidelines that are advisory in nature and establish minimum ownership levels for Named Executive Officers and non-employee directors.
 
Guideline
 
Holding Period
CEO
5 x Base Salary
 
Until requirement met
Other Named Executive Officers
2 x Base Salary
 
Until requirement met
Non-employee Directors
3 x Annual Cash Retainer
 
Until requirement met
All of our Named Executive Officers and non-employee directors own stock in excess of the minimum ownership levels currently applicable to them.

13



OUR BOARD OF DIRECTORS


Prohibitions on Hedging, Insider Trading, and Pledging Company Securities
Our securities trading policy provides that executive officers, including our Named Executive Officers, and our directors, may not, among other things, purchase or sell puts or calls to sell or buy our stock, engage in short sales with respect to our stock, buy our securities on margin, or otherwise hedge their ownership of our stock. The purchase or sale of stock by our executive officers and directors may only be made during certain windows of time and under the other conditions contained in our securities trading policy. In addition, effective May 3, 2013, we updated our securities trading policy to specify that our executive officers are prohibited from pledging our stock without prior approval by our Board of Directors. At that time, the Board ratified an existing pledge of shares by Mr. Nusz, which pledge had been previously disclosed by Mr. Nusz to the Board. Subsequently, the Board has not approved a pledge by an executive officer; and Mr. Nusz no longer has pledged any shares of Company stock.

Attendance at Annual Meetings
The Board of Directors encourages all directors to attend the annual meetings of shareholders, if practicable. All of the Company’s directors attended last year’s annual meeting. We anticipate that all of our directors will attend the Annual Meeting.

Transactions with Related Persons
The Board of Directors recognizes that related person transactions present a heightened risk of conflicts of interest and, therefore, adopted, as of May 17, 2010, a Related Persons Transactions Policy to be followed in connection with all related person transactions involving the Company.

Procedures for Review, Approval and Ratification of Related Person Transactions
For purposes of the policy, an “Interested Transaction” is a transaction, arrangement or relationship in which:
the Company or any of its subsidiaries was, is or will be a participant;
the aggregate amount involved exceeds $120,000; and
any related person had, has or will have a direct or indirect material interest.

A “Related Person” means:
any director or director nominee of the Company;
any senior officer of the Company;
any person who is known by the Company to be the beneficial owner of more than 5.0% of the Company’s common stock;
any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, executive officer or a beneficial owner of more than 5% of the Company’s common stock, and any person (other than a tenant or employee) sharing the household of such director, executive officer or beneficial owner of more than 5% of the Company’s common stock; and
any firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.

The Board of Directors has determined that the Audit Committee will review the material facts of all Interested Transactions and approve, disapprove or ratify any such transaction. The Company’s Related Persons Transaction Policy pre-approves certain related person transactions, including:
any employment agreement of an executive officer if his or her compensation is required to be reported in the Company’s proxy statement pursuant to Item 402 of Regulation S-K promulgated by the SEC ("Item 402");
director compensation which is required to be reported in the Company’s proxy statement pursuant to Item 402;
any transaction with another company at which a Related Person’s only relationship is as an employee (other than an executive officer), director or beneficial owner of less than 10% of that company’s shares is pre-approved or ratified (as applicable) if the aggregate amount involved for any particular service does not exceed the greater of $500,000 or 25% of that company’s total annual revenues; and
charitable contribution, grant or endowment by the Company to a charitable organization, foundation or university at which a Related Person’s only relationship is as an employee (other than an executive

14



OUR BOARD OF DIRECTORS


officer) or a director is pre-approved or ratified (as applicable) if the aggregate amount involved does not exceed the lesser of $200,000 or 10% of the charitable organization’s total annual receipts.

In determining whether to approve or disapprove entry into a Interested Transaction, the Audit Committee shall take into account, among other factors, the following: (1) whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and (2) the extent of the Related Person’s interest in the transaction. Further, the policy requires that all Interested Transactions required to be disclosed in the Company’s filings with the SEC be so disclosed in accordance with applicable laws, rules and regulations.

There were no Interested Transactions since May 17, 2010 which were required to be reported in “Transactions with Related Persons,” where the procedures described above did not require review, approval or ratification or where these procedures were not followed. In addition, since January 1, 2018, there has not been any transaction or series of similar transactions to which the Company was or is a party in which the amount involved exceeded or exceeds $120,000 and in which any of the Company’s directors, executive officers, holders of more than 5% of any class of its voting securities, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive Compensation," and the transactions described or referred to below.

Transactions Involving Directors
Forge Energy. As previously disclosed in our proxy statement for our 2018 Annual Meeting and on a Form 8-K filed with the SEC by the Company on December 11, 2017, the Company and Oasis Petroleum Permian LLC, a wholly owned subsidiary of the Company, entered into a Purchase and Sale Agreement (the “Purchase Agreement”) with Forge Energy, LLC (“Forge Energy”), pursuant to which the Company agreed to purchase from Forge Energy leasehold interests and related assets in the core of the Delaware Basin (the “Permian Basin Acquisition”). On February 14, 2018, pursuant to the terms and conditions of the Purchase Agreement, the Company completed the Permian Basin Acquisition for aggregate consideration consisting of $549.8 million in cash and 46 million shares of the Company’s common stock. Upon closing of the Permian Basin Acquisition, the Company has approximately 22,000 net acres in the Delaware Basin.

In connection with the evaluation of the Permian Basin Acquisition, Messrs. Nusz and Reid disclosed to the Board that they held a 0.25% and 0.125% membership interest, respectively, in Forge Energy. Due to this interest, Messrs. Nusz and Reid recused themselves from the vote of the Board approving the Permian Basin Acquisition. Furthermore, in its evaluation of the Acquisition, the Board hired a nationally recognized investment banking advisory firm to advise them and render an opinion as to the fairness of the Permian Basin Acquisition.
HOW WE ARE PAID
We believe that attracting and retaining qualified non-employee directors is critical to our future value growth and governance, and that providing a total compensation package between the market 50th and 75th percentiles of our peer group is necessary to accomplish that objective. Our Board of Directors also believes that the compensation package for our non-employee directors should require a significant portion of the total compensation package to be equity-based to align the interests of our directors with the interests of our shareholders.
After review with compensation consultant Longnecker & Associates (“Longnecker”) of non-employee director compensation paid by our 2018 compensation peer group, our Board of Directors approved the following compensation program for non-employee directors for fiscal year 2018 (which is the same program in effect for fiscal year 2017, except as noted below):
an annual cash retainer fee of $70,000, plus cash payments of $1,500 for each Board of Directors’ meeting attended and $1,500 for each committee meeting attended;
lead director retainer of $25,000;
committee chairperson fees in the following amounts: (a) Audit Committee chair-$20,000, (b) Compensation Committee chair-$15,000, and (c) Nominating and Governance Committee chair-$11,250;

15



OUR BOARD OF DIRECTORS


an annual equity award for each non-employee director equal to a number of shares of restricted stock having a value of approximately $167,500 on the date of grant, based on the closing price of our common stock on the date of grant.
2018 Changes to Non-employee Director Compensation. For 2018, the Board approved the following changes to the compensation plan for our non-employee directors, in order to bring the total compensation package in line with the market 50th percentile of our 2018 compensation peer group and to help us retain qualified non-employee directors in a competitive market:
the annual cash retainer fee increased from $65,000 to $70,000; and
the annual equity award for each non-employee director has been increased from a number of shares of restricted stock having a value of approximately $160,900 to a number of shares having a value of approximately $167,500 on the date of grant.
Previously, due to the challenging commodity price environment affecting our industry, our non-employee directors voluntarily reduced the value of their annual restricted stock awards from $170,000 in 2014 to $117,000 in 2016. While our stated target compensation package for non-employee directors is between market 50th and 75th percentiles, our Board implemented changes to director compensation in 2018 in order to keep pace with the market 50th percentile; and the value of the annual restricted stock grant remains below the 2014 level.
Directors who are also our employees do not receive any additional compensation for their service on our Board of Directors. Each director is reimbursed for (i) travel and miscellaneous expenses to attend meetings and activities of our Board of Directors or its committees; (ii) travel and miscellaneous expenses related to such director’s participation in our general education and orientation program for directors; and (iii) travel and miscellaneous expenses for each director’s spouse who accompanies a director to attend meetings and activities of our Board of Directors or any of our committees.
Director Compensation Table
The following table provides information concerning the compensation of our non-employee directors for the fiscal year ended December 31, 2018.
Name
 
Fees Earned
or Paid in Cash
($)(1)
 
Stock Awards
($)(2)
 
All Other
Compensation
($)
 
Total
($)
William J. Cassidy
 
$
111,250

 
$
167,787

 
$

 
$
279,037

Ted Collins, Jr.(3)
 
$

 
$
167,787

 
$

 
$
167,787

John E. Hagale
 
$
91,000

 
$
167,787

 
$

 
$
258,787

Michael McShane
 
$
139,000

 
$
167,787

 
$

 
$
306,787

Paula D. Polito (4)
 
$
22,000

 
$
41,877

 
$

 
$
63,877

Bobby S. Shackouls
 
$
107,500

 
$
167,787

 
$

 
$
275,287

 
 
 
 
 
 
 
 
 
(1)
Includes annual cash retainer fee, board and committee meeting fees, and committee chair fees for each non-employee director during fiscal year 2018 as more fully explained above.
(2)
Reflects the aggregate grant date fair value of restricted stock awards granted under our LTIP in fiscal year 2018, computed in accordance with FASB ASC Topic 718. See Note 15 to our consolidated financial statements on Form 10-K for the year ended December 31, 2018 for additional detail regarding assumptions underlying the value of these equity awards. The grant date fair value for restricted stock awards is based on the closing price of our common stock on the grant date, which was (i) $9.27 per share on January 24, 2018 for Messrs. Cassidy, Collins, Hagale, McShane, and Shackouls, and (ii) $10.34 per share on November 1, 2018 for Ms. Polito. As of December 31, 2018, Messrs. Cassidy, Hagale, McShane, and Shackouls each held 18,100 outstanding shares of restricted stock, which shares vested in full on January 24, 2019; and Ms. Polito held 4,050 shares which will vest in full on November 1, 2019. Mr. Collins' shares vested upon his death.
(3)
Mr. Collins served on the Board until his passing in January 2018.
(4)
Ms. Polito joined the Board of Directors on November 1, 2018, and her annual stock award was prorated for 2018.

16



OUR BOARD OF DIRECTORS


HOW TO COMMUNICATE WITH US

Communications with the Board of Directors
Shareholders or other interested parties may contact any director (including Mr. McShane, the Board’s Lead Director), any committee of the Board, or our non-management directors as a group, by writing to them c/o Corporate Secretary, Oasis Petroleum Inc., 1001 Fannin Street, Suite 1500, Houston, Texas 77002. Comments or complaints relating to the Company’s accounting, internal accounting controls or auditing matters also will be referred to members of the Audit Committee. All such communications will be forwarded to the appropriate member of the Board.


17



OUR COMPANY

OUR COMPANY
OUR EXECUTIVE OFFICERS

Set forth below is biographical information about each of the Company's executive officers, other than Messrs. Nusz and Reid, both of whom are Directors of the Company and whose information may be found above in "Item 1 - Election of Our Director Nominees."

lou.jpg
 
Michael H. Lou has served as our Executive Vice President and Chief Financial Officer since August 2011. Mr. Lou served as our Senior Vice President Finance (or similar capacities) from September 2009 to August 2011 and has 22 years of experience in the oil and gas industry. Mr. Lou also serves as Director and President of OMP GP.

PREVIOUS EXPERIENCE

§ From 2006 to 2008, Mr. Lou served as Chief Financial Officer of various oil and gas companies. From 1997 to 2006, he held positions of increasing responsibility, most recently as Director, at various investment banks.

EDUCATION

§ Mr. Lou holds a Bachelor of Science in Electrical Engineering from Southern Methodist University.

CHARITABLE, COMMUNITY AND INDUSTRY INVOLVEMENT

§ Mr. Lou serves on the board of OneGoal Houston, a college entry and persistence initiative for under-privileged students in Houston. He also serves on the Host Committee of the Cystic Fibrosis Foundation's 65 Roses charity in Houston. Mr. Lou and his family participate with their local congregation in Boxes of Blessing, providing meals for a week for families in need throughout the Houston area. Mr. Lou also rides annually with the Oasis team in the MS 150.


