DEF 14A 1 d675130ddef14a.htm DEF 14A DEF 14A
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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.     )

 

 

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Preliminary Proxy Statement

 

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

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under §240, Rule 14a-12

Anadarko Petroleum Corporation

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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LOGO

TO OUR STOCKHOLDERS:

The 2019 Annual Meeting of Stockholders of Anadarko Petroleum Corporation will be held at 1201 Lake Robbins Drive, The Woodlands, Texas, 77380 on Tuesday, May 14, 2019, at 5:00 p.m. (Central Daylight Time).

The attached Notice of Annual Meeting of Stockholders and proxy statement provide information concerning the matters to be considered at the Annual Meeting. The Annual Meeting will cover only the business contained in the proxy statement and will not include a management presentation.

Pursuant to rules promulgated by the U.S. Securities and Exchange Commission, we are also providing access to our proxy materials over the Internet. As a result, we are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials (Notice) instead of a paper copy of this proxy statement, a proxy card and our 2018 annual report. The Notice contains instructions on how to access those documents over the Internet, as well as instructions on how our proxy materials. All stockholders who do not receive a Notice should receive a paper copy of the proxy materials by mail. We believe that the Notice process allows us to provide our stockholders with information in a more timely manner, reduces our printing and mailing costs, and helps to conserve natural resources.

Your Vote is Important

Your vote is important and we encourage you to vote even if you are unable to attend the Annual Meeting. You may vote by Internet or by telephone using the instructions on the Notice or, if you received a paper copy of the proxy card, by signing and returning it in the postage-paid envelope provided for your convenience. You may also attend and vote at the Annual Meeting.

 

Very truly yours,

 

LOGO

R. A. WALKER

Chairman of the Board

and Chief Executive Officer

 

LOGO

www.anadarko.com


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LOGO

1201 Lake Robbins Drive

The Woodlands, Texas 77380

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

DATE:

Tuesday, May 14, 2019

TIME:

5:00 p.m. (Central Daylight Time)

PLACE:

1201 Lake Robbins Drive

The Woodlands, Texas, 77380

RECORD DATE:

March 19, 2019

If you are a holder of record of common stock at the close of business on March 19, 2019, the record date, then you are entitled to receive notice of and to vote at the Annual Meeting.

AGENDA:

 

  (1)

elect the twelve directors named in this proxy statement;

 

 

  (2)

ratify the appointment of KPMG LLP as the Company’s independent auditor for 2019;

 

 

  (3)

approve the Anadarko Petroleum Corporation 2019 Omnibus Incentive Compensation Plan;

 

 

  (4)

approve, on an advisory basis, the Company’s named executive officer compensation;

 

 

  (5)

if presented, vote on the stockholder proposal set forth on pages 90 through 93 in the accompanying proxy statement; and

 

 

  (6)

transact such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof.

 
 

 

YOUR VOTE IS IMPORTANT:

Please take the time to vote by following the Internet or telephone voting instructions provided. If you received a paper copy of the proxy card, you may also vote by completing and mailing the proxy card in the postage-paid envelope provided for your convenience. You may also attend and vote at the Annual Meeting. You may revoke your proxy at any time before the polls close at the Annual Meeting by following the instructions in this proxy statement.

As a stockholder, your vote is very important and the Company’s Board of Directors strongly encourages you to exercise your right to vote.

BY ORDER OF THE BOARD OF DIRECTORS

LOGO

Philip H. Peacock

Vice President, Deputy General Counsel,

Corporate Secretary and Chief Compliance Officer

March 29, 2019

The Woodlands, Texas

 

Important Notice Regarding the Availability of Proxy Materials

for the Annual Meeting of Stockholders to be Held on May 14, 2019:

The proxy statement and annual report for 2018 are available at

https://materials.proxyvote.com/032511

 

 

 


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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 and Section 21E of the Securities Exchange Act of 1934. Anadarko believes that its expectations are based on reasonable assumptions. No assurance, however, can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this proxy statement, including Anadarko’s ability to successfully complete the share-repurchase or debt-reduction programs; and to successfully plan, secure additional government and partner approvals, enter into additional long-term sales contracts, take FID and the timing thereof, finance, build and operate the necessary infrastructure and LNG park in Mozambique. See “Risk Factors” in Anadarko’s 2018 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings and press releases. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements.


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Table of Contents

 

 

 

 

LETTER FROM THE LEAD DIRECTOR

     2  

PROXY SUMMARY

     3  

ANADARKO BOARD OF DIRECTORS

     12  

ITEM 1 – Election of Directors

     12  

CORPORATE GOVERNANCE

     19  

Board and Committee Governance

     19  

Board Leadership Structure

     19  

CEO Succession Planning

     20  

Board Oversight

     20  

Board Oversight of Risk

     20  

Environmental, Social and Governance Matters

     20  

Compensation Committee Risk Assessment

     21  

Committees of the Board

     22  

Board of Directors

     24  

Director Independence

     24  

Director Nominee Selection Process

     24  

Annual Board Evaluation Process

     26  

Director Continuing Education

     26  

Communication with Directors of the Company

     26  

Stockholder Participation in the Selection of Director Nominees

     26  

Compensation and Benefits Committee Interlocks and Insider Participation

     27  

Director Compensation

     27  

Director Compensation Table for 2018

     29  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     31  

Directors, Director Nominees and Executive Officers

     31  

Certain Beneficial Owners

     33  

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     34  

AUDIT COMMITTEE REPORT

     35  

COMPENSATION AND BENEFITS COMMITTEE REPORT ON 2018 EXECUTIVE COMPENSATION

     36  

LETTER FROM THE CHAIR OF THE COMPENSATION AND BENEFITS COMMITTEE

     37  

COMPENSATION DISCUSSION AND ANALYSIS

     38  

Executive Summary

     38  

2018 Compensation Framework Emphasizes Performance-Based Pay

     44  

2018 Compensation Structure and Decisions Link Direct Compensation Elements to Strategy and Outcomes

     46  

Base Salary

     46  

Performance-Based Annual Incentive Program (AIP)

     46  

Equity-Based Compensation

     50  

How We Make Compensation Decisions

     52  

Indirect Compensation Elements

     54  

Agreement with CEO

     58  

Stock Ownership Requirements

     58  

Clawback Policy

     59  

Regulatory Requirements

     59  

Conclusion

     59  

EXECUTIVE COMPENSATION

     60  

Summary Compensation Table

     60  

All Other Compensation Table for 2018

     61  

Grants of Plan-Based Awards in 2018

     62  

Outstanding Equity Awards at Fiscal Year-End 2018

     64  

Option Exercises and Stock Vested in 2018

     66  

Pension Benefits for 2018

     66  

Non-Qualified Deferred Compensation for 2018

     70  

Potential Payments Upon Termination or Change of Control

     72  

CEO PAY RATIO

     78  

TRANSACTIONS WITH RELATED PERSONS

     79  

INDEPENDENT AUDITOR

     80  

ITEM 2 — Ratification of the Appointment of the Independent Auditor

     80  

2019 OMNIBUS INCENTIVE COMPENSATION PLAN

     81  

ITEM 3 — Approval of the 2019 Omnibus Incentive Compensation Plan

     81  

ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

     89  

ITEM 4 —  Advisory Vote to Approve the Company’s Named Executive Officer Compensation

     89  

STOCKHOLDER PROPOSAL

     90  

ITEM 5 — Stockholder Proposal — Paris Compliant Business Plan

     90  

GENERAL INFORMATION

     94  

Questions and Answers About the Annual Meeting

     94  

APPENDIX A – Additional Information

     A-1  

APPENDIX B – 2019 Omnibus Incentive Compensation Plan

     B-1  
 

 

 

  


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LOGO

1201 Lake Robbins Drive

The Woodlands, Texas 77380

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

May 14, 2019

 

We are furnishing you this proxy statement in connection with the solicitation of proxies by our Board of Directors (Board) to be voted at the 2019 Annual Meeting of Stockholders (Annual Meeting) of Anadarko Petroleum Corporation, a Delaware corporation, sometimes referred to herein as the Company, Anadarko, us, we or like terms.

The Annual Meeting will be held on Tuesday, May 14, 2019, at 5:00 p.m. (Central Daylight Time). The proxy materials, including this proxy statement, proxy card or voting instructions and our 2018 annual report, are being distributed and made available on or about March 29, 2019.

We provide our stockholders access to our proxy materials on the Internet (https://materials.proxyvote.com/032511). Accordingly, a Notice of Internet Availability of Proxy Materials (Notice) will be mailed to most of our stockholders on or about March 29, 2019.

 

Stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request a printed set of the proxy materials to be sent to them by following the instructions in the Notice.

The Notice also provides instructions on how to inform us whether to send future proxy materials to you electronically by e-mail or in printed form by mail. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail or printed form will remain in effect until you terminate or change it.

Choosing to receive future proxy materials by e-mail allows us to provide you with the information you need in a more timely manner, saves us the cost of printing and mailing documents to you, and conserves natural resources.

 

 

 

LOGO      1  


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Letter from the Lead Director

 

 

 

Dear Fellow Stockholder:

On behalf of the Anadarko Board of Directors, we would like to thank you for your continued investment in Anadarko. We remain focused on overseeing the successful execution of Anadarko’s long-term strategy, and are committed to delivering capital-efficient growth while returning capital to stockholders.

As a Board, we regularly review the Board’s composition as well as the individual directors’ skillsets, including a thorough annual review of the Board, its committees and each director, for alignment with Anadarko’s long-term strategy and to ensure that we are able to continue providing the most effective oversight on behalf of stockholders. We have a highly qualified and experienced Board that is diverse in terms of not just skills and background, but also personal characteristics such as race and gender. We have refreshed our Board over the years with fresh perspectives complementing our existing directors’ skillsets, experience and institutional knowledge. In 2018, we were pleased to welcome Alexandra Pruner and Michael Grimm to the Board. Both bring a variety of diverse experiences and perspectives to the table, and bolster our Board’s ability to continue to effectively oversee Anadarko’s strategy, as well as other matters important to our ability to succeed over the long-term.

Our Board’s deliberations have for many years been informed by feedback from our stockholders gained through regular, proactive engagement. We greatly value our engagements with stockholders and, since 2012, Anadarko has regularly reached out to at least its 50 largest stockholders to solicit feedback on corporate governance, executive compensation, sustainability and environmental issues, among other matters. These discussions have resulted in changes to the Company’s governance and compensation practices over the years, including enhancements to the 2018 compensation programs to increase focus on capital efficiency and safety performance.

During the spring of 2018, Anadarko sought feedback from stockholders owning approximately 64% of the Company’s outstanding common stock. Additionally, in the fall of 2018 Anadarko sought feedback from stockholders owning approximately 58% of the Company’s outstanding common stock. These conversations helped inform the Board’s views on several issues, including enhanced climate change risk reporting, and resulted in a 2018 Climate Change Risk Assessment and Management Report, which, when published in November 2018, reflected the valuable input of our stockholders. Investors also provided very positive feedback on the report in subsequent discussions, as well as additional helpful feedback for our Board to consider going forward.

I encourage you to read more about our Board of Directors, Anadarko’s corporate governance practices and executive compensation discussed in this proxy statement. Thank you for your continued support and valued input.

LEAD DIRECTOR

 

LOGO

H. Paulett Eberhart

 

 

2    LOGO


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Proxy Summary

 

 

 

This summary highlights information contained elsewhere in the proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. For more complete information regarding the Company’s 2018 performance, please also review the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

2019 Annual Meeting of Stockholders:

 

Date and Time:

   Tuesday, May 14, 2019, at 5:00 p.m.

Location:

  

1201 Lake Robbins Drive

The Woodlands, Texas 77380

Record Date:

   March 19, 2019

Mail Date:

   March 29, 2019

Proposals and Board Recommendations:

 

Proposal  

        Board Vote        

        Recommendation        

  

Page      

Reference      

1. Election of the Twelve Directors Named in this Proxy Statement

      FOR EACH    

    DIRECTOR    

    NOMINEE    

   12    

Management Proposals

    

2. Ratification of KPMG LLP as Independent Auditor for 2019

      FOR        80    

3. Approve 2019 Omnibus Incentive Compensation Plan

      FOR        81    

4. Approve, on an Advisory Basis, the Company’s Named Executive Officer 2018 Compensation

      FOR        89    

Stockholder Proposal

    

5. Paris Compliant Business Plan

      AGAINST        90    

Director Nominees:

 

Name   Age   Director
Since
  Independent   Audit
Committee
  Compensation
and Benefits
Committee
  Governance
and Risk
Committee
  Executive
Committee

Anthony R. Chase

      64       2014   Yes   M      

David E. Constable

      57       2016   Yes       M  

H. Paulett Eberhart*

      65       2004   Yes       C   M

Claire S. Farley

      60       2017   Yes       M  

Peter J. Fluor

      71       2007   Yes     M    

Joseph W. Gorder

      61       2014   Yes     C     M

John R. Gordon

      70       1988   Yes   M      

Sean Gourley

      39       2015   Yes       M  

Michael K. Grimm

      64       2018   Yes     M    

Eric D. Mullins

      56       2012   Yes   C       M

Alexandra Pruner

      57       2018   Yes   M      

R. A. Walker (CEO)

      62       2012   No               C

*Lead Director

C=Chair

M=Member

 

 

LOGO      3  


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Proxy Summary

 

 

 

Our Mission and Strategy

Our objective is to deliver competitive and sustainable returns to stockholders by:

 

  exploring for, developing and commercializing oil and natural gas resources vital to the world’s health and welfare;

 

  ensuring health, safety, and environmental excellence; and

 

  focusing on financial discipline, flexibility, and value creation;

while demonstrating the Company’s core values of integrity and trust, servant leadership, people and passion, commercial focus, and open communication in all that we do.

Executing on Our Strategy

Exercising capital efficiency is a foundational principle to deliver on our strategy. We allocate capital at the asset level based on expected return, and measured on a per debt-adjusted share (DAS) basis for Company performance. We strive to create attractive returns on, and of, capital by:

 

  investing within cash flow, which has been a foundational principle of our strategy for over a decade, based on a $50 oil and $3 natural gas environment;

 

  returning capital to stakeholders if realized prices are higher than expected, versus materially increasing our investment plans; and

 

  producing value and growth from investments that generate peer-leading per DAS corporate performance.

2018 Highlights

In 2018 we delivered on our commitment to increase the return of cash to investors through repurchasing stock, retiring debt and increasing our dividend:

 

  Expanded Share Repurchase Program We expanded our share-repurchase program to $5 billion in November 2018 and have completed $3.75 billion of share repurchases since the inception of the program in September 2017.

 

  Increased Debt-Reduction Program We increased our debt-reduction program to $2 billion in November 2018 and retired more than $600 million of debt during 2018.

 

  Increased Dividend 500% During 2018, the Board increased the per-share quarterly dividend paid to our common stockholders from 5 cents to 30 cents.

 

  Progressed LNG Development in Mozambique In February 2018, the Government of Mozambique approved the Development Plan for the Anadarko-operated, initial two-train Golfinho/Atum
   

liquefied natural gas (LNG) project in Mozambique. In addition, we selected the preferred offshore construction and installation contractor and major infrastructure and resettlement projects continue to proceed. Also during 2018 and subsequent to year end, LNG sales and purchase agreements were executed, increasing contracted volumes to more than 9.5 million tonnes per annum (MTPA). In light of this progress, the Company formally launched project financing in December 2018 and is working to finalize arrangements with lenders and secure all required partner and government-related approvals. The Company is on schedule to make a final investment decision on the project, which is expected to provide significant cash flow over the long term once LNG is achieved, during the first half of 2019.

 

  Announced Midstream Asset Sale In November 2018, we announced a transaction to sell substantially all of our remaining midstream assets to Western Gas Partners, LP for consideration valued at approximately $4 billion. The transaction closed in February 2019 and we received approximately $2 billion of cash proceeds and 45,760,201 common units of Western Midstream Partners, LP as consideration for the sale.

 

 

LOGO

Corporate Governance

We Seek and Respond to Stockholder Feedback

Our stockholders’ views on executive compensation and corporate governance are important to us, and we value and incorporate their feedback and insights.

Since 2012, we have contacted at least our 50 largest stockholders’ governance and voting teams a minimum of twice a year to solicit feedback on Anadarko’s executive compensation programs, as well as corporate governance, sustainability and environmental issues and other matters. We are proud of our strong track record of engaging with stockholders and responding to the feedback received. For a full discussion of our stockholder engagement process, see page 42.

 

 

 

4    LOGO


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Proxy Summary

 

 

 

Twice last year, in the spring and again in the fall, we sought feedback from stockholders owning almost 64% and 58% of the Company’s outstanding

common stock, respectively. In addition to management, our Lead Director participated in the conversations with certain stockholders.

 

 

Corporate Governance Highlights

The Board monitors emerging best practices in corporate governance in order to incorporate them into its process to enhance value for our stockholders. Through such efforts, as well as in response to stockholder feedback, we have implemented or enhanced the following practices:

 

  Annual election of all directors        Strong stock ownership requirements

  Majority vote standard in uncontested elections        No poison pill

  Proxy Access        No pledging or hedging of Company securities

  Independent Board other than CEO        Expanded disclosure on political expenditures

  Independent Lead Director        Board oversight of ESG matters

Board Refreshment and Experience

 

The Board is committed to continuous improvement and employs a rigorous process to ensure that the composition of the Board is diverse, balanced and aligned with the evolving needs of the Company.

The Board assesses the diversity of the directors’ experience, expertise, perspective, tenure and age, among other attributes, to ensure it has an appropriate mix of skills and experience to fulfill its oversight obligations.

The Board also considers the Company’s long-term strategy when evaluating which specific skills and experience are required and weighs those skills when evaluating the current and potential directors.

As part of the evaluation of the directors’ skills and experience, the Board reviews a director skillset chart which identifies expertise, experience and other characteristics

that contribute to an effective and well-functioning board. This chart, which can be found on page 25, summarizes the various skills and experience of each director and helps the Board ensure the requisite skills are appropriately represented among the directors as a group and individually.

In addition, each year, the Board and its committees conduct evaluations of their performance and of each director. They consider the results of the evaluations when assessing the qualifications of the Board.

As a result of this thorough evaluation process, in 2018 the Board appointed Alexandra Pruner and Michael Grimm to the Board. These new directors bring diverse experiences and perspectives to the Board.

 

 

Composition of Independent Directors*

 

LOGO

 

*

As of December 31, 2018

 

 

LOGO      5  


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Proxy Summary

 

 

 

 

Environmental, Social and Governance Highlights

We are committed to operating in a sustainable manner and proactively working with the communities in which we operate. We recognize our responsibility to operate safely in

order to protect public health, the environment, and our employees and contractors, while finding and producing the oil and natural gas resources that fuel modern life. Our core values form the foundation for all that we do and provide a path toward sustainability.

 

 

 

Oversight and Engagement

 

Board Oversight of Environmental, Social and Governance (ESG) Matters. The Governance and Risk Committee provides oversight regarding our exposure to environmental and social risk, including climate-related risk. In their oversight roles, the Governance and Risk Committee and the full Board consider the outcomes of scenario analyses and review policy initiatives and actions related to climate risk. In addition, the Company has the following management committees that report to the Governance and Risk Committee:

 

•  Greenhouse Gas (GHG) and Air Quality Committee – evaluates and takes actions to manage and reduce emissions, improve air quality and share information relevant to evolving GHG policies and issues;

 

•  Hydraulic Fracturing Committee – assists management with recommendations on the use of hydraulic fracturing fluid formulations and disclosure by third-party vendors; and

 

•  Water Committee – focuses on water strategy development and implementation pertaining to data management, prudent use, sourcing, technology development, advocacy and communication.

 

 

LOGO

 

Stakeholder Engagement on ESG Matters. We work to maintain a constructive dialogue with our stakeholders on ESG matters. Since 2012, we have contacted at least our 50 largest stockholders’ governance and voting teams a minimum of twice per year to solicit feedback on governance, executive compensation, sustainability and the environment. In addition, as described under “Enhanced Disclosure – Sustainability Report,” in 2018-2019 we also conducted an assessment of relevant ESG factors and preferred reporting mechanisms across our stakeholder base to inform our future ESG reporting and actions.

 

 

Recent Enhancements

2018 Climate Change Risk Assessment and Management Report. At our 2018 Annual Meeting of Stockholders (2018 Annual Meeting), a stockholder proposal requesting a climate change risk assessment received approximately 52% support. We have maintained a robust dialogue with our stockholders on this topic over time, and continued these conversations in the weeks leading up to the 2018 Annual Meeting and in the months following.

The Climate Change Risk Assessment and Management report that the Company published in November 2018 incorporates stockholder feedback and highlights our efforts to assess and manage climate-related risks in our business. The report can be found on our website at www.anadarko.com/climatechange.

The report was informed by the recommendations put forth by the Task Force on Climate-related Financial Disclosures (TCFD). At various stages of the drafting process, the report was reviewed and discussed by the internal Risk Council, the Chief Executive Officer (CEO) and other executive management, and the Governance and Risk Committee prior to its review and approval by the full Board. The report addresses:

 

  Climate Risk Management – discussions of how climate-related risk assessments are incorporated into Anadarko’s approach to governance and risk management through a long-standing ERM process overseen by the Board;

 

  Scenario Analysis – an evaluation of the Company’s portfolio against the scenarios published in the International Energy Agency’s 2017 World Energy Outlook;

 

  Key Emissions Metrics – data on various metrics, including three years of GHG emissions data (scope 1, 2, and 3); and

 

  Actions Taken – examples of large-scale facility design changes and other upgrades to existing facilities across the Company to reduce emissions in our operations and improve the environmental performance of our activities.

