Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

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¨    Soliciting Material Pursuant to § 240.14a-12
 
Pioneer Natural Resources Company
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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PIONEER NATURAL RESOURCES COMPANY
______________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 17, 2018
______________________________

To the Stockholders of Pioneer Natural Resources Company:
The Annual Meeting of Stockholders of Pioneer Natural Resources Company ("Pioneer" or the "Company") will be held on Thursday, May 17, 2018, at 9:00 a.m. Central Time at the Midland Corporate Office located at 3617 N. Big Spring, Midland, Texas 79705 (the "Annual Meeting") for the following purposes:
1.
To elect thirteen directors, each for a term to expire at the 2019 Annual Meeting of Stockholders.
2.
To ratify the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for 2018.
3.
To approve on an advisory basis named executive officer compensation.
4.
To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.
These proposals are described in the accompanying proxy materials. You will be able to vote at the Annual Meeting only if you were a stockholder of record at the close of business on March 22, 2018. If there are not sufficient votes represented for a quorum or to approve the foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned or postponed in order to permit further solicitation of proxies.
Internet Availability of Proxy Materials. Beginning on or about April 5, 2018, the Company mailed a Notice Regarding the Internet Availability of Proxy Materials (the "Notice of Availability") to its stockholders containing instructions on how to access this Proxy Statement and vote online, and the Company made proxy materials available to the stockholders over the Internet. Instructions for requesting a paper copy of the proxy materials are contained in the Notice of Availability.
YOUR VOTE IS IMPORTANT
Please vote over the internet at www.cstproxyvote.com or by phone at 1-866-894-0536 promptly so that your shares may be voted in accordance with your wishes and so that we may have a quorum at the Annual Meeting. If you received a paper copy of the proxy materials (which includes the proxy card), you may also vote by completing, signing and returning the paper proxy card by mail.
 
 
By Order of the Board of Directors,

Irving, Texas
April 5, 2018
 
Thomas J. Murphy
Corporate Secretary





TABLE OF CONTENTS


Proxy Statement Summary
General Information
Porposal One Election of Directors
Corporate Governance
Corporate Governance Guidelines
Board Leadership Structure
Director Independence
Director Succession and Self-Evaluation Process
Engagement with Stockholders
Procedure for Directly Contacting the Board and Whistleblower Policy
The Board, Its Committees and Its Compensation
Meetings and Committees of the Board
Board's Role in Oversight of Strategy and Risk Management
Attendance at Annual Meetings
Director Compensation
Stock Ownership Guidelines for Non-Employee Directors
Audit Committee Report
Compensation and Leadership Development Committee Report
Compensation Discussion and Analysis
Executive Compensation Tables
Summary Compensation Table
2017 Grants of Plan-Based Awards
Narrative Disclosure for the 2017 Grants of Plan-Based Awards Table
2017 Outstanding Equity Awards at Fiscal Year End
2017 Option Exercises and Stock Vested
Pension Benefits
2017 Non-Qualified Deferred Compensation
Potential Payments upon Termination or Change in Control
Ratio of the CEO's Compensation to the Median Compensation of the Company's Other Employees
Compensation Programs and Risk Considerations
Compensation and Leadership Development Committee Interlocks and Insider Participation
Security Ownership of Certain Beneficial Owners and Management
Section 16(a) Beneficial Ownership Reporting Compliance
Transactions with Related Persons
Proposal Two Ratification of Selection of Independent Registered Public Accounting Firm
Proposal Three Advisory Vote to Approve Named Executive Officer Compensation
Stockholder Proposals; Identification of Director Candidates
General Information about the Annual Meeting
Stockholder List
Annual Report and Other Information
Internet and Phone Voting



PROXY STATEMENT SUMMARY
The following section is only a summary of key elements of this Proxy Statement, and is intended to assist you in reviewing this Proxy Statement in advance of the Annual Meeting. This summary does not contain all of the information you should consider, and you are encouraged to read this entire Proxy Statement before submitting your votes.
2018 Annual Meeting of Stockholders
Date and time:
Thursday, May 17, 2018, at 9:00 a.m. Central Time
Place:
3617 N. Big Spring, Midland, Texas 79705
Record date:
March 22, 2018
How to vote:
If you are a stockholder of record, you may vote in person at the Annual Meeting or by Proxy using any of the following methods:
By internet: at www.cstproxyvote.com
By telephone: call toll-free 1-866-894-0536
Votes submitted by internet or phone must be received by 6:00 p.m., Central Time, on Wednesday, May 16, 2018.
If you received a paper copy of the proxy materials, you may also vote by completing, signing and returning the paper proxy card by mail.
Voting Matters and Board Recommendations
Proposal
Description
Board Vote Recommendation
Page Reference (for more detail)
1
Election of 13 director nominees
FOR each of the director nominees
2
Ratification of the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for 2018
FOR
3
Approval, on an advisory basis, of named executive officer compensation
FOR
Business Highlights
In 2017, the Company delivered another excellent operational performance, with solid execution, robust oil production growth, excellent horizontal well performance in the Permian Basin and reduced production costs. Highlights of the Company's 2017 performance included:
increasing production by 16 percent - increasing production by 16 percent compared to 2016; oil production increased by 25 thousand barrels of oil per day ("MBOPD"), or 19%, compared to 2016; production growth was driven by the Company’s Permian Basin horizontal drilling program, with total Permian Basin oil production for 2017 increasing by 26% compared to 2016;
reducing production costs by 12 percent - production costs per barrel oil equivalent ("BOE") decreased by 12 percent compared to 2016; production costs benefited from the Company’s cost reduction initiatives and increasing volumes of horizontal Permian Basin production, which had an average production cost of approximately $2.00 per BOE;
significantly adding to proved reserves - added proved reserves of 314 million barrels oil equivalent ("MMBOE") from discoveries, extensions and technical revisions of previous estimates (excludes positive price revisions of 52 MMBOE, proved reserves divested of 7 MMBOE and proved reserves acquired of 1 MMBOE), with total proved reserves at year-end 2017 equaling 985 MMBOE; these proved reserve additions were primarily driven by Pioneer's horizontal Permian Basin drilling program;
continuing to maintain a strong balance sheet - year-end cash on hand and short- and long-term investments totaled $2.2 billion, with net debt to 2017 operating cash flow at year end of 0.3 times and net debt to book capitalization of five percent; the Company is rated as mid-investment grade by three credit rating agencies; and
continuing to demonstrate responsiveness and leadership in sustainability - published the Company’s inaugural Sustainability Report following engagement with investors and a number of external stakeholders (the 2017 Sustainability Report is available for download and printing at www.pxd.com/Values/Sustainability), and received the Interstate Oil and Gas Compact Commission ("IOGCC") Environmental Partnership Award for water conservation projects in both Midland and Odessa.

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During 2017, Pioneer’s stock performed in line with the average of its 12-company E&P peer group (the group used with respect to the Company's 2017 performance unit award grants). Looking back over the five-year period covering 2013 through 2017 and the three-year period covering 2015 through 2017, Pioneer's stock significantly outperformed the average of the peer group. This strong performance reflected Pioneer’s strong balance sheet, strong derivatives position, improving capital efficiency and excellent operational performance during a period of highly volatile commodity prices.
Nominees for Director
 
 
 
 
 
Committee Memberships(1)
Other Current Public Co. Boards (#)
Name
Age
Director Since
Primary Occupation
Independent(1)
AC
CLD
HSE
NCG
Edison C. Buchanan
63
2002
Former Managing Director, Credit Suisse First Boston
ü
 
üC
 
ü
Andrew F. Cates
47
2009
Managing Member, Value Acquisition Fund
ü
 
ü
 
ü
Timothy L. Dove
61
2013
President and Chief Executive Officer
 
 
 
 
 
Phillip A. Gobe
65
2014
Former President and Chief Operating Officer, Energy Partners, Ltd.
ü
 
ü
ü
 
1
Larry R. Grillot
71
2013
Retired Dean, Mewbourne College of Earth and Energy, The University of Oklahoma
ü
ü
 
ü
 
Stacy P. Methvin
61
2013
Retired Vice President, Shell Oil Company
ü
 
ü
ü C
 
1
Royce W. Mitchell
63
2014
Executive Consultant
ü

üACFE
 
ü
 
Frank A. Risch
75
2005
Retired Vice President and Treasurer, Exxon Mobil Corporation
ü

ü C
ACFE
 
 
ü
Scott D. Sheffield
65
1997
Chairman, retired Chief Executive Officer
 
 
 
 
 
1
Mona K. Sutphen
50
2015
Partner, Macro Advisory Partners LLP
ü

 
ü
ü
 
J. Kenneth Thompson
66
2011
President and CEO, Pacific Star Energy LLC
ü LD
 
ü
 
üC
3
Phoebe A. Wood
64
2013
Retired Vice Chairman and Chief Financial Officer, Brown-Forman Corporation
ü

üACFE
 
 
ü
3
Michael D. Wortley
70
2015
Chief Legal Officer, Reata Pharmaceuticals, Inc.
ü
ü
 
 
ü
____________________
(1)     Definitions of abbreviations used in Nominees for Director table:
 
AC



Audit Committee
 
C
 
 
Chairperson
 
CLD
Compensation and Leadership Development Committee
 
ACFE
Audit Committee Financial Expert
 
HSE

Health, Safety and Environment Committee

 
LD
Lead Independent Director
 
NCG
Nominating and Corporate Governance Committee
 
 
 
Composition Highlights of Director Nominees
Independence: the Board seeks to ensure that at least two-thirds of its members will be independent under applicable laws and regulations. Eleven of the Board’s 13 members are independent, as defined by the rules of the New York Stock Exchange (the "NYSE").
Board refreshment: Over time, the Board refreshes its membership through a combination of adding or replacing directors to achieve the appropriate balance between maintaining longer-term directors with deep institutional knowledge of the Company and adding directors who bring a diversity of perspectives and experience. Since 2013, five new independent directors have been added to the Board, of whom three were women.
Diversity of skills and experience: In assessing the composition of the Pioneer Board, the Board and its Nominating and Corporate Governance Committee strive to achieve an overall balance of diversity of

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backgrounds and experience at policy-making levels with a complementary mix of skills and professional experience in areas relevant to the Company's business and strategy. If a third party search firm is engaged to assist in seeking candidates for the Board, Pioneer’s Corporate Governance Guidelines provide that the search firm will affirmatively be instructed to seek to present women and minority candidates.
The Board believes that the above-named nominees for election at the Annual Meeting offer a diverse range of backgrounds, skills and experience in relevant areas that contribute to overall effective leadership and exercise of oversight responsibilities by the Board:
Director Nominee Independence
Independent Director Tenure
Gender Diversity
Age Diversity
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Governance Highlights
Pioneer's Board of Directors believes that sound governance practices and policies provide an important framework to assist it in fulfilling its duty to stockholders. The following are some of the Company's more significant governance practices and policies:
 
þ
11 of 13 directors are independent
þ
Separate CEO and Chairman of the Board positions; Lead Independent Director
þ
Board tenure/refreshment:
average tenure of independent directors is less than seven years
seven out of 11 independent directors have tenures less than five years

þ
Board oversight of:
the Company’s long-term strategy
risk management - annual review of enterprise risks, with a focus on specific risks during interim quarters

þ
Annual Board and Committee self-evaluations
þ
Active stockholder engagement process, with participation by independent Board members
þ
Stockholder proxy access
þ
All directors stand for election annually
þ
Majority voting for directors in uncontested elections
þ
Independent audit, compensation and governance committees
þ
Robust stock ownership policy for directors
þ
All directors attended more than 75% of the meetings of the Board and Committees on which they served during 2017
þ
Anti-hedging and pledging policies
þ
Compensation clawback policy
þ
No poison pill
2017 Executive Compensation Highlights
Pioneer's executive compensation program is designed to reward the named executive officers for the achievement of strategic and operational goals and increases in stockholder returns, while discouraging unnecessary or excessive risk taking. The three main components of the executive compensation program, each of which generally is targeted at the median level of the Company's peer group, are:
Base salary - fixed cash compensation component
Annual cash bonus incentive award - variable cash payout based on Company and individual performance for the year
Long-term incentive plan awards - equity compensation with 50% of target value allocated to time-based awards cliff vesting after three years, and 50% of target value allocated to performance unit awards with payout being dependent on relative total stockholder return against industry peers over a three-year period
The following charts illustrate the various components of total 2017 annual compensation for the Chief Executive Officer ("CEO") and the other named executive officers as a group as reported in the Summary Compensation Table.
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The Company's executive compensation and compensation-related governance policies and practices incorporate many best practices, including the following:
Key Compensation Practices
þ
Pay for performance - over 80% of target 2017 total compensation (annual bonus and long-term incentive compensation) was variable and dependent on performance
þ
Emphasize long-term performance - long-term equity-based incentives represented over 70% of target 2017 total compensation for the NEOs; 50% of equity awards are in the form of performance units with payout being dependent on relative total stockholder return against industry peers over a three-year period
þ
Compensation clawback policy
þ
Double-trigger cash severance benefits in the event of a change in control
þ
Double-trigger acceleration of equity awards in the event of a change in control
þ
Compensation Committee members are all independent and the Committee utilizes an independent compensation consultant
þ
Minimum stockholding requirements of six times base salary for the CEO and three times base salary for executive vice presidents
þ

Beginning with the 2018 annual cash bonus incentive program, incorporating goals for return on capital employed and changing goals for production and proved reserves growth to be on a per-share basis
þ
Health, safety and environmental goals incorporated into the annual cash bonus incentive program
þ
Annual advisory vote on executive compensation
þ
No tax gross ups
þ
No employment agreements
þ
No hedging or pledging of Company common stock
þ
No repricing of stock options or buying out underwater stock options
Stockholder Outreach and Engagement
The Company regularly engages with stockholders, including with respect to corporate governance, sustainability and compensation matters. This process has led to a number of enhancements in the Company's governance, compensation and disclosure practices, including:
The Board has implemented proxy access.
The Board has enhanced its diversity through the appointment of three highly qualified women directors with significant and varied areas of experience.
The Company revised its annual incentive compensation program for 2018 to incorporate a specific metric for return on capital employed and changed goals for production and proved reserves growth to be on a per share basis, and changed its 2018 equity awards for all executive officers on its Management Committee to be “double trigger” in the event of a change in control.
The Board has enhanced its disclosure regarding the backgrounds, skills, qualifications and experience of each director nominee in response to recent corporate governance initiatives.
The Company published its inaugural Sustainability Report following engagement with a number of stockholders and other stakeholders.
The Board acted to declassify the Board, so that directors are elected annually.
The Board adopted majority voting for directors.
During 2017 and through the date of this Proxy Statement, Pioneer has reached out to holders of more than 60 percent of the Company's outstanding shares, and received feedback from holders of over 30 percent of the Company's outstanding shares. In many cases, calls with investors have involved at least one independent member of the Board.
Strong Company Culture and Experienced Leadership
Pioneer maintains a strong Company culture. In 2017, Pioneer was named the fifth best place to work among large companies in the Dallas/Fort Worth area based on a survey of employees conducted by The Dallas Morning News. It is the eighth consecutive year that the Company has been ranked in the top five.

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The following table sets forth for each of the Company's executive officers his or her age, title and the year when the officer was first employed by the Company or one of its predecessors.
Name and Age
Title
Year Began with the Company
Timothy L. Dove, 61
President and Chief Executive Officer
1994
Mark S. Berg, 59
Executive Vice President, Corporate/ Vertically Integrated Operations
2005
Chris J. Cheatwood, 57
Executive Vice President and Chief Technology Officer
1998
Richard P. Dealy, 52
Executive Vice President and Chief Financial Officer
1992
J. D. Hall, 52
Executive Vice President, Permian Operations
1989
Kenneth H. Sheffield, Jr., 57
Executive Vice President, Operations/Engineering/Facilities
1982
William F. Hannes, 58
Senior Vice President, Special Projects
1997
Frank E. Hopkins, 70
Senior Vice President, Investor Relations
2005
Mark H. Kleinman, 56
Senior Vice President and General Counsel
2005
Teresa A. Fairbrook, 44
Vice President and Chief Human Resources Officer
1999
Margaret M. Montemayor, 40
Vice President and Chief Accounting Officer
2010
Stephanie D. Stewart, 50
Vice President and Chief Information Officer
2014


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PROXY STATEMENT
2018 Annual Meeting of Stockholders
______________________________
GENERAL INFORMATION
This Proxy Statement provides information in connection with the solicitation of proxies by the Board of Directors (the "Board") of the Company for use at the Annual Meeting, which will be held on Thursday, May 17, 2018, at 9:00 a.m. Central Time, at the Midland Corporate Office located at 3617 N. Big Spring, Midland, Texas 79705.
You may attend the Annual Meeting and vote your shares of the Company's common stock if you were a stockholder of record at the close of business on March 22, 2018. If you are not present at the Annual Meeting, your shares may be voted only by a person to whom you have given a proper Proxy. The Board is requesting your Proxy so that the persons named on the Proxy will be authorized to represent you and vote your shares at the Annual Meeting. Those persons will also be authorized to vote your shares to adjourn the Annual Meeting from time to time and to vote your shares at any adjournments or postponements of the Annual Meeting. You may revoke the Proxy in writing at any time before it is exercised at the Annual Meeting. See "General Information about the Annual Meeting - Voting and Quorum - Revoking a Proxy."
Electronic Availability of Proxy Statement and Annual Report
As permitted under the rules of the Securities and Exchange Commission (the "SEC"), the Company is making this Proxy Statement and its Annual Report available to its stockholders electronically via the internet. The Company is sending the Notice of Availability on or about April 5, 2018, to its stockholders of record as of the close of business on March 22, 2018. The Notice of Availability includes:
instructions on how to access the Company's proxy materials electronically,
the date, time and location of the Annual Meeting,
a description of the matters intended to be acted upon at the Annual Meeting,
a list of the materials being made available electronically,
instructions on how a stockholder can request paper or e-mail copies of the Company's proxy materials,
any control/identification numbers that a stockholder needs to access the Proxy, and
information about attending the Annual Meeting and voting in person.
Voting Matters and Board Recommendations
The following table sets forth the items currently on the agenda for the Annual Meeting, along with the Board's recommendations.
Proposal
Description
Board Vote Recommendation
Page Reference (for more detail)
1
Election of 13 director nominees
FOR each of the director nominees
2
Ratification of the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for 2018
FOR
3
Approval, on an advisory basis, of named executive officer compensation
FOR

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For additional information about the Annual Meeting, including what vote is required for each item, how a Proxy that is properly completed and submitted will be voted, and what is the quorum required for the meeting, please see "General Information about the Annual Meeting."
PROPOSAL ONE
ELECTION OF DIRECTORS
Directors and Nominees
Upon recommendation of the Nominating and Corporate Governance Committee, the Board has nominated the 13 individuals named below for election as directors at the Annual Meeting, each of whom is currently serving as a director of the Company. The Board has no reason to believe that any of its nominees will be unable or unwilling to serve if elected. If a nominee becomes unable or unwilling to accept nomination or election, either the number of the Company's directors will be reduced or the persons acting under the Proxy will vote for the election of a substitute nominee that the Board recommends.
As discussed in more detail below, the Board considers each director's relevant experience, qualifications, skills and other factors in the course of the Board's annual self-evaluation. In addition, with regard to the overall composition of the Board, the Nominating and Corporate Governance Committee and the Board seek to achieve an overall balance of backgrounds and diversity of experience at policy-making levels with a complementary mix of skills and professional experience in areas relevant to the Company's business and strategy. The biographies of each of the nominees set forth below contain certain information about his or her principal occupation and business experience, and also highlight certain of the nominee's particular attributes that the Board believes the nominee brings to the Board and led the Nominating and Corporate Governance Committee and the Board to conclude that he or she should be nominated to serve as a director of the Company.
Required Vote
The Company's Amended and Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), provides that all directors are to be elected annually. The Company's Fifth Amended and Restated Bylaws (the "Bylaws") 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 in order for him or her to be elected to the Board. As a condition to being nominated, each nominee for director is required to submit an irrevocable letter of resignation that becomes effective if the nominee does not receive a majority of the votes cast in an uncontested election and the Board decides to accept the resignation. If a nominee who is currently serving as a director does not receive a majority of the votes cast for his or her election, the Board will act on the tendered resignation within 90 days after the date of the certification of the election results. If the resignation is not accepted, the Board will publicly disclose its decision and its primary rationale, and the director will continue to serve as a director until his or her successor is elected and qualified or until his or her earlier resignation or removal. If the Board accepts the resignation, the Board may fill the vacancy in accordance with the Company's Bylaws or may decrease the size of the Board.