Michael H. Lou
 

Executive Vice President and Chief Financial Officer




 
lorentzatos.jpg
 
Nickolas J. Lorentzatos has served as our Executive Vice President, General Counsel and Corporate Secretary since January 1, 2014. Mr. Lorentzatos served as our Senior Vice President, General Counsel and Corporate Secretary from September 2010 to December 31, 2013, and has 19 years of experience in the oil and gas industry and 23 years practicing law. Mr. Lorentzatos also serves as Director and Executive Vice President, General Counsel and Corporate Secretary of OMP GP.

In addition, Mr. Lorentzatos is responsible for the oversight and management of the Company's human resources, information technology, corporate services, and governmental affairs departments.

PREVIOUS EXPERIENCE

§ Previously, Mr. Lorentzatos served as Senior Counsel with Targa Resources from July 2007 to September 2010. From April 2006 to July 2007, he served as Senior Counsel to ConocoPhillips. Prior to the merger of Burlington Resources Inc. and ConocoPhillips, which became effective in 2006, he served as Counsel and Senior Counsel to Burlington since August 1999. From September 1995 to August 1999, he was an associate with Bracewell & Patterson, LLP.

EDUCATION

§ Mr. Lorentzatos holds a Bachelor of Arts from Washington and Lee University, a Juris Doctor from the University of Houston, and a Masters of Business Administration from the University of Texas at Austin.

CHARITABLE, COMMUNITY AND INDUSTRY INVOLVEMENT

§ Mr. Lorentzatos is a board member of the HAY Center, which focuses on helping children transitioning out of foster care in the Houston area.

Nickolas J. Lorentzatos
 

Executive Vice President, General Counsel and Corporate Secretary




 

18



OUR COMPANY

OUR PEOPLE
Getting and keeping the best people
The law requires us to provide, in this proxy, a lot of information about our board members and executive leadership. We are happy to do that, but we are a company of over 700 employees, and we don’t think you can appreciate our potential without understanding what we do to find, motivate, and keep the best people in our sector.
We believe there is a big difference between getting good employees and getting the best employees. We also believe there is a difference between merely retaining employees and getting the most from their talents and work ethic. So we invest in a variety of support and benefits programs that enable our people to perform at their best. These include:
Medical, prescription, dental and vision insurance for all employees and their families
Health care flexible spending account
Health savings account
401(k) plan with company match incentive
Insurance benefits
Paid time off for holidays, sick days, and vacation
Family leave
Other leave of absence benefits
Flexible working arrangements
Wellness benefits
Stock awards for all employees
Annual performance-based cash incentive awards for all employees
Employee referral program
In addition, we believe all of our people should have access to professional and personal development opportunities. We not only want the best-trained workforce, we want to reward those who stay with us in our cyclical industry. We thus provide:
Technical/professional training
Tuition reimbursement
Leadership training, including week-long, university-based, executive education courses (Wharton, Stanford, UVA)
Field leadership development training
Management training
Regular talent reviews and career development guidance
Oasis Academy for Success online learning resource
Annual performance review process
Intern program
We don’t assume we are creating an inclusive and supportive culture for our most important capital-our human capital: we measure for it. We regularly monitor voluntary employee turnover, broken down by geography and operating unit. Our voluntary turnover rate has fallen steadily since 2014, and our 2018 voluntary turnover rate of 8.4% is half of the U.S national average, according to the Mercer North America Turnover Survey, 2018.
OUR COMMITMENT
Operating to the highest safety standards is non-negotiable for all employees and operating partners
Our comprehensive health and safety management system covers 100% of operated assets
We undertake regular internal and external safety audits, including contractor safety audits
We track various accident rate and near miss metrics for employees and contractors
Safety performance is integrated into the annual performance-based cash incentive awards for all employees
Anyone on any worksite is able to halt operations to address a safety issue
The Safety Leadership Team meets regularly with Oasis management to drive continual improvement of our safety strategy

19



OUR COMPANY

Our audit committee has direct responsibility for health and safety and it is the first agenda item at every audit committee meeting
Oasis contractors must adhere to our contractor health and safety requirements
Regular safety training is provided to all employees throughout the company
We lead industry collaboration efforts to promote worker and environmental safety. For example:
Ipipe partnership founding member, advancing spill and leak prevention technology
TrainND program participation, sharing best practice safety training
We are committed to minimizing our environmental impact and being good environmental stewards
Our comprehensive environmental management system is designed to achieve 100% coverage of operated assets
We have measurement and monitoring programs, and strive to reduce emissions, waste and water use
We maintain a 24/7 control room designed to monitor and respond to environmental incidents - a public hotline connects directly to the control room
We maintain crisis management and emergency response plans for our basins and critical employees are Incident Command System trained
Our environmental management systems and incident response programs helped us to achieve a 44% reduction in the number of spills from 2017 to 2018, with 99% of spills staying within containment on location
We have programs that are designed to meet all local, state and federal environmental regulations
We engage directly with local stakeholders with a goal of meeting their environmental expectations
Community investments help to ensure long-term, sustainable development in the places where we live and work
We work with NextOp to attract US Military veterans for open positions at Oasis
We support a number of charities and local communities, including:
the OneGoal initiative in Houston, helping underprivileged high school students reach their full potential and graduate from college
the HAY Center in Houston, assisting youth graduating out of foster care in becoming independent
the MS 150 and Bike to the Beach - the Oasis team rides and raises money in an effort to find a cure and treatment for multiple sclerosis and autism, respectively
Habitat for Humanity, building homes for families in need of decent and affordable housing
city-wide clean-up days in Williston and Watford City, North Dakota
the McKenzie County, ND hospital
the volunteer fire departments of the cities of Williston, Ray, Lignite, Fairview, Culbertson, Froid, Grenora and Alexander, where many of our employees volunteer their time
We see extremely high rates of employee engagement in our community projects
OUR COMPLIANCE & CONTROLS
We believe it is important to create, maintain, and enforce clear frameworks for our Company’s governance and operations as well as our officers’, directors’, and employees’ behavior.  In addition to the many provisions described elsewhere in this proxy statement, the following important elements of our risk management, compliance, controls, and overall governance can be found on our website at www.oasispetroleum.com/investors/corporate-governance/:
Bylaws
Corporate Governance Guidelines
Financial Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Controller
Code of Business Conduct and Ethics. This includes provisions governing:
vendors, suppliers, and contractors
foreign payments
health and safety
environmental responsibilities
non-discrimination
freedom of association

20



OUR COMPANY

political contributions
Related Persons Transactions Policy
Insider Trading Policy
Anti-hedging policy
Anti-pledging policy
Short-swing Trading and Reporting Policy
Clawback provisions governing cash and equity incentives for Named Executive Officers
Charters for the Board’s Audit, Compensation and Nominating and Governance Committees
Contractor EH&S requirements
The Company’s Remediation Plan With Respect to Disclosed Material Weakness in Internal Control Over Financial Reporting As Of December 31, 2018
As disclosed in our Annual Report on Form 10-K filed on March 1, 2019 and transparently discussed in our earnings release dated February 26, 2019, we identified a material weakness in our internal control over financial reporting as of December 31, 2018 with respect to the presentation of certain crude oil purchases and sales arrangements. We previously reported these transactions on a net basis; however, we were required to present these purchase and sale arrangements on a gross basis, which resulted in an audit adjustment to the 2018 annual consolidated financial statements and the revision of the 2017 annual consolidated financial statements and the unaudited interim financial information for fiscal years 2018 and 2017. The revision, which is included within our Annual Report on Form 10-K for the year ended December 31, 2018, had no effect on our reported net income, Adjusted EBITDA, earnings per share or stockholders’ equity, and was determined to be immaterial to our consolidated financial statements based on management’s analysis of quantitative and qualitative factors.

Management also performed additional analyses and procedures in order to conclude that the Company’s consolidated financial statements for the year ended December 31, 2018 are fairly presented, in all material respects, in accordance with generally accepted accounting principles. With the oversight of our Audit Committee, we have developed, and are currently working on implementing and completing, a plan to remediate the material weakness, which implements certain changes to our internal control over financial reporting, including but not limited to:
enhancement of the controls over all purchase and sale arrangements;
revision and communication of the accounting controls, policies and procedures relating to the application of Accounting Standards Codification 845, Nonmonetary Transactions (“ASC 845”); and
enhancement of integration and documentation of standards within and between accounting, marketing and other key departments to timely identify transactions that are subject to ASC 845.

Our Audit Committee, which is comprised only of independent directors, all of whom the Board has determined are financially literate, is actively engaged in providing oversight of our financial reporting and related internal controls and will continue to be engaged on these matters, including overseeing the progress of our remediation plan.

21



AUDIT COMMITTEE REPORT

AUDIT COMMITTEE REPORT    

The information contained in this Audit Committee Report and references in this proxy statement to the independence of the Audit Committee members shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates such information by reference in such filing.

The Company has determined that: (1) Messrs. McShane, Cassidy, and Hagale are independent, as defined in Section 10A of the Exchange Act and under the standards set forth by the New York Stock Exchange (“NYSE”) and (2) all current Audit Committee members are financially literate. In addition, Messrs. McShane and Hagale qualify as audit committee financial experts under the applicable rules promulgated pursuant to the Exchange Act.

During the last fiscal year, and earlier this year in preparation for the filing with the SEC of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, the Audit Committee:
reviewed and discussed the Company’s audited consolidated financial statements as of and for the year ended December 31, 2018 with management and with the independent registered public accounting firm;
considered the adequacy of the Company’s internal controls and the quality of its financial reporting, and discussed these matters with management and with the independent registered public accounting firm;
reviewed and discussed with the independent registered public accounting firm (1) their judgments as to the quality of the Company’s accounting policies, (2) the written disclosures and letter from the independent registered public accounting firm required by Public Company Accounting Oversight Board Independence Rules, and the independent registered public accounting firm's independence, and (3) the matters required to be discussed by the Public Company Accounting Oversight Board’s AS 1301, Communication with Audit Committees, and by the Auditing Standards Board of the American Institute of Certified Public Accountants;
discussed with management and with the independent registered public accounting firm the process by which the Company’s chief executive officer and chief financial officer make the certifications required by the SEC in connection with the filing with the SEC of the Company’s periodic reports, including reports on Forms 10-K and 10-Q;
pre-approved all auditing services and non-audit services to be performed for the Company by the independent registered public accounting firm as required by the applicable rules promulgated pursuant to the Exchange Act, considered whether the rendering of non-audit services was compatible with maintaining PricewaterhouseCoopers LLP’s independence, and concluded that PricewaterhouseCoopers LLP’s independence was not compromised by the provision of such services (details regarding the fees paid to PricewaterhouseCoopers LLP in 2018 for audit services, tax services and all other services, are set forth at “Item 2-Ratification of Selection of Independent Registered Public Accounting Firm -Audit and All Other Fees” below); and
based on the reviews and discussions referred to above, recommended to the Board of Directors that the consolidated financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

As recommended by the NYSE’s corporate governance rules, the Audit Committee also considered whether, to assure continuing auditor independence, it would be advisable to regularly rotate the audit firm. The Audit Committee has concluded that the current benefits to the Company from continued retention of PricewaterhouseCoopers LLP warrant retaining the firm at this time. The Committee will, however, continue to review this issue on an annual basis.

Notwithstanding the foregoing actions and the responsibilities set forth in the Audit Committee’s charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s consolidated financial statements are complete and accurate and in accordance with generally accepted accounting principles.

Management is responsible for the Company’s financial reporting process, including its system of internal controls, and for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States. The independent registered public accounting firm is responsible for expressing an opinion on those financial statements. Committee members are not employees of the Company or accountants or auditors by profession. Therefore, the Committee has relied, without independent verification, on management’s

22



AUDIT COMMITTEE REPORT

representation that the consolidated financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the United States and on the representations of the independent registered public accounting firm included in its report on the Company’s consolidated financial statements.