Enhanced Disclosure. We continue to enhance our disclosure on ESG matters important to our stakeholders, including:

 

 

ESG Metrics Scorecard – In response to stockholder feedback, we now publish enhanced quantitative data on

 

 

 

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Proxy Summary

 

 

 

    select ESG metrics critical to measuring our performance as a corporate citizen, including global GHG emissions, water usage, health and safety, and social performance. The scorecard can be found at www.anadarko.com/Corporate-Responsibility/Metrics.

 

  Website Disclosure – We continue to enhance the information available in the Corporate Responsibility section of our website and to work collaboratively with a number of third-party providers of ESG reports and ratings to ensure we transparently provide the appropriate information to improve the accuracy of their data.

 

  Sustainability Report – In 2019, we plan to release a newly designed Corporate Responsibility and ESG Report. Development of this report is being guided by an assessment undertaken in late 2018 and early 2019 to collect and understand feedback on current and future ESG disclosures from a variety of stakeholders, including stockholders. Through online surveys and phone interviews, we gathered valuable input on the ESG factors most important to our stakeholders, preferred reporting mechanisms, and an improved understanding of how ESG factors may contribute to our valuation. We look forward to sharing the results of this assessment with the release of our new report later this year.

ESG Areas of Focus

Climate Change. We are committed to being good stewards of the environment. The Company’s climate strategy is to reduce both emissions of methane and other GHGs from our operations, and the environmental footprint of our activities. We believe this strategy is in the best interests of the environment, our Company and our stakeholders. We actively monitor climate-related issues and potential policy changes as a means to assess and manage potential risks.

We have a history of supporting emissions reduction and climate-related research. These efforts include a program we helped pioneer with other industry partners, the Environmental Defense Fund, and state regulatory officials in Colorado, aimed at identifying next-generation technologies that will improve methane-emissions monitoring from oil and natural gas operations.

Environmental, Health and Safety. Safety and concern for the environment and the health and well-being of all our employees and other stakeholders is fundamental to delivering sustainable, positive economic performance.

Our Environmental, Health and Safety policies establish our standards and expectations for all employees. These policies codify our standards for respecting and protecting the public, our employees, our contractors and the

environment. Both contractually and from a relationship perspective, we expect our contractors, suppliers, agents and service providers to maintain business practices that are comparable with our own. We monitor our performance under these policies with the Board’s Governance and Risk Committee, which has responsibility for reviewing and discussing with management the Company’s environmental, health and safety programs.

We continue to have a strong focus on safety, and that commitment is reflected in the Company’s Annual Incentive Program (AIP) metrics discussed beginning on page 46. We are committed to being an industry leader in this area and continually benchmark, using publicly available data, against our peers on safety performance, best practices, and measurements. Examples of our key safety practices include our LiveSAFE and SafeStart programs, as well as Stop Work Authority, which empowers all employees and contractors to stop work immediately if something is deemed unsafe until the matter has been resolved.

Human Rights. We recognize that as a responsible global operator, it is our obligation to respect human rights and comply with all applicable laws. In addition:

 

  We require that our contractors adopt sound human rights practices designed to treat workers fairly and with dignity and respect, while providing a safe and healthy environment, conducting business in compliance with applicable environmental and labor laws, and refraining from corrupt practices. In addition, we require our contractors to ensure that inhumane living conditions are prevented and prohibited with regard to their employees and contractors;

 

  We require our contractors to remain in compliance with all applicable laws, including those relating to the prohibition, prevention and eradication of forced, bonded, indentured, involuntary convict or compulsory labor, as well as illegal child labor, in their facilities and in connection with the services they provide us; and

 

  Similarly, we strongly support the eradication of any practices that enable, promote or sustain human trafficking. We reject human trafficking and modern day slavery in all its forms.

Human Capital Management and Corporate Culture. The Company strives to maintain a culture of openness, honesty, fairness and accountability, which starts at the Board level. Our Corporate Governance Guidelines outline the expectations that the Board establish and promote policies that encourage this culture. The policies apply to the Board as well as to relationships among and between the Board, and our stockholders and employees.

 

 

 

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ESG Reporting

We recognize that ESG reporting is an area of interest for our stakeholders, and in recent years we have made significant strides in improving overall transparency. We continue to take steps to enhance our disclosure on ESG matters important to our stakeholders.

We provide information regarding our ESG practices through a number of different resources. As a member of IPIECA, we look to the 2015 Oil and Gas Industry Guidance on Voluntary Sustainability Reporting as well as the Global Reporting Initiative’s (GRI) 2016 Consolidated Set of Sustainability Reporting Standards for direction on sustainability topics for inclusion.

Additional information regarding Anadarko’s ESG practices is available in the following areas:

Corporate Responsibility Website

www.anadarko.com/Corporate-Responsibility/

2017 HSE and Sustainability Report

www.anadarko.com/content/documents/apc/Responsibility/2017_HSE_Report.pdf

2018 Climate Change Risk Assessment and Management Report

www.anadarko.com/content/documents/apc/Responsibility/ClimateChange-RiskAssess-Mngt-FINAL.pdf

ESG Metrics Scorecard

www.anadarko.com/Corporate-Responsibility/Metrics/

 

 

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Executive Compensation

Pay for Performance Philosophy

Our compensation programs are based on metrics aligned with our corporate strategy and designed to align our executives’ interests with those of our long-term stockholders.

2018 Compensation Results

As shown in the charts below, in 2018, compensation for our executive officers continued to be delivered in line with our performance outcomes.

For 2018, the AIP performance targets were set at challenging levels, with strong year-over-year performance required in key operational, financial and safety metrics for target payouts to occur. The Company performed well

against our core operational, financial and safety measures for 2018, and also achieved significant milestones towards a final investment decision related to the LNG development project in Mozambique. Accordingly, AIP awards for the executive officers were above target.

Our performance-based long-term awards are based on relative total stockholder return (TSR) performance, and we placed eighth in the 12-company peer group for the three-year period ended December 31, 2018. As a result, the incentive compensation realized by our executive officers for performance units (PU) was substantially below target and grant date value.

For a full discussion, including discussion of the Compensation Committee’s adjustment to increase the AIP score, see Compensation Discussion and Analysis beginning on page 38.

 

 

 

 

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Proxy Summary

 

 

 

CEO Realized Pay Demonstrates Alignment with Company Performance. Consistent with our pay-for-performance philosophy, 91% of the CEO’s total direct compensation is at-risk. Accordingly, the value that is intended to be received by the CEO is aligned with the Company’s actual operational and financial performance, including its stock-price performance. As demonstrated below, the value actually received by the CEO can differ substantially from grant date values, which are calculated and reported in the Summary Compensation Table (SCT) and related proxy tables as required by the SEC.

Cumulative realized pay for the CEO over the last three years was less than one-half of the aggregate target value, demonstrating the efficacy of our plan’s pay-for-performance construction.

 

 

LOGO

The chart above compares reported pay and realized pay for 2016, 2017 and 2018. The amounts include each direct compensation element, i.e., salary, non-equity incentive plan compensation/bonus, performance units, restricted stock units and non-qualified stock options. The SCT column in the chart depicts the data reported in the 2018 SCT, while the Realized column depicts the actual value received (or vested) by the CEO in each year, including actual performance-based compensation paid for prior performance periods. The methodology for calculating realized pay for purposes of this chart is more fully described in the table on Appendix A.

 

 

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Proxy Summary

 

 

 

Elements of our 2018 Compensation Program

 

Component

   Award    Performance Metrics    Purpose

Base Salary

   Cash    N/A    Provides a fixed level of competitive compensation to attract and retain executive talent.

Annual Incentive

Program (AIP)

   Cash   

Operational

•  Reserve Additions Growth per DAS

•  Sales Volume Growth per DAS

   Replacing proved reserves is essential for an exploration and production company. Reserve growth is measured on a debt-adjusted share basis to determine whether reserves are being replaced in a capital-efficient manner that is accretive to stockholder value. Sales volumes reflect the conversion of reserves into operating cash flows. Sales volume growth is similarly measured on a debt-adjusted share basis to determine whether sales volume growth is being achieved in a manner that is accretive to stockholder value.
  

Financial

•  Cash Flow Return on Invested Capital

•  Controllable Cash Costs

   These metrics focus on capital efficiency and financial discipline. The Company allocates the majority of its capital to assets that generate strong economic margins and returns while a portion is allocated to long-term projects that are intended to provide future reserves and sales volume. The Controllable Cash Costs performance metric incentivizes employees to manage and reduce costs to maximize margins and profitability.
  

HSE Performance

•  Total Recordable Incident Rate (TRIR)

•  Level 3 Incidents

   Health and safety is very important to us and critical to our success. Accordingly, the Health, Safety and Environmental (HSE) performance metric includes both (i) TRIR for both employees and contractors and (ii) Level 3 safety and environmental incidents in order to focus employees and contractors on maintaining a safe work environment. A Level 3 Incident generally involves a significant environmental impact, an impact to the public and/or significant monetary damages, or a fatality or permanent disability. As a result, our HSE performance metrics capture both the number and the severity of the incidents in a given year.

Equity

Compensation

   Performance Units (50%)    3-Year Total Stockholder Return (TSR)    TSR provides not only an effective comparison of our performance against an industry peer group, but also an absolute performance-based component as the value of vested awards is tied to the price of our common stock at the time of payout.
   Non-Qualified Stock Options (25%)    Absolute Stock Price    Stock Options reward absolute value creation and typically vest pro rata annually over three years, encouraging both performance and retention.
  

Restricted Stock

Units (25%)

   Absolute Stock Price    Restricted Stock Units align with absolute stock price performance and provide retentive value, especially in a volatile and cyclical industry.

 

 

 

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Anadarko Board of Directors

 

 

 

ITEM 1 — ELECTION OF DIRECTORS

 

 

 

LOGO

 

 

 

 

 

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES.

Nominees for Director Nominated by the Board of Directors for Terms Expiring in 2020

 

Our Restated Certificate of Incorporation provides that all directors are to be elected annually.

At the Annual Meeting, the terms of our thirteen incumbent directors will expire. Twelve of those incumbent directors have been nominated to stand for election and, if elected at the Annual Meeting, will hold office until the expiration of their one-year terms at the 2020 Annual Meeting of Stockholders or their earlier resignation, retirement or removal. As of the Annual Meeting, the number of directors constituting the Board will be decreased from thirteen to twelve.

The Board is not aware of any reason why the director nominees would not be able to serve as directors of the Company. However, if a nominee is unavailable for election, then the proxies will be voted for the election of another nominee proposed by the Board or, as an alternative, the Board may reduce the number of directors to be elected at the Annual Meeting.

Our By-Laws provide for the election of directors by the majority vote of stockholders in uncontested elections. This means the number of votes cast “for” a nominee’s election must exceed the number of votes cast “against” such nominee’s election (with abstentions and broker non-votes not counted as votes either “for” or “against” the nominee’s election) in order for him or her to be elected to the Board.

In addition, as required by our By-Laws, each incumbent nominee has submitted an irrevocable letter of resignation stating that he or she will resign if he or she does not receive the required majority vote. If a director were to fail to receive a majority of votes cast and the Board were to accept the resignation tendered, then that director would cease to be a director of Anadarko.

As discussed in more detail on page 24 of this proxy statement, the Board considers various qualifications, characteristics and other factors when evaluating individual directors, as well as the composition of the Board as a whole. As part of this process, the Board and its Governance and Risk Committee review the particular experiences, qualifications, attributes and skills of each nominee to determine if that person should stand for election to serve as a director of the Company.

The biographies of each of the nominees contain information regarding the person’s experience and director positions held currently or during the last five years, and information regarding involvement in certain legal or administrative proceedings, to the extent applicable. They also highlight the particular experiences, qualifications, attributes or skills that caused the Governance and Risk Committee and the Board to conclude that the person should be nominated to serve as a director of the Company.

 

 

 

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Anadarko Board of Directors

 

 

 

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW.

Nominees for Director Nominated by the Board of Directors for Terms Expiring in 2020

 

ANTHONY R. CHASE

    

 

Mr. Chase, 64, has served as Chairman, Chief Executive Officer and owner of ChaseSource, L.P., a Houston-based staffing and real estate development firm since 2008. He served as an Executive Vice President of Crest Investment Company, a Houston-based private equity firm, from January 2009 until December 2009. Prior to these positions, he served as the Chairman and Chief Executive Officer of ChaseCom, L.P., a global customer relationship management and staffing services company that he founded and owned until its sale in 2007 to AT&T. Mr. Chase’s entrepreneurial track record also includes two other successful business ventures, including Chase Radio Partners, which he founded, developed and ultimately sold, and Cricket Wireless, which he co-founded, developed and later sold. Mr. Chase has also been a Professor of Law at the University of Houston since 1991 and has published numerous environmental law and other law review articles during his tenure. Mr. Chase is on the board of directors of the Greater Houston Partnership, and served as its Chairman during 2012. From July 2004 to July 2008, he served as a director of the Federal Reserve Bank of Dallas, and also served as its Deputy Chairman from 2006 until his departure in July 2008. He is also on the board of directors of the Houston Endowment and the Texas Medical Center and serves on the Board of Trustees for St. John’s School and KIPP Schools. Mr. Chase holds Bachelor of Arts, Master of Business Administration and Juris Doctor degrees from Harvard University. In addition to Mr. Chase’s current public-company directorship noted in the box to the right, in the past five years he also served on the boards of Paragon Offshore plc, Sarepta Therapeutics, Inc. (NASDAQ: SRPT) and Western Gas Holdings, LLC, a subsidiary of Anadarko.

 

Key Contributions to the Board. Mr. Chase’s unique experience as a successful and widely respected entrepreneur, business leader, and environmental and business legal scholar provides invaluable perspective to the Board. In addition, he has significant experience with strategic transactions and mergers and acquisitions.

    

 

LOGO

 

    

 

Director Since:

 

February 2014

 

Independent

 

Current Directorships:

 

Nabors Industries Ltd.

 

    
    
    
    
    

 

DAVID E. CONSTABLE

 

    

Mr. Constable, 57, has been a senior advisor at Cerberus Capital Management, one of the world’s leading private investment firms, since March 2017. He served as an advisor to the board of Sasol Limited (JSE: SOL) (NYSE: SSL) (Sasol), an international integrated energy and chemicals company based in South Africa, from July 2016 until July 2017. Prior to that, he served as Sasol’s President and Chief Executive Officer from July 2014 through June 2016 and previously served as Chief Executive Officer from July 2011 through July 2014. Prior to Sasol, Mr. Constable spent nearly 30 years at Fluor Corporation (NYSE: FLR) (Fluor) where he lived on several continents and served in various leadership positions, primarily in the oil and gas, refining, chemical, power and mining industries. Prior to moving to Sasol, Mr. Constable served as Group President of Operations for Fluor. He is a member of The Business Council and a past member of the World Economic Forum International Business Council. Mr. Constable holds a bachelor’s of science degree in civil engineering from the University of Alberta, and graduated from the International Management Program at the Thunderbird School of Global Management, as well as the Advanced Management Program at the Wharton School of the University of Pennsylvania. In addition to Mr. Constable’s current public-company directorships noted in the box to the right, in the past five years he also served on the board of Sasol.

 

Key Contributions to the Board. Mr. Constable’s experience as a public company CEO, as well as his project-management expertise and broad international business experience, make him a valued member of the Board.

    

 

LOGO

 

    

 

Director Since:

 

July 2016

 

Independent

 

Current Directorships:

 

ABB Ltd

 

Rio Tinto Limited

 

Rio Tinto plc

 

    

 

 

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Anadarko Board of Directors

 

 

 

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW.

Nominees for Director Nominated by the Board of Directors for Terms Expiring in 2020

 

H. PAULETT EBERHART (Lead Director)

    

 

Ms. Eberhart, 65, has served as Chairman and Chief Executive Officer of HMS Ventures, a privately held business involved with technology services and the acquisition and management of real estate since March 2014. From January 2011 through March 2014, she served as the President and Chief Executive Officer of CDI Corp. (NYSE: CDI) (CDI), a provider of engineering and information technology outsourcing and professional staffing services. She served as a consultant to CDI from April 2014 through December 2014. Ms. Eberhart also served as Chairman and Chief Executive Officer of HMS Ventures from January 2009 until January 2011. She served as President and Chief Executive Officer of Invensys Process Systems, Inc. (Invensys), a process automation company, from January 2007 to January 2009. From 1978 to 2004, she was an employee of Electronic Data Systems Corporation (EDS), an information technology and business process outsourcing company, and held roles of increasing responsibility over time, including senior level financial and operating roles. From 2003 until March 2004, Ms. Eberhart was President of Americas of EDS, and from 2002 to 2003 she served as President of Solutions Consulting at EDS. Ms. Eberhart is a Certified Public Accountant. In addition to Ms. Eberhart’s current public-company directorships noted in the box to the right, in the past five years she also served on the boards of Ciber, Inc., Cameron International Corporation, CDI and Advanced Micro Devices, Inc. (NASDAQ: AMD).

 

Key Contributions to the Board. Ms. Eberhart brings a wealth of operational, accounting and financial experience to the Board, as well as managerial, manufacturing and global experience, through her numerous years of service as an executive officer for EDS, Invensys and CDI. She also held various other operating and financial positions during her 26 years at EDS. In addition, she gained significant experience through her service on the boards of other public companies and her involvement with various civic and charitable organizations.

    

 

 

 

 

 

 

LOGO

 

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Director Since:

 

August 2004

 

Independent

 

Current Directorships:

 

LPL Financial

Holdings Inc.

 

Valero Energy

Corporation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    
    
    

CLAIRE S. FARLEY

    

 

Ms. Farley, 60, has served as Vice Chair of Energy, advising the Energy group, for KKR & Co. L.P. (NYSE: KKR) (KKR), a global investment firm that manages investments including private equity, energy, infrastructure, real estate, credit strategies and hedge funds, since February 2017. Prior to that she served as Vice Chairman for KKR’s energy and infrastructure business from 2015 through February 2017, as Partner for KKR’s energy and infrastructure business from 2012 through 2015 and as Managing Director for KKR’s energy and infrastructure business from November 2011 through December 2012. Prior to joining KKR, from September 2010 to October 2011, Ms. Farley co-founded and served as Co-Chief Executive Officer of RPM Energy, LLC, which partnered with KKR to invest in unconventional oil and gas resources. Prior to co-founding RPM Energy, Ms. Farley was a Senior Advisor at Jefferies Randall & Dewey, the global oil and natural gas industry advisory group at Jefferies Group, Inc., from August 2008 to September 2010 and was Co-President of Jefferies Randall & Dewey from February 2005 to July 2008. Prior to that, Ms. Farley served as Chief Executive Officer of Randall & Dewey, an oil and natural gas asset transaction advisory firm, from September 2002 until its acquisition by Jefferies Group, Inc. in February 2005. From January 2001 to May 2002 she served as Chief Executive Officer of Trade-Ranger Inc., a start-up venture, and as Chief Executive Officer of Intelligent Diagnostics Corporation, also a start-up venture, from October 1999 to January 2001. Prior to that, Ms. Farley spent 18 years (1981 to 1999) at Texaco, Inc. where her roles included Chief Executive Officer, Hydro Texaco; President, North American Production Division; and President, Worldwide Exploration & New Ventures. In addition to Ms. Farley’s current public-company directorships noted in the box to the right, in the past five years she also served on the boards of Encana Corporation (TSX: ECA) (NYSE: ECA) and FMC Technologies, Inc.

 

Key Contributions to the Board. Ms. Farley is a respected leader in the energy industry with a strong track record of success, including extensive experience in finance, strategic investments, mergers and acquisitions, and exploration and new ventures.

    

 

 

 

 

LOGO

 

 

 

 

    

 

 

 

 

 

 

 

 

 

Director Since:

 

February 2017

 

Independent

 

Current Directorships:

 

LyondellBasell

Industries N.V.

 

TechnipFMC plc

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    
    
    
    
    
    

 

 

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Anadarko Board of Directors

 

 

 

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW.

Nominees for Director Nominated by the Board of Directors for Terms Expiring in 2020

 

PETER J. FLUOR

    

 

Mr. Fluor, 71, has been Chairman and Chief Executive Officer of Texas Crude Energy, LLC, a private, independent oil and gas exploration company located in Houston, Texas, since 1990. He has been employed by Texas Crude Energy, LLC since 1972 and took over the responsibilities of President in 1980. Mr. Fluor serves as lead director of Fluor Corporation (NYSE: FLR). In addition to Mr. Fluor’s current public-company directorship noted in the box to the right, in the past five years he also served on the board of Cameron International Corporation.

 

Key Contributions to the Board. Mr. Fluor brings more than 45 years of exploration and production operations, exploration and production service, finance, banking and managerial experience to the Board as a result of his experience at Texas Crude Energy, LLC, as well as his service as a director of other public companies and involvement with various civic and charitable organizations.