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THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW.
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Edison C. Buchanan
Director since: 2002
Age: 63
Independent: Yes
 
Mr. Buchanan was a Managing Director of various groups in the Investment Banking Division of Dean Witter Reynolds in their New York and Dallas offices from 1981 to 1997. In 1997, Mr. Buchanan joined Morgan Stanley Dean Witter as a Managing Director in the Real Estate Investment Banking group. During 2000, Mr. Buchanan served as Managing Director and head of the domestic Real Estate Investment Banking Group of Credit Suisse First Boston.

 
 
 
 
Selected Experiences, Qualifications, Attributes and Skills: Mr. Buchanan’s more than 20 years in investment banking and finance, including in senior executive roles, brings to the Board significant senior executive experience and extensive experience in corporate finance, mergers and acquisitions and commercial transactions, strategic planning and human resources.
Education:
Bachelor of Science degree in Civil Engineering, Tulane University
Master of Business Administration in Finance and International Business, Columbia University
Pioneer Committees: Compensation (Chair); Nominating and Corporate Governance
Current Public Company Directorships: None
Prior Public Company Directorships (within last five years): None
Current Non-Public Company Board or other Service: Commonweal Conservancy (Chair)


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Andrew F. Cates
Director since: 2009
Age: 47
Independent: Yes
 
Mr. Cates is the Managing Member of Value Acquisition Fund and Chief Executive Officer of RVC Outdoor Destinations, a developer and operator of outdoor resorts. He has acquired and asset managed commercial real estate throughout the United States within various entities, including Value Acquisition Fund, an acquisition, development, and asset management company that he founded in 2004. After starting his
 
 
 
career in Dallas, Texas with Crow Family Holdings and Viceroy Investments, he became the Project Developer and founding Board Chairman of Soulsville, one of the largest inner city revitalization projects in the United States. In 2000, he began working with a team of civic and business leaders that attracted the Vancouver Grizzlies NBA franchise to Memphis, Tennessee in 2001.
Selected Experiences, Qualifications, Attributes and Skills: As a founder and Managing Member of his own development company and with extensive experience in asset management and commercial investments, Mr. Cates brings to the Board extensive experience in corporate finance and capital markets, mergers and acquisitions and strategic planning.
Education:
Bachelor of Business Administration in Finance, the University of Texas
Pioneer Committees: Compensation; Nominating and Corporate Governance
Current Public Company Directorships: None
Prior Public Company Directorships (within last five years): PICO Holdings, Inc.
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Timothy L. Dove
Director since: 2013
Age: 61
Independent: No
 
Mr. Dove was named the Company's President and CEO on January 1, 2017, pursuant to the succession process announced in May 2016 and discussed in more detail below. He held the positions for the Company of President and Chief Operating Officer from December 2004 to January 2017, Executive Vice President and Chief Financial Officer from February 2000 to November 2004 and Executive Vice President -
 
 
 
Business Development from August 1997 to January 2000. Mr. Dove joined Parker & Parsley Petroleum Company, a predecessor of the Company (together with its predecessor companies, "Parker & Parsley"), in 1994 as a Vice President and was promoted to Senior Vice President - Business Development in October 1996, in which position he served until the Company's formation in August 1997. Before joining Parker & Parsley, Mr. Dove was employed with Diamond Shamrock Corp. and its successor, Maxus Energy Corp., in various capacities in international exploration and production, marketing, refining, and planning and development. Mr. Dove also served as President and Chief Operating Officer of the general partner of Pioneer Southwest Energy Partners L.P. ("Pioneer Southwest"), which was a majority-owned subsidiary of the Company, from June 2007 through the Company's acquisition of Pioneer Southwest in December 2013. Mr. Dove's severance agreement provides that his failure to be re-elected constitutes "good reason" under his severance agreement whether or not his resignation is accepted by the Board, which would entitle him to terminate his employment and receive the benefits described in the section below entitled "Executive Compensation Tables - Potential Payments upon Termination or Change in Control."
Selected Experiences, Qualifications, Attributes and Skills: Mr. Dove’s more than 20 years as a senior executive of the Company, including as its current CEO and former Chief Financial Officer, brings to the Board extensive senior executive experience in and knowledge of the oil and gas exploration and production ("E&P") industry, the Company's operations and related technology matters, corporate finance, capital markets and mergers and acquisitions, strategic planning and human resources.
Education:
Bachelor of Science in Mechanical Engineering, Massachusetts Institute of Technology
Master of Business Administration, the University of Chicago
Pioneer Committees: None
Current Public Company Directorships: None
Prior Public Company Directorships (within last five years): Pioneer Southwest Energy Partners L.P.
Current Non-Public Company Board or other Service: Federal Reserve Bank of Dallas Energy Advisory Council; Massachusetts Institute of Technology Corporate Development Committee; Jesuit School of Dallas Foundation Board of Trustees
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Phillip A. Gobe
Director since: 2014
Age: 65
Independent: Yes
 
Mr. Gobe joined Energy Partners, Ltd. as Chief Operating Officer in December 2004 and became President in May 2005, and served in those capacities until his retirement in September 2007. Mr. Gobe also served as a director of Energy Partners, Ltd. from November 2005 until May 2008. Prior to that, Mr. Gobe served as Chief Operating Officer of Nuevo Energy Company from February 2001 until its acquisition by
 
 
 
Plains Exploration & Production Company in May 2004. Prior to that time, he held numerous operations and human resources positions with Vastar Resources, Inc. and Atlantic Richfield Company ("ARCO") and its subsidiaries. Subsequent to his retirement as an officer in September 2007, Energy Partners, Ltd. filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code in May
2009. Energy Partners, Ltd. emerged from bankruptcy in September of that same year.
Selected Experiences, Qualifications, Attributes and Skills: Mr. Gobe’s extensive experience in various roles with energy companies, including a major international energy company, which included more than nine years in a Chief Operating Role, brings to the Board significant senior executive experience and experience in and knowledge of the E&P industry and its operations and related technology matters, as well as experience in commercial transactions, health, safety and environmental ("HSE") matters and human resources.
Education:
Bachelor of Arts, the University of Texas
Master of Business Administration, the University of Louisiana in Lafayette
Pioneer Committees: Compensation; Health, Safety and Environment
Current Public Company Directorships: Pantheon Resources plc
Prior Public Company Directorships (within last five years): Pioneer Southwest Energy Partners L.P.
Current Non-Public Company Board or other Service: Scientific Drilling International, Inc. (Lead Director and Chair of the compensation committee)

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Larry R. Grillot
Director since: 2013
Age: 71
Independent: Yes
 
Dr. Grillot served as the dean of the Mewbourne College of Earth and Energy at the University of Oklahoma from 2006 until his retirement from the university in June 2015. Prior to his role at the University of Oklahoma, from 1973 until his retirement in 2003, Dr. Grillot worked for Phillips Petroleum Company in a variety of technical and managerial positions in exploration and production, including Manager of E&P Technology and Services,
 
 
 
Upstream Technology and Project Development, Manager of International Exploration, President and Region Manager for Phillips Petroleum Canada Limited and Manager of E&P Planning. Dr. Grillot is a member of the American Association of Petroleum Geologists, the American Geophysical Union, the Society of Exploration Geophysicists and the Society of Petroleum Engineers.
Selected Experiences, Qualifications, Attributes and Skills: Dr. Grillot’s significant experience in technical and executive positions in the E&P industry, as well as his doctorate degree in Geological Sciences and former role as a college dean, bring to the Board a depth of knowledge and experience in geology and other technological areas important to the Company, as well as operational experience in the E&P industry, domestically and internationally. In addition, Dr. Grillot brings to the Board knowledge of operating in environmentally sensitive areas through his experience with Phillips Petroleum Company overseeing international exploration activities, including seismic data.
Education:
Bachelor of Science in Physics, Mississippi State University
Master of Science in Geological Sciences, Brown University
Ph.D. in Geological Sciences, Brown University
Pioneer Committees: Audit; Health, Safety and Environment
Current Public Company Directorships: None
Prior Public Company Directorships (within last five years): None
Current Non-Public Company Board or other Service: None






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Stacy P. Methvin
Director since: 2013
Age: 61
Independent: Yes
 
Ms. Methvin was Vice President, Refining Margin Optimization of Shell Oil Company ("Shell") from 2011 until her retirement in 2012, and from 2009 until 2010, she was Vice President, Global Distribution of Shell. Ms. Methvin also held various other operational and management roles in the upstream, downstream and chemical businesses during her tenure at Shell and its subsidiaries that began in 1979, including President,
 
 
 
Shell Louisiana E&P Company, President, Shell Deer Park Refining Company, President, Shell Pipeline Company LP, President, Shell Chemical LP, and Vice President, Strategy and Portfolio for the downstream business.
Selected Experiences, Qualifications, Attributes and Skills: With more than 15 years of senior executive service in operational and management roles in the upstream, downstream and chemical business segments of a major international energy company, Ms. Methvin brings to the board significant senior executive experience, experience in and knowledge of the E&P industry and its operations, strategic planning and risk management, HSE matters, marketing transactions, international operations, regulatory compliance and human resources.
Education:
Bachelor of Arts in Geological and Geophysical Sciences, Princeton University
Pioneer Committees: Compensation; Health, Safety and Environment (Chair)
Current Public Company Directorships: Magellan Midstream Partners, L.P.
Prior Public Company Directorships (within last five years): None
Current Non-Public Company Board or other Service: Marquard & Bahls AG (Vice Chair); Louisiana Governor's Advisory Commission on Coastal Protection, Restoration and Conservation; Memorial Hermann Healthcare System; The Houston Zoo (Chair); Springside Chestnut Hill Academy
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Royce W. Mitchell
Director since: 2014
Age: 63
Independent: Yes
 
Mr. Mitchell has been an executive consultant, focusing on advising management teams and board audit committees of exploration and production companies, since January 2005, except for the period from April 2008 through December 2008 when he served as Chief Financial Officer of Frac Tech Services, Ltd. Mr. Mitchell served as Executive Vice President, Chief Financial Officer and Chief Accounting Officer of Key Energy
 
 
 
Services, Inc. from January 2002 to January 2005. Before joining Key Energy Services, Inc., he was a partner with KPMG LLP from April 1986 through December 2001 specializing in the oil and gas industry. Mr. Mitchell is also a certified public accountant.
Selected Experiences, Qualifications, Attributes and Skills: With more than 25 years with a major accounting firm, including 15 years as a partner, and significant experience as a chief financial officer and consultant for energy companies, Mr. Mitchell brings to the Board extensive experience and knowledge in accounting, corporate finance, mergers and acquisitions, risk management and commercial transactions, including significant experience in the E&P industry. Mr. Mitchell has been determined by the Board to meet the SEC's definition of audit committee financial expert.
Education:
Bachelor of Business Administration, Texas Tech University

Pioneer Committees: Audit; Health, Safety and Environment
Current Public Company Directorships: None
Prior Public Company Directorships (within last five years): Pioneer Southwest Energy Partners L.P.
Current Non-Public Company Board or other Service: None

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Frank A. Risch
Director since: 2005
Age: 75
Independent: Yes
 
Mr. Risch joined Exxon Corporation in 1966 as a financial analyst in New York and subsequently held various positions in finance, planning, marketing and general management with ExxonMobil and its operating affiliates in the U.S. and abroad for nearly 38 years. He retired in July 2004 as Vice President and Treasurer (and principal financial officer) of ExxonMobil.

 
 
 
Selected Experiences, Qualifications, Attributes and Skills: Mr. Risch’s extensive senior executive experience as a financial officer at a major international energy company brings to the Board extensive senior leadership experience, and extensive knowledge and experience in accounting, finance, capital markets, strategic planning, risk management, and mergers and acquisitions and commercial transactions. Mr. Risch has been determined by the Board to meet the SEC's definition of audit committee financial expert.
Education:
Bachelor of Science in Business Administration, Pennsylvania State University
Master of Science in Industrial Administration, Carnegie Mellon University
Pioneer Committees: Audit (Chair); Nominating and Corporate Governance
Current Public Company Directorships: None
Prior Public Company Directorships (within last five years): Susser Petroleum Partners LP
Current Non-Public Company Board or other Service: Carnegie Mellon University Tepper School of Business, Business Board of Advisors; Financial Executives International; The Dallas Theater Center (Life Trustee); The Dallas Holocaust Museum; HIAS International; Dallas CASA (Court Appointed Special Advocates) (Emeritus Director)
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Scott D. Sheffield
Director since: 1997
Age: 65
Independent: No
 
Mr. Sheffield has served as Chairman of the Board of the Company since 1999. He had served as Chief Executive Officer of the Company from 1997 through December 31, 2016, and then as the Executive Chairman until December 31, 2017, when he retired as an executive and officer of the Company pursuant to the CEO succession process announced in May 2016. Mr. Sheffield was the Chairman of the Board of Directors
 
 
 
and Chief Executive Officer of Parker & Parsley from January 1989 until Pioneer was formed in August 1997. Mr. Sheffield joined Parker & Parsley as a petroleum engineer in 1979, was promoted to Vice President - Engineering in September 1981, was elected President and a Director in April 1985, and became Parker & Parsley's Chairman of the Board and Chief Executive Officer on January 19, 1989. Before joining Parker & Parsley, Mr. Sheffield was employed as a production and reservoir engineer for Amoco Production Company. He had also served as Chief Executive Officer and director from June 2007, and as Chairman of the Board from May 2008, of the general partner of Pioneer Southwest through December 2013.
Selected Experiences, Qualifications, Attributes and Skills: Mr. Sheffield’s more than 25 years’ experience as CEO of the Company or its predecessor, and his extensive experience in petroleum engineering, brings to the Board extensive senior executive experience, experience in and knowledge of
the E&P industry, its operations and related technology matters, corporate finance, capital markets and mergers and acquisitions, strategic planning, marketing and hedging transactions, international business matters, governmental and regulatory matters and human resources. In addition, his service on the Advisory Board of the Center for Global Energy Policy at Columbia University, which conducts research and convenes policy experts and industry leaders on a range of energy-relevant matters, brings to the Board knowledge of and insight into environmental policy and renewable energy matters.
Education:
Bachelor of Science in Petroleum Engineering, the University of Texas
Pioneer Committees: None
Current Public Company Directorships: The Williams Companies, Inc.
Prior Public Company Directorships (within last five years): Pioneer Southwest Energy Partners L.P.
Current Non-Public Company Board or other Service: The Center for Global Energy Policy at Columbia University Advisory Board; CSL Capital Management, LLC; L1 Energy (UK) LLP Advisory Board

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Mona K. Sutphen
Director since: 2015
Age: 50
Independent: Yes
 
Ms. Sutphen is a Partner at Macro Advisory Partners LLP, a consulting firm providing strategic advice in the areas of financial markets, geopolitics and government policy, and previously spent three years at UBS AG, a global financial institution, as Managing Director, covering geopolitical risk and macro-policy trends. From 2009 through 2011, she served as White House Deputy Chief of Staff for Policy for President Obama, working on
 
 
 
a range of domestic and international policy and regulatory matters that included working with the U.S. Environmental Protection Agency (the "EPA") and the Council on Environmental Quality to advance President Obama's energy-related regulatory initiatives. Prior to her service as Deputy Chief of Staff for Policy, she was Managing Director at Stonebridge International, an international consulting firm, and from 1991 through 2000 was a career diplomat, serving on the staff of the National Security Council, the U.S. Mission to the United Nations and postings in Asia and Europe. Ms. Sutphen was also a Member of the President's Intelligence Advisory Board during President Obama's administration.
Selected Experiences, Qualifications, Attributes and Skills: Ms. Sutphen has a 20-year track record of building and scaling government and private sector enterprises. From her leadership role in the White House to her experience launching global strategy consulting firms and three years as Managing Director at a global financial institution establishing systems to evaluate macro risks, she brings to the Board significant senior executive experience, and extensive knowledge and experience in strategic planning and global, geopolitical and regulatory matters. In addition, her previous work with the EPA and the Council on Environmental Quality and current service on the Advisory Board of the Center for Global Energy Policy at Columbia University bring to the Board significant knowledge of and insight into environmental policy and renewable energy matters.
Education:
Bachelor of Arts, Mount Holyoke College
Masters of Science, the London School of Economics
Pioneer Committees: Compensation; Health, Safety and Environment
Current Public Company Directorships: None
Prior Public Company Directorships (within last five years): None
Current Non-Public Company Board or other Service: Drilling Info Holdings LLC; The Center for Global Energy Policy at Columbia University Advisory Board; The International Rescue Committee; Human Rights First; Mount Holyoke College Board of Trustees

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J. Kenneth Thompson
Director since: 2011
Age: 66
Independent: Yes
 
Mr. Thompson has served as the President and Chief Executive Officer of Pacific Star Energy LLC, a privately held oil and gas investment firm in Alaska, since September 2000. He served as Managing Director of Alaska Venture Capital Group LLC, a privately held oil and gas exploration company in which Pacific Star Energy LLC owns an interest, from December 2004 to December 2012. Mr. Thompson's experience includes
 
 
 
serving as Executive Vice President of ARCO's Asia Pacific oil and gas operating companies in Alaska, California, Indonesia, China and Singapore from 1998 to 2000, and President and Chief Executive Officer of ARCO Alaska, Inc., the parent company's oil and gas producing subsidiary based in Anchorage, from June 1994 to January 1998. He also served in various technical and management roles at ARCO from 1974 to 1998, including as executive head of ARCO's oil and gas research and technology center from 1993 to 1994, which included research and technology application in various geoscience disciplines, engineering technologies, information technology and environmental sciences.
Selected Experiences, Qualifications, Attributes and Skills: Mr. Thompson’s extensive experience as a CEO of an oil and gas exploration company and as a senior executive in operational and technical roles with a major international energy company bring to the Board significant senior executive experience, experience in and knowledge of the E&P industry and its operations, technology and research and development, strategic planning and risk management, HSE matters, international operations, and human resources. In addition, his experience as executive head of ARCO's oil and gas environmental research and technology initiatives and Chair of the environmental, health, safety and social responsibility committee of Coeur Mining, Inc. bring to the Board significant knowledge of and insight into environmental matters.
Education:
Bachelor of Science degree in Petroleum Engineering, Missouri University of Science & Technology
Pioneer Committees: Compensation; Nominating and Corporate Governance (Chair)
Current Public Company Directorships: Alaska Air Group, Inc. (Chair of the compensation committee); Coeur Mining, Inc. (Chair of the environmental, health, safety and social responsibility committee); Tetra Tech, Inc. (Chair of the compensation committee)
Prior Public Company Directorships (within last five years): None
Current Non-Public Company Board or other Service: CDF Capital (Chair)
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Phoebe A. Wood
Director since: 2013
Age: 64
Independent: Yes
 
Ms. Wood has been a principal at CompaniesWood, a consulting firm specializing in advising and investing in early stage investments, since 2008. She was Executive Vice President and Chief Financial Officer of Brown-Forman Corporation, a diversified consumer products manufacturer, from 2001 to 2006, and Vice Chairman and Chief Financial Officer from 2006 to 2008, where she was responsible for the financial operations of the
 
 
 
company, including corporate development, controller, treasury, investor relations, tax, information technology and internal audit. Prior to Brown-Forman Corporation, Ms. Wood was Vice President, Chief Financial Officer and a Director of Propel Corporation (a subsidiary of Motorola) from 2000 to 2001. Previously, Ms. Wood served in various capacities during her tenure at ARCO from 1976 to 2000, including financial management assignments in Alaska and England.
 