The Committee meets regularly with management and the independent registered public accounting firm, including private discussions with the independent registered public accounting firm, and receives the communications described above. The Committee has also established procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (b) the confidential, anonymous submission by the Company’s employees of concerns regarding questionable accounting or auditing matters. However, this oversight does not provide us with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, our considerations and discussions with management and the independent registered public accounting firm do not assure that the Company’s consolidated financial statements are presented in accordance with generally accepted accounting principles or that the audit of the Company’s consolidated financial statements has been carried out in accordance with generally accepted auditing standards.
Audit Committee of the Board of Directors
Michael McShane, Chair
William J. Cassidy, Member
John E. Hagale, Member


23



RATIFICATION OF AUDITORS

ITEM 2 - RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has selected PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for 2019. PricewaterhouseCoopers LLP has audited the Company’s consolidated financial statements since its inception on February 26, 2007. The 2018 audit of the Company’s consolidated financial statements and the effectiveness of internal control over financial reporting was completed on March 1, 2019.

The Board of Directors is submitting the selection of PricewaterhouseCoopers LLP for ratification at the Annual Meeting. The submission of this matter for approval by shareholders is not legally required, but the Board of Directors and the Audit Committee believe the submission provides an opportunity for shareholders through their vote to communicate with the Board of Directors and the Audit Committee about an important aspect of corporate governance. If the shareholders do not ratify the selection of PricewaterhouseCoopers LLP, the Audit Committee will reconsider the selection of that firm as the Company’s auditors.

The Audit Committee has the sole authority and responsibility to retain, evaluate and replace the Company’s auditors. The shareholders’ ratification of the appointment of PricewaterhouseCoopers LLP does not limit the authority of the Audit Committee to change auditors at any time.

Audit and All Other Fees
The table below sets forth the aggregate fees billed by PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, for the last two years (in thousands): 
 
 
2018
 
2017
Audit Fees(1)(4)
 
$
1,335

 
$
1,955

Tax Fees(2)(4)
 
626

 
147

All Other Fees(3)(4)
 
3

 
3

Total
 
$
1,964

 
$
2,105

  __________________ 
(1)
Audit fees represent fees for professional services provided in connection with: (a) the annual audits of the Company’s consolidated financial statements and effectiveness of internal control over financial reporting; (b) the review of the Company’s quarterly consolidated financial statements; and (c) review of the Company’s other filings with the SEC, including review and preparation of registration statements, comfort letters, consents and research necessary to comply with generally accepted auditing standards for the years ended December 31, 2018 and 2017.
(2)
Tax fees represent tax return preparation and consultation on tax matters.
(3)
All other fees include any fees billed that are not audit, audit related, or tax fees. In 2018 and 2017, these fees related to accounting research software.
(4)
Does not include fees paid to PricewaterhouseCoopers LLP for work in their capacity as the independent registered public accounting firm of Oasis Midstream Partners LP.
The charter of the Audit Committee and its pre-approval policy require that the Audit Committee review and pre-approve the plan and scope of PricewaterhouseCoopers LLP’s audit, tax and other services. For the year ended December 31, 2018, the Audit Committee pre-approved each of the services described above.

The Company expects that representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting to respond to appropriate questions and to make a statement if they desire to do so.

The Board of Directors unanimously recommends that shareholders vote FOR the ratification of the selection of PricewaterhouseCoopers LLP as the registered public accounting firm of the Company for 2019.



24



COMPENSATION COMMITTEE REPORT

OUR PAY
COMPENSATION COMMITTEE REPORT                                    
The information contained in this Compensation Committee Report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates such information.

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
Compensation Committee of the Board of Directors
Bobby S. Shackouls, Chair
William J. Cassidy, Member
Michael McShane, Member



25



COMPENSATION DISCUSSION AND ANALYSIS

COMPENSATION DISCUSSION AND ANALYSIS                        
This compensation discussion and analysis, or CD&A, (i) explains the Company's compensation philosophy, objectives, policies, and practices with respect to its executive officers, all of whom are Named Executive Officers within the meaning of applicable SEC rules, and (ii) analyzes the elements of compensation for the Company's "Named Executive Officers." This should be read in conjunction with the information presented in the tables that follow this CD&A.
Name
  
Title and Position During 2018
Thomas B. Nusz
  
Chairman and Chief Executive Officer
Taylor L. Reid
  
President and Chief Operating Officer
Michael H. Lou
  
Executive Vice President and Chief Financial Officer
Nickolas J. Lorentzatos
  
Executive Vice President, General Counsel and Corporate Secretary

Performance Highlights and Impact on Compensation Decisions
Our stock price performance is highly influenced by commodity price volatility. We produce and market oil and natural gas, commodities whose prices are largely a function of market supply and demand and subject to substantial volatility. Demand is impacted by general economic conditions, weather and other seasonal conditions, including hurricanes and tropical storms. Oil supply in the United States has grown dramatically over the past few years, and this, coupled with increases in production from key oil-producing nations, has contributed to the current global oversupply of crude oil, which caused a sharp decline in oil prices beginning in mid-2014 and a corresponding decline in the stock prices of companies, like us, that produce and market oil and natural gas.
Throughout 2015, 2016 and early 2017, global oil supply continued to outpace demand as oil inventories continued to build. In 2017 and early 2018, significant production cuts from key oil-producing nations coupled with strong demand growth led to a price recovery. However, in late 2018, supply once again exceeded demand leading to global oil inventory increases and significant price declines. All of this affected the way we paid our executive officers.
Our 2017 performance was strong in some areas and fell short in others, which affected 2018 target pay opportunities. After two years of exceptional performance despite the challenging market environment, the Company performed well again in 2017 with several notable strategic successes, but fell short of some of its rigorous 2017 performance targets. The Compensation Committee’s decisions regarding 2018 executive compensation reflected both realities:
Mr. Nusz's salary held flat for 2018, for the fifth consecutive year
2018 long-term incentive awards were approved at each executive officer's target award opportunity
however, the Committee set a floor share price of $9.00 to be used for purposes of converting the opportunity (expressed as a dollar amount) for 2018 long-term incentives into a number of shares, thereby reducing the number of shares each such officer would receive if the Company's stock price did not increase above the $9.00 threshold; the floor price was nearly $0.70 higher than the stock price at the time of the Committee's action
Despite a challenging commodities price environment, we saw both financial and strategic success in 2018. In 2018, we saw another steep decline in WTI - by 40% in the fourth quarter alone and 25% from the start of the year - and our stock price suffered; but as one of the first E&P companies to live within cash flow during the downturn, we continued to make adjustments and improve performance. We managed service costs (lowering lease operating expenses by 12%), and continued to improve our leverage metrics, and we were able to increase production by 25% and grow net cash provided by operating activities and Adjusted EBITDA by 96% and 35%, respectively. (For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss) including non-controlling interests and net cash provided by operating activities, see "Non-GAAP Financial Measures" in our Annual Report on Form 10-K for the year ended December 31, 2018.) Nevertheless, we acknowledge that our TSR has been negative on a one, three, and five-year basis; and so, in addition to continuously working to improve performance in spite of the market environment, beginning with PSUs granted in January 2019, we capped the percentage of PSUs that may be earned when the Company's absolute TSR is negative over the performance cycle. See "—Executive Compensation—2018 Performance Share Units."

26



COMPENSATION DISCUSSION AND ANALYSIS


In addition, the team successfully executed several strategic objectives which we expect to benefit the Company for years to come. These include closing the acquisition of 22,000 net core acres in the Delaware Basin in west Texas from Forge Energy LLC, completing a number of dispositions and divestitures, and, through our subsidiary Oasis Midstream Partners, completing the construction and startup of a second natural gas plant in Wild Basin. Our success in 2018 puts us in a position of considerable strength, both financially and operationally. As a result of our success against rigorous performance goals, annual incentives for 2018 were paid at 100% of target.
Although we experienced much strategic and operational success in 2018, we, and the industry as a whole, are facing a commodity market that continues to be volatile. Therefore, management has focused on planning for the future, while positioning the Company to succeed in the current market price environment.
Shareholder Outreach and 2018 Say-on-Pay Advisory Vote
Shareholder Outreach Process. Since 2015, at the direction of our Compensation Committee we have pursued a formal shareholder outreach campaign focused on our compensation practices in addition to our ongoing investor engagement on other topics. Members of management and our Compensation Committee sought input on our pay programs from our largest investors, and in 2016, 2017, and 2018, we conducted similar outreach campaigns, each time inviting shareholders representing over 50% of our outstanding shares. The investors we contacted generally supported the philosophy, structure, and elements of our compensation program; however, we have received requests for enhanced disclosure regarding certain elements, and our responses to selected requests are reflected in this proxy statement. Our outreach program has generated valuable feedback and, as a result, we have made a number of improvements to our pay program and disclosure including:
Beginning in January 2019, included a cap on the percentage of PSUs that may be earned when the Company's absolute TSR is negative over the performance cycle
Beginning in 2019, equity-based incentive compensation granted to all Named Executive Officers will be allocated 55% performance-based and 45% time-based, whereas previously, only our CEO's incentive awards were allocated in this manner
Enhanced disclosure around our performance goals, our “Initiatives” performance metrics, and the role that safety plays in our compensation determination process
Moved to an annual say-on-pay vote schedule in 2017
2018 Say-on-Pay Advisory Vote. At our 2018 annual meeting, we held our most recent say-on-pay advisory vote, which resulted in over 94% of votes cast approving the compensation of our Named Executive Officers. Our Compensation Committee evaluated the results of the 2018 say-on-pay advisory vote and the support expressed by shareholders and considered many other factors in evaluating our executive compensation programs as discussed in this CD&A, including the Committee’s assessment of the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of peer group company data. While each of these factors bore on the Committee’s decisions regarding our Named Executive Officers’ compensation, the Committee has not made any changes to the structure of our 2018 executive compensation program as a result of the 2018 advisory vote.
We continued to improve upon our pay program for 2019, based on shareholder feedback. We have continued to evolve our pay program to embrace market best practices, making modifications to our 2019 PSU awards to improve upon their already strong alignment to our performance. Beginning with PSUs granted in January 2019, the Committee:
added a TSR cap so that a Named Executive Officer cannot earn more than 100% of PSUs eligible to vest if the Company's absolute TSR is negative over the performance cycle;
reduced to 0% the PSUs that will be earned at the end of a performance cycle where the Company's TSR rank falls in the bottom three of the PSU peer group; and
added a cap on the number of PSUs that may be earned if the Company's stock price is at least $25 at the end of the performance cycle.
Also beginning in 2019, we adjusted the allocation of long-term equity-based compensation granted to our remaining Named Executive Officers other than our CEO from 50% performance-based and 50% time-based to 55% performance-based and 45% time-based, which aligns with the equity mix of our CEO. Mr. Nusz’s equity mix has been 55% performance-based and 45% time-based since 2015.

27



COMPENSATION DISCUSSION AND ANALYSIS

OUR COMPENSATION MIX                    
We view the various components of compensation as distinct but related, and we emphasize “pay for performance” by structuring our program so that a significant portion of our executive officers' total compensation is "at risk" and tied to the Company's long- and short-term financial, operational and strategic goals.
Our compensation philosophy is to foster entrepreneurship at all levels of the Company by awarding long-term equity-based incentives, currently in the form of restricted stock and PSUs, as a significant and integral component of compensation.
We determine the appropriate level for each compensation component based in part, but not exclusively, on our view of internal equity and consistency, and other considerations we deem relevant, such as rewarding extraordinary performance.