    

 

LOGO

 

    

 

Director Since:

 

August 2007

 

Independent

 

Current Directorships:

 

Fluor Corporation

 

    

JOSEPH W. GORDER

    

 

Mr. Gorder, 61, is Chairman, President and Chief Executive Officer of Valero Energy Corporation (NYSE: VLO) (Valero), an international manufacturer and marketer of transportation fuels, other petrochemical products and power. He served as President and Chief Operating Officer of Valero from November 2012, until he assumed the role of Chief Executive Officer on May 1, 2014. He assumed the role of Chairman of the Board effective December 31, 2014. Mr. Gorder previously served as Executive Vice President and Chief Commercial Officer beginning in January 2011, and formerly led Valero’s European operations from its London office. He previously served as Executive Vice President – Marketing and Supply beginning in December 2005. Prior to that, he held several positions with Valero and Ultramar Diamond Shamrock Corporation with responsibilities for corporate development and marketing. Mr. Gorder is also Chairman and Chief Executive Officer of Valero Energy Partners LP (NYSE: VLP), a midstream logistics master limited partnership. Valero Energy Partners LP is a subsidiary of Valero formed in 2013.

 

Key Contributions to the Board. Mr. Gorder’s more than 30 years of career experience in and knowledge of global energy markets provides invaluable insight to the Board and strategically assists Anadarko as it pursues its expanding business opportunities.

    

 

LOGO

 

    

 

Director Since:

 

July 2014

 

Independent

 

Current Directorships:

 

Valero Energy

Corporation

 

Valero Energy

Partners LP

 

 

 

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Anadarko Board of Directors

 

 

 

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW.

Nominees for Director Nominated by the Board of Directors for Terms Expiring in 2020

 

JOHN R. GORDON

    

 

Mr. Gordon, 70, is Senior Managing Director of Deltec Asset Management LLC, a registered investment firm located in New York, New York. He was President of Deltec Securities Corporation from 1988 until it was converted into Deltec Asset Management LLC. Prior to joining Deltec Asset Management LLC, Mr. Gordon was a managing director of Kidder, Peabody & Co., where he spent 12 years in the firm’s corporate finance department.

 

Key Contributions to the Board. Mr. Gordon’s role as Senior Managing Director of Deltec Asset Management LLC since 1988 provides him with significant finance and banking experience (including in the energy industry) as well as considerable managerial expertise. He also has significant involvement in various civic and charitable organizations.

    

 

LOGO

 

    

 

Director Since:

 

April 1988

 

Independent

 

    

SEAN GOURLEY

    

 

Dr. Gourley, 39, has served as Chief Executive Officer of Primer Technologies, Inc., a company building software to power artificial intelligence applications for the finance and military intelligence industries, since he founded it in February 2015. From March 2009 to January 2015, he was the Chief Technology Officer of Quid, Inc., a San Francisco-based augmented intelligence company he founded that builds software for strategic decision-making. Dr. Gourley studied at The University of Oxford as a Rhodes Scholar where he received a Ph.D. in physics, and he received both his Bachelor of Science and Master of Science in physics from the University of Canterbury in Christchurch, New Zealand. He was additionally a Post-Doctoral Research Fellow at the Said Business School at Oxford University and is currently an Equity Partner with Data Collective Venture Capital Fund, investing in key data and algorithmic technologies.

 

Key Contributions to the Board. As a highly successful executive and entrepreneur in the technology sector, Dr. Gourley brings a unique and valuable perspective to the Board. His leadership in big data, algorithmic technologies, information technology and software pertaining to artificial intelligence and strategic decision-making provides skill sets to the Board that can be beneficially applied and leveraged across the Company’s global operations. Dr. Gourley’s expertise complements and enhances the Company’s ability to leverage technology as a competitive advantage.

    

 

LOGO

 

    

 

Director Since:

 

September 2015

 

Independent

 

    
    
    
    

 

 

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Anadarko Board of Directors

 

 

 

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW.

Nominees for Director Nominated by the Board of Directors for Terms Expiring in 2020

 

MICHAEL K. GRIMM

    

 

Mr. Grimm, 64, is President of Rising Star Petroleum, L.L.C. He is the immediate Past Chairman of the Board for RSP Permian, Inc. Prior to being named Chairman, Mr. Grimm was a Co-Founder of RSP Permian in 2010, and served as a Co-Chief Executive Officer until 2014. From 2006 to 2017, Mr. Grimm served as President and Chief Executive Officer of Rising Star Energy Development Company, and from 1995 to 2006, he served as President and Chief Executive Officer of Rising Star Energy, L.L.C., an upstream exploration and production company active in onshore continental United States that he co-founded in 1995. From 1990 to 1994, Mr. Grimm was Vice President of Land and Exploration for Placid Oil Company. Prior to that, Mr. Grimm was employed for 13 years in the Land and Exploration Departments for Amoco Production Company in Houston and New Orleans. Mr. Grimm has more than 41 years of experience in the oil and natural gas industry. In addition to Mr. Grimm’s current public-company directorship noted in the box to the right, in the past five years he also served on the board of Energy Transfer Partners, L.P., before it became Energy Transfer LP, since December 2005.

 

Key Contributions to the Board. Mr. Grimm is a respected leader in the energy industry with a strong track record of success in the U.S. onshore, most recently in West Texas, where one of Anadarko’s most prolific growth assets is located.

 

    

 

LOGO

 

    

 

Director Since:

 

November 2018

 

Independent

 

Current Directorships:

 

Energy Transfer LP

 

    
    

ERIC D. MULLINS

    

 

Mr. Mullins, 56, serves as the Managing Director and Co-Chief Executive Officer of Lime Rock Resources, a company that he co-founded in 2005 which acquires, operates and improves lower-risk oil and natural gas properties. From May 2011 through October 2015, he also served as the Co-Chief Executive Officer and Chairman of the Board of Directors of LRE GP, LLC, the general partner of LRR Energy, L.P., an oil and natural-gas company. Prior to co-founding Lime Rock Resources, Mr. Mullins served as a Managing Director in the Investment Banking Division of Goldman Sachs (NYSE: GS) where he led numerous financing, structuring and strategic advisory transactions in the division’s Natural Resources Group. In addition to his current public-company directorships noted in the box to the right, in the past five years he served on the board of LRE GP, LLC.

 

Key Contributions to the Board. Mr. Mullins’s career experiences and knowledge in financing and strategic mergers and acquisitions for exploration and production companies greatly assists and enhances the Board’s ability to provide effective strategic oversight of a sustainable and growing enterprise.

    

 

 

LOGO

 

    

 

Director Since:

 

May 2012

 

Independent

 

Current Directorships:

 

Pacific Gas and

Electric Company

 

PG&E Corporation

 

    

 

 

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Anadarko Board of Directors

 

 

 

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES LISTED BELOW.

Nominees for Director Nominated by the Board of Directors for Terms Expiring in 2020

 

ALEXANDRA PRUNER

    

 

Ms. Pruner, 57, has served as Senior Advisor to Perella Weinberg Partners, a global independent advisory firm providing strategic and financial advice and asset-management services, since December 2018. Prior to that, she served as Chief Financial Officer of Perella Weinberg Partners since it combined in December 2016 with Tudor, Pickering, Holt & Co., LLC, an energy-focused investment bank and asset management firm. Prior to that, she served as Chief Financial Officer and a member of the Management Committee at Tudor, Pickering, Holt & Co., LLC since the firm’s founding in 2007. Ms. Pruner served as Senior Vice President, Strategic Business Development and publisher of World Oil magazine for Gulf Publishing Company from 2002 to 2007. Prior to joining Gulf Publishing Company, she spent two years in the technology sector serving the energy industry, including as Vice President, Energy Vertical at Idea Integration, an IT development and design firm, and Vice President, Marketing for PetroCosm Corporation, an oilfield service B2B procurement and supply chain management company. She served as Director of Investor Relations and Corporate Communications for The Houston Exploration Company, an independent exploration and production company, from 1997 to 2000 and as Director of Corporate Communications and Investor Relations for NUI Corporation, a multi-state natural gas distribution company, from 1991 to 1996. Ms. Pruner has extensive experience with the energy industry and in investment banking, having also been with Shearson Lehman Brothers from 1984 to 1990, including as Vice President, Corporate Affairs and Vice President, Government Affairs.

 

Key Contributions to the Board. Ms. Pruner’s experience in the oil and natural gas industry and her strategic leadership in finance and investment banking make her a valuable member of the Board.

    

 

LOGO

 

    

 

Director Since:

 

November 2018

 

Independent

 

Current Directorships:

 

Plains All American Pipeline, L.P.

 

Plains GP Holdings, L.P.

 

    
    
    
    
    
    

R. A. WALKER (Chairman of the Board)

    

 

Mr. Walker, 62, was named Chairman of the Board of the Company in May 2013, in addition to the role of Chief Executive Officer and director, both of which he assumed in May 2012. He also served as President from February 2010 until November 2018. He previously served as Chief Operating Officer from March 2009 until his appointment as Chief Executive Officer. He served as Senior Vice President, Finance and Chief Financial Officer from September 2005 until March 2009. Mr. Walker is Chairman for the Houston Museum of Natural Science, Vice Chairman and Executive Committee member of the Business Council, Business Roundtable, All-American Wildcatters (Chairman 2017 and 2018), and the Board of Directors of the American Petroleum Institute (Executive Committee). He also serves as a director and the Chairman of the Risk Committee at BOK Financial Corporation (NASDAQ: BOKF). In addition to his current public-company directorship noted in the box to the right, in the past five years Mr. Walker also served on the board of CenterPoint Energy, Inc. (NYSE: CNP).

 

Key Contributions to the Board. Mr. Walker has significant energy, banking and asset management experience, in addition to his role as Anadarko’s Chairman and Chief Executive Officer. He has served on numerous boards of public, private, industry trade associations and philanthropic organizations.

    

 

 

LOGO

 

    

 

Director Since:

 

May 2012

 

Not Independent – Management

 

Current Directorships:

 

BOK Financial

Corporation

 

    
    
    
    
    

 

 

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Corporate Governance

 

 

 

BOARD AND COMMITTEE GOVERNANCE

Our Board recognizes that excellence in corporate governance is essential in carrying out our responsibilities to our stakeholders, including our stockholders, employees, customers, communities, and creditors, as well as to the environment. Our Corporate Governance Guidelines, By-Laws, Code of Business Conduct and Ethics, Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, and written charters for the Audit Committee, the Compensation and Benefits Committee (Compensation Committee), and the Governance and Risk Committee, all as amended from time to time, can be found on the Company’s website at www.anadarko.com/responsibility/good-governance. These documents provide the framework for our corporate governance. Any of these documents will be furnished in print free of charge to any stockholder upon request. You can submit such a request to the Corporate Secretary at 1201 Lake Robbins Drive, The Woodlands, Texas 77380.

Under the Company’s Corporate Governance Guidelines, directors are expected to attend regularly scheduled Board meetings and meetings of the Board committees on which they serve, as well as the annual meeting of stockholders. Each incumbent director who served on our Board during 2018 attended at least 75% of the meetings of the Board and the committees on which he or she served that occurred during the period he or she served. There were 7 Board meetings in 2018. In addition, all of the incumbent directors attended the 2018 Annual Meeting, other than Mr. Grimm and Ms. Pruner, who joined the Board in November 2018.

BOARD LEADERSHIP STRUCTURE

Mr. Walker was elected Chairman of the Board effective following the Company’s 2013 Annual Meeting and has been re-elected to such role each year since that time. As the Company’s CEO, Mr. Walker works in concert with the rest of our majority-independent Board and the independent Lead Director, Ms. Eberhart, to oversee the execution of the Company’s strategy. The Board believes that the combined Chairman and CEO role, coupled with a strong and independent Lead Director, ensures open communication between the Board and executive management and promotes consistent and effective leadership of both the Board and executive management. In addition, the Board believes that a combined Chairman and CEO role is currently the best approach to promote long-term stockholder value for the reasons listed below.

 

  Promotes Unified Approach on the Development and Execution of Corporate Strategy — Maintaining a combined position enables the Company’s CEO to act as a bridge between management and the Board, helping both to act with a common purpose. This also fosters consensus building and alignment on strategy and tactical
   

execution of a Board-approved vision and strategy at the top levels within the Company.

 

  Provides Clear Lines of Accountability — A combined position has the practical effect of simplifying the accountability of the executive management team, thereby reducing potential confusion and fractured leadership.

 

  Provides Clear Roadmap for Stockholder/Stakeholder Communications — A combined position provides the Company’s stakeholders the opportunity to deal with a unified point of overall authority, which we believe results in more efficient and effective communications with stakeholders.

Role of Lead Director. The Board has a strong and active Lead Director whose duties and responsibilities ensure the Company maintains a corporate governance structure with appropriate independence and balance. Our independent Lead Director’s duties are closely aligned with the role of an independent, non-executive chairman. Ms. Eberhart, who previously served as Chair of the Audit Committee and currently serves as Chair of the Governance and Risk Committee, was initially appointed as Lead Director effective February 9, 2016. The Lead Director position is elected exclusively by the independent directors annually.

The Lead Director:

 

  assists the Chairman and the remainder of the Board in assuring effective corporate governance in managing the affairs of the Board and the Company;

 

  serves as a liaison between the Chairman and the independent directors;

 

  works with the Chairman to approve all meeting agendas, including suggesting the inclusion of agenda items;

 

  has authority to call special meetings of the Board;

 

  presides at executive sessions of the independent directors and, if applicable, the non-management directors, which are held in conjunction with each regularly scheduled quarterly meeting of the Board (or more frequently, if necessary), and any other meetings the Lead Director determines appropriate;

 

  approves information sent to the Board and approves meeting schedules to assure there is sufficient time for discussion of all agenda items;

 

  serves as a member of the Board’s Executive Committee, providing additional representation for the independent directors in all actions considered by the Executive Committee between Board meetings; and

 

  is required to be available for consultation and direct communication if requested by major stockholders.
 

 

 

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CEO SUCCESSION PLANNING

The Board recognizes that management succession planning is a fundamental and ongoing part of its responsibilities. The full Board is responsible for overseeing CEO succession planning, and assesses both expected and emergency CEO succession at least annually. The Board regularly works with its committees and members of management to evaluate potential successors to the CEO.

The Board discusses potential successors with the CEO, and together with the CEO reviews any development plans recommended for such individuals. A similar process is also followed with regard to the other executive officers.

BOARD OVERSIGHT

Anadarko maintains well-defined governance practices and principles, which guide the Board’s roles and responsibilities regarding corporate risk oversight. The role of the Board is to oversee and monitor the Company’s management in the interest and for the benefit of the Company’s stockholders, including oversight of the Company’s strategic plans and objectives. Management is responsible for delivering on our strategy, creating our culture, establishing accountability, and controlling risk. The Board and its committees work closely with management to balance and align strategy, risk, corporate social responsibility and other areas while considering feedback from stockholders.

Board Oversight of Risk

The Board’s role in the identification, assessment, oversight and management of potential risks that could affect the Company’s ability to achieve its strategic, operational and financial objectives consists of:

 

  reviewing and discussing the Company’s risk framework and risk management policies;

 

  facilitating appropriate coordination among the Board’s committees with respect to oversight of risk management by delegating oversight of the Company’s enterprise risk management program to the Governance and Risk Committee, the risk assessment framework and risk management policies, including the framework with respect to significant financial risk exposures, to the Audit Committee, and compensation risk to the Compensation Committee; and

 

  periodically meeting with members of management, including members of the Company’s internal Risk Council, to identify, review and assess the Company’s major risk exposures and steps taken to monitor, mitigate and report such exposures.

Role of the Board’s Committees. The Governance and Risk Committee is responsible for oversight of the Company’s significant risk exposures, including risks related to commodity prices, regulation, health and safety and cybersecurity. The Governance and Risk Committee periodically reviews and discusses with members of management significant risk exposures and the steps being taken to identify, monitor and mitigate such exposures. With the assistance of the Compensation Committee’s independent executive compensation consultant, the Compensation Committee is responsible for the oversight of the annual risk assessment of the Company’s compensation programs. The Audit Committee is responsible for oversight of the Company’s risk assessment framework and risk management policies, including the framework with respect to significant financial risk exposures, and periodically reviews and discusses such framework and policies with members of management.

Role of the Internal Risk Council. Anadarko uses a long-standing Enterprise Risk Management (ERM) process to assess risks that may affect the Company’s ability to achieve its strategic and financial goals. As part of this process and in order to facilitate oversight of potential risk exposures that have not been specifically delegated to any Board committee, the Board periodically meets with members of the Company’s internal Risk Council to review and assess the Company’s risk-management processes and to discuss significant risk exposures. Members of senior management comprise the Company’s internal Risk Council and provide periodic reports to the CEO, the Governance and Risk Committee and the full Board regarding the Company’s risk profile and risk-management strategies. In addition, the Company’s internal audit function regularly provides additional perspective and insight to the Audit Committee regarding potential risks facing the Company.

Environmental, Social and Governance Matters

We are committed to operating in a sustainable manner and proactively working with the communities in which we operate. We recognize our responsibility to operate safely in order to protect public health, the environment, and our employees and contractors, while finding and producing the oil and natural gas resources that fuel modern life. Anadarko’s core values form the foundation for all that we do and provide a path toward sustainability.

 

 

 

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The Governance and Risk Committee provides oversight regarding Anadarko’s exposure to risk, including climate-related risk. In their oversight roles, the Governance and Risk Committee and the full Board consider the outcomes of scenario analysis and review policy initiatives and actions related to climate change. In addition, the Company has the following management committees that report to the Governance and Risk Committee:

 

  Greenhouse Gas and Air Quality Committee

 

  Hydraulic Fracturing Committee

 

  Water Committee

For details regarding these committees and the Environmental, Social and Governance Highlights, see page 6 of the Proxy Summary.

COMPENSATION COMMITTEE RISK ASSESSMENT

The Compensation Committee reviewed a comprehensive compensation risk assessment conducted independently by Frederic W. Cook & Co., Inc. (FW Cook), the Compensation Committee’s independent compensation consultant. The assessment focused on the design and application of the Company’s executive and non-executive compensation

programs and whether such programs encourage excessive risk taking by executive officers and other employees. Based on this assessment and the Compensation Committee’s review, the Compensation Committee believes that the Company’s compensation programs (i) do not motivate our executive officers or our non-executive employees to take excessive risks, (ii) are well designed to encourage behaviors aligned with the long-term interests of stockholders, and (iii) are not reasonably likely to have a material adverse effect on the Company. Anadarko’s compensation programs are designed to support and reward appropriate risk taking and include the following:

 

  an appropriate balance of fixed versus variable pay, cash and equity pay components, operating and financial performance measures, short-term and long-term performance periods, extended vesting schedules, and established formulas and discretion;

 

  established policies to mitigate compensation risk including significant stock ownership requirements for officers of the Company, insider-trading prohibitions, clawback provisions, and specified caps on incentive awards; and

 

  independent Compensation Committee oversight, which also extends to incentive plans below the executive officer level.
 

 

 

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COMMITTEES OF THE BOARD

The Board has four standing committees: (i) the Audit Committee; (ii) the Compensation Committee; (iii) the Governance and Risk Committee; and (iv) the Executive Committee. For each of the standing committees of the Board, the table below shows the current membership, the principal functions and the number of meetings held in 2018:

 

Name, Members

and Meetings

 

Principal Functions

AUDIT COMMITTEE(1)

Eric D. Mullins (Chair)(2)

Anthony R. Chase

John R. Gordon

Mark C. McKinley

Alexandra Pruner

 

Meetings in 2018: 7

 

•  Discusses the integrity of the Company’s accounting policies, internal controls, financial reporting practices and the financial statements with management, the independent auditor and internal audit.

 

•  Reviews and discusses with management the Company’s risk assessment framework and risk management policies, including the framework with respect to significant financial risk exposures.

 

•  Monitors the qualifications, independence and performance of the Company’s internal audit function and independent auditor, and meets periodically with management, internal audit and the independent auditor in separate executive sessions.

 

•  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, including those received through the confidential anonymous Anadarko Hotline.

 

•  Monitors compliance with legal and regulatory requirements and the business practices and ethical standards of the Company.

 

•  Approves the appointment, compensation, retention and oversight of the work of the Company’s independent auditor and establishes guidelines for the retention of the independent auditor for any permissible services.

 

•  Prepares the Audit Committee report, which is on page 35.

COMPENSATION AND BENEFITS COMMITTEE(3)

Joseph W. Gorder (Chair)

Peter J. Fluor

Michael K. Grimm

 

Meetings in 2018: 6

 

•  Approves and evaluates the Company’s director and officer compensation plans, policies and programs.

 

•  Conducts an annual review and evaluation of the CEO’s performance in light of the Company’s goals and objectives.

 

•  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 38.

 

 

•  Reviews annually 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.

 

•  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.

 

•  Reviews the Compensation Discussion and Analysis, disclosure related to advisory votes by stockholders on executive compensation, including frequency of such votes, and other relevant disclosure made in the proxy statement.

 

•  Produces an annual Compensation Committee report, which is on page 36.

 

 

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Name, Members

and Meetings

 

Principal Functions

GOVERNANCE AND
RISK COMMITTEE(4)

H. Paulett Eberhart (Chair)

David E. Constable

Claire S. Farley

Sean Gourley

 

Meetings in 2018: 5

 

•  Recommends nominees for director to the full Board and, subject to the Board’s power and authority to determine the eligibility of nominees nominated by stockholders pursuant to Section 2.9 of the Company’s By-Laws, ensures such nominees possess the director qualifications set forth in the Company’s Corporate Governance Guidelines.