Selected Experiences, Qualifications, Attributes and Skills: Ms. Wood’s extensive senior executive experience as a financial officer in diverse industries, including a major international energy company, and Chair of the audit committee of another public company, bring to the Board extensive senior leadership experience, and deep knowledge and experience in accounting, finance, capital markets, strategic planning, risk management, mergers and acquisitions and commercial transactions. Ms. Wood has been determined by the Board to meet the SEC's definition of audit committee financial expert.
Education:
A.B. degree, Smith College
Master of Business Administration, the University of California Los Angeles
Pioneer Committees: Audit; Nominating and Corporate Governance
Current Public Company Directorships: Invesco Ltd. (Chair of the audit committee); Leggett & Platt, Incorporated (Chair of the compensation committee); PPL Corporation
Prior Public Company Directorships (within last five years): Coca-Cola Enterprises Inc.
Current Non-Public Company Board or other Service: The Gheens Foundation Board of Trustees; American Printing House for the Blind Board of Trustees (Vice Chair); Pitzer College Board of Trustees

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Michael D. Wortley
Director since: 2015
Age: 70
Independent: Yes
 
Mr. Wortley has served as the Chief Legal Officer for Reata Pharmaceuticals, Inc., a clinical-stage biopharmaceutical company, since 2015. He has practiced corporate law for over 35 years, focusing primarily on corporate governance matters, acquisitions and divestitures, public and private financings and securities law matters, including over 25 years in management positions. Mr. Wortley was a partner in the
 
 
 
Dallas, Texas, office of Vinson & Elkins L.L.P. from 1995 to 2014 and served in various leadership capacities, including Chief Operating Partner of the firm and Managing Partner of the Dallas office. Prior to joining Vinson & Elkins L.L.P., he was an attorney with Johnson & Wortley, P.C. (which prior to 1993 was known as Johnson & Swanson or Johnson & Gibbs) from 1978 to 1995 and served in various leadership capacities, including President and Chairman of the Board.
Selected Experiences, Qualifications, Attributes and Skills: Mr. Wortley’s more than 35 years as a corporate attorney advising boards of directors and management teams on a wide variety of legal and strategic matters, both as a senior partner with large law firms and an executive with another public company, bring to the Board extensive experience and knowledge of legal and regulatory matters, corporate governance, finance, capital markets, mergers and acquisitions and commercial transactions, strategic planning, risk management, and HSE and international matters.
Education:
Bachelor of Arts, Southern Methodist University
Juris Doctorate, Southern Methodist University
Master's in Regional Planning, the University of North Carolina at Chapel Hill
Pioneer Committees: Audit; Nominating and Corporate Governance
Current Public Company Directorships: None
Prior Public Company Directorships (within last five years): None
Current Non-Public Company Board or other Service: None

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Board Composition; the Directors’ Experiences, Qualifications, Attributes and Skills
The Board endeavors to achieve an overall balance of backgrounds and diversity of experience at policy-making levels with a complementary mix of skills and professional experience in areas relevant to the Company's business and strategy, while also ensuring that the size of the Board is appropriate to function effectively and efficiently. Accordingly, the Board and the Nominating and Corporate Governance Committee consider the qualifications of directors and director candidates individually and in the broader context of the Board’s overall composition and the Company’s current and future needs.
In considering whether an incumbent director should be nominated for reelection, the Board considers the results of its self-evaluation process, which is conducted early each year and is led by the Chairman and the Lead Director. See “Corporate Governance - Director Succession and Self-Evaluation Process” below for more detail about this process. In identifying potential director candidates for addition to the Board, the Nominating and Corporate Governance Committee will rely on any source available for the identification and recommendation of candidates, including its directors, officers and stockholders. If the Nominating and Corporate Governance Committee engages a third party search firm to assist in seeking candidates for the Board, the search firm will affirmatively be instructed to seek to present women and minority candidates.
As set out in the Company’s Corporate Governance Guidelines, all directors are expected to possess the highest personal values and integrity; exhibit sound judgment, intelligence, personal character, and the ability to make independent analytical inquiries; be willing to devote adequate time to Board duties; strive for a collegial atmosphere showing mutual respect for all Directors and opinions; and be able to serve on the Board for a sustained period.
With regard to the balance of diversity of experience and skills of the Board, the Board believes that it is important to have individuals with the following skills and experiences on the Board. The directors’ biographies above note each director’s relevant experience, qualifications, and skills relative to this list.

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Skill/Experience
Relevance
Senior Executive Experience
Brings different perspectives to motivate, manage and develop leadership qualities in others, and a practical understanding of complex organizations, processes, strategy, risk management and change management
E&P Industry Operations
Brings a practical understanding of issues specific to the Company's business and developing, implementing and assessing its strategy, operating plans and risk profile
Science/Technology/Engineering/ Research & Development
Provides experience and insight as innovation and technology will be a key contributor to achieving Pioneer’s long-term growth strategy
Accounting/ Finance
Important for overseeing the integrity of the Company’s financial reporting and internal controls and critically evaluating its performance; knowledge of finance and investment experience assist the Board in understanding, advising on, and overseeing the Company’s capital structure and financing and investing activities
M&A/Commercial Transactions
Provides insight into developing and implementing strategies for growing the Company’s business, accurately evaluating transactions and maximizing stockholder value
Strategic Planning / Risk Management
Assists the Board in its oversight of strategy, understanding the most significant risks to its achievement and monitoring its implementation and results
Environmental Policy & Compliance/Safety/Health
Brings understanding and experience that is valuable to the Board in overseeing the Company’s mission of being a leading independent energy company, developing natural resources in a way that protects the communities in which it operates and preserves the environment
Marketing/Sales
Brings an important perspective as the Company seeks to grow its production, particularly in terms of available processing, transportation and storage facilities and new markets, as well as the use of derivatives transactions to mitigate the effect of commodity price volatility on net cash provided by operating activities and net asset value
Global Business or International Matters
Provides valuable perspective on factors critical to the Company’s long-term strategy, including factors that can affect supply and demand for oil and gas, available markets and regulation
Legal/Governmental/Regulatory
Provides experience and insight that help the Board in fulfilling its oversight responsibilities regarding the Company’s legal and regulatory compliance and help the Company work constructively with governmental and political bodies, as the E&P industry is heavily regulated and is directly affected by governmental actions and decisions
Human Resources
Assists the Board in connection with its role in overseeing executive compensation, succession planning, and the identification and retention of executive talent
Other Public Boards
Through service on, or extensive experience providing professional advice to, other public company boards, brings an understanding of corporate governance practices and trends and insights into Board practices, relations between the Pioneer Board, the CEO and senior management, agenda setting and succession planning

CORPORATE GOVERNANCE
Corporate Governance Guidelines
The Board believes that sound governance practices and policies provide an important framework to assist it in fulfilling its duty to stockholders. The Company's Corporate Governance Guidelines cover the following principal subjects:
Role and functions of the Board and its Lead Director
Qualifications and independence of directors

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Size of the Board and director selection process
Committee functions and independence of committee members
Meetings of non-employee directors
Self-evaluation of the Board and its committees
Ethics and conflicts of interest (a copy of the current "Code of Business Conduct and Ethics" is posted on the Company's website at www.pxd.com/about/governance)
Contacting the Board (including the Lead Director or the Board's non-management or independent directors as a group), including reporting of concerns about the Company's accounting, internal controls or auditing matters
Compensation of the Board and stock ownership requirements
Succession planning and annual compensation review of senior management
Directors' access to senior management and to independent advisors
New director orientation
Continuing director education
Review and approval of related person transactions
The Company's Corporate Governance Guidelines are posted on the Company's website at www.pxd.com/about/governance. The Corporate Governance Guidelines are reviewed periodically and as necessary by the Company's Nominating and Corporate Governance Committee, and any proposed additions to or amendments of the Corporate Governance Guidelines are presented to the Board for its approval.
Board Leadership Structure
Recent CEO Succession. The Company's governing documents allow the roles of Chairman of the Board and CEO to be filled by the same or different individuals. This approach allows the Board flexibility to determine whether the two roles should be separate or combined based upon the Company's needs from time to time. Mr. Sheffield has served as Chairman of the Board since 1999, and in May 2016, the Board approved a succession process pursuant to which he retired as CEO effective December 31, 2016, a position he had held since 1997, and assumed the role of Executive Chairman of the Board. Mr. Dove, who had served as President and Chief Operating Officer of the Company since 2004, succeeded Mr. Sheffield as CEO as part of the approved succession process. Mr. Sheffield retired as an executive and employee of the Company on December 31, 2017, and has continued as Chairman of the Board in a nonexecutive capacity.
The Board believes that at present, Mr. Sheffield's continuing role as Chairman of the Board, and Mr. Dove's succession as CEO, promote unified leadership and direction for the Company, which allows for a clear focus for management to execute the Company's strategy and business plans. As Chairman with a deep knowledge of the Company, its history and its business, Mr. Sheffield is well suited to ensure that critical business issues are brought before the Board, which enhances the Board's ability to develop and implement business strategies. As Chairman, Mr. Sheffield will be in a position to serve as a sounding board for the CEO on the Company's strategic direction, while continuing to serve as a spokesperson for the E&P industry. Mr. Sheffield will continue to chair the meetings of the Board and coordinate board meetings and agendas with the Lead Director and the CEO.
Independent Leadership. To maintain a strong and independent board, all directors of the Company, other than Messrs. Sheffield and Dove, are "independent." In addition, the Company's Corporate Governance Guidelines provide that if the Chairman is also the CEO, or if the Chairman is otherwise not independent, the Board shall have a Lead Director, who is to be an independent director designated by the Nominating and Corporate Governance Committee, which is composed entirely of independent directors, from among the independent members of the Board, and who will serve as the chair of the Nominating and Corporate Governance Committee.

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Mr. Thompson has served as Lead Director of the Board since May 2015. The Lead Director provides, in conjunction with the Chairman, leadership and guidance to the Board, and also:
presides at all meetings of the Board at which the Chairman is not present;
presides at the executive sessions of the independent directors, and has the authority to call such executive sessions;
in consultation with the Chairman, the CEO and the Corporate Secretary, approves the agenda and meeting schedules for each meeting of the Board, taking into account suggestions of other directors;
coordinates the nature, quality, quantity and timeliness of, and is authorized to approve, information sent to the Board in advance of meetings;
serves as liaison between management and the independent directors, although all of the independent directors have complete and open access to the Chairman, the CEO and all members of management; and
serves as the Board's contact for direct employee and stockholder communications with the Board.
In addition, all directors are encouraged to suggest the inclusion of agenda items and meeting materials, and any director is free to raise at any Board meeting items that are not on the agenda for that meeting. All of these principles are set forth in the Company's Corporate Governance Guidelines.
The Board's independent directors regularly meet in executive session without the presence of any members of management. The Lead Director presides at these meetings and provides the Board's guidance and feedback to the Chairman and the Company's management team.
The Board regularly considers its leadership structure to ensure that the structure is appropriate in light of the needs of the Company’s business, and the Board is open to different structures as circumstances may warrant. At the present time, the Board believes that the current arrangement of having the strong leadership of the Company's Chairman, who had served as the Company’s CEO prior to his retirement, combined with the effective counterbalancing role of an independent Lead Director and a Board composed of strong and independent directors, best serves the interests of the Company and its stockholders.
Director Independence
Assessment Process. Each year, the Board, with the assistance of the Nominating and Corporate Governance Committee, assesses the independence of the Company's directors. In making this assessment, the Committee and the Board use the independence standards of the NYSE corporate governance rules for determining whether directors are independent, and additionally consider the rules of the SEC and the NYSE in determining independence for Audit Committee and Compensation and Leadership Development Committee ("Compensation Committee") members. A director cannot be considered independent unless the Board affirmatively determines that he or she does not have any relationship with management or the Company that may interfere with the exercise of his or her independent judgment, including any of the relationships that would disqualify the director from being independent under the rules of the NYSE and SEC. In addition, the Nominating and Corporate Governance Committee and the Board consider the tenure of each director and whether a long period of service could affect his or her objectivity and independence from management.
Independence of Pioneer’s Directors. The Board has assessed the independence of each director under the independence standards of the NYSE and affirmatively determined that all of the Board's directors other than Messrs. Sheffield and Dove (Messrs. Buchanan, Cates, Gobe, Mitchell, Risch, Thompson and Wortley, Dr. Grillot and Mses. Methvin, Sutphen and Wood) are independent. In connection with its assessment of the directors' independence, the Board reviewed the facts and circumstances of certain of the directors' roles as independent directors of companies that have a business relationship as a vendor or service provider to the Company in the ordinary course of business.

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In each such case, the Board concluded that the director is an independent director because his or her role at the other company is limited to that of an independent director, and the amount of business done between Pioneer and the other company is immaterial to both entities. This was applicable to Mr. Gobe's role as an independent director of Scientific Drilling International, Inc., a privately owned company that provides directional drilling services and other related technology services to the Company; Ms. Methvin's role as an independent director of the general partner of Magellan Midstream Partners, L.P., which owns interests in pipelines and storage facilities that provide services to the Company; Ms. Sutphen's role as an independent director of Drilling Info Holdings LLC, a privately owned company that publishes an industry information service to which the Company subscribes; and Mr. Thompson's role as an independent director of Tetra Tech, Inc., an engineering consulting firm that provides services to the Company.
Audit Committee. In connection with its assessment of the independence of each non-employee director, the Board also determined that each member of the Audit Committee meets the additional independence standards of the NYSE and SEC applicable to members of the Audit Committee. Those standards require that the director not be an affiliate of the Company and that the director not receive from the Company, directly or indirectly, any consulting, advisory or other compensatory fees except for fees for services as a director.
Compensation Committee. In connection with its independence assessment, the Board also determined that each member of the Compensation Committee meets the additional independence standards of the NYSE and SEC applicable to members of the Compensation Committee. Those standards require that the Board consider all factors specifically relevant to determining whether a director has a relationship to the Company that is material to his or her ability to be independent from management of the Company in connection with the duties of a member of the Compensation Committee, including the source of his or her compensation and whether he or she is affiliated with the Company, a subsidiary of the Company or an affiliate of a subsidiary of the Company.
Director Succession and Self-Evaluation Process
The Board does not currently believe that it is appropriate to impose either arbitrary term limits on directors' service or a mandatory retirement age. Directors who have served on the Board for an extended period of time provide valuable insight based on their experience with and understanding of the Company's mission, strategies and objectives and the challenges faced by the Company in the oil and gas industry, particularly given the industry's cyclical nature. In assessing the composition of the Pioneer Board, the Board and its Nominating and Corporate Governance Committee strive to achieve an overall balance of backgrounds and diversity of experience at policy-making levels with a complementary mix of skills and professional experience in areas relevant to the Company's business, while also ensuring that the size of the Board is appropriate to function effectively and efficiently.
Self-Evaluation Process and Board Composition. Each year the Board undergoes a self-evaluation process led by the Chairman and the Lead Director. As part of the annual board evaluation, the Lead Director and Chairman visit with each director individually to discuss his or her views on a wide range of issues concerning the Board, including:
whether the Board is effective in its role of overseeing and monitoring the Company’s long-term strategy, with the right focus on strategic and significant issues, while avoiding micro-management;
the effectiveness of the Board in identifying and discussing with management key material risks, and challenging management’s assumptions;
whether the Board has the right processes in place to evaluate the performance of the Company and the CEO, including against agreed goals;
whether the Board has a culture that is effective in eliciting open, candid and honest discussion of all issues and constructive interaction among the Board members, as well as with management, and whether all directors are active participants;

21


the effectiveness of the Board’s meeting time, and the timeliness and adequacy of the materials and presentations by management needed for the Board to understand, monitor and make informed decisions on strategic issues;
whether the Board has the correct processes for continuing education and on-boarding of new directors; and
whether the Board has the right number of members and the right mix of backgrounds, skills and experience.
Following these individual discussions, the Lead Director summarizes and reviews the results of the feedback received with all directors, and the Board discusses areas for potential improvement. The Board has made several changes to how it operates based on the results of its self-evaluations, including additional opportunities for director interaction with management succession candidates, increased frequency of reviews of key risks and better prioritization of meeting time.
In addition, as part of the process, the Board reviews its skills and qualifications matrix to ensure that the Board maintains an appropriate balance of knowledge and experience in light of the Company's strategy and the long-term interests of stockholders. The Board believes that, collectively, its current members bring to the Board, through a variety of backgrounds and experiences, including through education, technical expertise, direct hands-on experience and managerial roles, a diverse range of skills and experience in relevant areas that contribute to overall effective leadership and exercise of oversight responsibilities by the Board, as depicted in the following graph:

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Refreshment. Over time, the Board refreshes its membership through a combination of adding or replacing directors to achieve the appropriate balance between maintaining longer-term directors with deep institutional knowledge of the Company and adding directors who bring a diversity of perspectives and experience. For example, following the Annual Meeting of Stockholders in 2009, the Board was composed of ten directors, nine of whom were independent, including three directors who were newly elected to the Board at that time. Since that meeting:
Six of the nine independent directors who were serving on the Board as of the 2009 Annual Meeting have retired or resigned.
The membership of the Board has been expanded to thirteen directors, eleven of whom are independent.
Nine new directors have been named to the Board, eight of whom are independent.

22


Leadership of the Board and the composition of its committees have been refreshed and a new standing committee has been created:
The Lead Director and the chair of the Audit Committee have changed.
Four of the new independent directors serve on the Audit Committee, five serve on the Compensation Committee, and three serve on the Nominating and Corporate Governance Committee.
A new Health, Safety and Environment Committee, composed entirely of independent directors, has been established.
The new directors have bolstered the Board's diversity, experience and knowledge in the areas of oil and gas engineering and operations, geology, the midstream and downstream segments of the energy industry, macroeconomics, geopolitics, environmental policy, governmental relations and regulatory matters, safety, accounting, law and corporate governance.
If all of the nominees are elected to the Board, following the Annual Meeting, the average tenure of the independent directors will be seven years, and seven out of the 11 independent directors will have tenures of five years or less. The Board believes that, collectively, the directors offer a diverse range of backgrounds that contribute to the overall effectiveness of the Board:
Director Nominee Independence
Independent Director Tenure
Gender Diversity
Age Diversity
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Engagement with Stockholders
Pioneer has always valued its relationship with its stockholders and the Company has consistently demonstrated its commitment to engaging in constructive and meaningful communication with its stockholders. The Company has regularly engaged with stockholders and other stakeholders and solicited feedback on its corporate governance, sustainability and environmental programs and other important issues, including executive compensation. This process has led to a number of enhancements in the Company's governance and disclosure practices, including:
Proxy access - The Board implemented proxy access, allowing a stockholder or group of up to 20 stockholders owning in the aggregate three percent or more of the outstanding common stock continuously for at least three years to nominate and include in the Company's proxy materials director nominees constituting up to 20 percent of the number of directors in office or two nominees, whichever is greater, subject to meeting the requirements set forth in the Bylaws.
Diversity - The Board enhanced its diversity through the appointment of three highly qualified women directors with significant and varied areas of experience.
Governance - The Board acted to declassify the Board, so that directors are elected annually, and adopted majority voting for directors.
Executive Compensation - The Company made the following changes to its executive compensation program:

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commencing with the awards granted in 2018, changed equity awards for all executive officers on its Management Committee to be “double trigger” in the event of a change in control (Mr. Dove’s equity awards were changed in 2017); and
revised its annual incentive compensation program for 2018 to incorporate a specific metric for return on capital employed and changed goals for production and proved reserves growth to be on a per share basis.
Disclosure - The Company enhanced its public disclosures, in its SEC filings or on its website, including:
sustainability, both on the Company’s website and through the issuance by the Company of its inaugural Sustainability Report following engagement with investors and a number of external stakeholders, which included information specifically requested by investors regarding Pioneer’s leak detection and repair ("LDAR") programs, management of methane emissions and greenhouse gas emissions intensity (the 2017 Sustainability Report is available for download and printing at www.pxd.com/Values/Sustainability);
enhanced disclosures regarding the qualifications and skills of each director nominee in response to recent corporate governance initiatives;
political contributions;
diversity and inclusion practices; and
the governance practices of the Audit Committee.
As part of this engagement process, during 2017 and through the date of this Proxy Statement, Pioneer reached out to the 25 largest stockholders of the Company, holding in the aggregate more than 60 percent of the Company's outstanding shares, which led to feedback from holders of over 35 percent of the Company's outstanding shares. Participating on behalf of the Company were members of senior management and in many cases the Lead Director and/or the Chair of the Compensation Committee. This feedback covered a variety of topics, including strategy, risk management, executive compensation, sustainability and diversity. The concerns expressed by the Company's stockholders in these discussions were collected, reviewed and shared with the full Board. These discussions were in addition to the dozens of meetings and discussions management and investor relations personnel held with stockholders throughout the year.
Procedure for Directly Contacting the Board and Whistleblower Policy
Any stockholder or other interested party may directly contact the Board (including the Lead Director or the Board's non-management or independent directors as a group) by phone, email or in writing by following the procedures published on the Company's website at www.pxd.com/about/governance. Communications are received and processed by the Company's Corporate Secretary's Office and, as appropriate, forwarded to the Lead Director, the Board's designated Committee(s) or appropriate Committee Chair, or other member(s) of the Board. Complaints or concerns, including those relating to the Company's accounting, internal controls or auditing matters, may also be submitted anonymously or confidentially through Pioneer's Compliance Line by calling the number published on the Company's website at www.pxd.com/about/governance, although the Company may be obligated by law to disclose the information or identity of the person (if known) providing the information in connection with government or private legal actions and in some other circumstances. The Company's policy is not to take any adverse action, and to not tolerate any retaliation, against any person for asking questions or making good faith reports of possible violations of law, Company policy or the Code of Business Conduct and Ethics.
THE BOARD, ITS COMMITTEES AND ITS COMPENSATION
Meetings and Committees of the Board
The Board. Under the Company's Corporate Governance Guidelines, the Board provides oversight of management in conducting the business of the Company and monitors the Company's strategic direction