The approximate allocation of the targeted direct compensation components approved for each Named Executive Officer by the Compensation Committee for 2018, is as follows (percentages are based on each Named Executive Officer’s 2018 base salary, and target amounts of compensation with respect to annual performance-based cash incentive awards and long-term equity-based incentive awards):

chart-9fab0e09273f2e70c35.jpgchart-79748cf00b915b5bb22.jpg


28



COMPENSATION DISCUSSION AND ANALYSIS

2018 Compensation At a Glance
Compensation Element
 
Description
 
Recent and Upcoming Actions
 
 
 
 
 
Base Salary
 
 Fixed pay determined by position and level of responsibility
 Competitively targeted within peer group
 
CEO’s salary has remained flat for the past five years;
No increase to NEO salaries in 2018, unless their role was expanded
Annual Performance-based Cash Incentive
 
 Aligns executive officers' interests with those of our shareholders
 Payment made based on achievement of specified Company performance goals (see pages 33-36):

20% Production
20% Capital Efficiency
20% Cost Structure
20% EBITDAX
20% Strategic Initiatives

 Final payout subject to “Safety Modifier”
 Target payout is percentage of executive officer base salary which varies by position
 
2018 annual cash incentives paid at 100% of target
Long-term Equity-based Compensation






ØPSU Awards










ØRestricted Stock Awards
 
 Target grant is percentage of executive officer base salary which varies by position
 CEO - 55% performance-based; 45% time-based
 Other NEOs - 50% PSUs; 50% restricted stock.




 Aligns executive officers' interests with those of our shareholders

 Rewards long-term performance relative to industry peers
 Vest based on TSR relative to a peer group over three overlapping performance periods: 2 years, 3 years, and 4 years.


 Makes our compensation program competitive from a total remuneration standpoint;
 Encourages executive retention
 Vest ratably annually over three years
 
Change for 2019
Mix for NEOs other than CEO will shift to 55% performance-based; 45% time-based




Changes for 2019    
 If absolute TSR is negative over the performance cycle, PSUs eligible to vest are capped at 100% of target, regardless of relative TSR ranking

 No PSUs will vest if the company falls in the bottom three of the PSU peer group

 Added a cap on the number of PSUs that may be earned if the Company's stock price is at least $25 at the end of the performance cycle

Other Employee Benefits
 
 benefits available to all employees, including medical, dental, short and long-term disability, health club subsidy and 401(k) plan with employer matching of first 6% eligible compensation contributed
 limited perquisites
 
 
Change of Control and Severance Benefits
 
 provide financial security to help ensure that officers remain focused on our performance and the continued creation of shareholder value rather than on the potential uncertainties associated with their own employment

 • change in control benefits are "double trigger"
 
 

29



COMPENSATION DISCUSSION AND ANALYSIS

Target, Reported and Realized Pay Differ Depending on Our Performance

The majority of our Named Executive Officers' target compensation is in the form of "at-risk" compensation components, namely performance-based cash incentive and PSU awards, which are tied to the achievement of short and long-term performance criteria. By design, the value actually realized by our executives is aligned with the Company’s actual operational and financial performance, including absolute and relative stock-price performance. However, realized pay may differ substantially from compensation amounts reported in the Summary Compensation Table,

Our historic realized, target, and Summary Compensation Table reported pay levels underscore that alignment. Our CEO's target pay, displayed below, has remained unchanged since 2014 and has been historically just below the 50th percentile of the peer group for such period; for each of the past three years, our CEO's realized pay has been below his target pay. The difference shown is due, in large part, to the Compensation Committee's action to reduce Mr. Nusz's long-term equity based incentives granted in 2016 to 60% of target in response to the changing and uncertain market environment and in order to minimize dilution of the Company's shareholders
chart-21f96c4d7b5835d018a.jpg
Percentage of 50th
Percentile Total Compensation
(3 Year Avg)
 
97.0
95.3
63.4
 

The following table illustrates the calculations used to determine the differences between the amount reported in the 2018 Summary Compensation Table and the amount actually realized, or received, by our CEO in 2018 for each of the following direct compensation elements:

30



COMPENSATION DISCUSSION AND ANALYSIS

 
 
 
CEO Target Pay(1)
 
CEO Reported Pay(2)
 
CEO Realized Pay
 
 
 
2018 Target Compensation
($)
 
2018 Summary Compensation Table($)
 
2018 Actual Compensation Paid($)
 
 
 
 
 
 
 
 
Salary
 
820,000

 
820,000

 
820,000

Non-Equity Incentive Plan Compensation(3)
 
984,000

 
984,000

 
787,200

Stock Awards - Restricted Stock(4)
 
2,050,000

 
2,049,597

 
1,583,348

Stock Awards - Performance Share Units(5)
 
2,460,000

 
3,373,234

 
2,001,556

All Other Compensation(6)
 
N/A

 
31,869

 
31,869

Total 2018 Compensation
 
$
6,314,000

 
$
7,258,700

 
$
5,223,973

 
 
 
 
 
 
 
 
(1)
As disclosed under "2018 Executive Compensation Decisions—Annual Performance-Based Cash Incentive Awards" and "—Long-Term Equity-Based Incentives," target annual and long-term award opportunities are set at a multiple of Mr. Nusz's base salary. The Compensation Committee may determine to grant awards above or below the target level taking into account Company performance, market conditions, and other factors it deems appropriate.
(2)
The amounts indicated as Reported Pay in the table reflect the total direct compensation (calculated as Salary, Non-Equity Incentive Plan Compensation, and the grant value of Long-Term Incentive Awards) for 2018 as reported in the 2018 Summary Compensation Table on page 45. The grant date fair values for PSUs and restricted stock awards are described in footnote (2) to the 2018 Summary Compensation Table.
(3)
The Realized Pay column reflects the Non-Equity Incentive Plan Compensation Mr. Nusz earned under the Company’s Amended and Restated 2010 Annual Incentive Compensation Plan (the “Incentive Plan”) for the 2017 performance year, which was paid in February 2018.
(4)
The Realized Pay column reflects the value at vesting of restricted stock that vested during 2018 (36,740 shares valued at vesting of $340,580; 93,466 shares at $826,239; and 44,933 shares at $416,529). See the Options Exercised and Stock Vested Table on page 50 for more details.
(5)
The value included in the Reported Pay column is based on the weighted average grant date fair value price per unit of $12.71, as computed using a Monte Carlo simulation model in accordance with FASB ASC Topic 718. The value of the award using the NYSE closing price of the Company's common stock on January 24, 2018, the grant date, of $9.27 was $2,460,258. The Realized Pay column reflects the value at vesting of PSUs that were earned during 2018 (99,195 units valued at vesting of $799,512; and 149,137 units valued at vesting at $1,202,044). See the Option Exercised and Stock Vested Table on page 50 for more details.
(6)
Both the Reported Pay and Realized Pay columns in the table reflect the value of "All Other Compensation" that Mr. Nusz received in 2018 as reported in the 2018 Summary Compensation Table on page 45. No value is included in the Target Pay column because the Company has not established targets for these compensation items.

31



COMPENSATION DISCUSSION AND ANALYSIS

Best Practices in Our Compensation Program
Our program is competitive and continues to reflect an alignment with current governance trends and best practices, including shareholder-friendly features such as:
 
What We Do
 
þ
Pay for Performance - Our executives' total compensation is substantially weighted toward performance-based pay. Our annual performance-based cash incentive awards are based on performance against metrics set in advance which reflect key financial, operational and strategic objectives. At least 50%, and beginning in 2019, at least 55% of our long-term equity compensation awards to Named Executive Officers are PSUs, which are earned based on our relative total shareholder return against our peers.

 
þ
Robust Stock Ownership - We have adopted robust stock ownership guidelines for our executives and directors. Named Executive Officers, other than Mr. Nusz, are required to own shares having a value equal to 200% of their respective annual base salaries; and for Mr. Nusz, 500% of his annual base salary. Our executives are required to hold shares until such ownership requirements are met.
 
þ
Double-Trigger Change in Control Benefits - The Employment Agreements contain a "double trigger" accelerated vesting provision, which requires certain termination of employment events to occur in addition to a change in control in order for accelerated vesting of equity awards to occur. No cash payments are made unless a "double trigger" event occurs.
 
þ
TSR Cap - Beginning with 2019 awards, we added a TSR cap so that a Named Executive Officer cannot earn more than 100% of PSUs eligible to vest if the Company's absolute TSR is negative over the performance cycle.
 
þ
External Benchmarking - Our independent Compensation Committee reviews competitive compensation data based on an appropriate group of exploration and production peer companies, which group is reviewed on an annual basis, prior to making annual compensation decisions.
 
þ
Independent Compensation Consultant - We have engaged an independent executive compensation consultant who reports directly to the independent Compensation Committee and provides no other services to the Company.
 
þ
Annual Say on Pay Advisory Vote - Beginning in 2017, we have held annual Say-on-Pay Advisory Votes, consistent with our policy of seeking input from, and engaging in discussions with, our shareholders regularly.
 
þ
Mitigation of Undue Risk - We carefully consider the degree to which compensation plans and decisions affect risk taking. We do not believe that any of the compensation arrangements in place are reasonably likely to have a material adverse impact on the Company.

 
þ
Clawback in our Employment Agreements - In the Employment Agreements, we included clawback provisions applicable to compensation payable or paid pursuant to the Employment Agreements that is deemed incentive compensation and subject to recovery pursuant to the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 
 
What We Don't Do
ý
Excise Tax Gross-Ups - Neither our change in control plans nor our employment agreements with each of our Named Executive Officers (the "Employment Agreements") provide for excise tax gross-ups or any other tax gross-ups for perquisites.

ý
Evergreen Employment Agreements - The Employment Agreements have three-year terms, expiring March 20, 2021. They were most recently entered into in March 2018. Whether or not the terms of any of these agreements will be extended is a decision that our Compensation Committee will make closer to the time the terms are due to expire.
ý
Single-trigger Vesting or Payments in Employment Agreements - None of our equity incentive plans nor any of the Employment Agreements provide for automatic single trigger vesting of unvested equity awards or cash payments solely upon the occurrence of a "change in control" (as defined in the LTIP).
ý
Hedging or Derivative Transactions in Company Stock - We prohibit our executives from engaging in any short-term trading, short sales, option trading and hedging transactions related to our common stock. We also prohibit our executives from purchasing our common stock on margin. In addition, our executives are prohibited from pledging Company stock without approval of the Board.
ý
Perquisites - We offer minimal perquisites to the Company's executives, including a 401(k) retirement plan, parking and health club dues, which are available to all Company employees.
ý
No Stock Option Repricing, Reloads, or Exchange without Shareholder Approval - Our LTIP prohibits stock option repricing, reloading or exchange without shareholder approval. In addition, in 2015, we amended our LTIP in order to limit potential recycling of shares subject to stock options and stock appreciation rights.
ý
Guaranteed Bonuses - Annual performance-based cash incentive awards to our NEOs are determined based solely on the performance of the Company with respect to annual Company performance goals.
 
 

32



COMPENSATION DISCUSSION AND ANALYSIS

2018 EXECUTIVE COMPENSATION DECISIONS                                

The following is a discussion of the specific actions taken by our Compensation Committee related to each of our direct compensation elements for 2018. Each element is reviewed annually, as well as at the time of a promotion, other change in responsibilities, other significant corporate events or a material change in market conditions.
BASE SALARY
In setting annual base salary amounts, our Compensation Committee intends to set targets by position that are competitive within our peer group, taking into consideration factors such as the particular officer’s contribution to our financial performance and condition, the officer’s qualifications, skills, experience and responsibilities, as well as current market and industry conditions.