 

•  Reviews the qualifications of existing Board members before they are nominated for re-election to the Board.

 

•  Recommends members of the Board for committee membership.

 

•  Proposes Corporate Governance Guidelines for the Company and reviews them annually.

 

•  Oversees the Company’s compliance structure and programs.

 

•  Develops and oversees an evaluation process for the Board and its committees.

 

•  Reviews and approves related-person transactions in accordance with the Board’s procedures.

 

•  Reviews and investigates reports to the confidential anonymous Anadarko Hotline regarding material non-financial matters.

 

•  Reviews and discusses with management the Company’s significant risk exposures and the steps management has taken to identify, monitor and mitigate such exposures.

 

•  Oversees the work of the Company’s independent reserve engineering consultant.

 

•  Oversees the Anadarko Petroleum Corporation Political and Public Engagement Policy and the Company’s political activity, including annually reviewing the Company’s political contributions and trade association payments.

 

•  Reviews and discusses with management the Company’s environmental, health and safety programs.

EXECUTIVE COMMITTEE

R. A. Walker (Chair)

H. Paulett Eberhart

Joseph W. Gorder

Eric D. Mullins

 

Meetings in 2018: 0

 

•  Acts with the power and authority of the Board, in accordance with the Company’s By-Laws, in the management of the business and affairs of the Company while the Board is not in session.

 

•  Approves specific terms of financing or other transactions that have previously been approved by the Board.

 

(1)

The Board has determined that each member of the Audit Committee is independent as independence for audit committee members is defined in Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended (Exchange Act), and under the standards set forth by the NYSE. None of the Audit Committee members serve on the audit committee of more than two other public companies.

 

(2)

The Board has determined that Mr. Mullins qualifies as an “audit committee financial expert” under the rules of the SEC based upon his education and employment experience.

 

(3)

The Board has determined that each member of the Compensation Committee is: (i) independent under the standards set forth by the NYSE that govern Compensation Committee membership; (ii) a “non-employee director” under Rule 16b-3 of the Exchange Act; and (iii) an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (IRC).

 

(4)

The Board has determined that each member of the Governance and Risk Committee is independent under the standards set forth by the NYSE that govern Board membership.

 

 

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BOARD OF DIRECTORS

Director Independence

In accordance with NYSE rules, the Sarbanes-Oxley Act of 2002, the Exchange Act, the rules and regulations adopted thereunder, and the Company’s Corporate Governance Guidelines, the Board must affirmatively determine the independence of each director and director nominee in accordance with the Company’s director independence standards, which incorporate the standards set forth under the NYSE rules and are contained in the Company’s Corporate Governance Guidelines found on the Company’s website at www.anadarko.com/content/documents/apc/Responsibility/Governance_Documents/2017-11-14_Corp_Gov_Guidelines__FINAL_.pdf
.

Based on the standards contained in our Corporate Governance Guidelines, and the recommendation by the Governance and Risk Committee, the Board has determined that each of the following non-employee directors is independent and has no material relationship with the Company that could impair such director’s independence:

 

•  Anthony R. Chase

  

•  John R. Gordon

•  David E. Constable

  

•  Sean Gourley

•  H. Paulett Eberhart

  

•  Michael K. Grimm

•  Claire S. Farley

  

•  Mark C. McKinley

•  Peter J. Fluor

  

•  Eric D. Mullins

•  Joseph W. Gorder

  

•  Alexandra Pruner

Mr. Walker is not independent given his role as CEO of the Company.

For information regarding our policy on Transactions with Related Persons, please see page 79 of this proxy statement.

Director Nominee Selection Process

The Company’s Corporate Governance Guidelines require that with respect to open director positions, the Governance and Risk Committee (or a subcommittee thereof):

 

  identify the personal characteristics needed in a director nominee so that the Board as a whole will possess the appropriate qualifications;
  compile, through such means as the Governance and Risk Committee considers appropriate, a list of potential director nominees thought to possess the individual qualifications identified in the Corporate Governance Guidelines, as well as any additional specific qualifications the Board deems appropriate at the time;

 

  engage an outside consultant, as necessary, to assist in the search for qualified nominees;

 

  review the background, character, experience and temperament of each potential nominee;

 

  conduct interviews, and if appropriate recommend that other members of the Board and/or management interview each potential nominee; and

 

  evaluate each potential nominee in relation to the culture of the Company and the Board, which emphasizes independent thinking and teamwork.

Board Qualifications and Refreshment. The Board employs a rigorous process to ensure that the composition of the Board is diverse, balanced and aligned with the evolving needs of the Company. As stated in our Corporate Governance Guidelines, our Board assesses the qualifications of the Board as a whole based on a variety of factors, including diversity of experience, expertise, perspective and age in order to ensure the Board had the proper mix of skills and experience to provide effective oversight.

The Board recognizes that such diversity is an important factor in board composition and, although the Board does not have a formal policy, the Governance and Risk Committee ensures that diversity considerations are discussed in connection with each candidate for director. The Board considers the Company’s long-term strategy in evaluating what current and future skills and experience are required and weighs those skills when evaluating the directors as well as potential director candidates.

As part of this process, the Board reviews a director skillset chart that identifies expertise, experience and other characteristics that the Board believes contribute to an effective and well-functioning board and that the Board as a whole should possess.

 

 

 

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The Governance and Risk Committee considers these and other factors when evaluating potential candidates for the Board. Other factors considered include board refreshment and director tenure, age and gender. Together, this balance of skillsets, experiences and personal backgrounds allows our directors to provide the diversity of thought that is critical to the Board’s decision-making and oversight process.

Composition of Independent Directors Ensures Strong Oversight*

 

 

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*

As of December 31, 2018

 

 

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Annual Board Evaluation Process

The Board is committed to continuous improvement with respect to its ability to carry out its responsibilities. Each year the Board and its independent committees conduct self-evaluations related to their performance, including an evaluation of each director. These annual evaluations are an important tool to ensure the Board is well-positioned to provide effective oversight. The Governance and Risk Committee supervises these evaluations and uses various processes from year to year in order to solicit feedback, including periodic in-person interviews conducted by the Lead Director with each of the Board members. The topics covered in the evaluation include:

 

  the effectiveness of the Board and committee leadership structure;

 

  Board and committee skills, composition, diversity, and succession planning;

 

  Board culture and dynamics, including the effectiveness of discussion and debate at Board and committee meetings;

 

  the quality of Board and committee agendas and the appropriateness of Board and committee priorities; and

 

  Board/management dynamics, including the quality of management presentations and information provided to the Board and committees.

The Board considers the results of the evaluations when assessing the qualifications of the Board and to further enhance the effectiveness of the Board and its committees over time.

Director Continuing Education

The Company’s Director Education Policy encourages all members of the Board to attend director education programs appropriate to their individual backgrounds to stay abreast of developments in corporate governance and best practices relevant to their contribution to the Board as well as their responsibilities in their specific committee assignments. The Director Education Policy provides that the Company will reimburse directors for the costs associated with attending any director education program.

Communication with Directors of the Company

The Board welcomes questions or comments about the Company and its operations. Interested parties who wish to communicate with the Board, including the Lead Director, the independent directors, or any individual director, may contact the Chair of the Governance and Risk Committee at governanceriskchair@anadarko.com or at Anadarko Petroleum Corporation, Attn: Corporate Secretary, 1201 Lake Robbins Drive, The Woodlands, Texas 77380. If

requested, any questions or comments will be kept confidential to the extent reasonably possible. Depending on the subject matter, the Chair of the Governance and Risk Committee, with the assistance of the Corporate Secretary, will:

 

  forward the communication to the director or directors to whom it is addressed;

 

  refer the inquiry to the General Counsel for referral to the appropriate corporate department if it is a matter that does not appear to require direct attention by the Board or an individual director; or

 

  not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic.

These procedures may change from time to time, and you are encouraged to visit our website at http://www.anadarko.com for the most current means of contacting our directors. If you wish to request copies of any of our governance documents, please refer to page 19 of this proxy statement for instructions.

Stockholder Participation in the Selection of Director Nominees

Proxy Access. In September 2015, the Board amended the Company’s By-Laws to implement proxy access after conducting extensive stockholder engagement. Eligible stockholders 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 2.9(C) of our By-Laws. An eligible stockholder generally must deliver the Stockholder Notice (as defined in our By-Laws) to the Corporate Secretary at the principal executive offices of the Company not later than the close of business on the 120th day, nor earlier than the close of business on the 150th day, prior to the first anniversary of the date (as stated in the Company’s proxy materials) the definitive proxy statement was first sent to stockholders in connection with the preceding year’s annual meeting of stockholders and otherwise comply with all of the requirements of the By-Laws. For the 2020 Annual Meeting of Stockholders, we must receive the Stockholder Notice no earlier than October 31, 2019 and no later than November 30, 2019.

Other Director Nominations. Our By-Laws also provide that any stockholder intending to nominate a candidate for election to the Board or proposing any business to be brought before an annual meeting of stockholders, which nomination is not submitted for inclusion in the Company’s proxy materials pursuant to Section 2.9(C) of the By-Laws, generally must deliver written notice by mail to the Company’s Corporate Secretary at the principal executive offices of the Company not later than the close of business

 

 

 

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on the 90th day, nor earlier than the close of business on the 120th day, prior to the first anniversary of the preceding year’s annual meeting. The notice must include information specified in the By-Laws. For the 2020 Annual Meeting of Stockholders, we must receive notice of your intention to nominate a director or to introduce an item of business at that meeting no earlier than January 15, 2020 and no later than February 14, 2020.

During the past year, no stockholder submitted names of individuals to the Governance and Risk Committee for nomination to the Company’s Board pursuant to the procedures discussed above.

The Chairman of the meeting may disregard the nomination of a candidate for director, or refuse to allow the transaction of any business proposed by a stockholder, if the nomination or proposal is not made in compliance with the procedures in our By-Laws or the rules under the Exchange Act. For more information on stockholder participation in the selection of director nominees, please refer to Section 2.9 of our By-Laws, which are posted on the Company’s website at www.anadarko.com/content/documents/apc/Responsibility/
Governance_Documents/Bylaws.pdf.

The Board will consider individuals identified by stockholders on the same basis as nominees identified from other sources.

Compensation and Benefits Committee Interlocks and Insider Participation

The Compensation Committee consists of three independent directors, Messrs. Fluor, Gorder and Grimm. None of our executive officers currently serve, or in the past year have served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or our Compensation Committee.

Director Compensation

Overview. The Compensation Committee is solely responsible for determining the type and amount of compensation for non-employee directors. The committee reviews director compensation annually to ensure that it is appropriately designed to attract and retain qualified individuals who possess the expertise and skillset required by the Company’s Board members.

In setting non-employee director compensation, the Compensation Committee considers the competitive market as well as the significant amount of time that non-employee directors spend in fulfilling their duties to the Company and its stockholders. Compensation for non-employee directors

is designed to be competitive with our industry peer group and to further align the non-employee directors’ interests with the interests of the Company’s stockholders. As currently designed, the pay mix for non-employee directors favors equity over cash (69% equity / 31% cash) as compared to the peer average (63% equity / 37% cash) to further reinforce the alignment with stockholders.

To assist in the 2018 annual review of director compensation, the Compensation Committee directly retained FW Cook as its outside independent compensation consultant to provide benchmark compensation data and recommendations for compensation program design. FW Cook conducted a comprehensive review of the program, including a review of director compensation arrangements at other companies in the Company’s industry peer group. Following its review of the non-employee director compensation program, and based on the review and recommendations provided by FW Cook, the Compensation Committee did not make any changes to the non-employee director compensation program for 2018. The target compensation for non-employee directors has remained unchanged since 2015.

The total compensation, both cash and stock-based, that non-employee directors may receive annually under any of the Company’s compensation plans is limited under the terms of the Anadarko Petroleum Corporation 2008 Director Compensation Plan (2008 Director Compensation Plan) and the Anadarko Petroleum Corporation 2012 Omnibus Incentive Compensation Plan, as amended and restated (2012 Omnibus Plan). Non-employee director compensation will also be limited under the 2019 Omnibus Incentive Compensation Plan (2019 Omnibus Plan), if approved by our stockholders.

Annual Board Retainer and Other Fees. The following is a schedule of annual retainers for non-employee directors in effect during 2018, payable on a quarterly basis:

 

2018 Annual Retainer

   Amount($)

Annual Board Retainer

       110,000

Additional Annual Retainer for Chair of Audit Committee, Compensation Committee and Governance and Risk Committee

       25,000

Additional Annual Retainer for Lead Director

       35,000

To compensate a director in a year when there is an unusually high level of service required, a per-meeting fee of $2,000 will be paid for each meeting attended in excess of 20 combined Board and committee meetings in a calendar year. No per-meeting fees were paid in 2018. In addition, the Company may establish special committees of

 

 

 

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the Board from time to time and provide for additional retainers in connection therewith.

Non-employee directors may receive their annual retainer and per-meeting fees, if applicable, in cash or, if eligible, defer such cash compensation into the Anadarko Deferred Compensation Plan (described below), or any combination thereof. Non-employee directors may also elect to receive a number of deferred shares of common stock in lieu of all or a portion of such cash compensation, the grant date fair value of which, calculated pursuant to FASB ASC Topic 718, is approximately equal to the forgone cash compensation. These deferred shares may not be distributed to the non-employee director earlier than one year from the date of grant (except in the event of a separation from the Board due to death, disability or a change of control). This election option to receive deferred shares of common stock, in lieu of cash compensation, provides non-employee directors a method to invest in the Company as a stockholder and further aligns their interests with the interests of the Company’s stockholders.

Deferred Compensation Plan for Non-Employee Directors. Non-employee directors who are resident in the U.S. may participate in the Company’s Deferred Compensation Plan. The Deferred Compensation Plan allows non-employee directors to defer receipt of up to 100% of their cash compensation, and to allocate the deferred amounts among a group of notional accounts that mirror the gains and/or losses of various investment funds. The interest rate earned on the deferred amounts is not above-market or preferential. In general, deferred amounts are distributed to the participant upon leaving the Board or at a specific date as elected by the participant. No directors elected to defer compensation during 2018.

Stock Plan for Non-Employee Directors. In addition to the annual retainer and per-meeting fees, if applicable, non-employee directors receive annual equity grants. Equity grants to non-employee directors are awarded each year on the date of the Company’s annual meeting of stockholders. For 2018, each non-employee director who was elected at the 2018 Annual Meeting received an annual deferred share grant with a grant date fair value (calculated pursuant to FASB ASC Topic 718) of approximately $250,000. Ms. Pruner and Mr. Grimm each received a prorated equity grant when they were elected to the Board in November 2018. Non-employee directors may elect to receive their

shares on a specific date, but not earlier than one year from the date of grant (except in the event of a separation from the Board due to death, disability or a change of control). Stock-based awards made to non-employee directors were made pursuant to the 2008 Director Compensation Plan until it expired on May 19, 2018. Since that date, stock-based awards have been granted to non-employee directors pursuant to the 2012 Omnibus Plan. In addition, if approved by the Company’s stockholders, stock-based awards to non-employee directors will be made pursuant to the 2019 Omnibus Plan after the date of the 2019 Annual Meeting.

Stock Ownership Requirement for Non-Employee Directors. Non-employee directors are required to hold stock with a value equivalent to at least seven times the annual Board retainer and have five years from the date of their initial election to the Board to comply. All non-employee directors exceeded their ownership requirement at December 31, 2018, other than certain directors who are still within the five-year compliance period.

 

 

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Other Compensation. Non-employee directors are covered under the Company’s Accidental Death & Dismemberment Plan and the Company pays the annual premium for such coverage on behalf of each non-employee director. The Company also provides each non-employee director with Personal Excess Liability coverage and pays the annual premium on their behalf. The Company maintains an Aid to Education Program under which certain gifts made by employees, officers, non-employee directors and retired employees to qualified institutions of learning are matched on a two-to-one basis. The maximum contribution matched per donor, per calendar year is $2,500, resulting in a maximum Company yearly match of $5,000 per donor. Although not considered compensation, directors are reimbursed for reasonable expenses incurred in connection with Board-related activities.

 

 

 

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DIRECTOR COMPENSATION TABLE FOR 2018

The following table sets forth information concerning total non-employee director compensation earned during the 2018 fiscal year by each director who served on the Board in 2018. Mr. Walker does not receive any compensation for his service as a director.

 

Name

 

  

Fees Earned
or Paid in
Cash($)

 

  

Stock
Awards
($)(1)

 

  

Option
Awards
($)(2)

 

  

Non-Equity
Incentive Plan
Compensation
($)

 

  

Change in
Pension Value
and
Non-Qualified
Deferred
Compensation
Earnings ($)

 

  

All Other
Compensation
($)(3)

 

  

Total($)

 

Anthony R. Chase(4)

       115,625        250,028        0        0        0        2,042        367,695

David E. Constable(4)

       111,875        250,028        0        0        0        2,042        363,945

H. Paulett Eberhart(5)

       170,000        250,028        0        0        0        2,042        422,070

Claire S. Farley(4)

       111,875        250,028        0        0        0        2,042        363,945

Peter J. Fluor

       0        360,190        0        0        0        2,042        362,232

Joseph W. Gorder

       0        385,148        0        0        0        2,042        387,190

John R. Gordon

       110,000        250,028        0        0        0        2,042        362,070

Sean Gourley

       110,000        250,028        0        0        0        2,042        362,070

Michael K. Grimm(6)

       14,025        123,644        0        0        0        977        138,646

Mark C. McKinley

       110,000        250,028        0        0        0        2,042        362,070

Eric D. Mullins

       0        385,148        0        0        0        2,042        387,190

Alexandra Pruner(6)

 

      

 

14,025

 

 

      

 

123,644

 

 

      

 

0

 

 

      

 

0

 

 

      

 

0

 

 

      

 

977

 

 

      

 

138,646

 

 

 

(1)

The amounts in this column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of (i) the annual deferred shares granted to each non-employee director in 2018 and (ii) the deferred shares granted to those directors who elected to receive deferred shares in lieu of the cash fees that they earned for service to the Company in 2018 as follows:

 

  a.

Each director, other than Mr. Grimm and Ms. Pruner, received 3,921 deferred shares granted in connection with their election by stockholders on May 15, 2018, with a grant date fair value of $250,028.

 

  b.

Messrs. Fluor, Gorder and Mullins received deferred shares that were awarded in lieu of the receipt of a cash retainer and other fees. Pursuant to their elections, Mr. Fluor was awarded 2,048 deferred shares with a grant date fair value of $110,162 and Messrs. Gorder and Mullins were awarded 2,512 deferred shares with a grant date fair value of $135,120.

 

  c.

Mr. Grimm and Ms. Pruner received 2,437 deferred shares for their partial year of service from their appointment to the Board on November 15, 2018 through the Annual Meeting, with a grant date fair value of $123,644.

 

  

The value ultimately realized by each director may or may not be equal to the determined values. For a discussion of valuation assumptions, see Note 1 — Summary of Significant Accounting Policies — Share-Based Compensation of the Notes to Consolidated Financial Statements included under Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2018. As of December 31, 2018, each of the non-employee directors had aggregate outstanding deferred shares as follows: Mr. Chase — 21,331; Mr. Constable — 13,877; Ms. Eberhart — 53,513; Ms. Farley — 10,285; Mr. Fluor — 51,045; Mr. Gorder — 28,182; Mr. Gordon — 59,286; Dr. Gourley — 17,960; Mr. Grimm — 2,437; Mr. McKinley — 20,231; Mr. Mullins — 26,471, and Ms. Pruner — 2,437.

 

(2)

The non-employee directors did not receive any stock option awards in 2018. As of December 31, 2018, only the following non-employee directors had aggregate outstanding vested and exercisable stock options as follows: Mr. Fluor — 3,400 and Mr. Gordon — 3,400. There were no unvested options as of December 31, 2018.

 

(3)

For all non-employee directors, except for Mr. Grimm and Ms. Pruner, the amounts in this column include annual premiums paid by the Company for each director’s benefit in the amount of $121 for Accidental Death & Dismemberment (AD&D) coverage and $1,921 for Personal Excess Liability (PEL) coverage. For Mr. Grimm and Ms. Pruner, the amounts include $16 for AD&D coverage and $961 for PEL coverage for their partial year of service on the Board during 2018.

 

 

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Corporate Governance

 

 

 

 

(4)

The amount in the Fees Earned or Paid in Cash column includes fees earned for service on a special committee of the Board established in 2017 to provide review and oversight with respect to various activities in Colorado. The committee was terminated in May 2018. The amounts represent pro-rated payments based on the $15,000 annual retainer for the chairman of the committee, Mr. Chase, and the $5,000 annual fee for committee members.

 

(5)

In addition to her 2018 annual board retainer, the total compensation reported for Ms. Eberhart includes additional annual retainers for her service as Lead Director and as Chair of the Governance and Risk Committee during 2018.

 

(6)

Mr. Grimm and Ms. Pruner were appointed to the Board effective November 15, 2018.