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for the long-term interests of stockholders. Directors are expected to devote sufficient time to carrying out their duties and responsibilities effectively and to attend all scheduled meetings of the Board and of the Committees on which they serve. During 2017, the Board held nine meetings, and its independent directors met in executive session four times. Each of the directors attended more than 75 percent of the aggregate of the total number of meetings of the Board and the total number of meetings of all committees of the Board on which that director served.
The Board has established four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Health, Safety and Environment Committee. The Board has also formed an ad hoc reserves committee to assist the Board in overseeing the Company's reporting of proved reserves and an ad hoc committee to assist the Company in addressing concerns about sustainability reporting matters.
Upon the Nominating and Corporate Governance Committee's recommendations, the Board elects Committee members annually. The table below sets forth the current composition of the Board Committees and the number of meetings each Committee held during 2017.
Name
Audit Committee
Compensation Committee
Health, Safety and Environment Committee
Nominating and Corporate Governance Committee
Director:
 
 
 
 
Edison C. Buchanan
 
ü (Chair)
 
ü

Andrew F. Cates
 
ü

 
ü

Timothy L. Dove
 
 
 
 
Phillip A. Gobe
 
ü

ü

 
Larry R. Grillot
ü
 
ü

 
Stacy P. Methvin
 
ü

ü (Chair)
 
Royce W. Mitchell
ü

 
ü

 
Frank A. Risch
ü (Chair)
 
 
ü

Scott D. Sheffield
 
 
 
 
Mona K. Sutphen
 
ü

ü

 
J. Kenneth Thompson
 
ü

 
ü (Chair)
Phoebe A. Wood
ü

 
 
ü

Michael D. Wortley
ü

 
 
ü

Meetings in 2017
9
5
4
3
Audit Committee. The Audit Committee assists the Board with its responsibilities relating to the oversight of the Company's internal controls, financial statements and the audit process, including among other responsibilities:
overseeing:
the integrity of the Company's financial statements;
the Company's accounting, disclosure and financial reporting processes and its accounting policies and practices;
the Company's compliance with legal and regulatory requirements;
the independent auditor's qualifications and independence;
the performance of the Company's internal audit function; and
the performance of the Company's systems of internal controls;
reviewing and appraising the audit efforts of the Company's independent auditors and internal auditors and, where appropriate, replacing the independent auditors or internal auditors; and

25


providing an open avenue of communication among the independent auditors, financial and senior management, the internal auditors, and the Board.
In addition, the Audit Committee has the sole authority and responsibility with respect to the selection, appointment, engagement, compensation, oversight, evaluation, retention and, where appropriate, dismissal of the Company's independent auditors. The Chief Financial Officer works with the Audit Committee chair to prepare an agenda for regularly scheduled meetings, but the Audit Committee chair makes the final decision regarding the agenda for regularly scheduled meetings and develops the agenda for special meetings based on the information supplied by the persons requesting the special meeting. As a part of its effort to foster open communications, the Audit Committee Charter provides that the Audit Committee is to meet at least annually with management, the internal auditors and the independent auditors in separate executive sessions. As a matter of practice, the Audit Committee holds these executive sessions throughout the year. In addition, representatives of Ernst & Young LLP, the Company's independent registered public accounting firm, are present at all regularly scheduled quarterly meetings of the Audit Committee. Additional information regarding the functions performed by the Audit Committee and its membership is set forth in the "Audit Committee Report" included herein and also in the Audit Committee Charter that is posted on the Company's website at www.pxd.com/about/governance.
Financial Literacy of Audit Committee and Designation of Financial Experts. In 2017, the Board evaluated the members of the Audit Committee for financial literacy and the attributes of an audit committee financial expert as defined by the SEC. The Board determined that each of the Audit Committee members is financially literate and that three of the Audit Committee members (Messrs. Mitchell and Risch and Ms. Wood) meet the SEC's definition of audit committee financial expert.
Compensation Committee. The Compensation Committee assists the Board with its responsibilities relating to executive compensation and leadership development and management succession, including among other responsibilities:
reviewing and approving the compensation of the Company's executive officers, including the individual elements of the total compensation of the CEO;
monitoring the Company's overall employee compensation and benefits philosophy and strategy;
administering the Company's employee and executive benefit plans;
periodically reviewing and recommending to the full Board total compensation for each non-employee director for services as a member of the Board and its committees;
overseeing the Company's succession planning for the CEO and other executive officers;
overseeing the Company's leadership development activities; and
conducting an annual review of the CEO's performance and discussing the CEO's review of the other executive officers' performance.
The Compensation Committee is delegated all authority of the Board as may be required or advisable to fulfill the purposes of the Compensation Committee. The Compensation Committee may form and delegate some or all of its authority to subcommittees when it deems appropriate. Additional information regarding the functions performed by the Compensation Committee is set forth in the "Compensation Discussion and Analysis" included herein and also in the Compensation Committee Charter, which is posted on the Company's website at www.pxd.com/about/governance.
The Vice President and Chief Human Resources Officer of the Company acts as the management liaison to the Compensation Committee and works with the Compensation Committee chair to prepare an agenda for regularly scheduled meetings. The Compensation Committee chair makes the final decision regarding the agenda for regularly scheduled meetings and develops the agenda for special meetings based on the information supplied by the persons requesting the special meeting. The CEO makes recommendations to the Compensation Committee regarding the compensation of other executive officers and provides information to the Compensation Committee regarding the executive officers'

26


performance; however, the Compensation Committee makes all final decisions regarding the executive officers' compensation.
The Compensation Committee has:
the sole authority to retain, amend the engagement with, and terminate any compensation consultant to be used to assist in the evaluation of director, CEO or executive officer compensation;
the sole authority to approve the consultant's fees and other retention terms; and
full authority to cause the Company to pay the fees and expenses of such consultants.
During 2017, the Compensation Committee engaged the services of Meridian Compensation Partners LLC ("Meridian"). The terms of Meridian's engagement are set forth in an engagement agreement that provides, among other things, that Meridian is engaged by, and reports only to, the Compensation Committee and will perform the compensation advisory services requested by the Compensation Committee. Among the services Meridian performed were apprising the Compensation Committee of compensation-related trends, developments in the marketplace and industry best practices; informing the Compensation Committee of compensation-related regulatory developments; providing peer group survey data to establish compensation ranges for the various elements of executive compensation; providing an evaluation of the competitiveness of the Company's executive compensation and benefits programs; assessing the relationship between executive pay and performance; advising on the design of the Company's incentive compensation programs, including metric selection and target setting and the design and administration of the Company's performance unit award program; advising the Compensation Committee on director compensation; and providing such additional reports and analyses as requested by the Compensation Committee from time to time. Meridian does not provide any services to the Company other than its services to the Compensation Committee. The Compensation Committee has assessed the independence of Meridian pursuant to applicable SEC and NYSE rules and concluded that Meridian's work for the Compensation Committee does not raise any conflict of interest.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee assists the Board with its responsibilities relating to its composition and corporate governance, including among other responsibilities:
reviewing and assessing the adequacy of the Company's Corporate Governance Guidelines, and recommending to the Board any necessary modifications to those guidelines;
identifying and evaluating nominees for election at the annual meeting of stockholders, as well as for filling vacancies or additions on the Board that may occur between annual meetings;
recommending committee members and structure;
reviewing related person transactions that the rules of the SEC require be disclosed in the Company's Proxy Statement, and making a recommendation to the Board regarding the initial authorization or ratification of any such transactions;
advising the Board about, and developing and recommending to the Board, appropriate corporate governance principles and practices and assisting the Board in implementing those practices; and
overseeing the evaluation of the Board.
Additional information regarding the functions performed by the Nominating and Corporate Governance Committee is set forth in the Nominating and Corporate Governance Committee Charter that is posted on the Company's website at www.pxd.com/about/governance. Please see "Stockholder Proposals; Identification of Director Candidates - Director Nominations" for a discussion of the Nominating and Corporate Governance Committee's process and criteria for the selection of candidates for nomination to the Board.
Health, Safety and Environment Committee. The Health, Safety and Environment Committee assists the Board in its oversight of the Company's HSE practices, including among other responsibilities:

27


providing oversight for the Company's HSE practices;
monitoring management's efforts in creating a culture of continuous improvement in the Company's HSE practices;
reviewing the Company's HSE performance, including working with management to establish HSE goals and objectives, and communicating the Committee's evaluation of the Company's HSE performance to the Board's Compensation Committee as appropriate;
reviewing the Company's management of current and emerging HSE issues, including trends in legislation and proposed regulations affecting the Company; and
receiving reports from management regarding, and providing oversight for, the HSE aspects of the Company's sustainable development program.
Additional information regarding the functions performed by the Health, Safety and Environment Committee and its membership is set forth in the in the Health, Safety and Environment Committee Charter that is posted on the Company's website at www.pxd.com/about/governance.     
Board's Role in Oversight of Strategy and Risk Management
The Board generally designates one meeting each year at which the Board works with management to conduct an in-depth review of the Company’s strategic plans and identify the principal issues and risks to accomplishing its strategy. At each other regular meeting, in addition to reviewing the Company’s performance and business plans in relation to its strategy, the Board’s practice is to focus on one or more of the key risks identified, including management's efforts to monitor and mitigate those risks.
Except as discussed below, the Board as a whole oversees the Company's assessment of major risks and the measures taken to manage such risks.  For example, the Board:
oversees the long-term strategic direction of the Company;
receives periodic presentations from management regarding significant areas of operational risk and efforts to mitigate those risks;
oversees management of the Company's commodity price risk through regular review with executive management of the Company's derivatives strategy, and the oversight of the Company's policy that limits the Company's authority to enter into derivative commodity price instruments to a specified level of production, above which management must seek Board approval;
has established specific dollar limits on the commitment authority of members of senior management and requires Board approval of expenditures or entering into material contracts and transactions exceeding that authority; and
reviews management's capital spending plans, approves the Company's capital budget after reviewing projected investment returns, and requires that management present for Board review significant departures from those plans.
In addition, the Committees of the Board oversee specific areas of risk:
Audit Committee - oversees the Company's assessment and management of financial reporting and internal controls risks, as well as other financial risks such as the credit risks associated with counterparty exposure and risks related to cybersecurity. Management and the Company's external and internal auditors report regularly to the Audit Committee on those subjects.
Nominating and Corporate Governance Committee - oversees risks that may arise in connection with the Company's governance structures and processes, including Board and committee composition and succession planning, director independence, and the Company's charitable contributions, political spending and lobbying activities.
Compensation Committee - oversees risks that may arise in connection with the Company's compensation and compensation-related governance policies and practices, including the establishment of performance goals and incentives that are intended to reward the executives for

28


the achievement of strategic and operational goals and increases in stockholder returns, while discouraging unnecessary or excessive risk taking.
Health, Safety and Environment Committee - oversees the Company's HSE practices and monitors management's efforts in creating a culture of safety and environmental stewardship.
Ad Hoc Reserves Committee - periodically meets with the executives and employees of the Company responsible for overseeing the Company's proved reserves estimates to assist the Board in its oversight of the risks related to the Company's disclosure of proved reserves.
The Company believes that its leadership structure supports the risk oversight function of the Board. While the Chairman of the Board currently is not an independent director, strong, independent directors chair the Board committees involved with risk oversight, there is open communication between management and directors, and all directors are actively involved in the risk oversight function.
Attendance at Annual Meetings
The Board encourages all directors to attend the annual meetings of stockholders. All of the then-serving directors attended the 2017 Annual Meeting of Stockholders held on May 18, 2017.
Director Compensation
General
The elements of compensation for the Company's non-employee directors for the 2016-2017 director year, which ran from the 2016 Annual Meeting of Stockholders through the 2017 Annual Meeting, were as follows:
an annual base retainer fee of $50,000, payable in cash, for each non-employee director;
an annual grant of restricted stock units ("RSUs") for each non-employee director, valued at $225,000 based on the methodology described below; and
for the Lead Director, an additional annual retainer of $25,000, and for the chairs of the Audit Committee, Compensation Committee and Health, Safety and Environment Committee an additional annual retainer of $15,000, in each case, payable in the form of RSUs.
The Board’s practice is to review the Company's non-employee director compensation program from time to time based on recommendations from the Compensation Committee, and generally, any changes are made effective as of the next following Annual Meeting of Stockholders. Every other year, the Compensation Committee conducts an in-depth benchmarking review of the program, including each element of the program as well as the compensation in total, and conducts a high-level review of the program in years when the full benchmarking review is not done.
At its November 2016 meeting, the Compensation Committee reviewed with Meridian, its independent compensation consultant, Meridian's benchmarking study of non-employee director compensation, which included information as to the programs of the same peer group used by the Compensation Committee for purposes of benchmarking executive compensation for 2017. Meridian's study showed that Pioneer's non-employee director compensation program was well below the median of the peer group, ranking at the 24th percentile of the group, and in the case of compensation of the Audit Committee chair, ranked at the 25th percentile of the peer group. As a result, the Compensation Committee recommended, and the Board approved, the following changes to the program to achieve an overall compensation structure in line with the median of the peer group, which took effect immediately following the 2017 Annual Meeting of Stockholders:
the cash annual base retainer fee for each non-employee director was increased from $50,000 to $70,000; and
the additional annual retainer for the chair of the Audit Committee was increased from $15,000 to $20,000, with $15,000 payable in the form of RSUs and $5,000 payable in cash.

29


In addition, based on its consideration of the benchmarking data, the Compensation Committee has recommended, and the Board has approved, an additional annual retainer of $25,000, payable in the form of RSUs, for the chair of the Nominating and Corporate Governance Committee, to be effective as of the 2018-2019 director year, which begins as of the Annual Meeting.
All of the RSUs received in payment of non-employee directors' annual fees vest quarterly on a pro rata basis during the director year, and the price that is used to calculate the number of RSUs granted is based on an average of the closing stock prices over the 30 trading days prior to the date of the annual meeting of stockholders at which the directors were elected. The vesting of ownership and the lapse of transfer restrictions on RSUs awarded to non-employee directors is accelerated in full upon the death or disability of the director or a change in control of the Company.
Unless a deferral election is made, RSUs are paid in shares of the Company's common stock promptly following the vesting date. Non-employee directors may elect to defer settlement of their RSUs until the earliest to occur of (i) the one-year anniversary of the director's retirement, resignation or removal from the Board, (ii) a date certain that the director specifies, (iii) the director's death or (iv) a change in control of the Company.
Additionally, non-employee directors are (i) eligible to participate in the Company's Matching Gifts to Educational Institutions Policy, pursuant to which the Company will match up to $5,000 of eligible contributions to a qualifying educational institution each year, (ii) provided information technology support by the Company and (iii) reimbursed for travel and certain other related expenses to attend meetings of the Board or its committees and director education seminars and for the cost of certain trade publications. No additional fees are paid for attendance at Board or committee meetings. In those instances when a director's spouse accompanies the director to Board or committee meetings or director education seminars, the Company reimburses the director for the cost of the spouse's travel and certain related expenses.
2017 Director Compensation Table
The table below summarizes the compensation paid by the Company to non-employee directors during 2017. Mr. Dove, whose employee compensation is reflected within the Summary Compensation Table, does not receive additional compensation for serving on the Board.
Name
Fees Earned or Paid in Cash (1)
Stock Awards (2)
All Other Compensation (3)
Total
 
($)
($)
($)
($)
(a)
(b)
(c)
(g)
(h)
Edison C. Buchanan
$60,042
$234,913
$11,781
$306,736
Andrew F. Cates
$60,084
$220,188
$1,487
$281,759
Phillip A. Gobe
$60,084
$220,188
$996
$281,268
Larry R. Grillot
$60,084
$220,188
$5,151
$285,423
Stacy P. Methvin
$60,042
$234,913
$5,000
$299,955
Royce W. Mitchell
$60,084
$220,188
$2,002
$282,274
Frank A. Risch
$62,542
$234,913
$5,841
$303,296
Scott D. Sheffield (4)
$—
$—
$—
$—
Mona K. Sutphen
$60,084
$220,188
$—
$280,272
J. Kenneth Thompson
$60,132
$244,615
$2,406
$307,153
Phoebe A. Wood
$60,084
$220,188
$4,000
$284,272
Michael D. Wortley
$60,084
$220,188
$984
$281,256
___________
(1)
As noted above, the elements of compensation for the Company's non-employee directors during 2017 were a cash annual base retainer fee of $50,000, increased to $70,000 effective immediately following the 2017 Annual Meeting, plus an annual award of restricted stock units ("RSUs"), the amount of which varies for directors serving as Lead Director or the chair of a standing committee. A portion of the amounts included in this column represent cash received in lieu of fractional RSUs that vested during 2017 and were not deferred.

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(2)
Stock awards represent the aggregate grant date fair value attributable to RSU awards granted in 2017, determined in accordance with Financial Accounting Standards Board of Accounting Standards Codification Topic 718 ("FASB ASC 718"). Accordingly, the Company valued its RSU awards based on the market-quoted closing price of the Company's common stock on the last trading day prior to the grant date of the awards. Additional detail regarding the Company's share-based awards is included in Note H of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" in the Company's Annual Report on Form 10-K for the year ended December 31, 2017. Aggregate director stock awards for which restrictions had not lapsed as of December 31, 2017, totaled (i) 636 shares for Messrs. Cates, Gobe, and Mitchell, Ms. Wood and Dr. Grillot; (ii) 678 shares for Messrs. Buchanan and Risch and Ms. Methvin; (iii) 706 shares for Mr. Thompson; and (iv) 972 shares for Ms. Sutphen and Mr. Wortley. In accordance with director elections, shares for which vesting services had been performed but for which share issuance has been deferred totaled 22,857 for Mr. Buchanan, 4,855 for Messrs. Gobe and Mitchell, 1,342 for Dr. Grillot, 3,872 for Ms. Sutphen and Mr. Wortley, and 6,661 for Ms. Wood as of December 31, 2017. The Company did not issue to the directors any options to purchase the Company's common stock during 2017, and the directors, other than Mr. Sheffield, did not hold any unexercised stock options as of December 31, 2017. Mr. Sheffield holds unexercised stock options that were granted to him in 2012 in his capacity as CEO of the Company.
(3)
Amounts reported in the All Other Compensation column consist of certain travel and entertainment costs of directors and their spouses (if applicable) related to attendance at Board or committee meetings or director education seminars, and, in the case of the following directors, the amounts indicated, which represent a matching contribution made by the Company under its Matching Gifts to Educational Institutions Policy: Mr. Buchanan, $5,000; Dr. Grillot, $5,000; Ms. Methvin, $5,000; Mr. Risch, $5,000 and Ms. Wood, $4,000.
(4)
During 2017, all compensation paid to Mr. Sheffield was in his capacity as an employee of the Company, in his officer position of Executive Chairman of the Company, and no amounts were paid to him in his capacity as a director of the Company. For 2017, in his capacity as Executive Chairman, Mr. Sheffield received $990,018 in salary and a payout in respect of his annual cash bonus incentive award of $1,608,750. Mr. Sheffield did not receive a stock award in 2017. As of December 31, 2017, the aggregate employee stock awards for which restrictions had not lapsed for Mr. Sheffield included 34,778 RSU awards and 34,778 performance unit awards, and Mr. Sheffield owned a total of 36,232 stock options, all of which were vested and exercisable. In January 2018, to recognize the change in Mr. Sheffield’s status from a Company employee to a non-employee director, he was awarded RSUs valued at $112,500 as the pro rata portion of the normal annual grant of RSUs for non-employee directors.
Stock Ownership Guidelines for Non-Employee Directors
To support the Company's commitment to significant stock ownership, the Company has established an ownership guideline that non-employee directors own stock with a value of at least $500,000, which is approximately seven times the cash annual base retainer fee. The non-employee directors have three years after joining the Board to meet this guideline. Directors are required to retain all shares of common stock acquired upon the vesting of RSUs, other than sales to satisfy tax obligations, until the ownership guideline is reached. In evaluating compliance by directors with the stock ownership guidelines, the Compensation Committee has established procedures to minimize the effect of stock price fluctuations on the deemed value of the individual's holdings. All non-employee directors are in compliance with this ownership guideline.
AUDIT COMMITTEE REPORT
The information contained in this Audit Committee Report and references in this Proxy Statement to the independence of the Audit Committee members shall not be deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 (the "Exchange Act"), except to the extent that the Company specifically incorporates such information by reference in such filing.
The Audit Committee's purpose is to assist the Board with its responsibilities relating to the oversight of the Company's internal controls, financial statements and the audit process. The Board, in its business judgment, has determined that all members of the Audit Committee meet the independence standards of the NYSE and the SEC applicable to members of the Audit Committee.
The Company's management is responsible for the preparation, presentation and integrity of the Company's financial statements, accounting and financial reporting principles, and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm, Ernst & Young LLP, is responsible for performing an independent audit of the consolidated financial statements in accordance with generally accepted auditing standards and for auditing the Company's internal controls over financial reporting. While the Audit Committee has the responsibilities and powers set forth in its charter and management