At its December 2017 meeting, our Compensation Committee reviewed data with respect to our 2018 compensation peer group and approved an increase to Mr. Lorentzatos' salary for fiscal year 2018. The salaries of Messrs. Nusz, Reid, and Lou were not increased for 2018, and Mr. Nusz's salary has remained unchanged since 2014. The Committee approved an increase to Mr. Lorentzatos' salary to account for his organizational contributions, including increased oversight over a broad group of functions, and to remain competitive and for retention purposes:
 
 
2017 Base Salary
 
% Increase
 
2018 Base Salary
Thomas B. Nusz
 
$
820,000

 

 
$
820,000

Taylor L. Reid
 
$
600,000

 

 
$
600,000

Michael H. Lou
 
$
480,000

 

 
$
480,000

Nickolas J. Lorentzatos
 
$
380,000

 
11.8
%
 
$
425,000

ANNUAL PERFORMANCE-BASED CASH INCENTIVE AWARDS
Our annual performance-based cash incentive awards reward achievement of our annual Company performance goals. Our annual performance-based cash incentive program for our Named Executive Officers is governed by our Amended and Restated 2010 Annual Incentive Compensation Plan (the “Incentive Plan”).
Annual Cash Incentive Award Opportunity. Every December, the Compensation Committee establishes threshold, target and maximum cash incentive award opportunities for each Named Executive Officer for the upcoming year, set as a percentage of the officer’s base salary. For 2018, the annual incentive opportunities for Named Executive Officers were unchanged from 2017 levels:
 
 
Threshold
(as % of base salary)
 
Target
(as % of base salary)

 
Maximum
(as % of base salary)

Thomas B. Nusz
 
60
%
 
120
%
 
240
%
Taylor L. Reid
 
50
%
 
100
%
 
200
%
Michael H. Lou
 
50
%
 
100
%
 
200
%
Nickolas J. Lorentzatos
 
40
%
 
80
%
 
160
%
At the same time, the Company sets threshold, target and maximum levels for a number of established annual performance goals, each with a pre-assigned weighting, to serve as a guideline for determining award payouts earned by our executive officers for the upcoming year.
2018 Annual Incentive Performance Metrics. Each year, we measure our performance relative to target metrics and Initiatives, or milestones, which are generated through our annual budget and strategic planning processes and approved by our Board of Directors. Set forth below are the performance metrics for 2018, which were approved by the Board, and a description of how each metric helps us achieve our objectives. The 2018 performance metrics selected by the Board were the same as the metrics selected for 2017 and 2016. The Committee believes that setting specific performance goals in advance helps establish important benchmarks, and communicates the Company's top priorities to its Named Executive Officers and employees.

33



COMPENSATION DISCUSSION AND ANALYSIS

Performance Metric
 
Description and Rationale
Production
(Boe/day)
 
Ÿ Measured in equivalent average annual volumes;
Ÿ Target is derived from existing (or PDP) and new (or capital) volumes;
Ÿ Over or under performance is driven primarily by production optimization, weather impacts, well performance, the timing of tying in new wells from our capital program, and access to take-away and processing capacity for produced fluids and hydrocarbons.
Capital Efficiency
($/Boe)
 
Ÿ Measures the investment efficiency of our capital program and is demonstrated by finding and development costs;
Ÿ Determined by dividing our capital investment in our E&P operations during the year by the estimated ultimate recovery of the wells completed during the year in barrels of oil equivalent.
Cost Structure
 
 
LOE
($/Boe)
 
Ÿ Lease Operating Expense is the routine operating cost on a per barrel of oil equivalent of production basis;
Ÿ Includes cost elements such as produced water handling, labor, production chemicals, electricity, equipment rentals, equipment replacements, well workover expense.

G&A
($MM)

 
Ÿ Total general and administrative expenses for our E&P, midstream and wells services operations;
Ÿ Includes all administrative costs, such as cash and non-cash employee compensation; facility leasing and operating costs; third party fees such as legal, accounting, and tax; recruiting, travel and office expenses; and information technology and data services expenses;
Ÿ These costs are net of field labor costs, which are charged to operating expenses, and intercompany eliminations.
EBITDAX
($MM)
 
Ÿ Earnings before interest, taxes, depreciation, and exploration costs;
Ÿ This measure is a non-GAAP proxy for cash flow which is routinely used in the exploration and production sector and is driven by our volumes, realized prices and cash costs needed to run our business;
Ÿ This is the same measure that we discuss in connection with quarterly earnings, and to which we provide proper reconciliations to GAAP measures on our website.
Initiatives
 
Ÿ Strategic and operational goals that do not have numerical targets, but rather measure performance by accomplishment of stated objectives;
Ÿ 2018 Initiatives include: organization and manpower efficiency, Permian integration, enterprise resource optimization, key performance indicators, and big data and analytics.
Each year, after the Initiatives are selected, management assigns teams of employees to define measurable goals for each Initiative and to develop strategies for meeting them. Management evaluates and approves the goals and strategies, and the Initiative teams meet throughout the year to assess performance and provide progress updates to management. Ultimately Initiative performance is evaluated at the end of the year in connection with the determination of annual performance-based cash incentive awards.

Following the end of the applicable year, the Committee determines the amount of the awards earned based on a retrospective evaluation of performance against the established goals. The Compensation Committee may also consider other subjective features, such as extenuating market circumstances, individual performance and safety performance, when determining actual amounts of awards. Performance-based cash incentive awards to our executives are based solely on the performance of the Company, not the performance of the individual.
In addition, following the determination of the amount of the awards earned, the Committee applies a "safety modifier," which may adjust the amount of the awards downward depending on the Company's safety performance for the year. Safety performance is determined based on the evaluation of various relevant metrics and/or the achievement of certain objectives, which may vary from year to year. This "safety modifier" affects the awards received by all employees and so serves to make safety a top priority for every individual.


34



COMPENSATION DISCUSSION AND ANALYSIS

2018 Annual Performance Goals. In general, our Board of Directors attempts to set rigorous performance objectives such that there will be approximately a 50% probability of achieving the target performance metrics and that achievement at the threshold or maximum performance levels will be much less probable.
In order to create additional incentive for exceptional Company performance, at the discretion of our Compensation Committee, awards can be up to the maximum levels designated for each Named Executive Officer, but it is not expected that payment at this level would occur in most years.
In fact, to date, we have not awarded cash incentives at the maximum percentage for any Named Executive Officer in any year since our initial public offering.

In early 2018, the Board established annual performance goals for the 2018 annual cash incentive awards.
The 2018 Production and EBITDAX targets were set higher than target and actual performance in 2017.
The 2018 Capital Efficiency and LOE targets reflect expected levels of achievement based on 2017 actual performance. The Board anticipated a rise in service costs in an environment of improving oil prices and, therefore, did not foresee the team's ability to further reduce costs.
The G&A target for 2018 was set higher due to an expected increase in headcount during 2018 primarily related to higher levels of both capital and operating activity, including the launch of Oasis Well Services LLC's second frac crew, rapidly growing midstream business at the second gas plant, and operations in the Delaware Basin.

The following table sets forth the performance incentive metrics and goals established by the Board in early 2018, which the Compensation Committee used to evaluate Company performance when determining our Named Executive Officers' annual cash incentive awards for the year ended December 31, 2018. The table also provides comparisons to the performance goals established by the Board for 2017 and 2016. Please see "—Annual Performance–Based Cash Incentive Awards–2018 Annual Performance Goals" for additional information about our 2018 performance metrics.
Metric
 
Weighting
 
2018
Performance Goal
 
2017
Performance Goal
 
2016
Performance Goal
Production
 
 
 
 
 
 
 
 
Volume (Boe/d)
 
20
%
 
79,000

 
70,901

 
48,100

Capital Efficiency
 
 
 
 
 
 
 
 
Proved Developed finding and development cost ($/Boe)
 
20
%
 
$
11.13

 
$
8.58

 
$
17.07

Cost Structure
 
 
 
 
 
 
 
 
LOE ($/Boe)
 
10
%
 
$
7.35

 
$
7.00

 
$
8.00

G&A ($MM)
 
10
%
 
$
111.0

 
$
97.9

 
$
93

EBITDAX ($MM)
 
20
%
 
$
925

 
$
795

 
$
409

Initiatives
 
20
%
 
 
 
 
 
 
Initiatives are strategic and operational goals and milestones which we have identified as drivers of financial and operational business success. The number of Initiatives and their content or objectives will vary from year to year based on the current needs of the Company and the operating environment. Set forth below are the 2018 Initiatives, which were approved by the Board.

35



COMPENSATION DISCUSSION AND ANALYSIS

Initiative
 
Objectives
 
 
 
Organization and Manpower Efficiency
 
Ÿ Prepare the organization for growth and a focus on top quartile returns through organizational structure and alignment, effective decision making process improvement and eliminating waste and re-work.
Permian Integration
 
Ÿ Focus on developing our tactics, organization, skills and knowledge to have a successful first year in a new basin while understanding where that success fits in the five-year Permian plan.
Enterprise Resource Optimization
 
Ÿ Improve efficiency, efficacy, and scalability of our people, processes, and systems to allow for optimal and critical business decisions to be efficiently made across our entire enterprise which includes diverse assets, multiple business verticals, and multiple geographic locations.
Key Performance Indicators
 
Ÿ Develop current and forward looking metrics, communication process, and cycle that clearly and efficiently convey the organization's progress delivering returns consistent with the Company's expectations.
Big Data and Analytics
 
Ÿ Use big data and data analytics to produce quality information for the development of actionable new opportunities, evaluation and transfer of leading edge technology, and quality competitive and competitor intelligence in order to generate peer leading investment opportunities and corporate financial returns.
Our 2018 established performance goals and weightings that were used as a guideline to evaluate our 2018 performance for purposes of the 2018 annual performance-based cash incentive awards are provided below along with the resulting assessment of performance against each goal.
Metric
 
2017 Actual
Performance
 
2018
Performance Goal
 
Weight
 
2018 Result
 
 
 
 
Actual Performance
 
Assessment
 
 
 
 
 
 
 
 
 
 
 
Production
 
 
 
 
 
 
 
 
 
 
Volume (Boe/d)
 
66,144
 
79,000

 
20
%
 
82,525
 
Above Target
Capital Efficiency
 
 
 
 
 
 
 
 
 
 
Proved Developed finding and development cost ($/Boe)
 
$10.26
 
$
11.13

 
20
%
 
$15.13
 
Below Target
Cost Structure
 
 
 
 
 
 
 
 
 
 
LOE ($/Boe)
 
$7.34
 
$
7.35

 
10
%
 
$6.44
 
Above Target
G&A ($MM)
 
$91.8
 
$
111.0

 
10
%
 
$121.3
 
Below Target
EBITDAX ($MM)
 
$708
 
$
925

 
20
%
 
$959
 
Above Target
Initiatives(1)
 
 
 
 
 
20
%
 
 
 
Above Target
 
 
 
 
 
 
 
 
 
 
 
(1) Upon evaluation at the end of the year, four Initiatives were rated "Above Target" (Enterprise Resource Optimization, Permian Integration, Key Performance Indicators, and Organization and Manpower Efficiency) and one was rated "At Target" (Big Data and Analytics). The Board rated the Company's performance with respect to the Initiative metric as a whole as "Above Target."
At the end of 2018, our Compensation Committee reviewed our overall performance for 2018, including our performance with respect to the established performance goals and the other factors discussed above, with members of management and our full Board of Directors to determine the annual performance-based cash incentive

36



COMPENSATION DISCUSSION AND ANALYSIS

award amounts to be paid to our Named Executive Officers with respect to 2018. In 2018, we performed better versus our performance goals than we had in 2017, rating "Above Target" with respect to four of six metrics. Therefore, the Committee approved awards at 100% of each Named Executive Officer's respective target award opportunity, with specific values listed below:
Named Executive Officer
 
2018 Cash Incentive Award
Thomas B. Nusz
 
$984,000
Taylor L. Reid
 
$600,000
Michael H. Lou
 
$480,000
Nickolas J. Lorentzatos
 
$340,000
LONG-TERM EQUITY-BASED INCENTIVES
Long-term equity-based incentives are the largest component of pay for our Named Executive Officers. We believe that long-term equity-based incentive compensation is important because it:
balances short and long-term objectives;
aligns our executives' interests with the long-term interests of our shareholders;
rewards long-term performance relative to industry peers;
makes our compensation program competitive and helps us attract and retain the most qualified employees, directors and consultants in the oil and gas industry; and
gives executives the opportunity to share in our long-term value creation.

At least half of each Named Executive Officer’s equity incentive for 2018 is tied to multi-year performance vesting conditions. For 2018, our CEO received 45% of his total annual equity-based incentive compensation in the form of restricted stock awards and 55% in the form of PSUs, while our Named Executive Officers received 50% of their total annual equity-based incentive compensation in the form of restricted stock awards and 50% in the form of PSUs.