 

 

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Security Ownership of Certain

Beneficial Owners and Management

 

 

 

The information provided below summarizes the beneficial ownership of each named executive officer (NEO), each of our directors, all of our directors and executive officers as a group, and owners of more than five percent of our outstanding common stock. Generally, “beneficial ownership” includes those shares of common stock held by someone who has investment and/or voting authority of such shares or has the right to acquire such common stock within 60 days. The ownership includes common stock that is held directly and also stock held indirectly through a relationship, a position as a trustee, or under a contract or understanding. Unless otherwise indicated, the address of the persons below is 1201 Lake Robbins Drive, The Woodlands, TX 77380.

DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE OFFICERS

The following table sets forth the number of shares and percentage of Anadarko common stock beneficially owned by our NEOs, each of our directors, and all of our executive officers and directors as a group as of March 19, 2019. None of the common stock beneficially owned as set forth below is pledged as security.

 

     Amount and Nature of Beneficial Ownership

 

Name of Beneficial Owner

 

  

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

 

  

Stock Acquirable
Within 60 Days

 

  

Total Beneficial
Ownership(3)

 

  

Percent of
Class

 

R. A. Walker(4)

       337,694        795,938        1,133,632        *

Benjamin M. Fink

       19,896        90,690        110,586        *

Robert G. Gwin(5)

       72,023        169,813        241,836        *

Mitchell W. Ingram

       50,709        61,270        111,979        *

Daniel E. Brown

       27,327        128,494        155,821        *

Amanda M. McMillian

       18,891        76,231        95,122        *

Anthony R. Chase

       27,557               27,557        *

David E. Constable

       13,877               13,877        *

H. Paulett Eberhart

       53,513               53,513        *

Claire S. Farley

       10,285               10,285        *

Peter J. Fluor

       166,324        3,400        169,724        *

Joseph W. Gorder

       28,182             28,182        *

John R. Gordon

       184,296        3,400        187,696        *

Sean Gourley

       17,960               17,960        *

Michael K. Grimm

       2,437               2,437        *

Mark C. McKinley

       21,143               21,143        *

Eric D. Mullins

       35,534               35,534        *

Alexandra Pruner

       2,437               2,437        *

All directors and executive officers as a group (19 persons)

 

      

 

1,103,219

 

 

      

 

1,397,623

 

 

      

 

2,500,842

 

 

      

 

*

 

 

 

*

Less than one percent.

 

(1)

This column does not include shares of common stock that the directors or executive officers of the Company have the right to acquire within 60 days of March 19, 2019. This column does include shares of common stock held in the Company’s Benefits Trust as a result of the director compensation and deferral elections made in accordance with our benefit plans described elsewhere in this proxy statement. Those shares are subject to shared voting power with the trustee under that Trust and receive dividend equivalents on such shares, but the individuals do not have the power to dispose of, or direct the disposition of, such shares until such shares are distributed to them. In addition, some shares of common stock reflected in this column for certain individuals are subject to restrictions.

 

 

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Security Ownership of Certain

Beneficial Owners and Management

 

 

 

 

(2)

This column does not include the following number of restricted stock units, which are payable (after taxes are withheld) in the form of Company common stock: Mr. Walker — 103,444; Mr. Fink — 41,815; Mr. Gwin — 45,166; Mr. Brown — 57,215; Mr. Ingram — 43,948; and Ms. McMillian — 39,037. The restricted stock units do not have voting rights but do receive dividend equivalents which are reinvested in Company stock and paid upon vesting of the underlying award.

 

(3)

In addition to the Anadarko common stock reported in the table, as of December 31, 2018, the directors and executive officers beneficially owned common units of Western Gas Partners, LP (WES) as follows: Mr. Fink — 2,213; Mr. Gwin — 5,000; Ms. McMillian — 1,470; and Mr. McKinley — 9,000. In addition, as of December 31, 2018, the directors and executive officers beneficially owned common units of Western Gas Equity Partners, LP (WGP) as follows: Mr. Fink — 18,683; Mr. Gwin — 100,000; Ms. McMillian — 10,000; and Mr. Fluor — 61,118. On February 28, 2019, a wholly owned subsidiary of WGP merged with WES, with WES continuing as the surviving entity and becoming a consolidated subsidiary of WGP (the “Merger”). In connection with the Merger, each WES common unit outstanding (other than certain common units held by certain Anadarko affiliates) was converted into the right to receive 1.525 WGP common units, and following the Merger, WES changed its name to “Western Midstream Partners, LP”. Based upon the WES and WGP ownership described above, and assuming that the Merger had been consummated on December 31, 2018, the directors and executive officers would have beneficially owned common units of Western Midstream Partners, LP as follows: Mr. Fink — 22,058; Mr. Gwin — 107,625; Ms. McMillian — 12,242; Mr. Fluor — 61,118; and Mr. McKinley — 13,725. Mr. Fluor disclaims beneficial ownership with respect to 61,117 common units that are owned by his spouse. The Company owns a majority interest in Western Midstream Partners, LP through its wholly owned subsidiaries. As of March 19, 2019, there were approximately 452,990,862 common units of Western Midstream Partners, LP outstanding. The directors and executive officers, individually and as a group, beneficially own less than one percent of the outstanding common units of Western Midstream Partners, LP.

 

(4)

Includes 108,000 shares of common stock held by a limited liability company (LLC) over which Mr. Walker and his spouse exercise investment control. The membership interests in the LLC are held by Mr. Walker, his spouse and family trusts of which he is the trustee.

 

(5)

In 2017, Mr. Gwin transferred the economic interest in certain stock options and restricted stock units of Company common stock pursuant to a domestic relations order (DRO). The shares reported do not reflect the stock options or restricted stock units in which he has no economic or beneficial interest.

 

 

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Security Ownership of Certain

Beneficial Owners and Management

 

 

 

CERTAIN BENEFICIAL OWNERS

The following table shows certain information regarding the beneficial ownership of the Company’s common stock as of March 19, 2019 by each person who is known by the Company to beneficially own more than five percent of the Company’s common stock.

As of March 19, 2019, 501,939,804 shares of the Company’s common stock were outstanding.

 

Title of Class

 

  

Name and Address

of Beneficial Owner

 

  

Amount and Nature of
Beneficial Ownership

 

 

Percent  

of Class  

 

Common Stock

  

BlackRock, Inc.

55 East 52nd Street

New York, NY 10055

       44,409,389 (1)       8.85 %  

Common Stock

  

Dodge & Cox

555 California Street, 40th Floor

San Francisco, California 94104

       44,065,467 (2)       8.78 %  

Common Stock

  

The Vanguard Group

100 Vanguard Blvd.

Malvern, PA 19355

       39,501,506 (3)       7.87 %  

Common Stock

 

  

State Street Corporation

State Street Financial Center

One Lincoln Street

Boston, MA 02111

 

      

 

25,251,281

 

(4)

 

     

 

5.03

 

%  

 

 

(1)

Based upon its Schedule 13G/A filed February 11, 2019, with the SEC with respect to Company securities held as of December 31, 2018, BlackRock, Inc. has sole voting power as to 39,977,558 shares of common stock, shared voting power as to 0 shares of common stock, sole dispositive power as to 44,409,389 shares of common stock and shared dispositive power as to 0 shares of common stock.

 

(2)

Based upon its Schedule 13G/A filed February 14, 2019, with the SEC with respect to Company securities held as of December 31, 2018, Dodge & Cox has sole voting power as to 41,952,082 shares of common stock and sole dispositive power as to 44,065,467 shares of common stock.

 

(3)

Based upon its Schedule 13G/A filed February 11, 2019, with the SEC with respect to Company securities held as of December 31, 2018, The Vanguard Group has sole voting power as to 595,905 shares of common stock, shared voting power as to 117,977 shares of common stock, sole dispositive power as to 38,803,492 shares of common stock and shared dispositive power as to 698,014 shares of common stock.

 

(4)

Based upon its Schedule 13G filed February 13, 2019, with the SEC with respect to Company securities held as of December 31, 2018, State Street Corporation has shared voting power as to 22,993,346 shares of common stock and shared dispositive power as to 25,246,671 shares of common stock.

 

 

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Section 16(a) Beneficial

Ownership Reporting Compliance

 

 

 

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file with the SEC and any exchange or other system on which such securities are traded or quoted, initial reports of ownership and reports of changes in ownership of the Company’s common stock and other equity securities. Officers, directors and more than 10% stockholders are required by the SEC’s regulations to furnish the Company and any exchange or other system on which such securities are traded or quoted with copies of all Section 16(a) forms they filed with the SEC.

To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, the Company believes that all reporting obligations of the Company’s officers, directors and more than 10% stockholders under Section 16(a) were satisfied during the year ended December 31, 2018.

 

 

 

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Audit Committee Report

 

 

 

The following report of the Audit Committee of the Company, dated February 12, 2019, shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall this report be incorporated by reference into any filing made by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

The Audit Committee of the Board is responsible for independent, objective oversight of the Company’s accounting functions and internal control over financial reporting. The Audit Committee is composed of four directors, each of whom is independent as defined by the New York Stock Exchange (NYSE) listing standards. The Audit Committee operates under a written charter approved by the Board of Directors, which is available on the Company’s website at www.anadarko.com/content/documents/apc/Responsibility/Governance_Documents/Audit_Committee_Charter.pdf.

Management is responsible for the Company’s internal control over financial reporting. The independent auditor is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards in the United States of America and issuing a report thereon. The independent auditor is also responsible for performing an independent audit of the Company’s internal control over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes.

KPMG LLP served as the Company’s independent auditor during 2018 and was appointed by the Audit Committee to serve in that capacity for 2019 (and we are seeking ratification by the Company’s stockholders at this Annual Meeting of such appointment). KPMG LLP has served as the Company’s independent auditor since its initial public offering in 1986, and served as the independent auditor of its predecessor since 1981 when it was a wholly owned subsidiary of another company.

In connection with these responsibilities, the Audit Committee met with management and the independent auditor to review and discuss the December 31, 2018 audited consolidated financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018. The Audit Committee also discussed with the independent auditor the matters required to be discussed by standards of the Public Company Accounting Oversight Board (PCAOB).

The Audit Committee also received the written disclosures and the letter from the independent auditor required by the PCAOB regulating the independent auditor’s communications with the audit committee concerning independence and has discussed with the independent auditor that firm’s independence.

Based upon the Audit Committee’s review and discussions with management and the independent auditor referred to above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC.

THE AUDIT COMMITTEE

Eric D. Mullins, Chair

David E. Constable

Claire S. Farley

Mark C. McKinley

 

 

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Compensation and Benefits Committee Report on

2018 Executive Compensation

 

 

 

The Compensation Committee, the members of which are listed below, is responsible for establishing and administering the executive compensation programs of the Company. 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 that the Compensation Discussion and Analysis be included in this proxy statement.

THE COMPENSATION AND BENEFITS COMMITTEE

Joseph W. Gorder, Chair

Peter J. Fluor

Michael K. Grimm

 

 

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Letter from the Chair of the

Compensation and Benefits Committee

 

 

 

The Compensation and Benefits Committee designs our executive compensation programs to align the interests of our executive officers with those of our stockholders. We have a strong track record of engaging with stockholders to understand their perspectives on our compensation practices, and over the years have made a number of enhancements to our compensation programs and our disclosure based on the stockholder feedback that we have received.

As discussed last year, in 2017 we worked closely with our investors to identify the metrics that they believe best measure performance in our industry. Based on the feedback received, the Compensation and Benefits Committee revised the Annual Incentive Program for 2018 to more directly incentivize capital efficiency in the performance metrics and further increase our focus on the safety of our employees, contractors and the communities in which we live and operate.

Our 2018 compensation program design reflects the views of our stockholders, and we believe the compensation results are aligned with Anadarko’s performance achievements on both a short- and long-term basis. As you will see in the disclosure that follows, while Anadarko performed well against key operational, financial and safety measures for 2018, realized compensation levels for our executive officers were fully reflective of our recent absolute and relative stock performance.

We appreciate your ongoing engagement, feedback and support as we continue our efforts to structure programs aligned with long-term stockholder value.

 

THE COMPENSATION AND BENEFITS COMMITTEE

 

LOGO

Joseph W. Gorder, Chair

 

 

 

 

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Compensation Discussion and Analysis

 

 

 

 

EXECUTIVE SUMMARY

Our Mission and Strategy

Our objective is to deliver competitive and sustainable returns to stockholders by:

 

  exploring for, developing and commercializing oil and natural gas resources vital to the world’s health and welfare;

 

  ensuring health, safety, and environmental excellence; and

 

  focusing on financial discipline, flexibility, and value creation;

while demonstrating the Company’s core values of integrity and trust, servant leadership, people and passion, commercial focus, and open communication in all that we do.

Executing on Our Strategy

Exercising capital efficiency is a foundational principle to deliver on our strategy. We allocate capital at the asset level based on expected return, and measured on a per DAS basis for company performance. We strive to create attractive returns on, and of, capital by:

 

  investing within cash flow, which has been a foundational principle of our strategy for over a decade, based on a $50 oil and $3 natural gas environment;

 

  returning capital to stakeholders if realized prices are higher than expected, versus materially increasing our investment plans; and

 

  producing value and growth from investments that generate peer-leading per DAS corporate performance.

 

 

LOGO

 

2018 Highlights

In 2018, we delivered on our commitment to increase the return of cash to investors through repurchasing stock, retiring debt and increasing our dividend:

 

  Expanded Share Repurchase Program We expanded our share-repurchase program to $5 billion in November 2018, and have completed $3.75 billion of share repurchases since the inception of the program in September 2017.

 

  Increased Debt-Reduction Program — We increased our debt-reduction program to $2 billion in November 2018 and retired more than $600 million of debt during 2018.

 

  Increased Dividend 500% — During 2018, the Board increased the per-share quarterly dividend paid to our common stockholders from 5 cents to 30 cents.

 

  Progressed LNG Development in Mozambique In February 2018, the Government of Mozambique approved the Development Plan for the Anadarko-operated, initial two-train Golfinho/Atum LNG project in Mozambique. In addition, we selected the preferred offshore construction and installation contractor and major infrastructure and resettlement projects continue to proceed. Also during 2018 and subsequent to year end, LNG sales and purchase agreements were executed, increasing contracted volumes to more than 9.5 MTPA. In light of this progress, the Company formally launched project financing in December 2018 and is working to finalize arrangements with lenders and secure all required partner and government-related approvals The Company is on schedule to make a final investment decision on the project, which is expected to provide significant cash flow over the long term once LNG is achieved, during the first half of 2019.

 

  Announced Midstream Asset Sale — In November 2018 we announced a transaction to sell substantially all of our midstream assets to Western Gas Partners, LP for consideration valued at approximately $4 billion. The transaction closed in February 2019 and we received approximately $2 billion of cash proceeds and 45,760,201 common units of Western Midstream Partners, LP as consideration for the sale.
 

 

 

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Compensation Discussion and Analysis

 

 

 

The following summarizes the performance metrics used in 2018 for the Company’s performance-based compensation arrangements, highlights the rigor of such arrangements and shows the 2018 pay outcomes.

 

 

LOGO

2018 Annual Incentive Program

Our strategy drives the design of our compensation programs, which reflect our pay-for-performance philosophy. In 2017 we developed compensation metrics for our 2018 AIP that supported our focus on capital efficiency and financial discipline, while also taking into account feedback from our stockholders. The metrics included a cash return calculation and capital efficiency on a DAS basis. We also expanded the safety performance metric, now known as the HSE performance metric, to include a combination of TRIR for both employees and contractors and serious (“Level 3”) safety and environmental incidents.

For 2018, the Compensation Committee (referred to in this section of the proxy statement as the Committee) set targets under the updated AIP metrics at challenging levels taking into consideration the then-current market and business environment, and at levels that generally required strong year-over-year performance for target payouts.

For more information on the 2018 AIP, see the discussion beginning on page 46.

 

 

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Compensation Discussion and Analysis

 

 

 

 

2018 Pay Outcomes Demonstrate Pay and Performance Alignment

Our compensation programs are based on performance metrics that are aligned with our corporate strategy and are designed to align our executive officers’ interests with those of our long-term stockholders.

As shown in the charts below, in 2018, compensation for our NEOs continued to be delivered in line with our performance outcomes.

For 2018, AIP performance targets were set at challenging levels, with strong year-over-year performance required in

key operational, financial and safety metrics for target payouts to occur. The Company performed well against our core operational, financial and safety measures for 2018, and also achieved significant milestones towards a final investment decision related to the LNG development project in Mozambique. Accordingly, the AIP awards for the NEOs were above target. However, our performance-based long-term awards are based on relative TSR performance, and we placed eighth in the 12-company peer group for the three-year period ended December 31, 2018. As a result, the incentive compensation realized by our NEOs for performance units was substantially below target and grant date value.

 

 

 

 

LOGO

2015 Performance Units — Below-Target Payout. Based on Anadarko’s TSR performance results relative to peers for the three-year period ended December 31, 2018, the NEOs earned below-target payouts of 60% of their performance units (out of a maximum 200%). See page 50 for more details regarding performance units.

 

 

 

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Compensation Discussion and Analysis

 

 

 

 

LOGO

CEO Realized Pay Demonstrates Alignment with Company Performance. Consistent with our pay-for-performance philosophy, 91% of the CEO’s total direct compensation is at-risk. Accordingly, the value that is intended to be received by the CEO is aligned with the Company’s actual operational and financial performance, including its stock-price performance. As demonstrated below, the value actually received by the CEO can differ substantially from grant date values, which are calculated and reported in the Summary Compensation Table (SCT) and related proxy tables as required by the SEC.

As the following pages demonstrate, cumulative realized pay for the CEO over the last three years was less than one-half of the aggregate target value, demonstrating the efficacy of our plan’s pay for performance construction.

 

 

LOGO

The chart above compares reported pay and realized pay for 2016, 2017 and 2018. The amounts include each direct compensation element, i.e., salary, non-equity incentive plan compensation/bonus, performance units, restricted stock units and non-qualified stock options. The SCT column in the chart depicts the data reported in the 2018 SCT, while the Realized column depicts the actual value received (or vested) by the CEO in each year, including actual performance-based compensation paid for prior performance periods. The methodology for calculating realized pay for purposes of this chart is more fully described in the table on Appendix A.

 

 

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Compensation Discussion and Analysis

 

 

 

 

Leadership Changes

We maintain a focus on succession strategy, which is supported by a proactive internal development plan. Over the past year, we have made a number of targeted internal promotions in recognition of each individual’s professional growth and contributions to Anadarko. These promotions are a reflection of the Board’s emphasis on fostering executive talent and confidence in each executive’s ability to continue executing the Company’s long-term strategy.

In May 2018, Mr. Ingram was promoted from Executive Vice President, International & Deepwater Operations and Project Management to Executive Vice President, International, Deepwater and Exploration.

In August 2018, Ms. McMillian was promoted from Senior Vice President, General Counsel, Corporate Secretary and

Chief Compliance Officer to Executive Vice President and General Counsel.

In November 2018, Mr. Gwin was promoted from Executive Vice President, Finance and Chief Financial Officer to President and Mr. Fink was promoted from Senior Vice President to Executive Vice President, Finance and Chief Financial Officer.

We Seek and Respond to Stockholder Feedback

Our compensation decisions are guided by the feedback we receive from stockholders. Since 2012, we have reached out to at least our 50 largest stockholders’ governance and voting teams a minimum of twice a year to solicit feedback on Anadarko’s executive compensation programs, as well as corporate governance, sustainability and environmental issues and other matters.

 

 

 

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During the spring of 2018, we sought feedback from stockholders owning approximately 64% of the Company’s outstanding common stock. Additionally, in the fall of 2018 we sought feedback from stockholders owning approximately 58% of the Company’s outstanding common stock. Our stockholder engagement team consists of senior management from our Human Resources, Legal, Investor Relations, Corporate Communications and Health, Safety and Environment departments and has also included the Lead Director or the Chair of our Compensation Committee from time to time. Members of our engagement team also participate in various governance forums with our stockholders.

Our stockholders’ views on executive compensation and corporate governance are important to us, and we value and use their feedback and insights. The Board and its committees regularly discuss and consider the significant concerns that are identified through this engagement process as well as the outcome of the annual advisory vote on executive compensation. As a result, we have made numerous changes to our executive compensation programs and governance practices over the years, including a number of changes for 2018.

 

 

 

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Compensation Program Changes for 2018. As described in our 2018 proxy statement, following the Company’s 2017 Annual Meeting, our engagement team continued to seek feedback from stockholders, who expressed their views on the performance measures that they consider appropriate to best assess performance in our industry. Specifically, stockholders expressed a preference for us to more directly incorporate capital efficiency and financial discipline into performance metrics.

Based on this feedback, and in line with our consistent historical focus on financial discipline, we spent time

developing a set of compensation metrics that better reflect capital efficiency and financial discipline, soliciting stockholder input throughout the process. As a result, the 2018 AIP metrics included a cash return calculation and capital efficiency on a per DAS basis.

The Committee also enhanced the focus on safety performance in our compensation programs by expanding the Safety performance metric (now known as the HSE performance metric) in the 2018 AIP to include a combination of TRIR for both employees and contractors and Level 3 safety and environmental incidents.

 

 

The 2018 AIP performance metrics and results are discussed in more detail beginning on page 46.