31


and the independent registered public accounting firm for the Company are accountable to the Audit Committee, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's consolidated financial statements are complete and accurate and are in accordance with generally accepted accounting principles.
In performing its oversight role, the Audit Committee:
reviewed and discussed the audited consolidated financial statements as of and for the year ended December 31, 2017 with management and Ernst & Young LLP;
discussed with Ernst & Young LLP the matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight, and any other applicable accounting and auditing standards;
received the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young LLP's communications with the Audit Committee concerning independence; and
discussed with Ernst & Young LLP the firm's independence.
Management, the internal auditors and the independent auditors also made presentations to the Audit Committee throughout the year on specific topics of interest, including: (i) the Company’s enterprise risk assessment process; (ii) its information technology systems and controls; (iii) its income tax strategy and risks; (iv) its derivatives policy and usage; (v) its benefit plan fund management; (vi) the 2017 integrated audit plan; (vii) updates on completion of the audit plan; (viii) critical accounting policies; (ix) the impact of new accounting guidance; (x) compliance with the internal controls required under Section 404 of the Sarbanes-Oxley of 2002; (xi) the Company’s ethics and compliance program; (xii) risk management initiatives and controls for various acquisitions and business units; (xiii) strategy and management of the implementation of new systems; and (xiv) cybersecurity.
Based on the reports and discussions described in this Audit Committee Report, and subject to the limitations on the roles and responsibilities of the Audit Committee referred to below and in the Audit Committee Charter, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2017, for filing with the SEC. The Audit Committee has also selected Ernst & Young LLP as the Company's independent registered public accounting firm for 2018.
Although determined to be financially literate (as defined by the SEC rules), the members of the Audit Committee are not professionally engaged in the practice of auditing or accounting for the Company and are not experts in auditor independence standards or legal or regulatory matters. Members of the Audit Committee rely, without independent verification, on the information provided to them and on the representations made by management and the independent registered public accounting firm. Accordingly, the Audit Committee's oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee's considerations and discussions referred to above do not assure that the audit of the Company's consolidated financial statements has been carried out in accordance with generally accepted auditing standards, that the consolidated financial statements are presented in accordance with generally accepted accounting principles or that Ernst & Young LLP is in fact independent.
Respectfully submitted by the Audit Committee of the Board of Directors,
Frank A. Risch, Chair
Larry R. Grillot
Royce W. Mitchell
Phoebe A. Wood
Michael D. Wortley

32


COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE REPORT
The information contained in this Compensation and Leadership Development Committee Report shall not be deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Exchange Act, except to the extent that the Company specifically incorporates such information by reference to such filing.
During the last fiscal year, and this year in preparation for the filing of this Proxy Statement with the SEC, the Compensation and Leadership Development Committee of the Board:
reviewed and discussed the disclosure set forth under the heading "Compensation Discussion and Analysis" with management as required by Item 402(b) of Regulation S-K; and
based on the reviews and discussions referred to above, recommended to the Board that the disclosure set forth under the heading "Compensation Discussion and Analysis" be included in this Proxy Statement and incorporated by reference into the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017.
Respectfully submitted by the Compensation and Leadership Development Committee of the Board of Directors,
Edison C. Buchanan, Chair
Andrew F. Cates
Phillip A. Gobe
Stacy P. Methvin
Mona K. Sutphen
J. Kenneth Thompson

COMPENSATION DISCUSSION AND ANALYSIS
The purpose of this Compensation Discussion and Analysis is to explain the Compensation Committee's philosophy for determining the compensation program for the Company's CEO, Chief Financial Officer and three other most highly compensated executive officers for 2017 (the "NEOs") and to discuss how the 2017 compensation package for these executives was determined. Following this discussion are tables that include compensation information for the NEOs.
As discussed above, effective January 1, 2017, Timothy L. Dove succeeded Scott D. Sheffield as the Company’s CEO pursuant to the succession plan announced in May 2016, and Mr. Sheffield retired as an officer of the Company effective December 31, 2017. Accordingly, the NEOs for 2017 are as follows:
Timothy L. Dove, President and CEO;
Mark S. Berg, Executive Vice President, Corporate/Vertically Integrated Operations;
Chris J. Cheatwood, Executive Vice President and Chief Technology Officer;
Richard P. Dealy, Executive Vice President and Chief Financial Officer; and
J. D. Hall, Executive Vice President, Permian Operations.
Executive Summary
Company Compensation Philosophy and Components
The Company's executive compensation program is designed to emphasize "pay for performance." The three main components of the executive compensation program, each of which generally is targeted at the median level of the Company's peer group, are:
Base salary – fixed cash compensation component
Annual cash bonus incentive award – variable cash payout based on Company and individual performance for the year

33


Long-term incentive plan awards – equity compensation, with 50% of target value allocated to time-based awards cliff vesting after three years, and 50% of target value allocated to performance units with payout dependent on relative total stockholder return against industry peers over a three-year period; provides the opportunity to realize substantially more or less than the initial target values of the awards
Company Performance
Highlights of the Company's 2017 performance included:
increasing production by 16% compared to 2016; oil production increased by 25 MBOPD, or 19%, compared to 2016; production growth was driven by the Company’s Permian Basin horizontal drilling program, with total Permian Basin oil production for 2017 increasing by 26% compared to 2016;
reducing production costs per BOE (excluding production taxes) by 12% compared to 2016; production costs benefited from the Company’s cost reduction initiatives and increasing volumes of horizontal Permian Basin production, which had an average production cost of approximately $2.00 per BOE;
adding proved reserves of 314 MMBOE from discoveries, extensions and technical revisions of previous estimates (excludes positive price revisions of 52 MMBOE, proved reserves divested of 7 MMBOE and proved reserves acquired of 1 MMBOE), with total proved reserves at year-end 2017 equaling 985 MMBOE; these proved reserve additions were primarily driven by Pioneer’s horizontal Permian Basin drilling program;
continuing to maintain a strong balance sheet; year-end cash on hand and short- and long-term investments totaled $2.2 billion, with year-end net debt to 2017 operating cash flow of 0.3 times and year-end net debt-to-book capitalization of five percent, after repaying $485 million of the Company's 6.65% senior notes due 2017 with cash on hand; the Company is rated as mid-investment grade by three credit rating agencies;
continuing to increase cumulative production per well in the Permian Basin as a result of the use of the Company’s “Version 3.0” and “Version 3.0+” completion methods;
moving increasing volumes of Permian Basin oil to the Gulf Coast, which allowed the Company to realize premiums on Gulf Coast refinery and export sales; export sales to customers in Europe, Asia and Latin America reached approximately 90 thousand barrels per day during the fourth quarter of 2017;
continuing to build out Permian Basin infrastructure, including the construction of large-scale horizontal tank batteries and saltwater disposal facilities; also included the construction of additional field and gas processing facilities and the build-out of a field-wide water distribution system;
protecting cash flow and margins through attractive oil and gas derivative positions;
continuing to demonstrate responsiveness and leadership in sustainability; published the Company’s inaugural Sustainability Report following engagement with investors and a number of external stakeholders, and received the IOGCC Environmental Partnership Award for water conservation projects in both Midland and Odessa; and
maintaining the Company's strong culture; in 2017, Pioneer was named the fifth best place to work among large companies in the Dallas/Fort Worth area based on a survey of employees conducted by The Dallas Morning News. It is the eighth consecutive year that the Company has been ranked in the top five.
During 2017, Pioneer’s stock performed in line with the average of its 12-company E&P peer group used with respect to the Company's 2017 performance unit award grants. (See "Elements of the Company's Compensation Program - Annual Long-Term Incentive Awards - Performance Unit Awards" below for more information regarding the Company's peer group.) However, over the five-year period covering 2013

34


through 2017 and the three-year period covering 2015 through 2017, Pioneer’s stock significantly outperformed the average of the peer group. This strong performance reflected Pioneer’s strong balance sheet, strong derivatives position, improving capital efficiency and the excellent operational performance of its world class Permian Basin asset during a period of highly volatile commodity prices.
The following charts compare the cumulative total stockholder return on the Company's common stock during the three-year and five-year periods ended December 31, 2017, with cumulative total return during the same period for the Company's peer group average, the Standard & Poor's Oil and Gas Exploration & Production Index and the S&P 500.
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____________
Note:   The total stockholder returns for the Company's common stock and the indices in the chart are based on closing prices as of the first and last days in the periods depicted. The total stockholder returns for the Company's common stock differ from those reported below with respect to the performance unit awards because the returns for the performance unit awards are based on average closing prices of the Company's common stock over 60-day periods prior to the first and last days in the applicable periods.
2017 Compensation Actions
The following is a summary of the compensation decisions made by the Compensation Committee for 2017:
Base salary - as disclosed in the proxy statement for the 2017 Annual Meeting, in conjunction with Mr. Dove’s succession to the role of CEO effective January 1, 2017, his base salary was increased to $900,000, as compared to Mr. Sheffield's 2016 base salary of $990,000 when he served as CEO; other NEOs’ base salaries were increased based on the benchmarking data and other considerations as described below.
Annual cash bonus incentive award - in conjunction with Mr. Dove’s succession to the role of CEO, his bonus target, as a percentage of his base salary, was increased from 100 percent to 130 percent of base salary, which is equal to Mr. Sheffield's 2016 and 2017 target bonus levels, but the Committee held bonus target percentages constant for the other NEOs. Following the end of the year, the Committee assessed the Company's performance against its pre-determined goals and arrived at a final general payout level of 125 percent of target to recognize the Company's and the NEOs' achievements.
Annual long-term incentive plan awards - in conjunction with Mr. Dove’s succession to the role of CEO, the target value of his 2017 long-term incentive award was increased from $3,522,100 to $7,000,000, compared to Mr. Sheffield's 2016 total target dollar amount of $8,250,000; the Committee increased the target values for the other NEOs based on the benchmarking data and other considerations as described below, with 50 percent continuing to be allocated in the form of performance units and 50 percent in the form of restricted stock.

35


The following charts illustrate the various components of total 2017 annual compensation for the CEO and the other NEOs as a group as reported in the Summary Compensation Table below.

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More specific information regarding the Compensation Committee's compensation decisions for 2017 and the Company's executive compensation program is contained in the remainder of this Compensation Discussion and Analysis section.
Executive Compensation and Compensation-Related Corporate Governance Policies and Practices
The Company's executive compensation and compensation-related governance policies and practices are designed to reward the NEOs for the achievement of strategic and operational goals and increases in stockholder returns, while discouraging unnecessary or excessive risk taking, and incorporate many best practices, including the following:

36


What We Do
þ
Pay for performance - over 80 percent of target total compensation for the NEOs comprises variable compensation through annual bonuses and long-term incentive compensation.
þ
Emphasize long-term performance - over 70 percent of target total compensation for the NEOs comprises long-term equity-based incentives, with a mix of these incentives among performance units and restricted stock.
þ
HSE goals - the Compensation Committee incorporates health, safety and environmental goals in the annual cash bonus incentive program; the goals are set after approval by, and then performance is assessed primarily based on input from, the Health, Safety and Environment Committee.
þ
Robust stock ownership guidelines - six times (6x) base salary for the CEO and three times (3x) base salary for executive vice presidents; officers are required to retain their shares of common stock acquired upon the vesting of restricted stock awards or the exercise of stock options until the ownership guideline is reached, and sales of such shares are prohibited other than to satisfy tax obligations.
þ
Clawback policy - the Board has the right to cause the reimbursement of certain incentive compensation if predicated upon the achievement of financial results that were subsequently the subject of a required restatement.
þ
Double-trigger severance in the event of a change in control - cash severance amounts pay out only if a qualifying involuntary termination of employment also occurs in connection with a change in control.
þ
Double-trigger vesting of equity awards for the NEOs in the event of a change in control - commencing with their 2018 awards, the equity awards for all NEOs will provide for a double trigger so that upon a change in control, the awards generally will only vest prior to the scheduled vesting date if a qualifying termination event occurs (the CEO’s equity awards have provided for a double trigger since his 2017 award).
þ
Risk oversight - the Compensation Committee annually evaluates risk in setting executive compensation in order to establish an appropriate balance of incentives.
þ
Independent Compensation Committee with independent compensation consultant - all members of the Compensation Committee are independent. The Committee has engaged a compensation consultant that is independent of management and free of conflicts of interest with the Company.
þ
Reward future performance on a consistent basis - restricted stock and performance unit awards are awarded annually, with vesting over periods of three years, based on a dollar value divided by an average stock price, so that the rolling effect of vesting each year discourages manipulation in one year, which could have an adverse effect on the awards' value in a following year.
What We Do Not Do
ý
No tax gross ups - in 2013, all of the Company's executive officers, including the CEO and the other NEOs, agreed to amend their change in control agreements to eliminate the excise tax gross-up feature in their agreements.
ý
No defined benefit pension programs for the NEOs - the Company does not maintain a defined benefit pension program for the NEOs; the NEOs are eligible to participate in the Company's 401(k) and Matching Plan (the "401(k) Plan") and a non-qualified deferred compensation plan.
ý
No employment agreements - all of the Company's executive officers are employees at will, with no guaranteed salary or bonus.
ý
No hedging or pledging of Company common stock - policies prohibit directors, officers or employees from engaging in short sales or in transactions involving derivatives based on the Company's common stock, and directors and executive officers are prohibited from pledging Company securities as collateral for a loan or holding Company securities in a margin account without advance approval from the Board.
ý
No excessive perquisites - modest in amounts, frequently business-related and fully disclosed.
ý
No repricing of stock options - repricing stock options or buying out underwater stock options is prohibited without stockholder approval.

37


Stockholder Engagement and Response to 2017 Stockholder Advisory Vote on 2016 Named Executive Officer Compensation
Pioneer has always valued its relationship with its stockholders and the Company has consistently demonstrated its commitment to transparency and responsiveness to stockholder perspectives. In addition to its extensive investor relations activities, the Company has regularly engaged with stockholders and solicited feedback regarding its executive compensation program, as well as a range of environmental, health and safety and corporate governance matters and other important issues. During 2017 and through the date of this Proxy Statement, Pioneer has reached out to holders of more than 60 percent of the Company's outstanding shares, and received feedback from holders of over 30 percent of the Company's outstanding shares. Participating on behalf of the Company were members of senior management and in many cases independent members of the Board. The feedback received was reviewed and shared with the Board and its Committees. This engagement process was in addition to the dozens of meetings and discussions management and investor relations personnel held with stockholders throughout this time period.
At the 2017 Annual Meeting, approximately 89 percent of the total votes cast were voted in favor of the Company's say-on-pay proposal. Although the Compensation Committee was encouraged that a substantial majority of the Company’s stockholders supported the executive compensation program, the Committee believed that there was room for improvement from those results. Accordingly, after taking into consideration this feedback as well as evolving executive compensation practices, the Compensation Committee has taken the following actions:
Commencing with their 2018 awards, the equity awards for all NEOs provide for a double trigger, so that upon a change in control, the awards will not automatically accelerate, but will generally only vest prior to the scheduled vesting date if a qualifying termination event occurs; Mr. Dove's equity awards have provided for double trigger since his 2017 awards.
Commencing with the 2018 annual cash bonus incentive award program, the Committee has incorporated a specific metric for return on capital employed and changed goals for production and proved reserves growth to be on a per share basis for purposes of determining the Company’s performance score for the year.
Executive Compensation Program
Philosophy and Objectives
The Company's executive compensation program is designed to emphasize "pay for performance" by:
providing performance-driven compensation opportunities that attract, retain and motivate executives to achieve optimal results for the Company and its stockholders;
aligning compensation with the Company's short- and long-term business objectives while providing sufficient flexibility to address the unique dynamics of the E&P industry; and
emphasizing the use of equity-based compensation to motivate the long-term retention of the Company's executives and align their interests with those of stockholders.
As an executive's leadership role expands, and the scope, duties and responsibilities of the executive's position increase, the Compensation Committee believes a greater portion of total compensation should be performance-driven and have a longer duration, and base salary should be a relatively smaller portion of senior executive total compensation. The Committee believes that the majority of an NEO's realized compensation should be driven by the performance of the Company.
Executive Compensation Components
The components of the Company's executive compensation program for 2017 and the respective purposes of each within the framework of the Company's compensation philosophy and objectives are described in the table below.

38


Compensation Component
Description
Purpose and Philosophy
Base Salary
Fixed annual cash compensation
Provides a stable, fixed element of cash compensation
Recognizes and considers the internal value of the position within the Company and the individual's experience, leadership potential and demonstrated performance

Annual Cash Bonus Incentive
Performance-based annual cash compensation based on annual performance goals with pre-assigned weights
Rewards executives for the achievement of annual financial, operating and strategic goals and individual performance
Allows the Committee to evaluate both objective and subjective considerations when determining final payout amounts
Emphasizes team performance; however, individual executives may receive bonus payments above the team level if the individual's performance adds significant value, or below the team level if performance does not meet expectations



Long-Term Incentive, in Two Components
Performance Units - Equity compensation with payout in shares based on total stockholder return in relation to peers over a three-year period

Restricted Stock - Equity compensation with time-based, three-year cliff vesting
Long-term equity awards ensure that realized value to the executive aligns with value delivered to stockholders; realized value is dependent on Company performance over the long-term (three years); performance unit payout is dependent on relative total stockholder return against industry peers
Reinforces executive stock ownership
Through a combination of award types, encourages executives to take the proper level of risk in developing and executing the Company's business plan with a long-term focus
Critical to the Company's ability to attract, motivate and retain the Company's key executives





Other Compensation
Health and life insurance, retirement benefits and limited perquisites
Addresses health and post-retirement welfare of executives and provides certain other limited benefits
The Compensation Committee reviews peer data relative to each of the three main components for each NEO. The Committee's philosophy, in general, is to set base salary, target bonus percentage and target long-term incentive award value at approximately the median of the Company's peers for each NEO, unless the Committee determines that an NEO's term of experience and/or contribution level justify, or that industry conditions warrant, setting compensation levels below or above median. However, the ultimate values realized by the NEOs upon payout of the annual cash bonus incentive or vesting of long-term incentive awards will vary above or below median depending on performance, which in the case of the long-term incentive awards will be determined after three years.
Compensation Setting Process
Role of the Compensation Committee
As a part of its oversight of the Company's executive compensation program, the Compensation Committee:
administers the Company's executive compensation program;
establishes the Company's overall compensation philosophy and strategy; and
ensures the NEOs are rewarded appropriately in light of the guiding principles as described in the sections above.