In December of each year, the Compensation Committee, in consultation with Longnecker, its compensation consultant, establishes long-term incentive award opportunities for each Named Executive Officer with an aggregate value at the time of grant equal to a percentage of the officer’s base salary for the upcoming year. For 2018, the target long-term incentive award opportunities for the Named Executive Officers were not changed from the levels in place for 2017 and were set as follows:
 
 
PSU
(multiple of base salary)
 
Value of Target Grant
 
2018 Annual PSU Grant
 
Restricted Stock
(multiple of base salary)
 
Value of Target Grant
 
2018 Annual
RS Grant
Thomas B. Nusz
 
3.00
 
$
2,460,000

 
265,400
 
2.50
 
$
2,050,000

 
221,100
Taylor L. Reid
 
2.00
 
$
1,200,000

 
129,500
 
2.00
 
$
1,200,000

 
129,500
Michael H. Lou
 
2.00
 
$
960,000

 
103,600
 
2.00
 
$
960,000

 
103,600
Nickolas J. Lorentzatos
 
1.50
 
$
637,500

 
68,800
 
1.50
 
$
637,500

 
68,800
The Compensation Committee may determine to grant awards above or below the targeted opportunity level taking into account Company performance, current market conditions and any other factors it deems appropriate. In December 2017, the Compensation Committee approved 2018 long-term incentive awards at each executive officer's target award opportunity, but set a floor share price of $9.00 for determining the value of the grants to our Named Executive Officers, thereby reducing the number of shares each such officer would have received if the Company's stock price was not above the $9.00 threshold on the date of grant. In other words, the number of shares underlying restricted stock and PSUs granted would have been calculated using a grant date stock price of at least $9.00 even if the actual stock price at grant was lower.

This way, lower stock prices would not result in a significant increase in the number of shares granted and pose a potential windfall opportunity. The floor price applied to grants to be made in January 2018 and was nearly $0.70 higher than the stock price at the time of the Committee's action to approve the 2018 long-term incentive awards.

37



COMPENSATION DISCUSSION AND ANALYSIS

2018 Restricted Stock Awards
Restricted stock awards vest over a three-year period, provided the award recipient remains continuously employed through the applicable vesting dates. The first 1/3 tranche vested on January 24, 2019, the second 1/3 tranche will vest on January 24, 2020, and the final 1/3 tranche will vest on January 24, 2021 in each case, subject to the award recipient’s continued employment. While a Named Executive Officer holds unvested shares of restricted stock, he is entitled to all the rights of ownership with respect to the shares, including the right to vote the shares and to receive dividends thereon, which dividends must be paid within 30 days of the date dividends are distributed to our shareholders generally.
2018 Performance Share Units
Our PSU awards serve to align the interests of our Named Executive Officers and shareholders by (i) making a portion of the executive's compensation dependent upon the Company's TSR as compared to a TSR comparator group and (ii) increasing the percentage of the executive's compensation which is directly tied to the Company's performance.

For 2018, PSUs made up nearly 40% of the targeted total compensation granted to our Chief Executive Officer and at least 30% of the targeted total compensation granted to our other Named Executive Officers, which means that 30% to 40% of such officers' targeted pay depends on the Company's relative TSR as compared to its peers over a specified performance period.

The TSR metric does not always reflect operating performance or the quality of our strategic execution since it can be influenced by economic factors outside of the control of the Company, management and the Board, such as, most significantly for our industry, the worldwide collapse and volatility of crude oil prices. Nevertheless, TSR is a metric that some shareholders value, and so we continue to base a significant portion of our Named Executive Officers' compensation on TSR through the issuance of PSU awards.

Performance Periods. The PSU awards for 2018 are subject to three distinct performance periods:
a)
a two-year performance period beginning on January 24, 2018 and ending on January 23, 2020 for the first 1/3 tranche of the PSUs;
b)
a three-year performance period beginning on January 24, 2018 and ending on January 23, 2021 for the second 1/3 tranche of PSUs; and
c)
a four-year performance period beginning on January 24, 2018 and ending on January 23, 2022 for the third 1/3 tranche of PSUs.

Depending on the relative TSR achieved by us, a Named Executive Officer may earn between 0% and 200% of the PSUs eligible to vest at the end of each applicable performance period. If less than 200% of the PSUs that are eligible to vest are earned at the end of the applicable performance period, then the unearned PSUs subject to that tranche will be forfeited and the award recipient will not have another opportunity to earn up to an aggregate of 200% of the initial PSUs granted.
Total Shareholder Return Comparator Group. The PSUs are subject to designated two-year, three-year, and four-year performance periods, each of which began on January 24, 2018. The number of PSUs eligible to be earned for each period is subject to a market performance condition, which is based on a comparison of the TSR achieved with respect to shares of our common stock against the TSR achieved by each company in the PSU comparator group, which consists of the following companies:
•    Carrizo Oil & Gas, Inc.
 
•    Range Resources Corporation
•    Energen Corp.
 
•    RSP Permian, Inc.
•    Gulfport Energy Corp.
 
•    SM Energy Co.
•    Laredo Petroleum Inc.
 
•    Whiting Petroleum Corporation
•    Newfield Exploration Company
 
•    WPX Energy, Inc.
•    PDC Energy, Inc.
 
•    The Standard & Poor’s Oil & Gas Exploration & Production Select Industry Index, weighted as a single company
•    QEP Resources Inc.
 
 
 
Please see "—Benchmarking and Peer Group" for additional information about the Company's 2018 Peer Group.

38



COMPENSATION DISCUSSION AND ANALYSIS

2018 Performance Share Unit TSR Targets. The number of earned PSUs for each performance period will be calculated based on a scale similar to the following, which may change depending on the number of peer companies remaining at the end of the applicable performance period:
Total Shareholder Return Rank
 
% Initial PSUs Eligible to Vest for Performance Period that will become Earned Performance Units
 
% Initial PSUs Eligible to Vest for Performance Period that will become Earned Performance Units
 
% Initial PSUs Eligible to Vest for Performance Period that will become Earned Performance Units
1
 
200%
 
200%
 
200%
2
 
185%
 
183%
 
182%
3
 
169%
 
167%
 
164%
4
 
154%
 
150%
 
145%
5
 
138%
 
133%
 
127%
6
 
123%
 
117%
 
109%
7
 
108%
 
100%
 
91%
8
 
92%
 
83%
 
73%
9
 
77%
 
67%
 
55%
10
 
62%
 
50%
 
36%
11
 
46%
 
33%
 
18%
12
 
31%
 
17%
 
—%
13
 
15%
 
—%
 
 
14
 
—%
 
 
 
 
A Named Executive Officer generally must remain employed during the entirety of the performance period to earn the PSUs, although certain accelerated vesting provisions apply in the case of certain termination events. See "—Potential Payments Upon Termination and Change in Control" for additional information regarding these provisions. With respect to each PSU held by a Named Executive Officer (up to the maximum number of PSUs), we will credit an account with an amount equal to any cash dividends paid on one share of stock. Amounts credited to the account will be paid at the same time and on the same terms and conditions applicable to the PSUs, but only with respect to PSUs that become earned.
Changes for 2019 PSU Awards
Beginning with the 2019 annual grant of PSUs, the Committee approved the following changes to the terms of the awards:
added a TSR cap so that a Named Executive Officer cannot earn more than 100% of PSUs eligible to vest if the Company's absolute TSR is negative over the performance cycle, regardless of the Company's relative TSR performance;
reduced to 0% the PSUs that will be earned at the end of a performance cycle where the Company's TSR rank falls in the bottom three of the PSU peer group;
added a cap on the number of PSUs that may be earned if the Company's stock price is at least $25 at the end of the performance cycle.

In making these changes, the Committee considered shareholder feedback, industry and peer company data, and evaluations by external consultants. The Committee strongly believes that shareholders are best served by a management team that is highly incentivized to deliver differentiating performance in a challenging industry-wide environment, including focusing on items that are within management’s direct control, and the Committee will continue to monitor the design effectiveness of the long-term incentive awards in achieving the desired results.
Benchmarking and Peer Group
In order to attract, motivate and retain talented executive officers, we must ensure that our executive compensation program remains competitive with the types and ranges of compensation paid by our peer companies who compete for the same executive talent. On an annual basis, the Committee reviews and discusses compensation data for our

39



COMPENSATION DISCUSSION AND ANALYSIS

Named Executive Officers as compared to compensation data for similarly situated executive officers at peer companies selected by the Committee.

For 2018, members of our management team met with representatives from Longnecker and our Compensation Committee in the fourth quarter of 2017 to select a group of companies that they consider a “peer group” for executive and director compensation analysis purposes. This peer group was then used for purposes of developing the recommendations presented to our Board of Directors for 2018 compensation packages for our executive officers and non-employee directors. The oil and gas companies that comprise this peer group were selected primarily because they (i) have similar annual revenue, assets, market capitalization or enterprise value as us and (ii) potentially compete with us for executive-level talent. In light of these considerations, the Committee approved the removal of Denbury Resources Inc. and EP Energy Corporation from the Company's peer group for 2018 because they no longer met the selection criteria.
2018 Peer Group. The 2018 peer group for compensation purposes consisted of:
•    Carrizo Oil & Gas, Inc.
 
•    QEP Resources Inc.
•    Energen Corp.
 
•    Range Resources Corporation
•    Gulfport Energy Corp.
 
•    RSP Permian, Inc.
•    Laredo Petroleum, Inc.
 
•    SM Energy Co.
•    Newfield Exploration Company
 
•    Whiting Petroleum Corporation
•    PDC Energy, Inc.
 
•    WPX Energy, Inc.
Like us, these companies are oil-weighted, unconventional oil and gas operators, and they are of a similar size and compete with us for talent.
Longnecker compiled compensation data for the peer group from a variety of sources, including proxy statements and other publicly filed documents. Longnecker also provided published survey compensation data from multiple sources. This compensation data was then used to compare the compensation of our Named Executive Officers to comparably titled persons at companies within our peer group and in the survey data, generally targeting base salaries and total direct compensation for our Named Executive Officers at the market 50th percentile of our peer group, and targeting annual cash and long-term incentives so that our Named Executive Officers will have the opportunity to realize in future years total direct compensation up to the market 75th percentile of our peer group based on Company performance. For example, with respect to PSU awards, a Named Executive Officer may earn up to 200% of the initial PSUs granted, if, at the end of the performance period, the Company's TSR ranking is first among the PSU comparator group. Please see "-2018 Performance Share Units."
Employee Benefits
In addition to the elements of compensation previously discussed in this section, our Named Executive Officers are eligible for the same health, welfare and other employee benefits as are available to all our employees generally, which include medical and dental insurance, short and long-term disability insurance, a health and/or professional club subsidy and a 401(k) plan with a dollar-for-dollar match on the first 6% of eligible employee compensation contributed to the plan. In addition, the 401(k) plan permits the Board of Directors, in its discretion, to make an employer contribution for a plan year equal to a uniform percentage of eligible compensation for each active participant in the plan, including our Named Executive Officers, subject to applicable IRS limitations. While the Board of Directors has made such contributions in prior years, the Board determined not to make such a contribution in 2018. We do not sponsor any defined benefit pension plan or nonqualified deferred compensation arrangements at this time.

The general benefits offered to all employees (and thus to our Named Executive Officers) are reviewed by our Compensation Committee each year. Currently, we provide our Named Executive Officers with limited perquisites, including certain parking and transportation benefits and payment of health club dues. Benefits offered only to Named Executive Officers are reviewed by our Compensation Committee in conjunction with its annual review of executive officer compensation.

40



COMPENSATION DISCUSSION AND ANALYSIS

Setting Executive Officer Compensation
Role of the Compensation Committee. Our independent Compensation Committee makes all compensation decisions related to our Named Executive Officers and oversees a rigorous process to evaluate progress toward performance goals, monitor external trends, measure competitiveness and determine compensation outcomes. The Committee meets at least once per calendar quarter, with standing agenda items that support a disciplined process and address the responsibilities outlined in the Committee’s charter.
As discussed in greater detail throughout this CD&A, our Compensation Committee met numerous times during 2018 to review and discuss executive compensation matters with respect to 2018. Each year, at its December meeting, the Committee considers a range of information to determine the appropriate performance-based annual cash incentive awards for our Named Executive Officers for the current year, including:
Company performance relative to the Company's performance goal guidelines established by the Board at the beginning of the year;
Company performance relative to the Company's operational, financial and strategic initiatives established at the beginning of the year; and
The current year’s economic environment, commodity price fluctuations and other unforeseen influences (adverse or beneficial) that should be considered in the Committee’s evaluation of company and individual officer performance.