 

 

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Track Record of Good Governance Practices. Through our commitment to good governance, including our continued stockholder engagement efforts, over the past several years we have implemented the following practices related to our executive compensation programs:

 

      What We Do              What We Don’t Do

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   Structure our executive officer compensation so that more than 85% of pay is at risk     LOGO    No employment contracts with our executive officers
LOGO    Emphasize long-term performance in our equity-based incentive awards     LOGO    No tax gross-ups on perquisites except with respect to the Company’s standard relocation program available to all employees
LOGO    Require double-trigger for equity acceleration upon a change of control     LOGO    No excise tax gross-ups in key employee change-of-control contracts entered into by newly appointed and/or newly hired executive officers, irrespective of an existing agreement
LOGO    Maintain a competitive compensation package     LOGO    No pledging of Company securities
LOGO    Require strong stock ownership for executive officers and directors     LOGO    No short sales or derivative transactions in Company stock, including hedges
LOGO    Provide for clawback provisions     LOGO    No current payment of dividends on unvested awards and no repricing of stock options unless approved by stockholders

 

 

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2018 COMPENSATION FRAMEWORK EMPHASIZES PERFORMANCE-BASED PAY

Our executive compensation programs include direct and indirect compensation elements. We believe that a majority of an executive officer’s total compensation opportunity should be performance-based; however, we do not have a specified formula that dictates the overall weighting of each element.

As illustrated in the charts below, 79% of the CEO’s, and an average of 74% of the other NEOs’, current target total compensation opportunity is provided through equity-based incentive awards that are dependent upon long-term corporate performance and stock-price appreciation. Any value ultimately realized for these long-term equity-based incentive awards is directly tied to Anadarko’s absolute and relative stock-price performance and will fluctuate in line with stockholder returns.

 

 

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The charts above are based on the following: current base salaries, as discussed on page 46; target bonus opportunities approved by the Committee in 2018, as discussed on page 47; and the grant date value for the 2018 annual equity awards, as discussed on page 51.

 

 

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Elements of our 2018 Compensation Program

 

Component

  

Award

  

Performance Metrics

  

Purpose

Base Salary

   Cash    N/A   

Provides a fixed level of competitive compensation to attract and retain executive talent.

 

Annual Incentive

Program (AIP)

   Cash   

Operational

•  Reserve Additions Growth per DAS

•  Sales Volume Growth per DAS

  

Replacing proved reserves is essential for an exploration and production company. Reserve growth is measured on a debt-adjusted share basis to determine whether reserves are being replaced in a capital-efficient manner that is accretive to stockholder value. Sales volumes reflect the conversion of reserves into operating cash flows. Sales volume growth is similarly measured on a debt-adjusted share basis to determine whether sales volume growth is being achieved in a manner that is accretive to stockholder value.

 

  

Financial

•  Cash Flow Return on Invested Capital

•  Controllable Cash Costs

  

These metrics focus on capital efficiency and financial discipline. The Company allocates the majority of its capital to assets that generate strong economic margins and returns while a portion is allocated to long-term projects that are intended to provide future reserves and sales volume. The Controllable Cash Costs performance metric incentivizes employees to manage and reduce costs to maximize margins and profitability.

 

  

HSE Performance

•  Total Recordable Incident Rate (TRIR)

•  Level 3 Incidents

  

Health and safety is very important to us and critical to our success. Accordingly, the Health, Safety and Environmental (HSE) performance metric includes both (i) TRIR for both employees and contractors and (ii) Level 3 safety and environmental incidents in order to focus employees and contractors on maintaining a safe work environment. A Level 3 Incident generally involves a significant environmental impact, an impact to the public and/or significant monetary damages, or a fatality or permanent disability. As a result, our HSE performance metrics capture both the number and the severity of the incidents in a given year.

 

Equity

Compensation

   Performance Units (50%)    3-Year Total Stockholder Return (TSR)   

TSR provides not only an effective comparison of our performance against an industry peer group, but also an absolute performance-based component as the value of vested awards is tied to the price of our common stock at the time of payout.

 

   Non-Qualified Stock Options (25%)    Absolute Stock Price   

Stock Options reward absolute value creation and typically vest pro rata annually over three years, encouraging both performance and retention.

 

  

Restricted Stock

Units (25%)

   Absolute Stock Price   

Restricted Stock Units align with absolute stock price performance and provide retentive value, especially in a volatile and cyclical industry.

 

 

 

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2018 COMPENSATION STRUCTURE AND DECISIONS LINK DIRECT COMPENSATION ELEMENTS TO STRATEGY AND OUTCOMES

The following is a discussion of the specific actions taken by the Committee in 2018 related to each of our direct compensation elements. Each element is reviewed annually, as well as at the time of a promotion, other change in responsibilities, other significant corporate event or a material change in market conditions.

Base Salary

In setting new salary levels for each of the NEOs, the Compensation Committee considered a number of factors, including each executive’s experience, individual performance, internal pay equity, development, and other individual or organizational circumstances, including the current market and business environment.

The table below reflects the base salaries for the NEOs at the beginning of 2018 as well as any modifications approved by the Committee in November 2018, as part of its annual review of executive compensation:

 

Name

   Salary as of
January 1, 2018($)
  Salary as of
November 15, 2018($)
   Increase(%)

Mr. Walker

       1,300,000       1,300,000        0

Mr. Fink

       (1 )       625,000        (1 )

Mr. Gwin

       750,000       1,000,000        33.3

Mr. Ingram

       650,000       775,000        19.2

Mr. Brown

       625,000       675,000        8

Ms. McMillian

       (1 )       625,000        (1 )

 

(1)

Mr. Fink and Ms. McMillian served as senior vice presidents of the Company on January 1, 2018. Mr. Fink was appointed as Executive Vice President, Finance and Chief Financial Officer in November 2018, at which time his base salary was increased to $625,000. Ms. McMillian was appointed as Executive Vice President and General Counsel in August 2018, at which time her base salary was increased to $625,000.

Coincident with Mr. Gwin’s appointment to President in November 2018, his base salary was increased as noted above. Mr. Ingram received an increase to his base salary to reflect the additional job responsibilities he assumed in May 2018, upon his appointment as Executive Vice President, International, Deepwater and Exploration. Mr. Brown received an increase to his base salary in 2018 to reflect the additional job responsibilities he assumed in November 2018 and his continued development in his role.

Performance-Based Annual Incentive Program (AIP)

The AIP is designed to focus on key performance metrics and targeted levels of performance that are intended to drive differentiating performance year-over-year and increase stockholder value. The Committee believes that the AIP’s annual performance metrics, although short-term in nature, work together to position the Company for strong TSR performance over the long term. All employees of the Company, including our executive officers, are eligible to participate in the AIP, which is part of our 2012 Omnibus Plan. At the beginning of each year, the Committee reviews and approves the performance metrics and targeted levels of performance. These targeted levels of performance align with the Board-approved budget for the year and reflect the market and business environment in which we operate. (See Appendix A for definitions and calculation methods.) As discussed below, we engage in a rigorous process to set performance targets and appropriately align compensation levels with performance results.

 

 

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Rigorous Process Utilized to Develop Strategic AIP Performance Targets. The Company employs a rigorous process to establish the annual capital budget, which directly promotes the Company’s strategic objectives and is the basis for developing the AIP performance targets. The chart below outlines our process in detail from the initial budget “build up” process through final approval and certification of the Company’s AIP results by the Committee.

 

 

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Individual Target Bonus Opportunities. Individual target bonus opportunities are set as a percentage of base salary. Executives may earn from 0% up to 200% of their individual bonus target. The bonus targets for 2018 are shown in the table below. As part of its annual review of executive compensation, the Compensation Committee made the following changes to the NEOs’ bonus targets for 2018:

 

Name

   Target Bonus
for 2017(%)
  Target Bonus
for 2018(%)
  Increase(%)

Mr. Walker

       130       130       0

Mr. Fink

       (1 )       81.73 (1)       N/A

Mr. Gwin

       95       110       16

Mr. Ingram

       95       110       16

Mr. Brown

       95       110       16

Ms. McMillian

       (1 )       85.65 (1)       N/A

 

(1)

Mr. Fink and Ms. McMillian served as senior vice presidents of the Company on January 1, 2018 and were appointed as executive vice presidents in November and August of 2018, respectively. The Committee set a target bonus opportunity of 95% for each of these officers in their new role. Their target bonus opportunities and, as a result, actual bonus awards for 2018 were prorated using a blended rate calculated based on the percentage of 2018 that each executive served in their respective roles and the target bonus opportunity applicable to each role.

Coincident with Mr. Gwin’s appointment to President in November 2018, his target bonus opportunity was increased as noted above. Mr. Ingram received an increase to his target bonus opportunity to reflect the additional job responsibilities he assumed in May 2018, upon his appointment as Executive Vice President, International, Deepwater and Exploration. Mr. Brown’s increase in 2018 reflects the additional job responsibilities he assumed in November 2018 and his continued development in his role. In addition, the Committee determined that Mr. Walker’s target bonus opportunity for the 2019 AIP would increase to 150%.

 

 

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2018 AIP Performance Results. During 2018, the Company performed well against our core operational, financial and safety measures. The Company continued to deliver on its strategy to create value for stockholders. In addition, its focus on strong operational and safety performance coupled with higher-than-expected oil prices and organic reserve additions resulted in above-target AIP achievement levels for 2018. The table below reflects the 2018 performance results against each of the specified targets. Each performance metric and the total AIP score are capped at 200%. For a detailed description of the 2018 AIP performance metrics, see page 45.

 

2018 AIP Performance Metrics

   2018 Target-Setting
Considerations
  

Relative

Weighting

Factor

  

AIP

Target

Performance

 

AIP

Performance

Results

 

AIP

Performance

Score

Reserve Additions Growth per DAS(1)

   Target set at a level that required more than a 100% reserve replacement ratio        20%        11.9 %       22.8 %       27.8%

Sales-Volume Growth per DAS(1)

   Target set at a level that required strong year-over-year increase in production on a divestiture-adjusted basis        20%        12.9 %       15.1 %       25.0%

Cash Flow Return on Invested Capital(1)

   Target set based on current market and business environment        20%        19.0 %       27.0 %       36.4%

Controllable Cash Costs ($/BOE)(2)

   Target incorporated certain controllable costs to maximize margins and profitability, including LOE, controllable G&A and transportation costs        20%        10.42       11.04       8.1%

Total Recordable Incident Rate (employees and contractors)

   Target set at a level that required strong year-over-year improvements        10%        0.55       0.49       14.3%

Level 3 Incidents(3)

   Target set at a level that required strong year-over-year improvements        10%        7       0       20.0%
       

 

 

              

 

 

 
                    

Calculated Performance Score

            100%                            131.6%

Committee Adjustments

(see below for additional disclosure)

   Substantial progression of Mozambique LNG development project toward FID, which is expected to create significant long-term value for stockholders                     18.4%

Approved AIP Performance Score

                                           150.0%

 

(1)

See Appendix A for definitions and calculation methods.

 

(2)

Controllable Cash Costs are the sum of lease operating expense (LOE), controllable general and administrative (G&A) costs and oil and gas transportation costs per barrel of oil equivalent sales volume. LOE excludes the cost of deepwater work-overs because of timing uncertainty and magnitude. Controllable G&A includes costs that are subsequently reclassified to exploration expense for accounting purposes and excludes restricted stock, severance costs, restructuring costs, bonus plans and benefits costs.

 

(3)

Level 3 Incidents generally involve a significant environmental impact, an impact to the public and/or significant monetary damages, or a fatality or permanent disability.

 

 

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Committee Adjustments. The Committee has historically utilized its discretion in limited circumstances to adjust compensation levels under the AIP when it believes that outcomes are insufficiently reflective of overall Company performance. For example, in 2017 the Committee lowered the final AIP score from a calculated performance score of 92.6% to a final AIP score of 85.0%.

In February 2019, the Committee conducted a thorough assessment of the Company’s performance over the year, including performance against the new AIP performance metrics adopted for 2018, as well as progress on key strategic initiatives that have the opportunity to deliver long-term stockholder value but were not reflected in the AIP

performance metrics. Based on this comprehensive review, the Committee approved an increase in the AIP score, bringing the 2018 AIP performance score from 131.6% to 150.0%. The adjustment was approved in recognition of the Company’s reaching a number of important milestones to position it for a final investment decision related to the Mozambique LNG development project, which is expected to provide significant cash flow over the long term. These accomplishments included obtaining government approval of the Development Plan, executing the requisite LNG sale and purchase agreements, and launching project finance arrangements. See page 38 for more details on the progress of the LNG development project.

 

 

The 2018 AIP awards for the NEOs are shown in the table below and are reflected in the “Non-Equity Incentive Plan Compensation” column (131.6%) and the “Bonus” column (18.4%) of the Summary Compensation Table.

 

Name

   Base
Salary
Earnings
for 2018($)
        Target
Bonus %
       

Approved

AIP

Performance

Score

        Individual
Performance
Adjustments
        Actual
Bonus
Award($)

Mr. Walker

    

 

1,300,000

 

 X

    

 

130%

 

 X

    

 

150%

 

±

    

 

0

 

=

    

 

2,535,000

Mr. Fink(1)

    

 

514,423

 

 X

    

 

81.73%

 

 X

    

 

150%

 

±

    

 

0

 

=

    

 

630,700

Mr. Gwin

    

 

778,846

 

 X

    

 

110%

 

 X

    

 

150%

 

±

    

 

0

 

=

    

 

1,285,100

Mr. Ingram

    

 

664,423

 

 X

    

 

110%

 

 X

    

 

150%

 

±

    

 

0

 

=

    

 

1,096,300

Mr. Brown

    

 

630,769

 

 X

    

 

110%

 

 X

    

 

150%

 

±

    

 

0

 

=

    

 

1,040,800

Ms. McMillian(1)

    

 

578,269

 

 X

    

 

85.65%

 

 X

    

 

150%

 

±

    

 

0

 

=

    

 

742,900

 

(1)

The bonus targets for Mr. Fink and Ms. McMillian were prorated as a result of their appointments as executive vice presidents in November and August of 2018, respectively, using a blended rate calculated based on the percentage of 2018 that each served in their respective roles and the target bonus opportunity applicable to each role. For 2019, their bonus targets will be 95%.

 

Compensation Program Changes for 2019. At the 2018 Annual Meeting, our executive compensation programs received the support of almost 94% of the votes cast. Following constructive engagement with stockholders, the Committee determined it was appropriate to enhance the AIP program further in 2019 to demonstrate the Company’s commitment to capital discipline and free cash flow generation by including a Free Cash Flow Yield metric. The new metric replaces the Reserve Additions Growth per DAS metric. In determining to make this change, the Committee considered the fact that uncertainty regarding the

Company’s Mozambique development program makes it difficult to construct a fair and reasonable range of outcomes under the Reserve Additions Growth per DAS metric. In light of the Company’s plans to consider a final investment decision regarding its Mozambique development program and the desire to avoid any unintended benefits or detriments related to that metric that might arise as a result of making such decision, the Committee approved the Free Cash Flow Yield metric to replace Reserve Additions Growth per DAS for 2019.

 

 

 

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Equity-Based Compensation

Our equity-based long-term incentive program is designed to reward our executive officers for sustained long-term share performance. This program represents an average of 74% of target total compensation opportunity for our NEOs other than the CEO, and 78% for the CEO. It includes a combination of equity-based awards that we believe are performance-based in absolute and relative terms, while also providing a necessary retentive element. For additional details on the terms of these awards see page 62.

 

Equity Award

 

Allocation

 

Purpose

 

Vesting

Performance Units

      50%   Reward absolute and relative TSR performance   3-Year Performance Period

Non-Qualified Stock Options

   

 

25%

 

Reward absolute value creation

 

Pro Rata Annually Over 3 Years    

Restricted Stock Units

      25%   Align with absolute stock price performance and provide retention value   Pro Rata Annually Over 3 Years

 

Pursuant to our equity grant administration procedures established by the Committee, annual equity-based awards for executive officers are typically made at the regularly scheduled Committee meeting in the fall. Equity awards for newly hired executive officers or awards made in connection with promotions are made on the date such awards are approved by the Committee.

Performance Units — Absolute and Relative TSR. The Committee has established relative TSR as the performance criterion for the Company’s performance unit awards, and believes that a single focus on TSR as the performance criterion for the performance units is appropriate and is consistent with most energy industry peers. The calculation provides an effective relative comparison of our performance against an industry peer group, but also provides for an absolute performance-based component, as the payout of the performance unit awards is determined by the price of our common stock at the time of payout. Therefore, regardless of relative TSR during the performance period, a decrease in the price of our common stock over the performance period reduces the executive officer’s payout.

 

 

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Relative TSR performance is based on the difference between (1) the average closing stock price for the 30 trading days preceding the beginning of the three-year performance period, and (2) the average closing stock price for the last 30 trading days of the three-year performance

period, plus dividends paid for the performance period, and further adjusted for any other distributions or stock splits, where applicable.

Performance Unit Peer Group. The peer group for the performance units awarded in 2018 was identical to the peer group that was used for conducting the 2018 compensation benchmarking assessment, which is listed on page 53. If any of the peer companies undergoes a change in corporate capitalization or a corporate transaction (including, but not limited to, a going-private transaction, bankruptcy, liquidation, merger or consolidation) during the performance period, the Committee will evaluate whether to replace such peer company.

Alternative Designs Considered. Our plan requires above median performance to earn a target payout and 100th percentile performance to earn a maximum payout. The Committee has considered placing a cap on earned awards at target if absolute TSR is negative for the performance period, regardless of relative TSR, as well as other mechanisms for capping payout if TSR is negative. The Committee determined that placing such a cap on earned awards is not appropriate in our business which is highly dependent on the market-driven prices we receive for our oil, natural gas and natural gas liquids. The Committee strongly believes that stockholders 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. In addition, the Committee maintains the ability to apply negative discretion to these awards should the Committee deem such discretionary adjustment necessary.

 

 

 

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Performance Unit Performance Period and Payout Opportunity. The following table reflects the payout scale for the annual performance unit program. The payout scale demonstrates rigorous performance unit standards required for target and maximum payouts, including above median performance in order to earn a target payout:

 

Final TSR Ranking

   1    2    3    4    5    6    7    8    9    10    11    12

TSR Performance Percentile

       100%        91%        82%        73%        64%        55%        46%        36%        27%        18%        9%        0%

Payout as % of Target

       200%        182%        164%        146%        128%        100%        80%        60%        40%        0%        0%        0%

Equity Awards Granted During 2018

In 2018, the Committee approved the following awards under our 2012 Omnibus Plan for the NEOs. The target grant value of Mr. Walker’s award was held flat as compared to awards granted in 2017. Mr. Gwin received an increase in target grant value of his award to reflect his appointment as President in November 2018. Mr. Ingram received an increase to reflect the additional job responsibilities he assumed in in May 2018, upon his appointment as Executive Vice President, International, Deepwater and Exploration. Mr. Brown’s increase in 2018 reflected the additional job responsibilities he assumed in November 2018 and his continued development in his role. Mr. Fink and Ms. McMillian received increases as a result of their appointments as executive vice presidents in 2018. These awards, as well as a description of the methodology for calculating the grant date fair value, are included in the Grants of Plan-Based Awards Table on page 62.

 

           

Performance

Units (50%)

  

Stock

Options (25%)

  

Restricted Stock

Units (25%)

  Name    Total LTI
Grant Date
Value($)
  

Target #

of Units

   Grant
Date
Value($)
   # of
Stock
Options
   Grant
Date
Value($)
  

# of

Units

  

Grant

Date
Value($)

Mr. Walker

       10,868,290        88,952        5,433,188        172,205        2,660,102        49,991        2,775,000

Mr. Fink

       2,937,484        24,042        1,468,485        46,542        718,948        13,512        750,051

Mr. Gwin

       5,287,292        43,274        2,643,176        83,776        1,294,113        24,320        1,350,003

Mr. Ingram

       4,895,692        40,069        2,447,415        77,570        1,198,247        22,519        1,250,030

Mr. Brown

       4,895,692        40,069        2,447,415        77,570        1,198,247        22,519        1,250,030

Ms. McMillian

       2,937,484        24,042        1,468,485        46,542        718,948        13,512        750,051

Performance Units — Results for Performance Period Ended December 31, 2018

In January 2019, the Committee certified the performance results for the annual performance unit awards granted in 2015 for the three-year performance period that ended December 31, 2018. The performance results and Anadarko’s ranking, as highlighted, were as follows:

2015 Annual Award — Three-Year Performance Period (January 1, 2016 to December 31, 2018)

 

                                        APC                    

Final TSR Ranking

  1st   2nd   3rd   4th   5th   6th   7th   8th   9th   10th   11th   12th

TSR

      40.4%       34.5%       30.2%       7.4%       6.3%       3.8%       -0.7%    -3.6%           -24.2%       -27.4%       -30.9%       -42.5%

Payout as % of Target

      200%       182%       164%       146%       128%       100%       80%    60%        40%       0%       0%       0%

 

 

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The following table lists the number of performance units that would be awarded at minimum, target, and maximum levels and the actual number of performance units earned by the NEOs for the annual performance unit awards granted in 2015 for the three-year performance period that ended December 31, 2018:

 

     2015 Annual Performance Unit Award

Name

  

Minimum

# Units

  

Target

# Units

  

Maximum

# Units

  

Actual

# Units

Earned

Mr. Walker

       0        77,548        155,096        46,529

Mr. Fink

       0        6,429        12,858        3,857

Mr. Gwin(1)

       0        31,096        62,192        18,658

Mr. Ingram

       0        31,000        62,000        18,600

Mr. Brown

       0        9,504        19,008        5,702

Ms. McMillian

       0        7,827        15,654        4,696

 

(1)

For Mr. Gwin, the number of units earned does not include any value related to the transfer of the economic interest of performance units pursuant to a DRO.