39


In determining the compensation of the NEOs:
the Compensation Committee considers the CEO's evaluation of the other NEOs' performance and his recommendations as to their compensation, but the Committee makes all final decisions regarding their compensation; and
with regard to the CEO's compensation, the Committee:
determines the individual elements of the CEO's total compensation and benefits;
approves specific annual corporate goals and objectives relative to the CEO's compensation;
reviews the CEO's performance in meeting these corporate goals and objectives; and
prior to finalizing compensation for the CEO, reviews the Committee's intentions with the other independent directors on the Board and receives their input.
The Compensation Committee utilizes tally sheets to review each NEO's total compensation and potential payouts in the event of a change in control and for various employment termination events, including the NEO's potential "walk-away" benefits. The Committee also reviews historical target and actual compensation levels to determine whether the compensation program design is meeting the Committee's objectives of providing fair compensation and effective retention, as well as supporting the program's emphasis on pay-for-performance.
A further description of the duties and responsibilities of the Compensation Committee can be found in "Corporate Governance - Meetings and Committees of the Board."
Role of Management
The Company's Human Resources Department assists the Compensation Committee and its independent compensation consultant in gathering the information needed for their respective reviews of the Company's executive compensation program. This assistance includes assembling requested compensation data for the NEOs. As referenced in the section above, the CEO develops pay recommendations for the other NEOs for review and discussion with the Committee. The Committee, in executive session and without executive officers present, approves the CEO's pay levels.
Role of the Compensation Consultant
For 2017, the Compensation Committee retained Meridian to serve as an independent consultant to the Committee to provide information and objective advice regarding executive and director compensation. All of the decisions with respect to the Company's executive compensation, however, are made by the Committee. The Committee did not direct Meridian to perform its services in any particular manner or under any particular method. The Committee has the final authority to hire and terminate the compensation consultant, and the Committee evaluates the compensation consultant annually. Meridian does not provide any services to the Company other than in its role as advisor to the Committee, and the Committee has determined that no conflicts of interest exist as a result of the engagement of Meridian. The Committee has also retained Meridian as its independent consultant on executive and director compensation for 2018.
From time to time, Meridian contacts the Company's executive officers for information necessary to fulfill its assignment and makes reports and presentations to and on behalf of the Compensation Committee that the Company's executive officers also receive.
Benchmarking
In conjunction with Meridian, the Compensation Committee annually benchmarks the competitiveness of its compensation programs to determine the degree to which target and actual compensation levels reflect the Company's overall philosophy and compare to the external market. Each year the Committee identifies a peer group consisting of independent oil and gas E&P companies that have similar operational and capital investment profiles as the Company. The Committee believes these metrics are appropriate for determining peers in this context because these metrics are likely to result in identification of the

40


companies with which the Company should expect to compete for executive talent. Thus, the Committee believes this peer group provides a reasonable point of reference for comparing the compensation of the Company's executives to others holding similar positions and having similar responsibilities. The Committee's overall objective is to construct a peer group with roughly equal numbers of companies that are larger than and smaller than the Company, primarily taking into consideration the companies' relative sizes in terms of enterprise value and market capitalization, but also considering total assets and revenue. The Committee reviews the peer group each year and makes changes as needed.
The Company's benchmarking consists of all components of direct compensation, including base salary, annual cash bonus targets and long-term incentive awards. Information gathered from the proxy statements of the peer group companies and Meridian's proprietary databases are reviewed as a part of the benchmarking effort.
For the 2017 compensation decisions, the Compensation Committee used a peer group of 16 companies and grouped those companies into two tiers as follows:
Tier 1 Companies
Enterprise Value (1)
Market Cap. (2)
 
($ million)
($ million)
EOG Resources, Inc.
$59,459
$53,253
Anadarko Petroleum Company
$49,691
$35,412
Devon Energy Corporation
$34,080
$23,096
Apache Corporation
$31,753
$24,234
Continental Resources, Inc.
$26,597
$19,462
Concho Resources Inc.
$22,190
$19,337
Noble Energy, Inc.
$21,981
$15,357
Hess Corporation
$20,438
$16,980
Marathon Oil Corporation
$18,092
$13,395
Cabot Oil & Gas Corporation
$13,023
$12,001
Tier 2 Companies
Enterprise Value (1)
Market Cap. (2)
 
($ million)
($ million)
Chesapeake Energy Corporation
$17,553
$4,872
Cimarex Energy Co.
$13,609
$12,763
Range Resources Corporation
$12,152
$9,585
Southwestern Energy Company
$11,599
$6,829
Whiting Petroleum Corporation
$7,353
$2,407
Murphy Oil Corporation
$7,292
$5,235
Summary Statistics and Pioneer Ranking
Enterprise Value (1)
Market Cap. (2)
 
($ million)
($ million)
Summary Tier 1 Statistics
 
 
25th Percentile
$20,824
$15,762
50th Percentile
$24,393
$19,400
75th Percentile
$33,498
$23,949
Summary Tiers 1 and 2 Statistics
 
 
25th Percentile
$12,805
$8,896
50th Percentile
$19,265
$14,376
75th Percentile
$27,886
$20,371
__________
(1)
Enterprise value is the summation of market capitalization as of September 30, 2016 plus net debt as of June 30, 2016.
(2)
Market capitalization was determined as of September 30, 2016.

41


Pioneer
$31,854
$31,488
Percentile Rank - Tier 1
67%
85%
Percentile Rank - Tiers 1 and 2
80%
91%
The Compensation Committee believed the Tier 1 peer group companies were most closely related to the Company in size and operations. The Tiers 1 and 2 group includes the Tier 1 peer group companies plus the next six companies closest in size and operations to the Company. The Committee believes a tiered approach to analyzing benchmarking data provides additional insight to determine the most comparable levels of compensation for each NEO. The Committee relies primarily on the market survey data of the Tier 1 peer group companies to make its compensation decisions. Overall, the peer companies remained the same as the group used for 2016 decisions, except that Chesapeake Energy Corporation, Range Resources Corporation and Southwestern Energy Company were reclassified from the Tier 1 category to Tier 2.
Elements of the Company's Compensation Program
The following sections describe in greater detail each of the components of the Company's executive compensation program and how the amounts of each element were determined for 2017.
Base Salary
In establishing the NEOs’ 2017 base salaries, which are set forth in the table below, the Compensation Committee reviewed with Meridian its base salary benchmarking data and analyzed how effectively the data matched each executive's duties and responsibilities. As discussed above, in conjunction with Mr. Dove’s succession to the role of CEO effective January 1, 2017, his base salary was increased to $900,000, as compared to Mr. Sheffield's 2016 base salary of $990,000 when he served as CEO. In determining Mr. Dove’s base salary, the Committee took into account that Mr. Sheffield would share in some responsibilities during the transition process, and therefore set Mr. Dove’s base salary below that of Mr. Sheffield as well as the median for the peer group. With respect to the base salaries of other NEOs, the Committee referred to the median of the benchmarking data, but also took into consideration the fact that the responsibilities of the Company’s NEOs were broader than those of their respective peers. For example, Mr. Dealy’s responsibilities include oversight of the Company's supply chain, marketing and corporate reserves functions, and Mr. Berg’s responsibilities were expanded broadly to cover the Company’s land, regulatory, government relations, corporate communications and vertically integrated services functions. In the case of Mr. Hall, his responsibilities were greatly expanded to cover all operations in the Company’s Permian Basin area in conjunction with the transition of Mr. Dove’s role from Chief Operating Officer to CEO.
NEO
2016 Base Salary
2017 Base Salary
% Change
Timothy L. Dove
$675,000
$900,000
33%
Richard P. Dealy
$565,000
$582,000
3%
Mark S. Berg
$440,000
$460,000
5%
Chris J. Cheatwood
$440,000
$460,000
5%
J. D. Hall
$420,000
$453,600
8%

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Annual Cash Bonus Incentive Program
The annual cash bonus incentive award component of the Company's executive compensation program is intended to compensate the NEOs based on the achievement of annual financial, operating and strategic goals and individual performance.
Target Bonus Amounts. At the beginning of the year, the Compensation Committee establishes for each NEO a target bonus level as a percentage of the executive's base salary. As discussed above, in conjunction with Mr. Dove’s succession to the role of CEO effective January 1, 2017, his bonus target, as a percentage of his base salary, was increased from 100 percent to 130 percent of base salary, which is equal to Mr. Sheffield's 2016 and 2017 target bonus levels. For the other NEOs, the levels that had been established in 2016 were determined to be near the median level of companies in the Company's peer group, and accordingly, were not increased for 2017 and were set as follows:
NEO
2016 Target Bonus %
2017 Target Bonus %
% Change
Timothy L. Dove
100
130
30%
Richard P. Dealy
100
100
-%
Mark S. Berg
80
80
-%
Chris J. Cheatwood
80
80
-%
J. D. Hall
80
80
-%
Performance Score. Shortly following the end of the year, when the Company's results are known, the Committee evaluates the Company's and the NEOs' performance and determines the actual payout to each NEO based on the following formula, provided a technical baseline performance hurdle has been attained:
Actual payout
=
Base salary
x
Target bonus (%)
x
Performance score (%)
+/-
Individual performance adjustment (if any)
To assist the Compensation Committee in its determination of the performance score, the Compensation Committee works with senior management to establish a limited number of operational, financial and strategic performance goals, each with a pre-assigned weighting, for purposes of guiding the Committee's evaluation of performance. These goals were anticipated to be among the most critical business goals to focus the Company on what needed to be accomplished during the following year, and also support the Company's long-term strategy. The goals also seek to provide a balanced approach, such that the goals to achieve production growth or additions to proved reserves are complemented by goals designed to control costs and limit the Company's debt levels.
2017 Performance Goals and Results. The pre-established targets for the 2017 operational, financial and strategic goals, together with the results, are set out in the table below. The target performance metrics are intended to align with the guidance the Company provides its investors at the beginning of the year. Following the Compensation Committee's assessment of the Company's performance, the Committee determined an actual payout percentage for each goal. The payout percentage for each goal can range from zero to a maximum of 250 percent, and is established by the Committee using its subjective judgment as to the Company's performance in each area. The Committee believes it is important to retain its ability to exercise a certain level of discretion so that the Board and management will have flexibility to plan for and react to changing industry circumstances, such as commodity prices, cost structures and acquisition and divestment opportunities, without creating conflicting incentives for management.

43


Performance Goal
Target Performance
Performance Result
Relative Weight
Payout (% of Target)
Weighted Payout
Production growth (1)
≥98.5 MMBOE
99.3 MMBOE
15%
100%
15%
Ratio of net debt to EBITDAX (2)
≤0.75x
0.3x
15%
175%
26.25%
Proved reserve replacement (3)
≥225%
300%
15%
125%
18.75%
Base lease operating and general and administrative costs/BOE
≤10.25
$9.25
15%
175%
26.25%
Health, safety and environmental (4)
 
 
10%
64.5%
6.45%
Certain strategic goals (5)
 
 
30%
125%
37.5%
Total performance factors
 
 
100%
 
130.2%
Discretionary factor (not to exceed +/- 33%)
 
 
 
 
(5.2)%
Final performance score
 
 
 
 
125%
___________
(1)
"MMBOE" means millions of barrels of oil equivalent.
(2)
"EBITDAX" represents earnings before depletion, depreciation and amortization expense; impairment of oil and gas properties, inventory and other property and equipment; exploration and abandonments; accretion of discount on asset retirement obligations; interest expense; income taxes; gain or loss on the disposition of assets; noncash derivative related activity; amortization of stock-based compensation; and other noncash items.
(3)
"Proved reserve replacement" is the summation of annual proved reserves, on a BOE basis, attributable to revisions of previous estimates and extensions and discoveries, if any, divided by annual production of oil, natural gas liquids ("NGLs") and gas, on a BOE basis. Revisions of previous estimates exclude positive price revisions of 52 MMBOE resulting from increases in oil and gas prices in 2017 compared to 2016.
(4)
HSE goals generally were weighted one-half toward health and safety-related goals and one-half toward environmental-related goals, with the payout percentage being primarily based on input from the Health, Safety and Environment Committee as to its evaluation of Company performance in the areas of safety observations, safety investigations, training of personnel and environmental metrics.
(5)
For 2017, the strategic goals category comprised preserving the strength of the Company's balance sheet; closely managing overhead costs on a per BOE basis; continuing to execute the Company's well optimization program and benchmark the program against the costs of the Company's peers; cost effectively implementing the second phase of the Company’s enterprise resource planning system and preparing for the continued sustainability of the system; establishing internal strategic planning and technology strategy teams; and continuing to maintain the Company's culture and expand the Company's workforce diversity initiatives.
The Company believes that, in 2017, the Company delivered another excellent operational performance. The following summarizes some of the notable performance highlights from the year relating to the performance goals, which led to the Compensation Committee's decisions as to the payout percentages set forth above:
Production growth - exceeded the goal despite experiencing unexpected drilling delays in the first half of the year, with average daily oil sales volumes increasing by 19 percent from 2016 on a comparable basis, driven by the Company's successful Permian Basin horizontal drilling program (total Permian Basin oil production increased 26 percent year-over-year).
Ratio of net debt to EBITDAX - well exceeded the goal; the Company maintained a strong year-end balance sheet, with year-end cash on hand and short- and long-term investments totaling $2.2 billion.
Proved reserve replacement - exceeded the goal; added proved reserves of 314 MMBOE from discoveries, extensions and technical revisions of previous estimates (excludes positive price revisions of 52 MMBOE, proved reserves divested of 7 MMBOE and proved reserves acquired of 1 MMBOE).
Base lease operating and general and administrative costs/BOE - well exceeded the goal; the Company reduced production costs per BOE by 12 percent and general and administrative costs per BOE by 14 percent in 2017 compared to 2016, driven by cost reduction initiatives and growth of low-cost Permian Basin horizontal production.

44


Health, safety and environmental - met the goals; the Company implemented a number of safety initiatives and emergency preparedness processes; strengthened its environmental compliance culture; reduced reportable spills by 13 percent and total spill volumes by 21 percent compared to 2016; adopted and implemented a company-wide LDAR tracking procedure and software solution; and continued to enhance its sustainability disclosures, including the issuance of the Company’s inaugural Sustainability Report following engagement with investors and a number of external stakeholders; however, the Compensation Committee exercised its discretion to reduce the performance score in light of two safety incidents during the year.
Strategic goals - accomplished essentially all goals; despite the continued low commodity price environment, the Company maintained its strong balance sheet and closely managed its overhead on a per BOE basis and added derivatives positions for 2018; successfully improved well productivity throughout the areas where the Company is actively drilling, particularly in its Eagle Ford area, while mitigating cost inflation through the Company’s vertical integration operations; continued the implementation of its enterprise resource planning system on schedule and on budget and a program to maintain its sustainability for the future; successfully established strategic planning and technology strategy teams to assist in the execution of the Company’s long-term strategy; and continued to maintain Pioneer’s strong corporate culture, once again being ranked among the top five large companies to work for in the Dallas-Fort Worth area.
Under the program, the Compensation Committee retains discretion to adjust the amount of the final payout, positively or negatively, by up to 33 percent, to recognize critical performance factors and industry conditions, for all NEOs as a group or separately for each NEO based on individual performance factors, but the total payout for any NEO may not exceed 250 percent of his or her target bonus. In applying its discretion to reduce the payout level for cash bonuses for 2017, the Committee took into account the operational delays experienced by the Company in the first half of the year.
Individual performance adjustments. Following the determination of the general payout level for the NEOs as a whole, the Compensation Committee reviewed with Mr. Dove the individual performance of the other NEOs, and concluded that each of the NEOs performed at a high level contributing to the Company's performance against its goals, but no individual NEO's achievements merited bonus payments above or below the bonus payout level for the Company as a whole.
The Committee met with the full Board to review Mr. Dove’s performance and concluded that he continued to provide excellent leadership and strategic direction for the Company in 2017. Accordingly, Mr. Dove received the same bonus payout level for the other NEOs and the Company.
Annual Long-Term Incentive Awards
In late 2016, the Compensation Committee began the process of determining the total target dollar amount of the 2017 annual long-term incentive awards to be granted to each NEO by meeting with Meridian to review benchmarking data related to long-term incentive awards, including median award levels at companies within the Company's peer group, in accordance with the Company's compensation philosophy. The Committee also reviewed each NEO's total compensation level and each NEO's performance to determine if unique performance issues, positive or negative, existed that should affect the value of the 2017 annual long-term incentive award. Although the Committee reviews the size and current value of prior long-term incentive awards, it did not consider these values in determining the 2017 long-term incentive award for the NEOs. The Committee believes that prior years' awards were a component of those specific years' total compensation and were not excessive, and future awards should be competitive with an NEO's current peer group position in order to retain and motivate the NEO.
As discussed above, total target dollar amount of Mr. Dove’s long-term incentive awards for 2017 was increased from $3,522,100 to $7,000,000, in recognition of his succession to the CEO role, compared to Mr. Sheffield's 2016 total target dollar amount of $8,250,000.
With respect to the other NEOs, at the Compensation Committee's regularly scheduled March 2017 meeting, the Committee determined to make only modest increases in the total target dollar amount of

45


their long-term incentive awards, except for Mr. Hall. With respect to Mr. Hall, the Committee took into consideration the expansion of his responsibilities to cover all operations in the Company’s Permian Basin area in conjunction with the transition of Mr. Dove’s role from Chief Operating Officer to CEO, and the Committee’s desire to increase the proportion of his compensation directly linked to the performance of the Company’s common stock.
The Compensation Committee next reviewed the Company's approach for delivering long-term incentives to NEOs. As a part of its review, the Committee considered the balance of risk in the long-term incentive program, peer company practices, and input from senior management and Meridian. In accordance with the pay-for-performance philosophy of the Company's compensation program, the Committee approved continuing the mix of long-term incentives for NEOs for 2017 at 50 percent performance units and 50 percent restricted shares. The Committee believes this mix of long-term incentive awards provides an effective balance of risk, where restricted stock awards are time-based, full value awards, which avoid an "all or nothing" mentality, and performance units provide benefits based on the performance of the Company's stock price over a three-year period in relation to the Company's peer group total stockholder return.
The table below shows the approved total target dollar amount of the long-term incentive awards granted to each NEO for 2017, compared to 2016, and the allocation of the 2017 target amount between the two award types. To arrive at the resulting number of restricted shares and target performance units awarded, the target amount of the award was divided by the 30 trading day average closing price of the Company's common stock prior to February 1, 2017.
 
 
 
 
Allocation Among Awards (1)
NEO
2016 Target Value
2017 Target Value
% Change
Restricted Stock/RSU Awards
Performance
Units
Timothy L. Dove
$3,522,100
 
$7,000,000
 
99
%
$3,500,000
 
$3,500,000
Richard P. Dealy
$2,475,000
 
$2,550,000
 
3
%
$1,275,000
 
$1,275,000
Mark S. Berg
$1,998,000
 
$2,050,000
 
3
%
$1,025,000
 
$1,025,000
Chris J. Cheatwood
$1,998,000
 
$2,050,000
 
3
%
$1,025,000
 
$1,025,000
J. D. Hall
$1,600,000
 
$2,500,000
 
56
%
$1,250,000
 
$1,250,000
___________
(1)
These dollar amounts may vary from the values disclosed in the Summary Compensation Table and the 2017 Grants of Plan-Based Awards table below because those amounts are calculated based on the grant date fair value of the awards for accounting purposes in accordance with SEC rules. See the footnotes to those tables for further information regarding the methodology for determining the values of the awards for purposes of those tables.