In addition, at its December meeting, the Committee also evaluates and approves the structure of our compensation program for the following year. For 2018, our compensation structure, including salaries and related annual performance-based cash incentive award and long-term equity-based incentive compensation opportunity targets, generally remained unchanged from 2017, with the exception of Mr. Lorentzatos's salary, which was increased as noted above.

Our Compensation Committee generally intends to target approximately the market 50th percentile for base salary and total direct compensation within our peer group and to structure our annual cash and long-term incentives to provide our executive officers with an opportunity to earn up to a maximum of approximately the market 75th percentile for total direct compensation, in recognition of exceptional Company and individual performance. To date, we have not paid the maximum possible cash incentive award which would be necessary to achieve total direct compensation near the 75th percentile, to any executive officer in any year since our initial public offering in 2010. See "-Benchmarking and Peer Group" above.

Our Compensation Committee does review survey information as a frame of reference, taking into consideration factors such as the age of the data in the survey, the particular officer’s contribution to our financial performance and condition, as well as such officer’s qualifications, skills, experience and responsibilities. Our Compensation Committee also considers such factors as industry shortages of qualified employees for such positions, recent experience in the marketplace, and the elapsed time between the surveys used and when compensation decisions are made. In light of these qualitative and other considerations, the base salary and total direct compensation of a particular officer may be greater or less than the market 50th percentile and total potential direct compensation may be greater or less than the market 75th percentile and, in any event, our Compensation Committee recognizes that the compensation of certain of our executive officers whose base salary and total direct compensation are currently less than the market 50th percentile may continue to build to these targeted levels.
Role of the Chief Executive Officer and Other Officers. The Compensation Committee considers input from Mr. Nusz, our Chief Executive Officer, Mr. Reid, our President and Chief Operating Officer, and Mr. Lou, our Chief Financial Officer, regarding our executive compensation structure and the individual compensation levels for each executive officer, including themselves. Our CEO and his officer team also provide information to the Committee regarding the performance of the Company and the attainment of the Company's performance goals for the Committee’s determination of annual performance-based cash incentive awards. The Committee makes the final determination of Named Executive Officer compensation.
Role of the Compensation Consultant. Our Compensation Committee’s charter grants the Committee the sole authority to retain, at our expense, outside consultants or experts to assist in its duties. For 2018, our Compensation

41



COMPENSATION DISCUSSION AND ANALYSIS

Committee engaged Longnecker & Associates to advise it with respect to executive compensation matters, including development of the annual compensation peer group and an annual review and evaluation of our executive and director compensation packages generally, based on, among other things, survey data and information regarding general trends. Representatives from Longnecker periodically meet with our Compensation Committee throughout the year and advise our Compensation Committee with regard to general trends in director and executive compensation, including:
competitive benchmarking;
incentive plan design;
peer group selection; and
other trends and developments affecting executive compensation.

In addition, Longnecker provides our Compensation Committee and management with survey compensation data regarding our compensation peer group for each fiscal year.

Independence of Compensation Consultant. In selecting Longnecker as its independent compensation consultant, the Compensation Committee assessed the independence of Longnecker pursuant to SEC rules and considered, among other things:
whether Longnecker provides any other services to us;
the policies of Longnecker that are designed to prevent any conflict of interest between Longnecker, the Compensation Committee and us
any personal or business relationship between Longnecker and a member of the Compensation Committee or one of our executive officers; and
whether Longnecker owns any shares of our common stock.

The terms of Longnecker’s engagement are set forth in an engagement agreement that provides, among other things, that Longnecker is engaged by, and reports only to, the Compensation Committee and will perform the compensation advisory services requested by the Compensation Committee. Longnecker does not provide any other services to the Company, and the Compensation Committee has concluded that we do not have any conflicts of interest with Longnecker.

Among the services Longnecker was asked to perform were:
assessing the relationship between executive pay and performance;
apprising the Compensation Committee of compensation-related trends, developments in the marketplace and industry best practices;
informing the Compensation Committee of compensation-related regulatory developments;
providing peer group survey data to establish compensation ranges for the various elements of compensation;
providing an evaluation of the competitiveness of the Company’s executive and director compensation and benefits programs; and
advising on the design of the Company’s incentive compensation programs.
Employment Agreements
General Philosophy. During 2018, we had employment agreements in effect with Messrs. Nusz, Reid, Lou and Lorentzatos. These employment agreements are designed to ensure an individual understanding of how the employment relationship may be extended or terminated, the compensation and benefits that we provide during the term of employment and the obligations each party has in the event of termination of the officer’s employment. In consultation with our compensation consultant, Longnecker, we determined that, due to the historical roles they have played in our success and growth, Messrs. Nusz and Reid are critical to the ongoing stability and development of the business and, therefore, entering into employment agreements with these individuals was advisable. In addition, in light of Mr. Lou’s promotion to Executive Vice President and Chief Financial Officer in 2011 and Mr. Lorentzatos’s promotion to Executive Vice President, General Counsel and Corporate Secretary in 2014, we determined that it was in our best interest to enter into an employment agreement with each of these officers in recognition of their level of responsibility within our organization; however, we have not entered into employment agreements with any of our other employees, and we expect the remainder of our employees to remain "at will."

42



COMPENSATION DISCUSSION AND ANALYSIS

Current Employment Agreements. In 2018, we amended and restated the employment agreements with each of our Named Executive Officers, effective March 20, 2018, in each case, to provide a term of three years that ends on March 20, 2021 and may be renewed upon agreement between us and the executive prior to the end of the term. None of the amended employment agreements, nor the previous agreements in effect in 2018, contains an automatic extension provision.

What the employment agreements do. The employment agreements provide for specified minimum annual base salary rates, which may be increased (but not decreased) by our Board of Directors in its discretion. The employment agreements also provide that the executives are eligible to receive annual performance-based bonuses each year during the employment term. Further, the employment agreements provide the executives with the opportunity to participate in the employee benefit arrangements offered to similarly situated executives and provide that they may periodically receive stock grants pursuant to our long-term incentive compensation plan.

The employment agreements also provide for severance and change in control benefits to be paid to Messrs. Nusz, Reid, Lou and Lorentzatos under certain circumstances and certain post-termination non-compete, non-disclosure and similar obligations. We believe that the interests of our shareholders are best served if we provide separation benefits to eliminate, or at least reduce, the reluctance of executive officers and other key employees to pursue potential corporate transactions that may be in the best interests of our shareholders, but that may have resulting adverse consequences to the employment situations of our executive officers and other key employees. Further, these arrangements ensure an understanding of what benefits are to be paid in the event of termination of employment in certain specified circumstances and/or upon the occurrence of a change in control. Severance benefits are provided to reflect the fact that it may be difficult for executive officers to find comparable employment within a short period of time if they are involuntarily terminated. Change in control benefits are provided in order that the executives may objectively assess and pursue aggressively our interests and the interests of our shareholders with respect to a contemplated change in control, free from personal, financial and employment considerations.

The employment agreements also contain “clawback” provisions that enable us to recoup any compensation that is deemed incentive compensation if required by any law, government regulation, stock exchange listing requirement, or Company policy adopted as required by such law, government regulation, or stock exchange listing requirement.

What the employment agreements do not do. As was the case with the previous employment agreements, the current employment agreements with our Named Executive Officers do not provide for (i) an automatic extension of the term of the agreement or (ii) potential tax gross up payments if a covered executive receives golden parachute payments in connection with a change in control. Instead, the employment agreements include provisions providing that the executive will be required to pay in full any excise taxes associated with any golden parachute payments received, unless reducing the payments to the executive within the Section 280G safe harbor amount would put the executive in a better net after-tax position. In addition, in connection with the 2015 amendments, we removed the provision in the employment agreements providing for the automatic single trigger vesting of unvested equity awards upon the occurrence of a "change in control" (as defined in the LTIP). This provision has been replaced with a double trigger vesting provision, in the event that certain terminations of employment occur within a two-year period following a "change in control," consistent with best market practices.
Clawback Policy
Currently, our equity-based incentive compensation awards and the employment agreements with our Named Executive Officers contain the following provisions for the recoupment of incentive compensation:
Restricted stock and PSU agreements covering grants made to our Named Executive Officers and other service providers in 2011 and later years include language providing that the award may be cancelled and the award recipient may be required to reimburse us for any realized gains to the extent required by applicable law or any clawback policy that we adopt.
The LTIP and the Incentive Plan include provisions specifying that awards under those arrangements are subject to any clawback policy we adopt.
The employment agreements described in more detail under "-Employment Agreements" above contain a clawback provision that enables us to recoup any compensation that is deemed incentive compensation if required by any law, government regulation, stock exchange listing requirement, or Company policy adopted as required by such law, government regulation, or stock exchange listing requirement.

43



COMPENSATION DISCUSSION AND ANALYSIS

Our Compensation Committee is currently evaluating the practical, administrative and other implications of implementing and enforcing a clawback policy, and intends to adopt a clawback policy in compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 once final rules are promulgated by the SEC.
Tax and Accounting Considerations
Section 162(m) of the Code, generally imposes a $1 million limit on the amount of compensation paid to certain executive officers that a public corporation may deduct for federal income tax purposes in any tax year. While we will continue to monitor our compensation programs in light of the deduction limitation imposed by Section 162(m) of the Code, our Compensation Committee considers it important to retain the flexibility to design compensation programs that are in the long-term best interests of the Company and of our shareholders. As a result, the Compensation Committee may conclude that paying compensation that is nondeductible under Section 162(m) of the Code is appropriate. Under prior law, there was an exception to the $1 million deduction limitation for compensation that meets the requirements of “qualified performance-based compensation.” However, pursuant to the “Tax Cuts and Jobs Act,” this exception has been eliminated for tax years after 2017, subject to limited transition relief that applies to certain arrangements in place as of November 2, 2017. Accordingly, no assurance can be given that awards paid in 2018 and later years that were originally intended to qualify for the “qualified performance-based compensation” exception will in fact be deductible.

If an executive is entitled to nonqualified deferred compensation benefits that are subject to Section 409A of the Internal Revenue Code, and such compensation does not comply with Section 409A, then the benefits are taxable in the first year they are not subject to a substantial risk of forfeiture and are subject to certain additional adverse tax consequences. We intend to design any such arrangements with our Named Executive Officers and other service providers to be exempt from, or to comply with, Section 409A.

All equity awards to our employees, including our Named Executive Officers, and to our directors will be granted and reflected in our consolidated financial statements, based upon the applicable accounting guidance, at fair market value on the grant date in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), Topic 718, “Compensation-Stock Compensation.”
Compensation Practices as They Relate to Risk Management
We believe our compensation programs do not encourage excessive and unnecessary risk taking by our executive officers (or other employees) and are not reasonably likely to have a material adverse effect on us. Because our Compensation Committee retains the ability to apply discretion when determining the actual amount to be paid to executives pursuant to our annual performance-based cash incentive program, our Compensation Committee is able to assess the actual behavior of our executives as it relates to risk taking in awarding cash incentive amounts. Further, our use of long-term equity-based compensation serves our compensation program’s goal of aligning the interests and objectives of our executives with those of our shareholders, thereby reducing the incentives to unnecessary risk taking.