Restricted Stock. In February 2017, the Committee established objective performance criteria, which were required to be achieved in order to award any restricted stock units in 2018 to certain executive officers. If the performance criteria were achieved, the Committee would make awards of restricted stock units to the executive officers. The restricted stock units awarded typically vest pro rata annually over three years, beginning with the first anniversary of the grant date. All of the restricted stock unit awards granted in November 2018 were made after the Company achieved the 2017 performance criterion, which was the Company’s attainment of $1.1 billion in Cash Flows from Operating Activities (Net cash provided by (used in) operating activities) as calculated in the Consolidated Statement of Cash Flows of the Company’s financial statement published in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, but excluding the effect of any legal settlements/satisfaction of judgments that are $1 million or greater.

Stock Options. Stock options typically vest pro rata annually over three years, beginning with the first anniversary of the date of grant, and have a term of seven years. The exercise price is not less than the market price on the date of grant and repricing of stock options to a lower exercise price is prohibited, unless approved by stockholders.

HOW WE MAKE COMPENSATION DECISIONS

The Committee has overall responsibility for evaluating and approving the officer and director compensation plans,

policies and programs of the Company. The Committee is also responsible for producing a report reviewing the Company’s Compensation Discussion and Analysis. The Committee uses several different tools and resources in reviewing elements of executive compensation and making compensation decisions. These decisions, however, are not purely formulaic and the Committee exercises judgment and discretion as appropriate.

Compensation Philosophy. Our compensation programs are designed to pay for performance and motivate and retain a highly experienced and cohesive executive team to successfully manage the operations of a global company of our scope and complexity. Specifically, our compensation programs:

 

LOGO Align with stockholder interests

LOGO Align pay outcomes with Company performance

LOGO Incentivize outperformance

LOGO Reward absolute and relative performance

Compensation Consultant. The Committee has retained FW Cook as an independent consultant to provide advice on executive compensation matters. The decision to engage FW Cook was made by the Committee and FW Cook reports directly and exclusively to the Committee; however, at the Committee’s direction, the consultant works directly with management to review or prepare materials for the Committee’s consideration. While engaged as the Committee’s consultant, FW Cook did not perform any services for the Company outside the scope of its arrangement with the Committee. During 2018, the Committee reviewed FW Cook’s independence and determined that there were no conflicts of interest as a result of the Committee’s engagement of FW Cook. The Committee did not engage any consultant other than FW Cook during 2018 to provide executive compensation consulting services.

In 2018, FW Cook attended all of the Committee meetings and provided the Committee with market analyses, including Peer Proxy Data (defined below), and an annual independent assessment of the risk associated with the Company’s compensation programs. In addition, FW Cook advised the Committee on the following: market trends; regulatory and governance developments and how they may impact our executive compensation programs; the design and structure of our executive compensation programs to ensure linkage between pay and performance; setting the pay for our CEO; and compensation recommendations for the other executive officers, in consultation with the CEO.

 

 

 

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Benchmarking Peers. The Committee looks at a number of factors when determining our peer group, including size, similarity of business, geographical proximity of operations and competition for talent. Within the oil and gas industry, there are very few companies that resemble us on all such factors. To make sure that we are reasonably positioned within our peer group, we have historically looked outside of what might be considered a normal market capitalization range to make sure that our overall group is balanced while remaining representative of the companies that we actually compete with for talent and business. The Committee believes the selected companies are currently the most appropriate with respect to executive compensation benchmarking. The differences and similarities between us and the companies in our industry peer group are taken into consideration when referencing benchmarks for executive compensation decisions.

Each year, FW Cook conducts an independent review of the Company’s industry peer group for the Committee to use as a reference point for assessing competitive executive compensation data (including base salary, target annual incentives and annualized long-term incentive grant values). This review includes an evaluation of Anadarko’s peers as designated by proxy advisors, peers of direct peers, and companies included in Anadarko’s broad Global Industry Classification Standard Industry Group. In each case, FW Cook assesses whether there are companies that should be added to or removed from Anadarko’s existing peer group based on relevant size, scope and the nature of their business operations. Unless significant and material changes have affected the companies in our peer group such that a company is no longer an appropriate peer, the Committee prefers to maintain a high degree of continuity of the peer group to ensure consistent comparison for both pay and performance from year to year. Following this year’s annual review, the Committee determined that the 11 companies included in the Company’s industry peer group remained appropriate for the 2018 executive compensation benchmarking comparison.

The Company’s industry peer group used for conducting the 2018 executive compensation benchmarking assessment is listed below.

 

  Apache Corporation
  Chesapeake Energy Corporation
  Chevron Corporation
  ConocoPhillips
  Devon Energy Corporation
  EOG Resources, Inc.
  Hess Corporation
  Marathon Oil Corporation
  Noble Energy, Inc.
  Occidental Petroleum Corporation
  Pioneer Natural Resources Company

Benchmarking Data. To assist in reviewing the design and structure of our executive compensation programs, FW Cook provides the Committee with an independent assessment of the compensation programs and practices of the companies in our industry peer group. This comprehensive analysis includes compensation data that is obtained from the latest peer proxy statements and updated, as applicable, with recent public filings for company-by-company detail on peer NEO positions (Peer Proxy Data) as well as supplemental third-party survey data.

Due to organizational differences in executive leadership structures and business strategies across our peers, it is difficult to benchmark comparable executive leadership positions for many of our NEOs. As a result, the Committee places emphasis on the Peer Proxy Data in making compensation decisions because this data provides greater transparency and insight into the comparability of our NEOs and executive leadership structure relative to the NEOs and executive leadership structure of our peers. When reviewing benchmarking data, the Committee reviews 25th, 50th, and 75th percentile data; however, the Committee does not target a specific percentile of the benchmark data and in making officer compensation decisions takes into account other considerations as noted below.

Role of CEO and/or Other Executive Officers in Determining Executive Compensation. The Committee, after reviewing the information provided by FW Cook and considering other factors and with input from FW Cook, determines each element of compensation for our CEO. When making determinations about each element of compensation for the executive officers other than the CEO, the Committee also considers recommendations from our CEO. Additionally, at the Committee’s request, our executive officers may assess the design of, and make recommendations related to, our compensation and benefit programs, including recommendations related to the performance measures used in our incentive programs. The Committee is under no obligation to implement these recommendations. Executive officers and others may also attend Committee meetings when invited to do so, but the executive officers do not attend when their individual compensation is being discussed.

Other Important Considerations. In addition to the above resources, the Committee strongly considers other factors when making compensation decisions, such as individual experience, individual performance, internal pay equity, development and succession status, and other individual or organizational circumstances, including the current market and business environment. With respect to equity-based awards, the Committee also considers the expense of such awards, the impact on dilution, and the relative value of each element comprising the executive officers’ target total compensation opportunity.

 

 

 

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Tally Sheets. The Committee uses tally sheets in its annual executive compensation review to enhance the analytical data used by the Committee to evaluate our executive officer compensation and to provide the Committee with a consolidated source for viewing the aggregate value of all

elements of executive compensation. The Committee does not assign a specific weighting to the tally sheets in their overall decision-making process, but uses them to gain additional perspective and as a reference in the decision-making process.

 

 

INDIRECT COMPENSATION ELEMENTS

As identified in the table below, the Company provides certain benefits and perquisites (considered indirect compensation elements) that are considered typical within our industry and necessary to attract and retain executive talent. The value of each element of indirect compensation is generally structured to be competitive within our industry.

 

Indirect Compensation Element

 

 

Primary Purpose

 

 

Retirement Benefits

 

 

•  Attracts talented executive officers and rewards them for extended service

 

•  Offers secure and tax-advantaged vehicles for executive officers to save effectively for retirement

 

Other Benefits (for example,

healthcare, paid time off,

disability and life insurance)

and Perquisites

 

 

•  Enhances executive welfare and financial security

 

•  Provides a competitive package to attract and retain executive talent, but does not constitute a significant part of an executive officer’s compensation

 

Severance Benefits

 

 

•  Attracts and helps retain executives in a volatile and consolidating industry

 

•  Provides transitional income following an executive’s involuntary termination of employment

 

 

Retirement Benefits

Our executive officers participate in the following retirement and related plans:

Anadarko Employee Savings Plans. The Anadarko Employee Savings Plan (401(k) Plan) is a tax-qualified retirement savings plan that allows participating U.S. employees to contribute up to 30% of eligible compensation, on a before-tax basis or on an after-tax basis (via a Roth or traditional after-tax contribution), into their 401(k) Plan accounts. Eligible compensation includes base salary and AIP bonus payments. Under the 401(k) Plan, we match an amount equal to one dollar for each dollar contributed by participants up to six percent of their total eligible compensation. In addition, participants in the Personal Wealth Account (PWA) program, a qualified pension plan, receive an additional four percent contribution of eligible compensation. The 401(k) Plan is subject to applicable IRC limitations regarding participant and Company contributions. Due to IRC limitations that restrict the amount of benefits payable under tax-qualified plans, we also sponsor a non-qualified Savings Restoration Plan. The Savings Restoration Plan accrues a benefit equal to the excess, if any, of Company matching and PWA contributions that

would have been allocated to a participant’s 401(k) Plan account each year without regard to the IRC limitation over amounts that were, in fact, allocated to a participant’s account. For additional details on the Savings Restoration Plan see page 70. Amounts deferred, if any, under the 401(k) Plan and the Savings Restoration Plan (collectively, the Savings Plans) by the NEOs are included, respectively, in the “Salary” and “Non-Equity Incentive Plan Compensation” columns of the Summary Compensation Table on page 60. Our matching contributions allocated to the NEOs under the Savings Plans are included in the “All Other Compensation” column of the Summary Compensation Table.

Pension Plans. Anadarko provides funded, tax-qualified retirement benefits for all eligible U.S. employees. Due to IRC limitations that restrict the amount of benefits payable under tax-qualified plans, we also sponsor non-qualified restoration plans that cover the executive officers and certain other employees. The pension plans do not require contributions by participants and a participant becomes vested in his or her benefit at the completion of three years of service as defined in the pension plans. Eligible compensation covered by the pension plans consists of base salary and AIP bonus payments.

 

 

 

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Mr. Walker has supplemental retirement benefits under our non-qualified Retirement Restoration Plan that provide for a special service credit of eight years if he remained employed by us until the age of 55. Mr. Walker vested in these benefits in 2012. The service credits are considered applicable service towards our retirement benefit programs, including pension and retiree medical and dental benefits, where applicable. These supplemental retirement benefits were provided to Mr. Walker in 2007 to recognize that he was a mid-career hire that we would like to retain for the remainder of his career. Providing him additional service credits recognizes a portion of his prior industry experience and service years, which directly benefit us and our stockholders.

The accrued benefits for each of the NEOs, including the benefits related to any special service credits, are discussed in the Pension Benefits Table on page 69. The Committee does not intend to grant any additional pension credits to executive officers and has not done so since 2007.

Other Benefits

We provide other benefits such as medical, dental, and vision insurance, flexible spending and health savings accounts, paid time off, payments for certain relocation costs, disability coverage and life insurance to each executive officer. These benefits are also provided to all other eligible U.S.-based employees. Certain employees, including the executive officers, are eligible for participation in the Company’s Management Life Insurance Plan, which provides an additional life insurance benefit of two times base salary, and the Deferred Compensation Plan, which allows participants to voluntarily defer receipt of up to 75% of their salary and/or up to 100% of their AIP bonus payments. Details regarding the Deferred Compensation Plan and participation in the plan by the NEOs are discussed beginning on page 70.

Perquisites

We provide a limited number of perquisites to the executive officers. These perquisites are assessed annually by the Committee as part of the total competitive review. The expenses related to the perquisites are imputed and considered taxable income to the executive officers as applicable. We do not provide any tax gross-ups on these perquisites. The perquisites provided to the executive officers are as follows: financial counseling; tax preparation and estate planning; comprehensive annual physical exam; personal excess liability insurance; limited personal use of the company aircraft; and club memberships. The executive officers also receive benefits for which there is no incremental cost to the Company, such as tickets to certain sporting, civic, charitable and cultural events or limited

personal use of Company facilities. In addition, family members and invited guests are occasionally permitted to accompany executive officers and directors on business flights and the aggregate incremental cost to the Company is de minimis.

Mr. Walker has a personal usage limit of up to $300,000 that allows him to use Company aircraft for a limited amount of personal travel. To the extent his usage exceeds such amount, he is required to reimburse the Company pursuant to a time-sharing agreement. The prior year’s aggregate incremental direct operating costs for the aircraft is used to calculate the value of personal usage.

The incremental costs of the various perquisites provided are included in the “All Other Compensation” column of the Summary Compensation Table on page 60 and in the All Other Compensation Table and supporting footnotes following the Summary Compensation Table on page 61.

Severance Benefits

Post-termination and change-of-control severance benefits are typical within our industry. The Company currently provides the severance benefits described below to its executive officers. These plans are an essential component of our executive compensation programs and are necessary to attract and retain executive talent in a highly competitive market, provide continuity of management in the event of an actual or threatened change of control and provide executive officers with the security to make decisions that are in the best long-term interest of the stockholders. On a periodic basis, the Committee, in consultation with its executive compensation consultant, will review, consider and adjust, as necessary and appropriate, the provisions of post-termination and change-of-control severance benefits provided to executive officers to ensure that such arrangements serve the Company’s interests in retaining key executives, are consistent with market practice and are reasonable.

Officer Severance Plan. Our executive officers are eligible for benefits under the Officer Severance Plan with the exception of Mr. Walker whose severance benefits are included in his Severance Agreement, which is described on page 58. Benefits provided under the Officer Severance Plan may vary depending upon the executive officer’s level within the organization and years of service with us and are made at the discretion of the Committee. Executive officers receiving benefits under the Officer Severance Plan are required to execute an agreement releasing us from any and all claims from any and all kinds of actions arising from the executive officer’s employment with us or the termination of such employment. The typical severance benefits that may be provided for our executive officers

 

 

 

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following the occurrence of an involuntary termination event (as described on page 72) include the following:

 

  a payment equal to two times annual base salary plus one year’s target bonus under our AIP;

 

  if provided, a pro rata bonus under our AIP for the year of termination, which will be payable at the end of the performance period, based on actual Company performance as certified by the Committee;

 

  the option to continue existing medical and dental coverage levels at current active employee rates for up to six months;

 

  the vesting of some or all unvested restricted stock units and stock options; and

 

  a payout, if any, of outstanding performance units, which will be made at the end of the performance period based on actual Company performance results.

Key Employee Change-of-Control Contracts. All of our executive officers are employed on an at-will basis and we do not maintain employment contracts with any of our executive officers. We have key employee change-of-control contracts with all of our executive officers other than Mr. Walker, whose change-of-control severance benefits are included in his Severance Agreement, which is described on page 58.

If we experience a change of control (as defined on page 72) during the term of the contract, then the contract becomes operative for a specified protection period. These contracts generally provide that the executive officer’s terms of employment (including position, work location, compensation and benefits) will not be adversely changed during the protection period. If we (or any successor in interest) terminate the executive officer’s employment (other than for cause (as defined on page 72), death or disability), the executive officer terminates for good reason (as defined on page 72) during such protection period, or upon certain terminations prior to a change of control or in connection with or in anticipation of a change of control, the executive officer is generally entitled to receive certain payments and benefits. In 2018, no payments were paid under the change-of-control contracts.

In February 2011, the Committee reduced the level of post-change-of-control severance benefits under the key employment change-of-control contracts, on a prospective basis, for newly appointed and newly hired executive officers. As of December 31, 2018, only one executive officer, Mr. Gwin, remained subject to these legacy arrangements. The Committee expects to replace Mr. Gwin’s legacy change-of-control contract when it is next modified.

The table below summarizes the general provisions of the Key Employee Change-of-Control Contract for Executive Vice Presidents entered into with Messrs. Fink, Ingram, and Brown and Ms. McMillian. Mr. Walker’s change-of-control severance benefits are included in his Severance Agreement, which is described on page 58. Mr. Gwin’s key employee change-of-control contract is described on page 57.

 

Key Employee Change-of-Control Contract

for Executive Vice Presidents

 

 

•  Initial two-year term automatically extended each year unless either party provides notice not to extend

 

•  Double-trigger provision(1)

 

•  Three-year protection period

 

•  2.5 times annual base salary plus the higher of target bonus for the year of termination or the average bonus for the last two years

 

•  Prorated annual bonus (based on the higher of target performance or actual performance)

 

•  Up to three additional years of matching contributions into the Savings Restoration Plan

 

•  Up to three additional years of age and service credits under the Company’s retirement and pension plans

 

•  Three years continuation of medical, dental, and life insurance benefits

 

•  No continuation of financial planning benefits

 

•  Best-of-net tax provision (i.e., no tax gross-up by the Company)(2)

 

•  Outplacement services up to a maximum of $30,000

 

•  Officer is subject to a confidentiality provision

 

 

(1)

Severance payments are made only in the event of both a change of control and the termination of the executive officer’s employment without cause or for good reason during the applicable protection period.

 

(2)

Requires the Company to either (i) reduce the amount of certain severance benefits otherwise payable so that such severance benefits will not be subject to the tax imposed by IRC Section 4999, or alternatively (ii) pay the full amount of severance benefits to the executive officer (but with no tax gross-up), whichever produces the better after-tax result for the executive officer.

 

 

 

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As described above, in February 2011, the Committee reduced the level of post-change-of-control severance benefits under the key employee change-of-control contracts, on a prospective basis, for newly appointed and newly hired executive officers. Mr. Gwin entered into a key employee change-of-control contract prior to that time and certain elements of his contract vary from the Key Employee Change-of-Control Contract for Executive Vice Presidents.

Mr. Gwin’s contract includes a modified single-trigger provision, which is a good reason provision allowing him to terminate for any reason during the 30-day period immediately following the first anniversary of a change of control and receive severance benefits. His contract also provides for a severance multiple of 2.9 times base salary plus AIP bonus (based on the higher of (i) the highest AIP bonus paid over the last three years prior to the change of control or (ii) the AIP bonus for the most recently completed fiscal year during the protection period (such higher amount being the Highest Annual Bonus)) and includes a prorated annual bonus based on the Highest Annual Bonus. In addition, Mr. Gwin’s contract provides for three years of financial planning benefits and includes an excise tax gross-up, or the right to receive a payment in an amount sufficient to make the executive whole for any excise tax on excess parachute payments imposed under IRC Section 4999.

Consistent with the Key Employee Change-of-Control Contract for Executive Vice Presidents, Mr. Gwin’s contract also provides for three years continuation of medical, dental and life insurance benefits, up to three additional years of matching contributions into the Savings Restoration Plan, up to three additional years of age and service credits under the Company’s retirement and pension plans, and outplacement services up to a maximum of $30,000. The Committee expects to replace Mr. Gwin’s legacy change-of-control contract when it is next modified.

As a condition to receipt of any change-of-control severance benefits, an executive officer must remain employed by us and provide services commensurate with his or her position until the executive officer is terminated pursuant to the provisions of the contract. The executive officer must also agree to retain in confidence any and all confidential information known to him or her concerning us and our business so long as the information is not otherwise publicly disclosed.

The above descriptions of the Company’s key employee change-of-control contracts are not a full summary of all of the terms and conditions of these agreements and are qualified in their entirety by the full text of the agreements, which are on file with the SEC.

Change of Control  — Treatment of Outstanding Unvested Equity Awards. The treatment of unvested outstanding equity awards upon a change of control of Anadarko is prescribed by the applicable plan document under which the awards were granted. The 2012 Omnibus Plan, which governs awards made on or after May 15, 2012, includes a double-trigger provision that provides that, unless otherwise specified in the award agreement, accelerated vesting of awards only occurs in the event of both a change of control of the Company and the termination of the participant’s employment without cause or for good reason during the applicable protection period. All equity awards issued under the 2012 Omnibus Plan contain this double-trigger feature.

 

 

 

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AGREEMENT WITH CEO

Mr. Walker — Severance Agreement

In connection with Mr. Walker’s appointment to CEO in 2012, the Committee determined that his employment should be continued on an at-will basis. On February 16, 2012, the Company and Mr. Walker entered into a Severance Agreement to combine and restructure certain severance benefits previously provided to him under the Officer Severance Plan and through his key employee change-of-control contract. Effective May 15, 2012, Mr. Walker was no longer eligible to receive benefits under the Officer Severance Plan and waived the severance benefits under his key employee change-of-control contract, thereby reducing the level of change-of-control severance benefits that he was formerly eligible to receive. The general provisions of the Severance Agreement are as follows:

 

Severance Benefits Outside of a Change of Control

 

•  Pro-rated annual bonus based on actual performance for the year of termination

 

 

•  Two times the sum of his annual base salary and annual target bonus for the year of termination

 

 

•  Up to six months continued participation in the Company’s medical and dental care plans at active employee rates and reimbursement for the cost of up to 18 additional months of COBRA continuation coverage

 

 

Change-of-Control Severance Benefits

 

•  Double-trigger provision (requiring both a change-of-control and a termination of employment)

 

 

 

•  Three-year protection period following Change of Control

 

•  2.5 times annual salary plus the higher of target bonus for the year of termination or the average bonus for the last two years

 

 

•  Prorated annual bonus (based on the higher of target performance or actual performance)

 

 

•  Up to three additional years of matching contributions into the Savings Restoration Plan

 

 

•  Up to three additional years of age and service credits under the Company’s retirement and pension plans

 

 

•  Up to three years continuation of medical, dental, and life insurance benefits

 

•  Best-of-net tax provision (i.e., no tax gross-up by the Company)

 

 

•  Outplacement services up to a maximum of $30,000

 

 

•  Subject to a confidentiality provision

The above description of Mr. Walker’s Severance Agreement is not a full summary of all of the terms and conditions of this agreement and is qualified in its entirety by the full text of the agreement, which is on file with the SEC.