46


Restricted Stock and RSU Awards
For the 2017 restricted stock and RSU award program, the awards cliff vest three years after the date of grant, subject to the NEO remaining employed with the Company continuously through the vesting date. For tax reasons, NEOs who have attained or who will attain the stated retirement age under the awards (which is age 60 for the 2017 awards) during the vesting period of the awards are awarded RSUs instead of restricted stock. Additional information regarding the terms of these awards is described below under "Executive Compensation Tables-Narrative Disclosure for the 2017 Grants of Plan-Based Awards Table."
Performance Unit Awards
For the 2017 performance unit award program, the Compensation Committee determined, as it has since it began awarding performance units in 2007, that performance should be measured objectively rather than subjectively and should be based on relative total stockholder return, or "TSR" (as defined in the award agreements), over a three-year performance period. The Committee believes relative TSR is an appropriate long-term performance metric because it generally reflects all elements of a company's performance and provides the best alignment of the interests of management and the Company's stockholders. The Committee does from time to time consider incorporating other performance metrics, such as return on assets or levels of income, but believes that such other metrics are subsumed by TSR, particularly on a relative basis, and could lead to unintended results caused by the cyclicality of the oil and gas business. Therefore, the Committee believes that TSR is the best metric by which to measure relative performance of the Company and management compared to the Company's peers.
The companies in the peer group used in measuring relative TSR with respect to the performance unit grants in 2017 were unchanged from 2016, being Anadarko Petroleum Company, Apache Corporation, Cabot Oil & Gas Corporation, Concho Resources Inc., ConocoPhillips, Continental Resources, Inc., Devon Energy Corporation, EOG Resources, Inc., Hess Corporation, Marathon Oil Corporation and Noble Energy, Inc. As depicted in the following table, the payout will range from zero percent to 250 percent of a target number of performance units awarded based on the Company's relative TSR ranking in the peer group at the end of the three-year performance period that began on January 1, 2017 and ends December 31, 2019:
TSR Rank   
Against Peers
Percentage of Performance Units Earned (1)
1
250%
2
200%
3
175%
4
150%
5
125%
6
110%
7
75%
8
50%
9
25%
10
0%
11
0%
12
0%
___________
(1)
See the 2017 Grants of Plan-Based Awards table below, and the description of the performance units following that table, for additional information regarding the terms of the performance units.
The performance unit awards granted each year provide an additional balance of risk to the long-term incentive award program because a new three-year performance period starts at the beginning of each year. As depicted in the table below, with respect to the performance units granted in 2015, for the period January 1, 2015 to December 31, 2017, the Company's TSR resulted in a ranking of fourth place,

47


providing a payout of 150 percent of target.
Ranking
Company
TSR (%)
1
Concho Resources Inc.
38
2
EOG Resources, Inc.
12
3
Continental Resources, Inc.
6
4
Pioneer
1
5
Devon Energy Corporation
(33)
6
Apache Corporation
(34)
7
Hess Corporation
(38)
8
Noble Energy, Inc.
(45)
9
Marathon Oil Corporation
(45)
10
Range Resources Corporation
(73)
11
Chesapeake Energy Corporation
(81)
12
Southwestern Energy Corporation
(81)
Accordingly, the performance shares earned by the NEOs for the 2015 to 2017 performance period were as follows:
NEO
Target Payout of Shares
Payout % of Target
Actual Payout of Shares
 
(#)
 
(#)
Timothy L. Dove
11,530
150%
17,295
Richard P. Dealy
7,845
150%
11,768
Mark S. Berg
5,434
150%
8,151
Chris J. Cheatwood
5,893
150%
8,840
J. D. Hall
2,934
150%
4,401
The following table shows, as of December 31, 2017, the relative TSR rankings of the Company and each of the named peer companies for the currently outstanding performance unit awards, which have periods that began January 1, 2016, or two years into the three year performance period, and January 1, 2017, or one year into the three year performance period, although the actual performance level cannot be known until the end of the applicable performance period.
Rank
Period Beginning
January 1, 2016
 
Period Beginning
 January 1, 2017
Company
TSR (%)
 
Company
TSR (%)
1
Continental Resources, Inc.
53%
 
Cabot Oil & Gas Corporation
27%
2
Cabot Oil & Gas Corporation
52%
 
ConocoPhillips
12%
3
Concho Resources Inc.
36%
 
Concho Resources Inc.
5%
4
EOG Resources, Inc.
31%
 
EOG Resources, Inc.
5%
5
Pioneer
14%
 
Marathon Oil Corporation
(7)%
6
ConocoPhillips
7%
 
Continental Resources, Inc.
(9)%
7
Devon Energy Corporation
0%
 
Devon Energy Corporation
(13)%
8
Marathon Oil Corporation
(1)%
 
Pioneer
(13)%
9
Apache Corporation
(8)%
 
Hess Corporation
(18)%
10
Anadarko Petroleum Company
(12)%
 
Anadarko Petroleum Company
(25)%
11
Hess Corporation
(15)%
 
Noble Energy, Inc.
(28)%
12
Noble Energy, Inc.
(20)%
 
Apache Corporation
(32)%
To demonstrate the pay-for-performance nature of the performance unit program, the following table shows the resulting realized values of the performance unit program for performance unit awards granted to the individuals serving as CEO since the program began in 2007:

48


Performance Period
Min Payout of Shares
Target Payout of Shares
Max Payout of Shares
Actual Earned Date
TSR Rank
Payout % of Target
Actual Payout of Shares
 
(#)
(#)
(#)
 
 
 
(#)
Awards to Mr. Sheffield:
 
 
 
 
 
 
1/1/2007-12/31/2009
0
34,998
87,495
12/31/2009
7
75
26,249
1/1/2008-12/31/2010
0
38,478
96,195
12/31/2010
2
200
76,956
1/1/2009-12/31/2011
0
60,459
151,148
12/31/2011
1
250
151,148
1/1/2010-12/31/2012
0
28,222
70,555
12/31/2012
1
250
70,555
1/1/2011-12/31/2013
0
16,065
40,163
12/31/2013
1
250
40,163
1/1/2012-12/31/2014
0
17,553
43,883
12/31/2014
2
200
35,106
1/1/2013-12/31/2015
0
30,540
76,350
12/31/2015
4
150
45,810
1/1/2014-12/31/2016
0
23,273
58,183
12/31/2016
3
175
40,728
 
 
 
 
 
 
 
 
Awards to Mr. Dove:
 
 
 
 
 
 
 
1/1/2015-12/31/2017
0
11,530
28,825
12/31/2017
4
150
17,295
1/1/2016-12/31/2018
0
14,847
37,118
12/31/2018
Not yet determined
1/1/2017-12/31/2019
0
19,110
47,775
12/31/2019
Not yet determined
In administering the annual long-term incentive award program, awards are currently made to NEOs under the following guidelines:
All long-term incentive awards are approved during the regularly scheduled first quarter Compensation Committee meeting.
The Company does not time the release of material non-public information to affect the value of the executive equity compensation awards.
All annual awards cliff vest after three years, subject generally to the continued employment of the executive officer.
Total Direct Compensation
In determining the extent to which the Company's executive compensation program meets the Compensation Committee's compensation philosophy and objectives, the Committee reviews the competitiveness of total compensation (the aggregate of base salary, annual cash bonus incentive payment, and the grant value of long-term incentive plan awards), in addition to each of the individual compensation components.
Other Compensation
Overview
The Compensation Committee believes that providing some perquisites, as well as health, welfare and retirement benefits, as components of total compensation is important in attracting and retaining qualified personnel; however, because the Company has chosen to emphasize variable, performance-based pay, the Company takes a conservative approach to these fixed benefits. The Company's perquisite, retirement and other benefit programs are established based upon an assessment of competitive market factors and a determination of what is needed to attract, retain and motivate high caliber executives.
Limited Perquisites
The perquisites provided to the NEOs are the payment of the costs of financial counseling services, annual medical physical exams and personal use of the Company's cell phones and computers. The Company also pays for the costs for the NEOs' spouses to participate in certain business dinners or events, which the Company expects to be minimal.
Each year, the Company purchases a certain number of hours of flight time through a fractional aircraft ownership arrangement. These hours are made available for business use to the executive officers and

49


other employees of the Company. The Company's policy is to not permit employees, including executive officers, to use these hours for personal use. The Company expects there will be occasions when a personal guest (including a family member such as a spouse) will accompany an employee on a business-related flight. In such instances, the Company will follow the Internal Revenue Service rules and, where required, impute income to the employee based on the Standard Industry Fare Level rates provided by the Internal Revenue Service.
Health and Welfare Benefits
The Company's NEOs participate in the Company's health and welfare benefit plans, including medical, dental, disability and life insurance arrangements, on the same basis as the Company's other employees.
Retirement Plans
All eligible employees of the Company, including the NEOs, may participate in the Company's 401(k) Plan. The Company contributes two dollars for every one dollar of base compensation (up to five percent of base compensation and subject to the Internal Revenue Service imposed maximum contribution limits) contributed by the participant. The participant's contributions are fully vested at all times, and the Company's matching contributions vest over the first four years of service, after which time the matching contributions vest immediately. Participants may make additional pre-tax and after-tax contributions to the plan. All contributions are subject to plan and Internal Revenue Service limits.
The Company provides a non-qualified deferred compensation plan with a fixed Company matching contribution rate to certain of its more highly compensated employees, which includes the NEOs. The plan allows each participant to contribute up to 25 percent of base salary and 100 percent of the participant's annual cash bonus. Each year, the Company provides a matching contribution equal to the NEO's contribution, but limited to a maximum of ten percent of annual base salary. The Company's matching contribution vests immediately. The non-qualified deferred compensation plan permits each participant to make investment allocation choices for both their contribution and the Company match to designated mutual funds offered as investment options under the non-qualified deferred compensation plan. The Company retains the right to maintain these investment choices as hypothetical investments or to actually invest in the participant's investment choices. To date, the Company has chosen to actually invest the funds in the investment options selected so that the investment returns are funded and do not create unfunded liabilities to the Company. The Company believes the plan is administered in operational compliance with all applicable rules and law. For more information on the non-qualified deferred compensation plan provisions, see "Executive Compensation Tables - 2017 Non-Qualified Deferred Compensation."
Severance and Change in Control Arrangements
The Compensation Committee believes compensation issues related to severance and change in control events for the NEOs should be addressed through contractual arrangements. As a result, while the Company has not entered into employment agreements with its executive officers, the Company enters into severance and change in control agreements with each of its executive officers, including each NEO, to recruit and retain executives, provide continuity of management in the event of an actual or threatened change in control and provide the executive with the security to make decisions that are in the best long-term interest of the stockholders. The change in control agreements do not provide a "gross-up" payment for excise taxes that might be imposed on payments under the change in control agreements by Section 4999 of the Code, and it is the Company's policy that it will not provide such gross up benefits in future change in control or severance agreements. The terms of these agreements are described later in "Executive Compensation Tables - Potential Payments upon Termination or Change in Control."
Stock Ownership Guidelines
To support the commitment to significant stock ownership by NEOs, the Company's common stock ownership guidelines are as follows:

50


Officer
Required Stock Ownership - Multiple of Annual Base Salary
CEO
6x
Executive Vice Presidents
3x
An NEO generally has three years after becoming an executive officer to meet the applicable stock ownership guideline. In evaluating compliance by executive officers and directors with the stock ownership guidelines, the Compensation Committee has established procedures to minimize the effect of stock price fluctuations on the deemed value of the individual's holdings. The NEOs are required to retain all shares of common stock acquired in connection with the exercise of stock options or the vesting of other stock awards, other than sales to satisfy the exercise price of a stock option or tax obligations, until the applicable ownership guideline is reached. All NEOs have exceeded their minimum ownership guidelines. Given these robust requirements for stock ownership and the executives' historical levels of actual stock ownership, the Committee does not believe that it is necessary to adopt a separate policy requiring executives to retain stock following the vesting or exercise of their long-term incentive plan awards.
Prohibited Equity Transactions
The Company has a policy that prohibits directors, officers or employees from engaging in short sales or in transactions involving derivatives based on the Company's common stock, such as option contracts, straddles, collars, hedges and writing puts or calls. In addition, the Company has a policy that prohibits directors and executive officers from pledging Company securities as collateral for a loan or holding Company securities in a margin account without advance approval from the Board. In addition, the Company's policy requires that directors and executive officers must obtain authorization from the Board before entering into a trading plan that, under the SEC's Rule 10b5-1, would permit the sale of the Company's stock including at times when the director or executive officer is in the possession of material nonpublic information.
Policy on Recovery of Compensation and Clawbacks
The Board has adopted a clawback policy under which the Board, or a committee of the Board, has the right to cause the reimbursement by an executive officer of the Company of certain incentive compensation if the compensation was predicated upon the achievement of certain financial results that were subsequently the subject of a required restatement of the Company's financial statements and the executive officer engaged in fraudulent or intentional illegal conduct that caused the need for the restatement.
Indemnification Agreements
The Company has entered into indemnification agreements with each of its directors and executive officers. Each agreement requires the Company to indemnify the director or executive officer to the fullest extent permitted by the Delaware General Corporation Law. This means, among other things, that the Company must indemnify the indemnitee against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement that are incurred in a legal proceeding by reason of the fact that the person is or was a director, officer, employee or agent of the Company if the indemnitee meets the standard of conduct provided under Delaware law. Also as permitted under Delaware law, the indemnification agreements require the Company to advance expenses in defending such an action provided that the director or executive officer undertakes to repay the amounts if the person ultimately is determined not to be entitled to indemnification from the Company.
Deductibility of Executive Compensation
Section 162(m) of the Code places restrictions on the deductibility of executive compensation paid by public companies. Under the restrictions of Section 162(m) of the Code as in effect prior to and during 2017, the Company has not historically been able to deduct compensation paid to any of the NEOs (other than the Chief Financial Officer) in excess of $1,000,000 unless the compensation met the definition of

51


"performance-based compensation" as required in Section 162(m) of the Code. When the Company cannot deduct compensation payments, it results in additional tax costs to the Company.
The Company has undertaken to qualify certain components of its incentive compensation program as "performance-based compensation," such compensation of which was an exception to the deduction limitations of Section 162(m) of the Code as it existed prior to and during 2017, and which will still be applicable for compensation arrangements that will be deemed “grandfathered” under Section 162(m) of the Code pursuant to the Tax Cuts and Jobs Act. Specifically, the Company's annual cash bonus incentive payments and performance unit awards have been intended to qualify for deductibility under Section 162(m) of the Code in previous years.
As stated above, the annual cash bonus incentive program is implemented as part of the Company's Amended and Restated 2006 Long Term Incentive Plan (the "Long Term Incentive Plan") and has historically been intended to qualify certain cash bonus incentive awards as tax deductible "performance-based compensation" under Section 162(m) of the Code for the executive officers who are subject to Section 162(m) of the Code. In order to qualify the payout under the Company's annual cash bonus incentive program as "performance-based compensation," the payout to the NEOs has been subject to achievement of a technical baseline performance hurdle, established at the beginning of the year, that the Company must achieve before any payment is made under the program.
Because of the uncertainties associated with the application and interpretation of Section 162(m) and the regulations issued thereunder, as well as other factors beyond the Company's control, there can be no assurance that compensation intended to satisfy the requirements for deductibility under Section 162(m) will in fact be deductible. The Company believes that, under certain circumstances, such as to attract and retain key executives, to maintain competitiveness with other companies for executive talent or to recognize outstanding performance, it is in the Company's and its stockholders' best interests to provide compensation to selected executives even if it is not deductible, and the Company retains the discretion to award compensation that exceeds applicable Section 162(m) deduction limitations or that is otherwise not deductible.
EXECUTIVE COMPENSATION TABLES
Summary Compensation Table
For 2017, the compensation paid to the Company's NEOs consisted of a base salary, annual cash bonus incentive award payments, awards of restricted stock or RSUs (as applicable) and performance units, employer contributions to the Company's 401(k) and non-qualified deferred compensation plans, and certain perquisites, which elements of compensation are described in greater detail above in the "Compensation Discussion and Analysis" and in the tables that follow. The following table summarizes the total compensation earned by or paid to the NEOs for 2017 and if the individual was an NEO for the applicable year, for 2016 and 2015.

52


Name and Principal Position
Year
Salary (1)
Bonus (2)
Stock Awards (3)
Option Awards (3)
Non-Equity Incentive Plan Compensation (2)
All Other Compensation (4)
Total
 
 
($)
($)
($)
($)
($)
($)
($)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(i)
(j)
Timothy L. Dove
President and Chief Executive Officer
2017
$865,398
$—
$8,478,035
$—
$1,462,500
$128,311
$10,934,244
2016
$672,808
$—
$4,813,872
$—
$1,350,000
$108,890
$6,945,570
2015
$635,000
$666,750
$4,347,889
$—
$—
$98,685
$5,748,324
Richard P. Dealy
Executive Vice President and Chief Financial Officer

2017
$579,390
$—
$3,088,581
$—
$727,500
$96,538
$4,492,009
2016
$555,131
$—
$3,382,748
$—
$1,130,000
$89,312
$5,157,191
2015
$488,000
$585,600
$2,958,349
$—
$—
$78,646
$4,110,595
Mark S. Berg
Executive Vice President, Corporate

2017
$456,934
$—
$2,483,021
$—
$460,000
$95,175
$3,495,130
2016
$437,846
$—
$2,730,938
$—
$704,000
$76,723
$3,949,507
2015
$410,000
$393,600
$2,049,209
$—
$—
$86,280
$2,939,089
Chris J. Cheatwood
Executive Vice President and Chief Technology Officer

2017
$456,934
$—
$2,483,021
$—
$460,000
$89,666
$3,489,621
2016
$440,615
$—
$2,730,938
$—
$633,600
$87,564
$3,892,717
2015
$425,000
$357,000
$2,222,134
$—
$—
$84,265
$3,088,399
J.D. Hall
Executive Vice President, Permian Operations

2017
$448,438
$—
$3,027,988
$—
$453,600
$87,266
$4,017,292
2016
$419,538
$—
$2,385,436
$—
$672,000
$84,792
$3,561,766
2015
$372,308
$320,400
$1,106,508
$—
$—
$0
$1,799,216
___________
(1)
In 2017, the adjusted base salaries, as disclosed above in the section entitled "Compensation Discussion and Analysis," did not take effect until February 19, 2018.
(2)
Amounts in column (g) for 2017 and 2016 represent the actual payouts of annual cash bonus incentive awards related to performance in respect of such years, which were paid in March of the following year. See "Compensation Discussion and Analysis - Elements of the Company's Compensation Program - Annual Cash Bonus Incentive Program" above. Bonus amounts in column (d) for 2015 represent discretionary bonuses earned during 2015.
(3)
Amounts reported for Stock Awards in column (e) represent the grant date fair value of restricted stock, RSUs and performance unit awards, computed in accordance with FASB ASC Topic 718. Pursuant to SEC rules, all amounts shown in this column exclude the effect of estimated forfeitures related to service-based vesting conditions. The grant date fair values attributable to restricted stock and RSU awards are based on the market-quoted closing price of the Company's common stock on the last trading day prior to the grant date of the awards. The Company's performance units are valued for these purposes using the Monte Carlo simulation method assuming a target number of shares would be payable because this is deemed to be the "probable" payout percentage at the time of grant consistent with the estimate of aggregate compensation cost to be recognized over the service period. Actual payouts with respect to performance units can range from zero percent to 250 percent of a target number of performance units awarded based on the relative ranking of the Company's TSR in comparison to the peer group over the applicable three-year performance period. If the Company's relative TSR performance is below the threshold performance, no shares will be paid. If the Company's performance places it first among its peers, a maximum of 250 percent of the target number of shares will be paid. In that instance, the grant date fair value of the maximum number of shares for each of the NEOs pursuant to performance units granted in 2017 would be as follows: Mr. Dove, $12,339,050; Mr. Dealy, $4,495,262; Mr. Berg, $3,614,031; Mr. Cheatwood, $3,614,031; and Mr. Hall, $4,406,933. Additional detail regarding the Company's share-based awards is included in Note H of Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 and under the 2017 Grants of Plan-Based Awards table below. The Company has not granted stock options since 2012. For additional information regarding restricted stock, RSU and performance unit awards, as applicable, owned by the NEOs as of December 31, 2017, see the "2017 Outstanding Equity Awards at Fiscal Year End" table below.
(4)
Amounts reported as All Other Compensation in column (i) include the Company contributions to the NEOs' 401(k) Plan and non-qualified deferred compensation plan accounts, life insurance premiums and other perquisites, as shown in the following table:

53


 
Year ended December 31, 2017
 
Timothy L.
Dove
Richard P.
Dealy
Mark S.
Berg
Chris J.
Cheatwood
J.D.
Hall
401(k) contributions

$27,000


$26,600


$27,000


$26,819


$26,354

Non-qualified deferred compensation plan contributions
86,540

57,939

41,000

45,693

44,844

Life insurance premiums
8,799

2,622

5,623

5,623

3,483

Financial counseling
3,435

8,000

16,000

11,035

11,035

Personal and spousal travel (a)
2,537

1,377

5,552

496

1,550

Totals

$128,311


$96,538


$95,175


$89,666


$87,266

___________
(a)
Spousal travel & entertainment costs are included to the extent of the incremental costs incurred by the Company for travel and entertainment of spouses when accompanying the NEOs on Company-related business trips.
2017 Grants of Plan-Based Awards
The following table sets forth, for each NEO, information about grants of plan-based awards during 2017.
Name
Grant Date
Estimated Future Payouts under Non-Equity Incentive Plan Awards (1)
Estimated Future Payouts Under Equity Incentive Plan Awards (2)
All Other Stock Awards: Number of Shares of Stock or Units
Grant Date Fair Value of Stock and Option Awards (4)(5)
Threshold
Target
Maximum
Threshold
Target
Maximum
 
 
($)
($)
($)
(#)
(#)
(#)
(#)
 
($)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
 
(l)
Timothy L. Dove
02/27/2017
$—

$1,170,000


$2,925,000

 
 
 
 
 
 
02/27/2017
 
 
 
4,778

19,110

47,775

 
 

$4,935,620

02/27/2017



 
 
 
 
 
19,111

(3)

$3,542,415

Richard P. Dealy
02/27/2017
$—

$582,000


$1,455,000

 
 
 
 
 




02/27/2017
 
 
 
1,741

6,962

17,405

 
 

$1,798,105

02/27/2017
 
 
 
 
 
 
6,962

(3)

$1,290,476

Mark S. Berg
02/27/2017
$—

$368,000


$920,000

 
 
 
 
 




02/27/2017
 
 
 
1,400

5,597

13,993

 
 

$1,445,561

02/27/2017
 
 
 
 
 
 
5,597

(3)

$1,037,460

Chris J. Cheatwood
02/27/2017
$—

$368,000


$920,000

 
 
 
 
 
 
02/27/2017
 
 
 
1,400

5,597

13,993

 
 

$1,445,561

02/27/2017
 
 
 
 
 
 
5,597

(3)

$1,037,460

J.D. Hall
02/27/2017
$—

$362,880


$907,200

 
 
 
 
 


 

02/27/2017
 
 
 
1,707

6,825

17,063

 
 

$1,762,721

02/27/2017
 
 
 
 
 
 
6,826

(3)

$1,265,267

___________
(1)
The amounts in columns (c), (d) and (e) represent the threshold, target and maximum payment levels with respect to the Company's 2017 annual cash bonus incentive program under the Company's Long Term Incentive Plan, as discussed above in the section entitled "Compensation Discussion and Analysis" and below under "Narrative Disclosure for the 2017 Grants of Plan-Based Awards Table." If the Company's performance does not exceed the minimum baseline performance hurdle, then the payout under this program will be zero. The amounts shown in the "Target" column reflect a payout of 100 percent of the target bonus, and the amounts shown in the "Maximum" column reflect the highest possible payout of 250 percent of target bonus. Actual bonus payouts under this program for 2017, which were paid in March 2018, are reflected in the "Non-Equity Incentive Plan Compensation" column of the Summary Compensation Table.
(2)
The amounts in columns (f), (g) and (h) represent the number of shares deliverable upon threshold, target and maximum performance with respect to the grants of performance units in 2017 under the Long Term Incentive Plan. The number of shares shown in the "Threshold" column reflects the lowest possible payout (other than zero), representing 25 percent of the target number of performance units granted. If performance is below the threshold, no shares are issued. The number of shares shown in the "Target" column reflects a payout of 100 percent of the target number of performance units granted. The number of shares shown in the "Maximum" column reflects the highest possible payout of 250 percent of the target number of performance units granted.