44



EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows information concerning the annual compensation for services provided to us by our Named Executive Officers during the fiscal years ended December 31, 2018, 2017, and 2016. 
Name and
Principal Position
 
Year
 
Salary
($)(1)
 
Bonus ($)
 
Stock
Awards
($)(2)
 
Option Awards
($)(3)
 
Non-Equity Incentive Plan Compensation
($)(4)
 
All Other
Compensation
($)(5)
 
Total
($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Thomas B. Nusz
 
2018
 
$
820,000

 
$

 
$
5,422,831

 
$

 
$
984,000

 
$
31,869

 
$
7,258,700

Chairman and
Chief Executive Officer
 
2017
 
$
820,000

 
$

 
$
4,781,421

 
$
350,400

 
$
787,200

 
$
30,267

 
$
6,769,288

 
2016
 
$
820,000

 
$

 
$
2,220,528

 
$

 
$
1,574,400

 
$
21,189

 
$
4,636,117

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Taylor L. Reid
 
2018
 
$
600,000

 
$

 
$
2,846,410

 
$

 
$
600,000

 
$
22,553

 
$
4,068,963

President and Chief Operating Officer
 
2017
 
$
591,667

 
$

 
$
2,532,690

 
$
321,200

 
$
480,000

 
$
24,564

 
$
3,950,121

 
2016
 
$
500,000

 
$

 
$
1,048,956

 
$

 
$
800,000

 
$
19,908

 
$
2,368,864

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Michael H. Lou
 
2018
 
$
480,000

 
$

 
$
2,277,128

 
$

 
$
480,000

 
$
22,114

 
$
3,259,242

Executive Vice
President and Chief Financial Officer
 
2017
 
$
475,000

 
$

 
$
2,025,510

 
$
321,200

 
$
384,000

 
$
22,967

 
$
3,228,677

2016
 
$
420,000

 
$

 
$
881,328

 
$

 
$
672,000

 
$
20,208

 
$
1,993,536

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nickolas J. Lorentzatos
 
2018
 
$
421,250

 
$

 
$
1,512,224

 
$

 
$
340,000

 
$
20,508

 
$
2,293,982

Executive Vice
President, General
Counsel and
Corporate Secretary
 
2017
 
$
378,333

 
$

 
$
1,203,750

 
$
321,200

 
$
243,200

 
$
24,564

 
$
2,171,047

2016
 
$
360,000

 
$

 
$
579,744

 
$

 
$
460,800

 
$
19,908

 
$
1,420,452

  __________________ 
(1)
Reflects the base salary earned by each Named Executive Officer during the fiscal year indicated.
(2)
Reflects the aggregate grant date fair value of restricted stock awards and PSUs granted under our LTIP in the fiscal year indicated, computed in accordance with FASB ASC Topic 718, and does not necessarily reflect the actual value that may be realized by the executive. See Note 15 to our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018 for additional detail regarding assumptions underlying the value of these equity awards. For fiscal year 2018, the grant date fair value for restricted stock awards is based on the closing price of our common stock on January 24, 2018, the grant date for those awards, which was $9.27 per share. The grant date fair value for the PSUs granted on January 24, 2018 was calculated based on the initial number of PSUs granted at a weighted average grant date fair value price per unit of $12.71, as computed using a Monte Carlo simulation model in accordance with FASB ASC Topic 718. Assuming that the highest level of the performance condition is achieved, the grant date fair value for these awards would have been: for Mr. Nusz – $6,746,468, Mr. Reid – $3,291,890, Mr. Lou – $2,633,512, and Mr. Lorentzatos – $1,748,896.
(3)
In May 2017, Messrs. Nusz, Reid, Lou, and Lorentzatos, along with other officers and management employees, were each issued Class B Units in OMP GP LLC, all of which were unvested as of December 31, 2018. We believe that, despite the fact that the Class B Units do not require the payment of an exercise price, they are most similar economically to stock options, and as such, they are properly classified as "options" under the definition provided in Item 402(a)(6)(i) of Regulation S-K as an instrument with an "option-like feature." As discussed under "Executive Compensation—Potential Payments Upon Termination and Change in Control—OMP GP LLC Class B Units" in this proxy statement, the Class B Units in OMP GP LLC are intended to constitute "profits interests" for federal tax purposes and are not traditional options. Amounts included in this column reflect the grant date fair value of the Class B Units, calculated in accordance with FASB ASC Topic 718.
(4)
For fiscal year 2018, reflects amounts earned for services performed in 2018 pursuant to the annual performance-based cash incentive awards granted to the Named Executive Officers under the Incentive Plan. The amounts reported in the table were paid to the Named Executive Officers in February 2019. The

45



EXECUTIVE COMPENSATION

awards are described in more detail above under "—Compensation Discussion and Analysis—2018 Executive Compensation Decisions—Annual Performance-Based Cash Incentive Awards."
(5)
The following items are reported in the “All Other Compensation” column for fiscal year 2018:
Name
 
Parking
 
401(k)  Plan
Match
 
 
Tax Reimbursement(a)
 
Total
Thomas B. Nusz
 
$
4,008

 
$
16,500

 
 
$
11,361

 
$
31,869

Taylor L. Reid
 
$
4,008

 
$
16,500

 
 
$
2,045

 
$
22,553

Michael H. Lou
 
$
4,008

 
$
16,500

 
 
$
1,606

 
$
22,114

Nickolas J. Lorentzatos
 
$
4,008

 
$
16,500

 
 

 
$
20,508

 __________________ 
(a) Represents tax payments made in respect of imputed income for executives and persons accompanying executives on a Company-contracted aircraft for business entertainment purposes. No incremental cost was incurred by the Company for travel by accompanying persons. The Company does not allow Company-contracted aircraft to be used for personal travel; however, in limited circumstances, we have permitted an executive’s family member to accompany the executive on a flight when the executive is traveling for business.
Grants of Plan-Based Awards
The following table sets forth information concerning grants of plan-based awards to each of our Named Executive Officers under the LTIP during fiscal year 2018.
Name
 
Grant Date
 
Date of
Compensation
Committee
Action (if
different from
Grant Date)
 
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(1)
 
Estimated Future Payouts Under Equity Incentive Plan Awards(2)
(In Shares)
 
All Other
Stock Awards:
 Number of
Shares
of
Stock or Units
(#)(3)
 
Grant Date Fair Value of Stock and Option Awards
($)(4)
Threshold
 
Target
 
Maximum
 
Threshold
 
Target
 
Maximum
 
 
Thomas B. Nusz
 
1/24/2018
 
12/14/2017
 
 
 
 
 
 
 
 
 
 
 
 
 
221,100

 
$
2,049,597

 
 
1/24/2018
 
12/14/2017
 
 
 
 
 
 
 
39,810

 
286,632

 
530,800

 
 
 
$
3,373,234

 
 
 
 
 
 
$
492,000

 
$
984,000

 
$
1,968,000

 
 
 
 
 
 
 
 
 
 
Taylor L. Reid
 
1/24/2018
 
12/14/2017
 
 
 
 
 
 
 
 
 
 
 
 
 
129,500

 
$
1,200,465

 
 
1/24/2018
 
12/14/2017
 
 
 
 
 
 
 
19,425

 
139,860

 
259,000

 
 
 
$
1,645,945

 
 
 
 
 
 
$
300,000

 
$
600,000

 
$
1,200,000

 
 
 
 
 
 
 
 
 
 
Michael H. Lou
 
1/24/2018
 
12/14/2017
 
 
 
 
 
 
 
 
 
 
 
 
 
103,600

 
$
960,372

 
 
1/24/2018
 
12/14/2017
 
 
 
 
 
 
 
15,540

 
111,888

 
207,200

 
 
 
$
1,316,756

 
 
 
 
 
 
$
240,000

 
$
480,000

 
$
960,000

 
 
 
 
 
 
 
 
 
 
Nickolas J. Lorentzatos
 
1/24/2018
 
12/14/2017
 
 
 
 
 
 
 
 
 
 
 
 
 
68,800

 
$
637,776

 
 
1/24/2018
 
12/14/2017
 
 
 
 
 
 
 
10,320

 
74,304

 
137,600

 
 
 
$
874,448

 
 
 
 
 
 
$
170,000

 
$
340,000

 
$
680,000

 
 
 
 
 
 
 
 
 
 
   __________________ 
(1)
Represents annual performance-based cash incentive awards granted under the Incentive Plan during fiscal year 2018 for services performed in 2018. The awards were paid at the "target" level for each Named Executive Officer, as reported in the "Non-Equity Incentive Plan Compensation" column of the Summary Compensation Table for 2018. The awards (including performance goals and targets) are described in more detail above under “—Compensation Discussion and Analysis—Annual Performance-Based Cash Incentive Awards.”

46



EXECUTIVE COMPENSATION

(2)
Reflects PSUs granted under our LTIP in 2018. Amounts reported (a) in the “Threshold” column reflect 15% of the initial number of PSUs granted in 2018, which is the minimum amount payable under the PSU awards (assuming a TSR rank of 13th of 14 peers), (b) in the “Target” column reflect 108% of the initial number of PSUs granted in 2018, which is the target amount payable under the PSU awards (assuming a TSR rank of 7th of 14 peers), and (c) in the “Maximum” column reflect 200% of the initial number of PSUs granted in 2018, which is the maximum amount that may be earned pursuant to the awards (assuming a TSR rank of 1st of 14 peers). If relative TSR is below the 15th percentile, then 0% of the initial number of PSUs granted in 2018 will be earned. The number of our common shares actually received by the Named Executive Officer at the end of each designated performance period may vary from the initial number allocated to that period, based on our relative TSR as compared to the TSR of the other peer group companies. The PSUs are subject to designated two-year, three-year, and four-year performance periods, each of which began on January 24, 2018. The PSUs (including performance goals and targets) are described in more detail above under “—Compensation Discussion and Analysis—2018 Executive Compensation Decisions—Long-Term Equity-Based Incentives.”
(3)
Reflects restricted stock awards granted under our LTIP in 2018. These awards will vest over a three-year period. The first 1/3 tranche vested on January 24, 2019, the second 1/3 tranche will vest on January 24, 2020, and the final 1/3 tranche will vest on January 24, 2021, in each case, subject to the Named Executive Officer's continued employment. The awards are described in more detail above under “—Compensation Discussion and Analysis—2018 Executive Compensation Decisions—Long-Term Equity-Based Incentives.”
(4)
Reflects the aggregate grant date fair value of restricted stock awards and PSUs granted under our LTIP in the fiscal year indicated, computed in accordance with FASB ASC Topic 718, and does not necessarily reflect the actual value that may be realized by the executive. See Note 15 to our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018 for additional detail regarding assumptions underlying the value of these equity awards. For fiscal year 2018, the grant date fair value for restricted stock awards is based on the closing price of our common stock on January 24, 2018, the grant date for those awards, which was $9.27 per share. The grant date fair value for the PSUs granted on January 24, 2018 was calculated based on the initial number of PSUs granted at a weighted average grant date fair value price per unit of $12.71, as computed using a Monte Carlo simulation model in accordance with FASB ASC Topic 718.

47



EXECUTIVE COMPENSATION

Outstanding Equity Awards at Fiscal Year End
The following table sets forth information concerning outstanding equity awards held by each of our Named Executive Officers as of December 31, 2018.
 
 
Stock Awards
 
Option Awards
 
 
Restricted Stock Awards
 
PSUs
 
GP Unit Awards
Name
 
Number of Shares of Stock
That Have
Not Vested(1)
 
Market Value of 
Shares of Stock
That Have
Not Vested(2)
 
Equity Incentive  Plan Awards:
Number of
Unearned Shares
that Have
Not Vested(3)
 
Equity Incentive
Plan Awards: Market or
Payout Value of
Unearned Shares
that Have
Not Vested(4)
 
Number of Securities Underlying Unexercised Options Unexercisable(5)
 
Option Exercise Price(6)
 
Option Expiration Date(6)
Thomas B. Nusz
 
468,834

 
$
2,592,652

 
829,488

 
$
4,587,071

 
12,000

 
N/A
 
N/A
Taylor L. Reid
 
268,447

 
$
1,484,512

 
382,893

 
$
2,117,398

 
11,000

 
N/A
 
N/A
Michael H. Lou
 
219,940

 
$
1,216,268

 
312,074

 
$
1,725,767

 
11,000

 
N/A
 
N/A
Nickolas J. Lorentzatos
 
138,020

 
$
763,251

 
201,605

 
$
1,114,877

 
11,000

 
N/A
 
N/A
__________________  
(1)Includes the following outstanding restricted stock awards held by our Named Executive Officers:
Name
 
One-Time
Retention Grant (a)
 
2016 Annual Award (b)
 
2017 Annual Award (c)
 
2018 Annual Award (d)
 
Total
Thomas B. Nusz
 
64,400

 
93,467

 
89,867

 
221,100

 
468,834

Taylor L. Reid
 
38,580

 
47,767

 
52,600

 
129,500

 
268,447

Michael H. Lou
 
34,140

 
40,133

 
42,067

 
103,600

 
219,940

Nickolas J. Lorentzatos
 
17,820

 
26,400

 
25,000

 
68,800

 
138,020

(a)