STOCK OWNERSHIP REQUIREMENTS

We have maintained stock ownership requirements for executive officers since 1993 with the goal of promoting equity ownership and aligning our executive officers’ interests with those of our stockholders. These requirements must be met within three years after becoming subject to them. Currently, all of our NEOs either meet or exceed their specified requirements. The ownership requirements are currently established at the following minimum levels:

 

NEOs

 

  

Requirement

 

  

Ownership
Multiple as of
12/31/2018

 

Mr. Walker

       6 x base salary        21.3

Mr. Fink

       3 x base salary        7.4

Mr. Gwin

       4 x base salary        7.3

Mr. Ingram

       3 x base salary        7.6

Mr. Brown

       3 x base salary        7.8

 

Ms. McMillian

    

 

 

 

3 x base salary

 

    

 

 

 

5.8

 

Following Mr. Gwin’s appointment to President in November 2018, the Committee increased his stock ownership requirement.

The Committee reviews the stock ownership levels annually. In determining stock ownership levels, we include shares of common stock held directly by the officer (including shares beneficially owned in a trust, by a limited liability company or partnership, and by a spouse and/or minor children, unless the officer expressly disclaims beneficial ownership of such shares); shares of common stock held indirectly through the Anadarko Employee Savings Plan; deferred share balances resulting from an investment in the Company Stock Fund as defined in the Anadarko Petroleum Corporation Deferred Compensation Plan provided such balance is payable in shares; and unvested restricted stock and restricted stock units. For those officers of Anadarko who were also officers of WES and/or WGP as of December 31, 2018, any WES and/or WGP equity they own is also included in the calculation to determine their compliance. Outstanding performance units and unexercised stock options are not included. If an officer does not satisfy the stock ownership requirements, he or she must retain all shares acquired on the vesting of equity awards or the exercise of stock options (net of exercise costs and taxes) until compliance is achieved. Because of our strong ownership levels, other than as described above we do not maintain separate holding requirements for our equity awards.

 

 

 

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CLAWBACK POLICY

All awards granted under Anadarko’s 2012 and, if approved by stockholders at the Annual Meeting, 2019 Omnibus Plans are conditioned on repayment or forfeiture in accordance with applicable laws, Company policy, and any relevant provisions in the related award agreement. Each award agreement under the 2012 Omnibus Plan specifically provides that the awards are subject to forfeiture or repayment if the Company is required to prepare an accounting restatement due to material noncompliance of the Company with applicable rules as a result of misconduct (Restatement). In addition, upon approval by our Board of the 2019 Omnibus Plan, the Company adopted a clawback policy that provides that awards under the 2019 Omnibus Plan are subject to forfeiture or repayment if the Company is required to prepare a Restatement. In addition, the 2012 and 2019 Omnibus Plans each provide that the Committee may specify in an award agreement or otherwise that a recipient’s rights, payment, and benefits with respect to the award shall be reduced, cancelled, forfeited or recouped upon the occurrence of certain specified events, including termination of employment for cause, violations of material Company policies, or other conduct by the recipient that is detrimental to the business or reputation of the Company.

REGULATORY REQUIREMENTS

Together with the Committee, the Company carefully reviews and takes into account current tax, accounting and securities regulations as they relate to the design of our compensation programs and related decisions.

Prior to the enactment of tax reform legislation signed into law on December 22, 2017, which was originally known as the Tax Cuts and Jobs Act (TCJA), Section 162(m) of the IRC limited a company’s ability to deduct compensation paid in excess of $1 million during any fiscal year to each of certain

NEOs, unless the compensation was performance-based as defined under federal tax laws. Subject to certain transitional rules, the TCJA has repealed the exemption for performance-based compensation from the deduction limitation of Section 162(m) of the IRC for taxable years beginning after 2017. The Committee historically reviewed and considered the deductibility of our executive compensation programs; and provided compensation that was not fully deductible when necessary to retain and motivate certain executive officers and when it was in the best interest of the Company and our stockholders. To the extent compensatory awards are not covered by the transitional rules, the performance-based exception to the deduction limitation under Section 162(m) of the IRC will no longer be available to the Company and annual compensation paid to our covered executives in excess of $1 million will not be deductible.

The benefits payable under non-qualified plans for our executive officers and directors are unsecured obligations to pay. Assets to pay these benefits may be held under the Company’s Benefits Trust, which is subject to the claims of the general creditors of the Company.

CONCLUSION

We believe our executive compensation programs, together with the Committee’s oversight, are designed to pay for performance and enable us to attract, retain and motivate a strong leadership team. The programs provide executive officers with the necessary motivation to maximize the long-term operational and financial performance of the Company, while using sound financial controls and maintaining high standards of integrity. Especially in these complex and volatile times, we believe our executive compensation programs continue to align the executive officers’ interests, as well as the value they may ultimately realize, with the interests and returns of our stockholders.

 

 

 

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SUMMARY COMPENSATION TABLE

The following table summarizes the compensation for our NEOs for the fiscal year ended December 31, 2018, and, if the individual was an NEO for the applicable fiscal year, for the fiscal years ended December 31, 2017 and 2016.

 

Name and

Principal Position

 

Year

 

Salary

($)(1)

 

Bonus

($)(2)

  Stock
Awards
($)(3)
  Option
Awards
($)(3)
  Non-Equity
Incentive Plan
Compensation
($)(4)
 

Change in

Pension Value

and

Non-Qualified

Deferred

Compensation

Earnings
($)(5)

  All Other
Compensation
($)(6)
  Total ($)

R. A. Walker

Chairman and Chief

Executive Officer

      2018       1,300,000       311,000       8,208,188       2,660,102       2,224,000       348,241       464,774       15,516,305
      2017         1,300,000       0       8,345,537       2,776,583       1,436,500       2,613,459       487,817       16,959,896
      2016         1,300,000       0       8,362,171       2,828,445       2,670,200       3,019,011       470,425       18,650,252

Benjamin M. Fink

      2018         514,423       77,400       2,218,536       718,948       553,300       47,950       117,807       4,248,364

EVP, Finance and

                                   

Chief Financial Officer

                                   

Robert G. Gwin(7)

      2018         778,846       157,600       3,993,179       1,294,113       1,127,500       (8)       154,313       7,505,551

President

      2017         750,000       0       3,345,768       1,113,146       605,600       810,274       181,580       6,806,368
      2016         750,000       0       3,352,460       1,133,936       1,125,750       929,080       192,813       7,484,039

Mitchell W. Ingram

      2018         664,423       134,500       3,697,445       1,198,247       961,800       80,651       162,250       6,899,316

EVP, International,

      2017         627,885       400,000       3,345,768       1,113,146       507,000       107,021       218,803       6,319,623

Deepwater and Exploration

      2016         625,000       400,000       4,536,040 (9)       1,133,936       938,150       47,687       304,060       7,984,873

Daniel E. Brown

      2018         630,769       127,700       3,697,445       1,198,247       913,100       68,269       135,416       6,770,946

EVP, U.S. Onshore

Operations

      2017         563,077       0       3,345,768       1,113,146       429,200       942,109       95,492       6,488,792

Amanda M. McMillian

      2018         578,269       91,100       2,218,536       718,948       651,800       (8)       91,441       4,350,094

EVP and General Counsel

                                                                                         

 

(1)

As part of its annual review of executive compensation in November 2018, the Committee determined that no changes should be made to the base salary for Mr. Walker. Mr. Fink’s and Ms. McMillian’s respective amounts represent salary earned prior to and following their appointment as Executive Vice President in November and August of 2018, respectively. Coincident with Mr. Gwin’s appointment to President in November 2018, his base salary was increased. Mr. Ingram received an increase to his base salary to reflect the additional job responsibilities he assumed in May 2018. Mr. Brown’s increase reflects the additional job responsibilities he assumed in November 2018 and his continued development in his role.

 

(2)

The amounts indicated in this column for 2018 reflect the portion of the incentive cash bonus awards for 2018 paid out in February 2019 resulting from the Committee’s decision to increase the AIP calculated performance score from 131.6% to 150% in recognition of the Company’s substantial progress toward a final investment decision related to the Mozambique LNG development project. This decision is discussed on page 49. The amounts reflected in this column for Mr. Ingram in 2016 and 2017 were for a cash retention award paid to him as part of a Retention Agreement between him and the Company entered into when he began employment with the Company on November 1, 2015. Under the terms of the agreement, Mr. Ingram received a cash retention award of $800,000, less applicable taxes, which was paid in two equal installments in November 2016 and 2017, respectively.

 

(3)

The amounts included in these columns represent the aggregate grant date fair value of the awards granted to NEOs in 2018 computed in accordance with FASB ASC Topic 718. The value ultimately realized by the NEOs upon the actual vesting of the award(s) or the exercise of the stock option(s) may or may not be equal to this determined value. For a discussion of valuation assumptions, see Note 1 — Summary of Significant Accounting Policies — Share-Based Compensation and Note 23 — Share-Based Compensation of the Notes to Consolidated Financial Statements included under Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2018. The values in the “Stock Awards” column represent the grant date fair values for both restricted stock unit and performance unit awards. The performance unit awards are subject to market conditions and have been valued based on the probable outcome of the market conditions as of the grant date.

 

(4)

The amounts in this column reflect the portion of the incentive cash bonus awards for 2018 based on the AIP calculated performance score determined by the Compensation Committee prior to their application of discretion and paid out in February 2019 pursuant to the Company’s AIP. These awards are discussed in further detail beginning on page 46.

 

(5)

The amounts in this column reflect the annual aggregate change in the actuarial present value of each NEO’s accumulated benefit, expressed as a lump sum, under the Company’s pension plans described in more detail beginning on page 66. The amounts reported in this column are not a current cash payment but represent the year-over-year

 

 

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  change in the value of the NEO’s pension based on specified interest and discount rate assumptions for each year and include amounts that the NEO may not currently be entitled to receive because such amounts are not vested. The actual value of the pension will be determined at the time each NEO retires from the Company. The Company’s Deferred Compensation Plan does not provide for above-market or preferential earnings so no such amounts are included.

 

(6)

The amounts shown in this column are described further in the All Other Compensation Table below. The NEOs also receive benefits for which there is no incremental cost to the Company, such as tickets to certain sporting, civic, charitable and cultural events.

 

(7)

Prior to his appointment as President in November 2018, Mr. Gwin served as the Executive Vice President, Finance and Chief Financial Officer of the Company.

 

(8)

Mr. Gwin and Ms. McMillian each had a negative change in pension value for 2018: Mr. Gwin – $(205,846); and Ms. McMillian – $(28,076).

 

(9)

This column includes the performance unit grant awarded to Mr. Ingram in February 2016, in addition to the annual grant he received in November 2016. Since Mr. Ingram was not employed with the Company in October 2015 and did not receive an annual long-term incentive award at the same time as the other NEOs, he received two performance unit awards in 2016.

All Other Compensation Table for 2018

The following table describes each component of the “All Other Compensation” column for the fiscal year ended December 31, 2018 in the Summary Compensation Table but excludes other arrangements that are generally available to the Company’s salaried employees on the U.S. payroll and do not discriminate in scope, terms or operation in favor of the NEOs, such as medical, dental, disability and group life insurance programs:

 

Name

 

Personal
Use of
Aircraft

($)(1)

 

Contributions by the
Company to
Employee 401(k)
Plan and Savings
Restoration Plan

($)

 

Club
Membership
Dues

($)(2)

 

Financial/
Tax/
Estate
Planning

($)(3)

 

Excess
Liability
Insurance

($)

 

Other

($)(4)

 

Totals

($)

R. A. Walker(5)

      243,143       164,190       52,089       3,431       1,921       0       464,774 

Benjamin M. Fink

      13,677       82,152       3,377       16,680       1,921       0       117,807 

Robert G. Gwin

      27,598       83,067       25,047       16,680       1,921       0       154,313 

Mitchell W. Ingram

      7,444       117,142       17,857       16,680       1,921       1,206       162,250 

Daniel E. Brown

      37,475       63,598       15,742       16,680       1,921       0       135,416 

Amanda M. McMillian

      2,868       58,696       0       27,956       1,921       0       91,441 

 

(1)

The amount reported reflects the value of personal aircraft use for 2018. The value of personal aircraft use is based on the Company’s aggregate incremental direct operating costs, including cost of fuel, maintenance, landing and ramp fees, hangar fees, crew travel expenses, catering, navigation, and other miscellaneous trip-related variable costs. Because the Company’s aircraft are used predominantly for business purposes, fixed costs, which do not change based on use of the aircraft, are excluded. The value of travel to board meetings for companies other than Anadarko or its affiliates and civic organizations for which the NEOs serve as directors is considered personal use and is included in the amount reported above. Compensation is imputed for personal use of our aircraft by the NEOs and their guests. Although families and invited guests are occasionally permitted to accompany executive officers on business flights, no additional compensation is included in the table because the aggregate incremental cost to the Company is de minimis.

 

(2)

The amounts disclosed represent the payment of club membership fees. For those clubs not used exclusively for business, the entire amount has been included, although we believe that only a portion of this cost represents a perquisite.

 

(3)

Ms. McMillian’s value represents 2018 reimbursements for financial planning services received in 2017 and 2018.

 

(4)

The amount reported for Mr. Ingram includes a reimbursement of $611 for the cost of remaining relocation assistance with associated gross-up payment. The relocation assistance and associated gross-up payment were in accordance with the general relocation policy provided to employees. The amount also includes $595 for reimbursement of the cost of an executive physical.

 

(5)

Mr. Walker has a personal usage limit of up to $300,000 that allows him to use Company aircraft for a limited amount of personal travel. In the event his usage exceeds such amount, he is required to reimburse the Company pursuant to a time-sharing agreement. As reported above, the amount of Mr. Walker’s personal travel on the Company’s aircraft during 2018 did not exceed his personal usage limit.

 

 

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GRANTS OF PLAN-BASED

AWARDS IN 2018

The Grants of Plan-Based Awards Table sets forth information concerning annual incentive awards, performance units, stock options, and restricted stock units granted or modified during 2018 for each of the NEOs as described below.

Non-Equity Incentive Plan Awards (AIP). Values disclosed reflect the estimated cash payouts under the Company’s AIP, as discussed beginning on page 46, based on actual salaries earned in 2018. If threshold levels of performance are not met, the payout can be zero. If maximum levels of performance are achieved, the payout can be 200% of each NEO’s target. The amounts actually paid to the NEOs for 2018 are disclosed in the Summary Compensation Table in the “Non-Equity Incentive Plan Compensation” column.

Equity Incentive Plan Awards (PU). Awards reported reflect performance units, as discussed beginning on page 50, which are denominated as an equivalent of one share of Company common stock and, if earned, are paid in cash. Executive officers may earn from 0% to 200% of the

targeted award based on the Company’s relative TSR performance against a specified peer group over a three-year performance period. The threshold value reported represents the lowest earned amount, other than zero, based on a defined payout scale. Executive officers do not have voting rights with respect to performance units, and unless after a change of control the award has been converted into restricted stock units of the surviving company, no dividend equivalents are paid on the awards.

Stock Awards (RSU). Awards reported reflect restricted stock unit awards that vest pro rata annually over three years, beginning with the first anniversary of the grant date. Dividend equivalents are reinvested in shares of the Company’s common stock and paid upon the applicable vesting of the underlying award. Awards are eligible to be voluntarily deferred.

Stock Option Awards (NQSO). Awards reported reflect stock options that vest pro rata annually over three years, beginning with the first anniversary of the date of grant and have a term of seven years. The exercise price is not less than the market price on the date of grant and repricing of stock options to a lower exercise price is prohibited, unless approved by stockholders.

 

 

 

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        Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards
  Estimated Future Payouts Under
Equity Incentive Plan Awards
  All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
  All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
  Exercise
or Base
Price of
Option
Awards
($/Sh)
  Grant
Date Fair
Value of
Stock
and
Option
Awards
($)(1)

Name

  Grant Date   Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)
  Maximum
(#)

R. A. Walker

                                           

AIP

                1,690,000       3,380,000                                          

PU

      11/15/2018                         35,581       88,952       177,904                         5,433,188

RSU

      11/15/2018                                           49,991                   2,775,000

NQSO

      11/15/2018                                                 172,205       55.51       2,660,102

Benjamin M. Fink

                                           

AIP

                420,438       840,876                                          

PU

      11/15/2018                         9,617       24,042       48,084                         1,468,485

RSU

      11/15/2018                                           13,512                   750,051

NQSO

      11/15/2018                                                 46,542       55.51       718,948

Robert G. Gwin

                                           

AIP

                856,731       1,713,461                                          

PU

      11/15/2018                         17,310       43,274       86,548                         2,643,176

RSU

      11/15/2018                                           24,320                   1,350,003

NQSO

      11/15/2018                                                 83,776       55.51       1,294,113

Mitchell W. Ingram

                                           

AIP

                730,865       1,461,731                                          

PU

      11/15/2018                         16,028       40,069       80,138                         2,447,415

RSU

      11/15/2018                                           22,519                   1,250,030

NQSO

      11/15/2018                                                 77,570       55.51       1,198,247

Daniel E. Brown

                                           

AIP

                693,846       1,387,692                                          

PU

      11/15/2018                         16,028       40,069       80,138                         2,447,415

RSU

      11/15/2018                                           22,519                   1,250,030

NQSO

      11/15/2018                                                 77,570       55.51       1,198,247

Amanda M. McMillian

                                           

AIP

                495,287       990,575                                          

PU

      11/15/2018                         9,617       24,042       48,084                         1,468,485

RSU

      11/15/2018                                           13,512                   750,051

NQSO

      11/15/2018                                                 46,542       55.51       718,948

 

(1)

The amounts in this column reflect the aggregate grant date fair value of awards made to NEOs in 2018 computed in accordance with FASB ASC Topic 718. The value ultimately realized by each NEO upon the actual vesting of the award(s) or exercise of the stock option(s) may or may not be equal to this determined value. For a discussion of the valuation assumptions, see Note 1 — Summary of Significant Accounting Policies — Share-Based Compensation and Note 23 — Share-Based Compensation of the Notes to Consolidated Financial Statements included under Item 8 in our Annual Report on Form 10-K for the year ended December 31, 2018.

 

 

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2018

The following table reflects outstanding stock option awards and unvested and unearned stock awards (both time-based and performance-contingent) as of December 31, 2018, assuming a market value of $43.84 per share (the closing stock price of the Company’s common stock on December 31, 2018).

 

                        Stock Awards
                                Equity Incentive
Plan Awards
                        Restricted
Stock/Units(2)
  Performance
Units(3)
    Grant Date  

 

 

 

 

Option Awards(1)

  Number
of
Shares
or Units
of Stock
That
Have Not
Vested(#)
  Market
Value of
Shares
or Units
of Stock
That
Have Not
Vested($)
  Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested(#)
  Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested($)
    Number of Securities
Underlying Unexercised Options
  Option
Exercise
Price($)
  Option
Expiration
Date

Name

  Exercisable(#)   Unexercisable(#)

R. A. Walker

      05/15/2012       52,511       0       66.38       05/15/2019                
      11/05/2012       169,600       0       70.70       11/05/2019                
      11/06/2013       148,378       0       92.02       11/06/2020                
      11/06/2014       118,005       0       93.51       11/06/2021                
      10/26/2015       154,615       0       69.00       10/26/2022               46,529       2,039,831
      11/10/2016       91,107       45,554       61.87       11/10/2023       15,296       670,577       47,631       2,088,143
      11/14/2017       61,722       123,444       48.05       11/14/2024       39,245       1,720,501       167,044       7,323,209
      11/15/2018       0       172,205       55.51       11/15/2025       50,333       2,206,599       88,952       3,899,656

Benjamin M. Fink

      06/07/2013       1,614       0       87.98       06/07/2020                
      11/06/2013       6,731       0       92.02       11/06/2020                
      11/06/2014       16,462       0       93.51       11/06/2021                
      10/26/2015       22,432       0       69.00       10/26/2022               3,857       169,091
      11/10/2016       14,364       7,182       61.87       11/10/2023       1,723       75,536       4,291       188,117
      11/10/2016                       16,534       724,851        
      02/13/2017       3,839       7,678       68.14       2/13/2024       1,875       82,200       2,321       101,753
      11/14/2017       21,409       42,816       48.05       11/14/2024       9,724       426,300       33,108       1,451,455
      11/15/2018       0       46,542       55.51       11/15/2025       13,604       596,399       24,042       1,054,001

Robert G. Gwin(4)

      11/05/2012       30,224       0       70.70       11/05/2019                
      11/06/2013       29,616       0       92.02       11/06/2020