54


(3)
The amounts reported are the number of restricted shares of the Company's common stock or RSUs granted to each NEO in 2017 under the Long Term Incentive Plan in connection with the annual grant of awards as described above.
(4)
The Company did not grant any stock options in 2017.
(5)
Amounts for restricted stock, RSU and performance unit awards represent each award's grant date fair value computed in accordance with FASB ASC Topic 718. The value of performance units was determined on the grant date using the Monte Carlo simulation method assuming a target number of shares would be issued at settlement, as that is the “probable” outcome as of the grant date, and is consistent with the estimate of aggregate compensation costs that the Company would expense in its financial statements over the awards' three-year performance period, in accordance with FASB ASC Topic 718. See footnote 3 to the Summary Compensation Table for additional information about the assumptions used in calculating these amounts.
Narrative Disclosure for the 2017 Grants of Plan-Based Awards Table
The 2017 annual cash bonus incentive program awards and the 2017 awards of performance units, restricted stock and RSUs were granted to the NEOs under the Long Term Incentive Plan. The material terms of these awards are described below. Defined terms impacting the accelerated settlement or vesting of awards can be found below in "Potential Payments upon Termination or Change in Control."
Annual Cash Bonus Incentive Program Awards
The terms of the Company's annual cash bonus incentive program are described in "Compensation Discussion and Analysis — Elements of the Company's Compensation Program — Annual Cash Bonus Incentive Program" above. As described in that section and in "Compensation Discussion and Analysis - Elements of the Company's Compensation Program - Deductibility of Executive Compensation " above, at the beginning of 2017, the Compensation Committee established for each NEO a target bonus level expressed as a percent of the executive's base salary, and a baseline performance hurdle that was a condition to the payout of awards that, if achieved, would permit a payout at a maximum bonus level of 250 percent of target for each NEO; provided that the Committee would then have the discretion to reduce the payout below 250 percent (but not increase the payout under the program above 250 percent) after assessing the Company's performance. This approach was designed to qualify each NEO's annual cash bonus incentive program award as tax-deductible under Section 162(m) of the Code. The dollar values of the target and maximum bonus award opportunities for each NEO are reported in the "2017 Grants of Plan-Based Awards Table" above. In determining the actual amounts paid to the NEOs for 2016, the Committee evaluated the Company's and the NEOs' performance for 2017 and determined the actual payout to each NEO in relation to the Company's goals. The amounts actually paid to each NEO with respect to the 2017 annual cash bonus incentive program are reported in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
Performance Unit Awards
The performance unit awards represent the right to receive between zero percent and 250 percent of the target number of performance units granted, contingent on the continued employment of the NEO and the Company's achievement of the specified performance objective at the end of the performance period. The 2017 awards have a three-year performance period (January 2017 to December 2019), and the number of performance units earned will be based on the Company's TSR ranking for this three-year period compared to the TSR of the following peer companies: Anadarko Petroleum Company, Apache Corporation, Cabot Oil & Gas Corporation, Concho Resources Inc., ConocoPhillips, Continental Resources, Inc., Devon Energy Corporation, EOG Resources, Inc., Hess Corporation, Marathon Oil Corporation and Noble Energy, Inc., in accordance with the following table:

55


TSR Rank
Against Peers
Percentage of Performance Units Earned
1
250%
2
200%
3
175%
4
150%
5
125%
6
110%
7
75%
8
50%
9
25%
10
0%
11
0%
12
0%
TSR means the annualized rate of return stockholders receive through stock price changes and the assumed reinvestment of dividends paid over the performance period. For purposes of determining the TSR for the Company and each of the peer companies, the change in the price of the Company's common stock and of the common stock of each peer company is based upon the average of the closing stock prices over the 60-day periods preceding the start and the end of the performance period.
Performance units earned will generally be paid in shares of the Company's common stock (unless the Compensation Committee determines to pay in cash) no later than March 15 of the year following the year in which the performance period ends. The NEOs will also earn dividend equivalents on the performance units actually earned up to a maximum of the target number of performance units awarded, which will be paid at the time the performance units are settled.
If an NEO's employment with the Company is terminated during the performance period, the following rules will determine the number of performance units, if any, the NEO will earn: (1) if an NEO is terminated by the Company for cause or by the NEO without good reason, all of the performance units subject to the award will be forfeited to the Company; (2) if the NEO's employment is terminated due to death or disability, the NEO will receive settlement of a number of performance units equal to the target number of performance units awarded multiplied by a fraction, the numerator of which is the number of months during the performance period that the NEO was employed and the denominator of which is 36 (the "pro ration fraction"); (3) if the NEO's employment is terminated due to the NEO's normal retirement (on or after the attainment of age 60), the NEO will receive settlement of a number of performance units equal to the number of performance units that would have been earned if the NEO had continued employment through the end of the performance period multiplied by the pro ration fraction (unless the NEO had attained the age of 65 with at least ten years of service, in which case there would be no pro ration); and (4) if the NEO's employment is terminated by the Company without cause or by the NEO for good reason, then (A) Mr. Dove will receive a number of performance units equal to the number of performance units that would have been earned if they had continued employment through the end of the performance period, and (B) the other NEOs will receive settlement of a number of performance units equal to the number of performance units that would have been earned if the NEOs had continued employment through the end of the performance period multiplied by the pro ration fraction.
In the event of a change in control, for awards granted to the NEOs in 2017, other than Mr. Dove, the date of the change in control will be treated as the last day of the performance period and achievement of the performance objective and the number of performance units, if any, earned will be measured based on the Company's actual performance as of that date. In the event of a change in control, Mr. Dove's performance units will not automatically accelerate, but will generally only vest prior to the scheduled vesting date if a qualifying termination event occurs, with the payout being determined as of the date of the change in control. As mentioned above, commencing with their 2018 awards, all equity awards granted to the NEOs provide for a double trigger in the event of a change in control so that such awards

56


will not automatically accelerate, but will generally only vest prior to the scheduled vesting date if a qualifying termination event occurs.
Additional information regarding the performance unit awards can be found above under "Compensation Discussion and Analysis — Elements of the Company's Compensation Program — Annual Long-Term Incentive Awards."
Restricted Stock and RSU Awards
In general, the restricted stock awards cliff vest three years after the date of grant, subject to the NEO remaining employed with the Company continuously through the vesting date. While an NEO holds restricted shares, he is entitled to vote with holders of the Company's common stock and receive dividends on the shares at the same rate and time as other stockholders. RSU awards are similar to restricted stock awards in that they cliff vest three years after the date of grant and are settled in common stock of the Company, subject to the NEO remaining employed with the Company continuously through the vesting date, and the NEO has the right to receive payments equivalent to the dividends paid on the common stock at the same rate and time as other stockholders; however, the NEO has no voting rights in respect of RSUs.
If an NEO's employment with the Company is terminated prior to the vesting date, the following rules will apply: (1) if an NEO is terminated by the Company for cause or by the NEO without good reason, all of the restricted shares or RSUs subject to the award will be forfeited to the Company, (2) if an NEO is terminated due to death, disability, normal retirement (on or after attainment of age 60), by the Company without cause or by the NEO for good reason, a number of restricted shares or RSUs will vest equal to the total number of shares subject to the award multiplied by the pro ration fraction (unless, in the case of retirement, the NEO had attained the age of 65 with at least ten years of service, in which case there would be no pro ration), and (3) notwithstanding clause (2) of this paragraph, if Mr. Dove is terminated by the Company without cause or he terminates his employment for good reason, all of the restricted shares or RSUs subject to his awards will vest in full. In the event of a change in control, for the awards granted to the NEOs in 2017, other than Mr. Dove, the vesting of the restricted shares and RSUs will accelerate in full. In the event of a change in control, Mr. Dove's RSUs will not automatically accelerate, but will generally only vest prior to the scheduled vesting date if a qualifying termination event occurs. As mentioned above, commencing with their 2018 awards, all restricted share and RSU awards granted to the NEOs provide for a double trigger in the event of a change in control so that such awards will not automatically accelerate, but will generally only vest prior to the scheduled vesting date if a qualifying termination event occurs.
Additional information regarding the restricted stock and RSU awards can be found above in "Compensation Discussion and Analysis - Elements of the Company's Compensation Program - Annual Long-Term Incentive Awards."
2017 Outstanding Equity Awards at Fiscal Year End
The following table sets forth, for each NEO, information regarding stock options, restricted stock, RSUs and performance units that were held as of December 31, 2017, including awards that were granted prior to 2017:

57


 
Option Awards
 
Stock Awards
Name
Number of Securities Underlying Unexercised Options Exercisable
Number of Securities Underlying Unexercised Options Un-
exercisable
Option Exercise Price
Option Expiration Date
 
Number of Shares or Units of Stock that have not Vested (1)
Market Value of Shares or Units of Stock that have not Vested (1)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (1)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That have not Vested (1)
 
(#)
 
(#)
($)
 
 
(#)
 
($)
(#)
 
($)
(a)
(b)
 
(c)
(e)
(f)
 
(g)
 
(h)
(i)
 
(j)
Timothy L. Dove
15,558

(2)

$98.69

02/15/2021
 
11,531
(4)

$1,993,133

22,271

(7)

$3,849,542

 
16,470

(3)

$113.76

02/22/2022
 
14,848
(5)

$2,566,477

14,333

(8)

$2,477,459

 
 
 
 
 
 
 
19,111
(6)

$3,303,336

 
 
 
Richard P.
12,078

(3)

$113.76

02/22/2022
 
7,846
(4)

$1,356,181

15,650

(7)

$2,705,103

Dealy
 
 
 
 
 
 
10,434
(5)

$1,803,517

5,222

(8)

$902,623

 
 
 
 
 
 
 
6,962
(6)

$1,203,382

 
 
 
Mark S. Berg
5,607

(2)

$98.69

02/15/2021
 
5,435
(4)

$939,440

12,635

(7)

$2,183,960

 
6,863

(3)

$113.76

02/22/2022
 
8,423
(5)

$1,455,916

4,198

(8)

$725,624

 
 
 
 
 
 
 
5,597
(6)

$967,441

 
 
 
Chris J.
6,728

(2)

$98.69

02/15/2021
 
5,893
(4)

$1,018,605

12,635

(7)

$2,183,960

Cheatwood
8,235

(3)

$113.76

02/22/2022
 
8,423
(5)

$1,455,916

4,198

(8)

$725,624

 
 
 
 
 
 
 
5,597
(6)

$967,441

 
 
 
J.D. Hall
 
 
 
 
 
 
2,935
(4)

$507,315

11,036

(7)

$1,907,573

 
 
 
 
 
 
 
7,358
(5)

$1,271,830

5,119

(8)

$884,819

 
 
 
 
 
 
 
6,826
(6)

$1,179,874

 
 
 
 
 
 
 
 
 
 
2,822
(9)

$487,783

 
 
 
___________
(1)
Amounts in column (g) represent shares of the Company's common stock underlying restricted stock or RSUs that, in each case, are unvested as of December 31, 2017, and amounts in column (i) represent performance units that will vest, if at all, in amounts that depend on the relative performance of the Company's common stock over a three-year performance period, all as described below. Dollar amounts in columns (h) and (j) are based on the closing price of $172.85 of the Company's common stock on December 29, 2017, the last trading day of 2017. In addition to the vesting schedules described below, the termination of the NEO's employment or the occurrence of a change in control prior to the vesting date will affect the vesting of the award, all as described above in the section entitled "Narrative Disclosure for the 2017 Grants of Plan-Based Awards Table" or the section below entitled "Potential Payments upon Termination or Change in Control."
(2)
This award of stock options vested in full on February 15, 2014, which was the third anniversary of the grant date.
(3)
This award of stock options vested in full on February 22, 2015, which was the third anniversary of the grant date.
(4)
This award of restricted stock, or RSUs in the case of Mr. Dove, vested in full on February 15, 2018, three years after the grant date, but was outstanding on December 31, 2017.
(5)
This award of restricted stock, or RSUs in the case of Messrs. Berg and Dove, vests in full on February 15, 2019, in the third year following the grant date.
(6)
This award of restricted stock, or RSUs in the case of Messrs. Berg and Dove, vests in full on February 27, 2020, in the third year following the grant date.
(7)
This award of performance units was made in 2016 and has a three-year performance period (January 2016 to December 2018). In accordance with the rules of the SEC, which require disclosure of awards at the level immediately above actual levels achieved at the end of the prior fiscal year, the number of shares reported represents the number of performance units that would vest on December 31, 2018 if the Company's relative TSR resulted in a ranking of fourth out of the twelve peer companies, which would be 150 percent of the "Target" number of performance units awarded, in accordance with the table in the section above entitled "Narrative Disclosure for the 2017 Grants of Plan-Based Awards Table." As of December 31, 2017, the Company's relative TSR for this performance period would have resulted in a ranking of fifth place, or a payout of 125 percent of the target.
(8)
This award of performance units was made in 2017 and has a three-year performance period (January 2017 to December 2019). The conditions for vesting of this award are described above in "Narrative Disclosure for the 2017 Grants of Plan-Based Awards Table." In accordance with the rules of the SEC, which require disclosure of awards at the level immediately above actual levels achieved at the end of the prior fiscal year, the number of shares reported represents the number of performance units that would vest on December 31, 2019 if the Company's relative TSR resulted in a ranking of seventh out of the twelve peer companies, which would be 75 percent of the "Target" number of performance units awarded, in accordance with the table in the section above entitled "Narrative Disclosure for the

58


2017 Grants of Plan-Based Awards Table." As of December 31, 2017, the Company's relative TSR for this performance period would have resulted in a ranking of eighth place, or a payout of 50 percent of target.
(9)
This special retention award of restricted stock was granted on February 18, 2014 and vests in equal one-third installments on the third, fourth and fifth anniversaries of the date of grant subject to Mr. Hall remaining employed with the Company continuously through each vesting date. Accordingly, one-third of the shares granted vested on February 18, 2017.
2017 Option Exercises and Stock Vested
The following table sets forth, for each NEO, information about exercises of stock options, the lapse of restrictions on stock awards and the vesting of performance units during 2017:
 
Option Awards
 
Stock Awards
Name
Number of Shares Acquired on Exercise (1)
Value Realized on Exercise (1)
 
Number of Shares Acquired on Vesting
Value Realized on Vesting
 
(#)
($)
 
(#)
 
($)
 
(a)
(b)
(c)
 
(d)
 
(e)
 
Timothy L. Dove
$—
 
9,577

(2)

$1,838,784

(2)
 
 
 
 
10,639

(3)

$2,001,515

(3)
 
 
 
 
17,295

(4)

$2,990,651

(4)
Richard P. Dealy
$—
 
6,517

(2)

$1,251,264

(2)
 
 
 
 
7,802

(3)

$1,467,790

(3)
 
 
 
 
11,768

(4)

$2,034,923

(4)
Mark S. Berg
$—
 
4,091

(2)

$785,472

(2)
 
 
 
 
4,433

(3)

$833,980

(3)
 
 
 
 
8,151

(4)

$1,409,471

(4)
Chris J. Cheatwood
$—
 
4,895

(2)

$939,840

(2)
 
 
 
 
5,319

(3)

$1,000,663

(3)
 
 
 
 
8,840

(4)

$1,528,613

(4)
J.D. Hall
$—
 
1,905

(2)

$270,720

(2)
 
 
 
 
2,660

(3)

$500,426

(3)
 
 
 
 
4,401

(4)

$761,021

(4)
 
 
 
 
1,410

(5)

$365,760

(5)
___________
(1)
None of the NEOs exercised stock options during 2017.
(2)
The value realized with respect to vesting of restricted stock is based on the closing price per share of $192 of the Company's common stock on February 17, 2017, the most recent closing price of the Company's common stock prior to the date of vesting of the awards on February 18, 2017.
(3)
These shares vested as of February 22, 2017, in respect of the special retention awards granted in 2012. These awards had a longer vesting period than the Company's annual awards, with no vesting having occurred until February 2015, the third anniversary of the date of grant. One-third of the shares awarded vested in each of 2015, 2016 and 2017. The value realized as reported in column (e) is based on the closing price of $188.13 of the Company's common stock on February 22, 2017.
(4)
These shares vested as of December 31, 2017, in respect of the performance unit awards granted in 2015, with the number of shares of common stock earned with respect to such awards determined on the basis of the Company's achievement of performance objectives for the performance period beginning January 1, 2015 and ending on December 31, 2017. For this performance period, the Company's TSR resulted in a ranking of fourth place, providing a payout of 150 percent of the "Target" number of performance units awarded, in accordance with the table in the section above entitled "Narrative Disclosure for the 2017 Grants of Plan-Based Awards Table." The value realized with respect to these earned performance units is based on the closing price of $172.85 of the Company's common stock on December 29, 2017, the last trading day of 2017.
(5)
These shares vested as of February 18, 2017, in respect of a special retention award granted to Mr. Hall in 2014. This award has a longer vesting period than the Company's annual awards, with no vesting having occurred until February 2017, the third anniversary of the date of grant. One-third of the shares awarded vested in each of February 2017 and 2018, and the remaining shares will vest in February 2019, subject to Mr. Hall’s remaining employed with the Company continuously through each vesting date. The value realized as reported in column (e) is based on the closing price of $192 of the Company's common stock on February 18, 2017, the most recent closing price of the Company's common stock prior to the date of vesting of the awards on February 18, 2017.

59


Pension Benefits
The Company does not sponsor or maintain any plans that provide for specified retirement payments or benefits, such as tax-qualified defined benefit plans or supplemental executive retirement plans, for its NEOs.
2017 Non-Qualified Deferred Compensation
The Company's NEOs participate in the 401(k) Plan, a Company-sponsored, tax-qualified defined contribution retirement plan, and a non-qualified deferred compensation plan. The following table provides information about participation of each NEO in the Company's non-qualified deferred compensation plan:
Name
Executive Contributions in Last FY (1)
Registrant Contributions in Last FY (2)
Aggregate Earnings in Last FY (3)
Aggregate Balance at Last FYE (4)
 
($)
($)
($)
($)
(a)
(b)
(c)
(d)
(f)
Timothy L. Dove

$86,540


$86,540


$742,509


$3,984,159

Richard P. Dealy

$86,909


$57,939


$458,959